3 ways cost containment strategies can help bend the drug cost curve

Employer-sponsored health plans in Canada are expected to cost 7.0% more in 2021, according to Aon Canada’s 2021 Global Medical Trend Rates Report – a staggering 5.7% above the rate of inflation. Zeroing in on drug costs, TELUS Health’s 2020 Drug Data Trends and National Benchmarks Report found that average eligible costs for private drug plans grew more quickly in 2019 than in any of the four previous years, increasing by 7.6%.

“The biggest concern for plan sponsors is sustainability. They have to find a way to provide a competitive benefits offering to employees, while at the same time containing costs,” says Shawn O’Brien, principal, data enablement and drug, health, dental product roadmap, for TELUS Health. “It’s a balancing act.”

Here are three straightforward drug cost containment strategies that can help plan sponsors bend the drug cost curve so they can keep offering comprehensive health plans that meet plan members’ needs.

1. Leverage basic plan design features.

Some cost containment options have existed for many years, yet O’Brien says adoption has been slow. If you’re not applying these four measures yet, it may be time to consider them:

• Mandatory generic substitution replaces name-brand drugs with their lower-cost generic equivalents, or limits claim payments to the cost of generics
• Reference drug programs replace, or cut-back the cost of, drugs that don’t have a generic substitute with a lower-cost branded drug that has an equivalent effect
• Step therapy ensures that plan members try lower-cost alternatives first, before stepping up to higher-cost drugs
• Managed formularies ensure that new drugs go through an independent cost-benefit analysis, rather than being added to a plan’s formulary as soon as Health Canada approves them

Mandatory generic substitution, in particular, is gaining traction, and many carriers include it as the default unless a plan opts out. This is helping to drive a trend that saw generics account for 63% of private drug plan prescriptions in 2019, up from 58% in 2015.^[1]

2. Address specialty drug costs.

From 2018 to 2019, average eligible monthly costs per insured aged 25 to 64 for traditional (non-specialty) drugs rose by 2.9%. That same measure rose by 10.1% for specialty drugs (including biologics) costing $10,000 or more per year per claimant.[2]

“There are fewer people taking specialty drugs than traditional drugs because they treat more rare diseases, but still they account for more than 30% of total drug plan spending now, based on our book of business,” says O’Brien.

One approach that can help mitigate specialty drug costs is prior authorization, which checks to make sure plan members meet specific clinical guidelines before a specialty drug prescription is filled. Electronic prior authorization is the next logical step, offering greater efficiency and the potential for more timely access to drugs and reduced barriers to access.

Plan sponsors may also want to consider a strategy that substitutes biosimilars – drugs that achieve similar, but not directly equivalent, results – for high-cost biologics that don’t have generic equivalents. Sometimes, a biologic may be used to treat multiple conditions, while a biosimilar may only be approved to treat one, so systems must store information about each claimant’s condition for this strategy to work.

Product listing agreements that reduce the drug cost at the point of sale are also critical in lowering drug costs for many specialty drugs.

3. Support medication adherence.

Plan members don’t get the full benefit of medications if they don’t take them as prescribed – and may end up needing more drug support over the long term if they don’t keep their conditions under control. Yet TELUS Health has found that non-adherence (measured based on whether claimants refill their prescriptions on time) is high in three categories that together account for 28% of eligible drug costs: diabetes (24.8%), depression (23.0%), and cardiovascular conditions including high blood pressure and high cholesterol (16.2%).[3]

To support medication adherence, plan sponsors can employ simple technological tools such as apps that deliver daily reminders to take medications and send alerts when a prescription is due to be refilled. Some virtual care apps can arrange for renewals to be dispensed without a call to the doctor’s office or in-person appointment.

Apps can also make it easy to connect to a social worker, psychologist or psychotherapist and schedule a virtual appointment, which can be essential to support adherence for people with mental health conditions. The combination of medication and counselling, accessed quickly, can help to mitigate longer-term mental health issues. 

Your plan deserves a customized approach.

Every plan is different, which means it’s essential to develop a customized approach based on in-depth analysis of a plan’s primary cost drivers in order to make the most of cost containment strategies.

“Monitor your cost drivers regularly so you know where your costs sit relative to benchmarks. This is an important decision support tool to guide where you may want to make a design change,” advises O’Brien. “Know where you’re going to get the best return, based on your data, and measure outcomes to validate the design changes you make.”

[1] 2020 TELUS Health Drug Data Trends and National Benchmarks Report.
[2] Ibid.
[3] Ibid.