Employers should be closely examining the underlying drivers of cost growth in their drug plans, according to a new report by Innovative Medicines Canada.

“Typically, [plan sponsors] get their report at the end of the year, they’ll see a cost for their drug plan and they don’t know what’s driving it,” says Joe Farago, the organization’s executive director for private payers and investment.

The report aimed to highlight factors employers should be watching out for, he says. “Did they add more employees? Are they having a lot of chronic disease? And subsequently, is there anything they can do to lower their disease loads, or disease states of the company, that in the long run will keep their costs more manageable?”

Read: How will OHIP+ rollback affect plan sponsors?

In recent years, cost growth in Canada slowed slightly, with a compound annual growth rate of 3.5 per cent between 2016 and 2018, down from 4.7 per cent between 2012 and 2016. However, the 3.5 per cent rate may be overstated, noted the report, because it doesn’t include product listing rebate agreements between insurers and manufacturers or manufacturer financial assistance to patients.

Part of the reason for the slowdown in growth rates was the introduction of the OHIP+ program in Ontario, as well as generic drug price reductions in 2018, it said. But with the policy changes to OHIP+ that took effect in April 2019, that slowdown isn’t expected to carry on.

The biggest driver of growth is still utilization, defined as the number of claimants combined with the number of claims they each make. The report found utilization accounted for 65 per cent of growth in Ontario and 88 per cent outside of the province.

Notably, half of the cost growth in private drug plans was driven by claimants aged 45 to 64, although that cohort accounts for less than half of claimants overall. Since this age group uses more medications, they’d be a good target for chronic disease management programs, the report said, while younger age groups could benefit from wellness programs designed to prevent chronic disease.

Indeed, chronic disease drugs were a driver of 86 per cent of drug cost growth nationally, making up 67 per cent of drug costs. With chronic disease, employers must be aware of the cost implications of conditions that are likely to stay with members for the long term, says Farago.

Read: Growing use of specialty drugs putting pressure on plan sponsors: report

Even if growth rates remain modest, employers should still be examining which factors are pushing their organization’s costs higher. “They may be choosing to ignore the data simply because they’re happy with their growth rate,” he says. “But you should still take a look at your numbers and what’s driving your utilization even in years when it’s quiet, because it’s not always quiet.”

Among the top four therapeutic drug classes with the highest total costs, three were characterized as lower-cost and high-volume drugs for chronic diseases, specifically mental-health disorders, diabetes and respiratory conditions. The top class was biologic treatments for autoimmune conditions. Between 2016 and 2018, biologic and non-biologic treatments for autoimmune conditions was a top growing class, primarily due to claimant growth. Other top treatment classes were for cancer and diabetes, which grew in cost largely because of recent innovations in these therapies.

As for the costs of specific drugs, lower-cost therapies are still contributing to cost growth, mostly due to increased utilization, especially for chronic diseases. However, 2018’s price reductions for generic drugs moderated growth for this category. Meanwhile, drugs that cost between $10,000 and $25,000 made up half of cost growth due to a rising number of claimants, considering several biologic treatments for autoimmune diseases fall under that category.

Read: Plan sponsors using generic substitution, co-payments to curb drug plan costs: report

Regionally, while most provinces saw comparable compound annual growth rates, ranging between 3.6 per cent and 5.6 per cent, Quebec accounted for the largest proportions of national growth. Ontario, the most populous province, saw a muted growth rate of 1.3 per cent, due to OHIP+, while British Columbia was the other outlier with a growth rate of 13.6 per cent.

In B.C., Alberta, Saskatchewan and Manitoba, where provincial drug plans cover a greater share of the cost of drugs in higher-cost categories, cost growth stemmed largely from less expensive drugs for common chronic diseases. Meanwhile, Ontario, Quebec and the Atlantic provinces saw more growth from higher-cost drugs since these provinces are less integrated with public drug plans, causing private plans to foot more of the bills.

“We encourage employers to look at [their] own costs, compare versus the national report and then talk to [their] advisor, broker or insurance provider and find out, ‘Why does ours look different?'”  says Farago.

Read: What are the implications of pharmacare reform for private drug plans?

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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