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Can We Get Rid of the Pharma Elephant in the Room?

Published
11/03/2016 by Curtis McCone

It’s becoming increasingly difficult for Canadians to manoeuver around the huge elephant in the room, otherwise known as rising drug costs. But deepening trends are making the point: it’s beyond the time to find a way.

Our pharmaceutical drug costs have skyrocketed in recent years, more than tripling in per-capita costs from 1990 to 2010. Today, Canadians face the world’s highest costs – even higher than the No. 2 and No. 3 countries, Japan and the United States. Consider: one study found that New Zealanders pay 87 per cent less than Canadians for the blood-pressure drug amlodipine, while veterans in the U.S. pay 94 per cent less for the anti-depressant venlafaxine.

Under the healthcare system in Canada, drugs that are prescribed and administered in the hospitals are paid for by the province. Hospitals are under pressure to leverage their clout and centralize buying capabilities in order to bring down costs. More typically, they’re offloading those costs to the individual and private plans – if prescription drugs aren’t administered onsite (oral versus intravenous, for example), paying for them becomes a private, not public, problem.

Half of new specialty drugs (which improve our health but contribute to higher drug costs) are cancer drugs. And, again, 30 per cent of those specialty drugs are oral vs. intravenous, which means that the shifting of burden to private plans is only intensifying.

With such trends, it shouldn’t be surprising that benefits plan members consider prescription drug benefits as the most important component of their plans. A whopping 94 per cent of plan member respondents to the 2016 Sanofi Canada Healthcare Survey gave drug benefits that ranking – and 60 per cent gave their prescription plans top marks for excellence.

"The fact is that we need to focus on multiple fronts to better manage rising drug costs."

And while plan sponsors voiced their satisfaction with their benefits plans, the Sanofi study showed that they are increasingly concerned about escalating drug plan costs. Eighty per cent are worried that they will exceed the rate of inflation in the next three to five years.

The challenge, though, is how to drive a satisfactory return on their drug plan investment. The survey group was surprisingly lacking in knowledge about measures to better manage drug plan costs. Only 10 per cent, for example, laid claim to an “excellent or strong” understanding of stop-loss insurance. Case management for higher cost specialty pharmaceuticals resonated with slightly more – 13 per cent.

The fact is that we need to focus on multiple fronts to better manage rising drug costs. When an option like generic substitutions is available, it should be mandatory. Current managed drug formularies should be reviewed to ensure citizens are receiving equitable and affordable access to safe, effective and cost-effective medicines. We need to address the inconsistencies and inequities in today’s prescription drug coverage for our citizens. And the pharmacies dispensing fee caps and frequencies need to be revisited.

Further, we need to take a hard look at the limits on our stop-loss pools, which are under huge pressure to accommodate the escalating claims for high cost drugs. It’s leading some carriers to depart the market altogether. As Lloyds of London was quoted saying, “It’s like underwriting insurance for a burning house.”

Will national pharmacare – the long-awaited missing link to Canada’s healthcare system – help provide a fix? The goal is to get it done by 2020. But the reality is that we’ve been talking about the concept since 1964 and we’re not even close to a solution.

Curtis McCone is president of wealth management and employee benefits for HUB International Ontario. Contact McCone at curtis.mccone@hubinternational.com or visit www.hubinternational.com.