The 2015 workplace mental health priorities report

Read what employers, employees and physician think about mental health in the workplace.

Business man on computer
News & Views

You are here

Trends in drug plans

There has been no shortage of articles predicting significant shifts in the nature and amounts of prescription drug costs for plan sponsors, with recent reports reinforcing those predictions. Express Scripts Canada’s latest Drug Trend Report—based on drug claim data for more than seven million Canadians—found that the cost associated with specialty drugs continued to rise in 2014, seeing growth of around 12%. Numerous specialty medications, which are defined as high-cost drugs used in the treatment of chronic, complex conditions, are available in the Canadian market, with many more expected to be released over the next two to three years.

While specialty medications represented less than 2% of the total number of claims in 2014, this translated to 26.5% of prescription drug costs, and these drugs are expected to represent 35% of costs in the next five years. The increasing prevalence of these drugs has resulted in upward pressure on the cost of stop loss insurance from virtually all insurers. We can examine three different examples of specialty drugs and their impact on private plans.

Hepatitis C therapies

Several new treatments for the Hepatitis C virus (HCV) have become available in Canada recently, including Harvoni©, Sovaldi©, Galexos© and Holkira Pak©. While in most cases these new therapies result in a cure, they typically cost tens of thousands of dollars per patient. For example, Harvoni© is priced at approximately $70,000 per 12-week treatment. Morneau Shepell’s research shows that this single disease category will impact drug trend in Canada by around 2% in 2015. With more than 200,000 Canadians living with HCV, private plans have experienced significant claims for these drugs since their introduction. We anticipate that Hepatitis C will be in the top 10 diseases that generate the most drug cost in 2015 and 2016.

Recently, most provinces have approved coverage for these new drugs through public pharmacare programs and this should reduce the cost pressure on private plans. Current approvals for each drug are as follows, according to Express Scripts Canada:

  • Sovaldi© : approved in eight provinces, including seven effective in 2015
  • Harvoni© : approved in eight provinces, all effective in 2015
  • Galexos© : approved in eight provinces, including two effective in 2015
  • Holkira Pak© : approved in five provinces, all effective in 2015

In nearly all cases, these drugs have been approved through each province’s special access program, which allows provincial funding for drugs not covered under the regular drug formulary based on certain criteria. Plan sponsors should ensure that their benefit plan requires coordination with provincial programs so that unnecessary claims are not incurred by the plan.

Rheumatoid arthritis therapies

In early September 2015, the Canadian Life and Health Insurance Association (CLHIA) and the Canadian Rheumatology Association announced that national standards for access to biologic drugs through private insurance plans have been established for adult rheumatoid arthritis patients. Many plan sponsors will have noted significant usage in recent years of rheumatoid arthritis specialty drugs such as Enbrel©, Humira© or Remicade©. Given the introduction of national standards, all private insurers across Canada will adhere to a common set of criteria for patient access to specialty drugs unless the plan sponsor instructs otherwise.

Clinical evidence is used to determine access to specialty drugs, and this new process should increase transparency for both patients and plan sponsors and eliminate differences between provinces. This new initiative may prompt similar agreements for drugs treating other conditions in the future.

Cholesterol drugs

Most plan sponsors have seen a reduction in costs relating to cholesterol medication in recent years due to the introduction of lower-cost generic alternatives. However, Canadian approval of the first new injectable specialty drugs treating high cholesterol is expected by the end of 2015. While the average annual cost per patient of existing therapies is well under $1,000, the first available new drug in the United States (Praluent©) has an annual cost of approximately $14,000 ($USD), according to Express Scripts Canada. It is expected that Repatha© will be the first drug in this class available in Canada, but pricing is not yet known. Given the pervasiveness of high cholesterol, these drugs are expected to have a major impact on private plans. TELUS Health has estimated sales of this class of drug to be $250 million this year, rising to $2.5 billion by 2026, though competing drugs and other factors may slow down cost increases.

Flat trend for traditional medications

In contrast to specialty medications, spending on traditional drugs continued to decline in 2014 due largely to provincial drug reforms and pan-Canadian generic pricing agreements. According to Express Scripts Canada, average generic drug prices have fallen 28% since 2010. However, with the financial impact of these rules largely behind us and more high-cost drugs to be approved, prescription drug costs are still expected to increase in coming years.

Morneau Shepell’s research indicates a general inflationary trend in drug consumption of slightly over 3% so far during 2015. This result is higher than the observed trend in 2014 (2.7%). Of course these figures are averages, and plan sponsors can implement a variety of measures to help control drug costs.

To mitigate the impact of escalating drug costs and to help patients manage their conditions, many pharmacies now offer comprehensive counseling services, disease management assistance and specialized pharmacist services. Drug plans can be customized to include various cost-containment measures such as managed formularies, prior authorization, step therapy, generic substitution, deductibles and mail order services. While many plan sponsors have benefited from having introduced such measures, others, reluctant to modernize their plans and invest time and money in effectively promoting health and wellness, are subject to a greater risk of high-cost claims.