According to the 2015 Drug Trends Analysis by Express Scripts Canada, the average annual drug spends per private plan claimant increased by a modest 3.9% in 2015. However, the overall increase was comprised of a decline of 1.3% in spending for traditional medications and an increase of 18.6% in spending for high-cost specialty medications.
The savings found on traditional medications came from provincial pricing reforms which saw many drugs come off patent and be replaced by significantly lower cost generic therapies. However, this reform is coming to an end as the uptake on specialty medications is increasing. Due to the formulation of specialty drugs, generic substitutes are not available. Instead, subsequent entry biologics (SEBs), which are considered “substitutes” for the original brand specialty drug, are not generally interchangeable with the original brand name biologic and therefore, the uptake to a cheaper SEB is not expected to be high reducing the possibility of significant savings in the future.
A recent prescription drug study by Great-West Life comparing the top drugs in 2010 versus 2015, shows the rise and impact of biologic drugs in the past five years. While in 2010, Remicade and Humira appeared on their list of top drugs in terms of cost (note Enbrel was number six), in just five short years, three of the top five spots are now occupied by biologic medications:
|Top Five Drugs (All Strengths Combined)
2010 vs. 2015
|2010 Rank||Drug Name||% of Total Paid Cost||2015 Rank||Drug Name||% of Total Paid Cost|
* Indicates a biologic drug
In a survey of more than 200 employers by Benefits Canada, four out of five plan sponsors agreed that new drugs coming to the market are too expensive for drug plan sustainability. Express Scripts Canada, a large pharmacy benefit manager, predicts that higher cost specialty drugs will account for 35% of spending by 2018, up from 27% in 2014.
The development of new drug treatments for diseases once considered fatal is transforming the drug landscape. While these treatments provide substantial health improvements and saves lives, the costs of these new treatments are significant and pose an increasing risk to plan sponsors. Drug plans without maximums, and those plans that are not fully insured, such as self-funded ASO programs, are vulnerable to the financial burden/risk of these new high cost therapies. Catastrophic medical Stop loss coverage will become increasingly more important for those plan sponsors that provide unlimited drug coverage, however the cost of this coverage will continue to increase at 15% to 30% per year.
Prescription Drug Management
As the cost of drugs continue to rise and newer more expensive drug treatments continue to enter the market, more emphasis is being placed on drug plan management. The vast majority of group plans have now implemented generic substitution policies to take advantage of the savings made available through the government drug pricing reforms but continued vigilance is required to ensure the cost effectiveness of drug plans and their long term viability. Insurance carriers have introduced a number of initiatives over the past few years to ensure the most efficient and effective reimbursement of drug therapies:
- Mandatory/Generic/Therapeutic Drug Substitution – The majority of plans now enforce the payment of a lower cost alternative whether that be a generic version of the same drug or a lower cost therapeutic equivalent.
- Preferred Pharmacy Arrangements – A number of insurers now set up preferred pricing arrangements with select pharmacies. While the majority of plans still allow employees to choose which pharmacy they wish to use, financial incentives are provided to draw employees to lower cost alternative pharmacies (i.e. lower dispensing fee pharmacies, mail order pharmacies with no mark-up, etc.). For a defined list of drugs (i.e., those identified under a prior authorization or specialty drug management program), the pharmacy to be used may be mandated by the insurer to ensure preferred pricing is obtained. For employees that choose to fill their prescription at another pharmacy, the price differential is the responsibility of the employee.
- Prior Authorization – This process generally affects a select group of high cost drugs and was introduced to ensure there was rigour around the prescribing of the drug prior to reimbursement being made. Under this process, the reimbursement of the drug is contingent upon the employee’s doctor completing a form verifying the medical necessity of the drug.
- Specialty Drug Management Programs – Under this arrangement, the insurance carrier will take a more proactive approach in the management of the drug therapy to ensure adherence and improve employee well-being. Employees who are prescribed a drug on the specialty drug list (i.e., generally a biologic) may first be required to be medically approved for the drug (as is the case under prior authorization) and reimbursement may be contingent upon the employee following the protocols set by the insurer. Protocols may involve following a step therapy (i.e., trying one drug first before going to the next line of therapy), using a preferred pharmacy, or participating in a specific drug management program which ensures adherence to the drug therapy.
- Special Drug Formularies – This initiative limits drug reimbursement to only a specific formulary, or list of drugs. The formulary is strictly managed, and in some cases new drugs are not added to the eligibility list unless pre-approved, and priced, by the insurance carrier. Some formulary programs prescribe not only a step therapy for specific drug treatments but a different reimbursement level depending on whether the drug taken is a first, second, or third line of therapy.
Enclosed as Appendix B is a report by Sun Life titled, Specialty Drug: Trends, Challenges and Solutions, which provides further commentary on the increasing risk and challenges of specialty medications.
Pharmacogenetic testing is now being marketed to group plans in Canada. In the U.S., it is already being used in the prior authorization process for some drug therapies. These tests are not to be confused with the genetic testing that is currently being marketed on television, such as “23andMe”, which confirms ancestry and genetic markers for one’s predisposition for inherited diseases. Pharmogenetic testing examines specific genetic markers to determine a person’s ability to metabolize a particular set of drugs and therefore their effectiveness. The testing is being used to fine tune prescribing – a high ability to metabolize a drug confirms that the employee is likely to respond well to the drug, while a high inability to metabolize a drug confirms that the drug is likely not to be effective and another course of treatment should be prescribed. The testing is definitive for a wide variety of drugs and has been extremely effective in the prescribing of mental and nervous disorder drugs where the current approach to prescribing is trial and error.
There has not been wide adoption of this testing due to Bill S201 (Genetic Non-Discrimination Act) which is in the final stages of debate in the Senate. The Bill will determine the insurers rights to request the results of any genetic tests which could impact future insurance policy underwriting. Currently, pharmacogenetic testing is approached with caution for fear that the information could one day be used against you.
Medical Stop Loss Pooling Protection – Limits and/or Charges are on the Rise
With the continued introduction of newer, expensive drug treatments (i.e., oral cancer medications not covered under provincial plans and specialty biologic medications), more claims are reaching, and exceeding, the stop loss limits. In Sun Life’s book of business,
- In 2005, they had no drug claims that exceeded $75,000; now they have over 400 such claims.
- The number of claims at $75,000 has more than tripled over the past two years.
- The likelihood of a $50,000 claims has almost doubled since 2013.
Pooled claims for employers are increasing at a faster pace than the overall claims trend. Insurers are addressing the escalation of high cost drugs by adjusting pooling thresholds upwards (to reflect the changing risk levels) and/or making adjustments to pool charges.
Annual increases to pool charges, for plans that are fully insured, are in the area of 20% to 30% at the very minimum, and are becoming standard. Groups which are not fully insured and protected under the industry pooling arrangement are seeing increases in pool charges in the 100% plus range if a large ongoing pooled claim is experienced. Even more alarming is that carriers have been reluctant to negotiate these charges as their blocks of business are experiencing a high number of pool claims.
Cost of drug claims continues to rise and as more of them exceed the stop loss limits, the effectiveness of the stop loss limit continues to erode. Plan sponsors will want to consider accepting a higher degree of risk by raising the stop loss limit to offset the rising cost of stop loss coverage, or accept the fact that high cost drugs will result in an ever-increasing cost to group plans.
Paramedical Practitioners – Medically Necessary or Nice to Have
The paramedical claims continue to account for a larger portion of total Medical claims. While paramedical practitioners generally account for between 18% and 21% of the total medical spend, we are beginning to see an increase. It is not uncommon now to see plans where the spend can exceed 30% to 40% of the total medical claims. The prevalence of wellness clinics that house multiple practitioner practices under one roof has driven a trend towards multi-disciplined practitioner treatment programs and an increased utilization towards a variety of services. No longer does treatment under one practitioner suffice; multiple practitioners are now engaged as a part of the complete treatment plan.
While for some members’ paramedical practitioner coverage remains a medically necessary health care service, increasingly more are accessing the benefit merely as a part of their lifestyle. Dialogue is beginning across many industries regarding the sustainability of this benefit, and a shift to capping/reducing paramedical coverage as more clients are having to cut back on benefit costs to maintain and support the long term viability/affordability of the group benefits package.
The Leslie Group Limited has the experience and expertise to assist in the management of your employee benefits, should you have questions or require our assistance please contact us at 416 510 8966
Reference Article: Sun Life Financial – Specialty Drugs: Trends, Challenges and Solutions