point-counterpoint · point-counterpoint. the future of employer-sponsored prescription drug plans...

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POINT-COUNTERPOINTThe Future of Employer-Sponsored Prescription Drug Plans in Canada

Mike TrowellComprehensive Benefit Solutions Limited

22Tough Choices

HR Managers face difficult decisions regardingthe future of their employee benefit programs…

Point-CounterpointThe Future of Employer-Sponsored Prescription Drug Plans in Canada

33Case Study

Case Study• Employer facing a difficult decision…• In 2014, significant plan enhancements made to benefit program

• Coinsurance raised (from 80%) to 100% for all health, drugs• Maximums significantly increased for dental, paramedical practitioners• Healthcare spending accounts introduced

• In following plan year, paid claims increased sharply• Increased utilization driven by plan enhancements; and• Two individuals also began taking high cost prescription medications (Remicade,

Other) in excess of $25,000 annually


44Case Study

Case Study• 2015 renewal represented a 70% increase to the current (overall) annual

premiums, driven largely by a 340%+ increase to the health premium• As part of renewal package, advisor/provider recommended:

• reducing coinsurance levels back to 80%;• reducing maximums for dental and paramedical practitioners; and• implementing an annual maximum on prescription drugs of $10,000 per person

• This would effectively reduce the required overall increase to 32%• Internal finance department in favour of proposed changes• HR department felt drug maximum too drastic


55Case Study

Case Study• Even with proposed changes, remained a challenging renewal• Budgetary issues for employer vs. plan member perception with possible

reductions• Recommendation of annual maximum on prescription drugs presented most

significant challenge• Represented significant premium reduction• Represented significant increase to plan member cost• Fundamental change in philosophy of benefit program offering?

What would your company do?


66Agenda

Agenda

• Case Study – Introduction • Prescription Drug Costs• Other Observations• Point / Counterpoint• My Ideal Benefits Plan• Case Study – Results• Future Outlook• Q&A


77Prescription Drugs

Prescription Drug Costs – Overview• Extended health care represents the highest cost

associated with employee benefit programs (43.3%¹)• 53.9%² of extended health care costs associated with

prescription drugs• Drug costs on the rise as illustrated by insurer trend

factors³• 2016 12.09%• 2015 11.57%• 2014 10.64%

¹Source: Conference Board of Canada. “Benefits Benchmarking 2015”. (based on Life, AD&D, LTD, STD, Extended Health and Dental costs only).²Source: Great-West Life. “2016 Drug Trend Update”.³Source: Xerox HR Services. “Canadian Health Care Trend Survey Results 2016”.


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• Drugs major factor in rapidly increasing insurer health pooling charges• Pooling costs have now become a significant contributor to employee benefit

program costs• Many organizations now pay more than 20% of their health premiums towards

pooling• Cost issue is two-fold:

• Insurers increasing cost of pooling protection• Insurers asking employers to take on more risk (through increasing pooling thresholds)

• No end in sight• Pooling charges expected to continue to rise

Prescription Drugs

Prescription Drug Costs – Pooling Charges



Prescription Drug Costs – Future Growth• Major drug growth on the horizon…

Source: Barbara Martinez, Practice Leader, Great-West Life. “Starting the Plan Governance Revolution.” 2016.

High cost biologic and specialty drugs are

dominating the market

specialty drugs

Impact of patent cliff reduced as fewer generics available

patent cliff

Drug utilization increases with aging

population

demographics

Physicians often prefer prescribing newer, more

expensive drugs

prescribing trends



Prescription Drug Costs – UtilizationTop 5 Therapeutic Classes by Adjudicated Amount

Rank (by Adjudicated

Amount)Therapeutic Class Percent of Total

Adjudicated Amount

1 Immunomodulators (RA, etc.) 11.6%

2 Diabetes 8.7%

3 Depression 6.0%

4 Asthma 5.6%

5 Skin Disorders 4.7%

Source: TELUS Health. “8 Essential Cost Management Programs”. 2016.



Prescription Drug Costs – UtilizationTop 10 Single-Source Brands by Adjudicated Amount

Rank (by Adjudicated

Amount %)Brand Name Therapeutic Class Adjudicated Amount

PercentageAverage Eligible Cost

per Claimant

1 Remicade Immunomodulators 6.4% $26,324

2 Humira Immunomodulators 4.5% $15,703

3 Insulin Diabetes 3.1% $1,038

4 Harvoni Hepatitis 3.0% $68,894

5 Enbrel Immunomodulators 2.2% $13,925

6 Cymbalta Depression 1.9% $967

7 Advair Asthma 1.5% $452

8 Symbicort Asthma 1.3% $285

9 Stelara Skin Disorders 1.3% $18,254

10 Concerta ADD/Narcolepsy 1.2% $688


Source: TELUS Health. “8 Essential Cost Management Programs”. 2016.


Prescription Drug Costs – Classes• How are drug classifications defined?

Large complex molecules created by

living cells; injected or IV infused

biologicCreated by chemical

mixing process; usually in pill format

chemical

specialty>$10,000 per patient, per year; requires

special handling; complex treatment; maintenance

Source: TELUS Health. “2015 Drug Data Trends and National Benchmarks”.


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Prescription Drug Costs – Specialty Medications• Small percentage of plan members claiming specialty medications• Specialty medications make up 29% of total plan spending but only account for 1%

of the total number of claims¹• Low-frequency, high-severity

• Average specialty drug claim increased from $15,000 per year in 2008 to over $20,000 per year in 2015²

• 2015 Great-West Life Block of Business¹• Four specialty medications covered exceeding $200,000 in annual claims• Highest cost specialty medication (Elaprase – Hunter Syndrome) exceeded $1M in submitted

amount, $700,000 in eligible covered amount

Prescription Drugs

¹Source: Great-West Life. “2016 Drug Trend Update”.²Source: TELUS Health. “2015 Drug Data Trends and National Benchmarks.”


1414

Prescription Drug Costs – Cost Drivers

Cost of Healthcare

Health of DependentsCapabilities of Insurer

Demographics Corporate Culture

Plan Expenses Employee HealthHealth Plan Cost Drivers

PlanDesign

Prescription Drugs


1515

Prescription Drug Costs – Plan Design Options

Prescription Drugs

Coinsurance Dispensing Fee Caps

Generic Substitution

Annual Maximums

Other Managed Formularies

Preferred Provider

Networks

Cost Sharing

Health Case Management

Enhanced Generic

Substitution

Pay Direct Drug Cards

Therapeutic Pricing

Lifetime Maximums

Prior Authorization

Trial Prescriptions

Per Prescription Deductibles

AMS Formulary

Catastrophic Protection

Lifestyle Drugs


1616Agenda

Prescription Drug Costs – Plan Design¹Plan Feature Mean Median Minimum Maximum

Reimbursement Level 89% 90% 50% 100%

Annual Maximum per Insured $89,745 $5,000 $500 Unlimited

Deductible per Prescription $5 $5 Nil $12

Dispensing Fee Cap $9 $9 $0 No cap

¹Source: The Conference Board of Canada. “Benefits Benchmarking 2015”.²Source: TELUS Health. “2015 Drug Data Trends and National Benchmarks”.

According to TELUS Health, approximately 30% of their pay direct drug card holders have a coinsurance of 80%²


1717

Prescription Drug Costs – Plan Member Behaviour

Prescription Drugs

0%5%

10%15%20%25%30%35%40%

90% 80% 70%

Savings due to change in behaviour Savings due to change in coinsurance level

Source: Great-West Life. “Data Driven: Healthcare Consumerism”.



Prescription Drug Costs – Demographic Impact

$1,409

$0

$500

$1,000

$1,500

$2,000

$2,500

0-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+ Overall

Ave

rage

Ann

ual C

over

ed A

mou

nt

Plan Member Age Band

Source: Great-West Life. “2016 Drug Trend Update”.



Prescription Drugs – Other Observations• Insurers have introduced new, innovative programs designed to maximize

efficiencies and improve compliance as a means to reduce cost/liability• Health management programs

• Similar to disability management programs, patients mandated to work with a nurse practitioner when prescribed certain medications

• Mandatory Generic Pricing• Physician must complete form indicating medical need for brand name medication

• Increased Options for Drug Formularies• Includes variable reimbursement levels based on type of medication

• Acute 50%• Maintenance 75%• Specialty 100%



Prescription Drugs – Other Observations• Preferred Provider Networks (PPNs)

• Provide opportunities for savings/efficiencies for plan members/sponsors by having prescriptions filled at certain pharmacies

• Savings applicable to items such as dispensing fees, ingredient costs, mark-ups• Co-pay, coupon, pharmacy benefit cards

• Provided by the brand-name drug manufacturer• Provide rebates to plan members on their out-of-pocket drug spend (in some cases, eliminating

out-of-pocket expenses altogether)• Appealing to the plan member but may have detrimental impact to plan depending on design

• Mandatory vs. Voluntary Generic• Coordination of benefits


2121Other Observations

Other Observations• Benefit plan costs increasing in other areas

• LTD costs on the rise• Approximately 1/3 of all new LTD claims are related to mental illness

• Significant increase in utilization of paramedical practitioners• 5% of paramedical claimants account for up to 30% of total paramedical spending• Individuals claiming paramedical services tend to have HIGHER drug claim amounts than

individuals without paramedical claims

• Plan member perceptions of plans also a challenge• Many employees believe coverage for paramedical practitioners, vision care is not sufficient

and are asking their employer to increase coverage in these areas


2222Point-Counterpoint

POINT- COUNTERPOINT

Should you implement a cap on prescription

drug spend?



POINT – The case for capping drug maximums• Immediate reduction to ongoing liability associated with prescription drug plan• Simple change to make• “Easy” to communicate to staff• Immediate and ongoing savings to plan sponsor

• Significant reduction to health pooling charges• Reduction based on previous drug claim experience

• Plan will continue to provide adequate drug coverage for majority of plan members



POINT – The case for capping drug maximums• Savings can be used by employer to enhance other aspects of benefit program

• Can significantly enhance coverage for the majority of plan members (those not taking high cost medications)

• Plan members exceeding the annual maximum can look to other avenues for coverage

• Coordination of benefits• Provincial drug plans• Drug manufacturer rebate cards

From a strictly financial perspective, capping drug spend through the use of maximums is the easiest change to make and addresses many of the

issues facing benefit programs in today’s marketplace


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COUNTERPOINT – The case against capping drug maximums• Benefits Philosophy – why are you offering plan in the first place?

• Capping drug maximums goes against many of the principals companies use when developing plans

• You’re hurting the plan members that need coverage the most• While a small percentage of plan members utilize high cost medications, their out-of-pocket

costs would increase substantially if their claims were capped• You can’t go back

• If you implement a drug maximum, it can be extremely challenging to eliminate it• Relying on “other” plans is not the answer

• Member may not have a spouse with coverage• Government plan may not pay• Drug rebate card may not help

Point-Counterpoint


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COUNTERPOINT – The case against capping drug maximums• Believe it or not – drugs actually do work

• It is estimated that while costs for medications such as Remicade can be extremely high, they may in fact be lower than the associated costs of having individuals on disability

% of total spend by benefit typeCondition Drug Costs STD Costs LTD Costs Overall Plan Spending

Muscle/Bone 2.3% 3.0% 3.5% 8.8%

Depression 4.3% 1.7% 2.3% 8.2%

Cancer 2.5% 1.9% 2.5% 6.8%

Diabetes 5.8% 0.1% 0.3% 6.2%

Cholesterol 4.3% 0.1% 0.2% 4.6%

Rheumatoid Arthritis 3.7% 0.0% 0.0% 3.7%

Source: Great-West Life. “Data Driven: Breaking down benefit silos”.

Point-Counterpoint


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POINT-COUNTERPOINT – Result• Implementing a drug maximum is an effective means of controlling benefit costs

• Effectively eliminates many of the cost-related concerns prevalent in today’s insurance industry

• Majority of plan members will not be impacted• In fact, savings can be reallocated as enhancements in other areas

• It is the small percentage of plan members taking high cost medications that would face the financial burden of additional costs

• Possible that they would not be able to afford medication• Employers need to determine why they have a program (philosophy) in place• Employers must also understand the consequences of both options• No “right” answer for all

Point-Counterpoint


2828My Ideal Benefits Plan

MY OPINION – My Ideal (Health) Benefits Plan• Employee benefit programs should provide both

catastrophic protection and tax-effective payment of non-catastrophic expenses

• By implementing an annual drug maximum, you are effectively removing one of the most fundamental elements of your benefit program

• Instead, focus on efficiencies within the drug plan while maintaining competitive coverage in other areas

• Try to “ride out” the storm• Focus on elements within your control


2929My Ideal Benefits Plan

MY OPINION – My Ideal (Health) Benefits Plan• Prescription Drug Coverage

• Maximize efficiencies• Generic pricing, health management, PPNs, etc.

• Coinsurance by drug class (acute, maintenance, specialty)• Catastrophic Protection

• Specialty drugs• Some low-frequency, high-cost health coverage• Out of Country Travel• High deductible

• Healthcare Spending Accounts• Paramedical, vision, all other expenses• Deductibles, coinsurance


3030Case Study – Results

Case Study – Results

• Employer decided not to implement an annual maximum on drugs• Instead, focused on efficiencies and cost control measures

• Introduced tiered coinsurance on all health and drugs (80% of first $5,000; 100% thereafter)• Implemented Mandatory generic pricing, health management• Reduced coinsurance on dental to 80%• Removed insured hospital from plan• Increased healthcare spending account allocations

• Communicated to employees as a necessity given financial situation• Feedback from employees generally positive with a handful of exceptions• Plan performing well since changes made (79.0% Paid Loss Ratio)


3131Future Outlook

Future Outlook

• Drug costs will continue to rise• Increased utilization of specialty drugs• Pooling charges/thresholds will continue to increase• Prescription drug costs will continue to be highest cost associated with employee

benefit programs• Employers will continue to face difficult decisions regarding their programs

• Status quo• Subtle changes• Enhanced strategies• Drastic changes

• Including drug plan maximums


3232Future Outlook

Future Outlook

• Potential Game-Changer in Ontario?• Trillium (provincial drug program) has publicly stated its desire to be the first-payer on all

drugs on Ontario Drug Benefit Formulary• Would more closely align with drug programs offered in BC, SK, QC• Industry experts skeptical this will actually go through

• Significant cost to provincial drug plan• Could alter the prescription drug landscape for private plans within Ontario

• Significant reduction in cost to private plan sponsors

Source: Benefits Canada. “Change to make Trillium first payer could have major impact on private plans”. Mike Sullivan, Cubic Health. January 5, 2017.


3333Future Outlook

Future Outlook

• Federal Government Reviewing Taxability of Health and Dental Plans?• Federal government considering taxing private health and dental plans• With the exception of Quebec, health and dental premiums are non-taxable to plan members• By taxing private health and dental plans, government could raise an additional $2.9 Billion

annually• Too early to speculate as to what government decides to do• Would have significant impact on plan members as rising health and dental costs continue

Source: John Ivison, National Post. “Federal Government eye tax on private health and dental plans”. December 2, 2016.


3434Thank You

Thank You.

Mike TrowellVice President

Comprehensive Benefit Solutions Limited2020 Winston Park Drive, Suite 102

Oakville, ON L6H 6X7compben.com


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