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Drug cost trends

Statistics on prescription drug use in 2011 reflect the effect of drug cost control measures implemented by several provinces and the impact of many new generic drugs introduced on the market. The following table compares how the average cost per certificate varied from province to province in the last quarter of 2011 compared to the same quarter in 2010.

Variation in average cost per certificate

The one province that stands out immediately in the above table is Ontario with a 3% decrease in the average cost per certificate. That province had implemented measures in 2010 to reduce the cost of generic drugs to 25% of the cost of brand name drugs.

These measures will take full effect in April 2012. A combination of these measures and strongly proactive management of policyholders explains this result.

In Quebec, the reduction in generic drug prices was partially offset by higher dispensing fees and increased use of prescription drugs. Contrary to the public prescription drug plan, dispensing fees are not negotiable in Quebec, as is the case elsewhere in Canada.

In addition, generic drugs are notably used less in Quebec. One of the explanations for this is the 15-year rule, under which RAMQ forces plans to insure brand name drugs at the initial cost at which they were introduced on the market for 15 years after they were registered on the Régie de l’assurance maladie du Québec’s [Quebec health insurance board] (RAMQ) List of Medications. Since the standard practice is to reimburse these drugs according to the same coinsurance as their equivalent generic counterpart, we have observed that this impacts plans’ average cost. This rule does not exist in other provinces and is increasingly being challenged.

Another interesting observation is that, for the same period, the RAMQ has seen a 5% decrease in the average cost per member under age 65 (excluding recipients of last-resort financial assistance) for its Public Prescription Drug Insurance Plan, which is in stark contrast to the 5.3% increase seen for private plans.

New Brunswick had the highest increase in drug cost per certificate (8.2%). The average cost of a prescription rose by almost 6% in the fourth quarter of 2011, compared to the same period in 2010. Elsewhere in Canada, the cost per prescription has remained relatively stable in 2011.

Plan sponsors must be vigilant and monitor the cost of their insurance plan, which represents an increasingly greater portion of employees’ total compensation.

Morneau Shepell monitors quarterly prescription drug cost trends in order to appropriately advise its clients, offer them innovative and concrete solutions, and negotiate favourable renewal conditions.

1 The results were adjusted to remove the impact the insured members’ age has on cost.
2 The results for the provinces such as Prince Edward Island and Newfoundland and Labrador should be taken with reservation due to the smaller number of insured members in the TELUS Health Solutions databases.