The Drug Plan Conundrum: An Intricate and Difficult Problem
It doesn’t seem that long ago (although it’s been a decade now) that the infusion of generic drugs created the drug patent cliff, where the number one or two top drug plan spends – think Lipitor and Lyrica - tumbled down the cost list, eliciting a sigh of relief from plan sponsors and advisors alike. Relief, however, was short-lived as the costs of specialty and biological drugs have been steadily and relentlessly creeping higher and, in turn, increasing costs to both employers and employees. Despite the remarkable patient outcomes witnessed with these medications, there are still a few key questions to consider:
As a company, are we spending our money as wisely as we can?
Can we and our employees sustain the increasing costs to the benefit plan, through premiums and co-pays?
What options can we explore that reduce costs, but not quality of care?
As a consultant, I have been bringing the concept of drug formulary management to my clients for many years but have consistently seen a reluctance from plan sponsors to adopt drug formularies out of concern for disrupting their employee group. There was a time when technology did not support a smooth transition to a managed formulary, but that time has passed.
Multi-tier drug plans use formularies with coverage percentages that differ based on the medications and the availability of therapeutically equivalent alternatives. Multi-tier plans create an incentive for patients to use specific drugs by using different co-payment terms for each tier (i.e. 80%, 50% and 20%).
As pharmaceutical costs continue to rise, especially in the specialty drugs realm, it may be time for your company to address this issue through measures that can continue providing members with access to medications while reducing plan liability. The added benefit of reducing plan members’ out-of-pocket payments for premiums and drug co-pays is an alternative that deserves exploration. There is no doubt that costs are continuing their upward trajectory; the 2020 TELUS Health Drug Data Trends report outlines the eligible drug cost increase for 2019 at 5.1% (after removing the effect of the OHIP + impact), which is the highest increase in the last 5 years. This trend was driven by specialty drugs, which have more than doubled in the decade.
While high-cost drug treatments continue to add upward pressure, it is interesting to note that the number of plans with strategies – plan maximums and managed formularies - to mitigate these risks remains virtually unchanged for the period of 2015 to 2019. Plans featuring cost-containment strategies showed only a slight increase; plans with maximums increased from 16% to 21% and plans with managed formularies increased from 21% to 22%, according to TELUS Health, 2020. This represents a significant level of exposure and emphasizes the need to act now to mitigate this risk of dramatically increased costs to the plan.
I recently had the opportunity to speak with Helen Stevenson about her concerns within the pharmaceutical landscape. Helen is the founder and CEO of Reformulary Group, a healthcare technology company helping employers and their employees make smart medication choices. As the former Executive Officer of the Ontario Public Drug Program and Assistant Deputy Minister of Health, Helen has keen insight to the future pressures on the horizon. When I asked Helen, what keeps her up at night, she told me IV cancer medications once supported through provincial hospitals moving to private plans, as an acute pressure that will soon be prevalent.
The cost of doing nothing can jeopardize your ability as a plan sponsor to continue to support the same level of drug plan coverage. While potentially uncomfortable in the short-term, taking proactive measures may ensure your plan members continue to have access to the medications they need.
At Oak House Benefits, we’re here to help. Let us assess your drug risk profile, and help you optimize your drug plan for the years ahead. Please reach out and say hello – we can’t wait to hear from you.
Sandra Scott
Principal Consultant
Oak House Benefits