Drug plan managers have long struggled to address the management of high cost drugs, which on one hand vastly improve claimants’ health outcomes and provide better quality of life, but on the other hand were carving an ever-expanding place in group health benefits’ budgets. How to look beyond the high cost with a five-pillar approach?
Expensive drugs have been a hot topic ever since these first came to market over 25 years ago. The blood formation drug, Eprex, was the first specialty-type drug to hit Canadian drug plans used to treat severe anemia cases at the cost of about $7,000 annually. At the time, this was an unprecedentedly hefty price tag. Next came more expensive biologic drugs that were priced at about $20,000 annually, then cancer drugs were commercialized at the tune of $100,000+. In recent years, we have seen drugs to treat orphan diseases costing $300,000 or more per year on a recurring basis. In 2021, gene therapy is at our door with a $1 million+ plus price tag.
Drug plan managers have long struggled to address the management of these high cost drugs, which on one hand vastly improve claimants’ health outcomes and provide better quality of life, but on the other hand were carving an ever-expanding place in group health benefits’ budgets.
Employer consideration within their total rewards strategy
The use of specialty drugs remains low as a proportion of total drug costs, accounting for only for about 1% of all drug claims. However, the both represent a material proportion of a plan’s costs at approximately 35% on average and, for employees, access to specialty drug coverage represents an important feature of their health coverage. These drugs ensure that employees and their families have financial support, should the need for these high cost drugs unfortunately arise.
When addressing specialty drug coverage, an employer’s drug cost containment strategy should follow a five-pillar approach coherent with their total rewards strategy.
The Employer View
Drug plan managers may use HR and business objectives as a starting point to review drug plan design. Whether a firm’s first objective is to minimize costs, attract and retain talent, take care of employee health or foster innovation, those objectives should be reflected in the drug benefit design philosophy.
The Employee View
Employee perception as to the value of the health benefits program should also be considered. The current and future workforce demographic, the employee health needs, employee culture (e.g. consumerism, solidarity, etc.) all come into play.
The Financial View
The budget is a large component of the specialty drug question. This drug category accounts for about 35% of total drug costs, raising the question of long-term sustainability since many specialty drugs treat chronic diseases, thereby incurring recurring, escalating costs. Ensuring your design aligns with an organizations long term budgets and that appropriate protections are in place (e.g., pooling) are pivotal to drug plan design.
The Competitive view
Employers may want to keep in mind how their coverage offering fares in comparison within their industry or against organizations for which they are competing for talent.
The Environmental View
The provincial health care environment is an important consideration. Many provinces offer some level of catastrophic coverage (e.g., BC Pharmacare, the Ontario Trillium Program) or universal drug programs (e.g., Cancer Care Ontario) and plan sponsors should evaluate how much they want to duplicate, transfer or wrap around provincial coverage currently in place.
Tools to measure the qualitative aspects (such as employee perception or employee health) or to measure the financial aspects (such as the impact of changes in plan parameters) should be used to support a five-pillar approach to drug plan management. Based on those results, a strategy can then be put into place using cost containment tools available with insurers or other partners to execute on this.
*This article originally appeared in Benefits and Pensions Monitor, Web series