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Five tools every plan sponsor should consider to cap benefits costs

The future of private drug insurance can be friendly – as long as plan sponsors take action in mitigating ever-increasing drug costs through a variety of strategies. That was the overarching message of the 2022 Face to Face Drug Plan Management Forum held in Toronto.

Specialty drug costs are a major concern for employers, with a 9.5 per cent growth rate in the eligible amount per insured in 2021, according to TELUS Health’s 2022 Drug Data Trends and National Benchmarks Report*. Their growth is being driven by scientific discovery and drug innovation, said Suzanne Lepage, Private Health Plan Strategist, Suzanne Lepage Consulting, who led off the one-day conference on December 6, 2022. If this trend continues, the TELUS Health report finds, specialty drugs could represent almost half of the average eligible amount per certificate by 2026, or $55 out of a total certificate amount of $111, finds the report.

At the same time, employers seeking to attract and retain employees are worried about meeting the needs of their many populations. “We need to recognize the needs of diverse employees,” said Marie Helene Dugal, manager of pharmacy benefit strategy at Medavie Blue Cross. This means many are paying more for benefits such as extended healthcare, mental health services, drugs and paramedical practitioners.

As a result, employers require a plan to manage their benefits plans, reining in costs while still ensuring that their plan offerings are targeted and robust in order to remain attractive to plan members. They need to implement mandatory generic substitution, prior authorization programs, step therapy, biosimilar adoption and virtual pharmacy programs to improve medication adherence.

“The goal is to keep the plan sustainable,” said Lavina Viegas, director, pharmacy operations, TELUS Health Benefits Management. “Plan sponsors [need] to manage their plans more effectively.”

Taking proactive steps to manage costs

Employers are seeing flashing red lights when it comes to their benefits plans – and a lot of it stems from COVID -19, which either exacerbated or led to new diagnoses of chronic disease or the onset of mental health issues. “There was a seven per cent rise in employer-sponsored medical plan costs between 2022 and 2023,” said Viegas.

And those costs represent a large outlay for employers. “Fifteen per cent of payroll goes towards premiums in smaller companies and 30 per cent of payroll goes towards premiums in larger companies,” she said.

Worse, these costs are not going away. “We’re expecting these costs to continue to rise as people are going to their physicians post pandemic and presenting with diseases that were deferred,” said Viegas.

As a result, employers need to begin putting in plan safeguards now. Here are some effective ways to cap costs.

1. Mandate generic substitution

While only 55 per cent of plan sponsors have mandatory generic substitution, said Viegas, things are improving. Sixty-six per cent of all claims were for generics in 2021—up from 64 per cent in 2020. And yet, generic substitution, which ensures that plan members are prescribed generic drugs in lieu of high-cost brand name medications, can lead to dramatic cost savings. “In 2021, the average brand name claim was $121 – the generic was $20.29,” she said. “Look at your book of business to see if there is an opportunity for improvement.”

New generics are just around the corner. For example, generics for certain costly attention deficit hyperactivity disorder (ADHD) medications have just launched or are coming in 2023, Anjila Arora, director, pharmaceutical benefits, Sun Life Financial, told attendees of the conference. A generic for Intuniv, a commonly-prescribed medication, was introduced this year and a generic for Vyvanse is set to come to market in 2023. This is good news; according to TELUS Health’s report, in 2021, use of ADHD drugs rose to sixth position of all prescription drug claims.

2. Utilize prior authorization

Prior authorization is an effective way of ensuring that physicians and other health care providers prescribe medications judiciously. Because they have to get approval from the plan provider before a prescription is approved, having prior authorization in place can ensure that only the most necessary drugs are prescribed, said Viegas.

But prior authorization has to be introduced carefully, said Lepage. It should be an outcome of the drug review process that uses standardized, unbiased criteria to determine individual coverage eligibility, she said.

3. Use step therapy to reduce brand-name drug use

Step therapy is “really a program to help you slow down the expenses related to premium-priced medication,” said Viegas. It’s a process by which patients are started on lower-cost medications before ‘stepping up’ to higher-cost drugs.

Step therapy ensures that cost-efficient options are explored first, increasing the chance a lower-cost drug will work for a patient. As a result, this approach can save a lot of money when it comes to conditions like diabetes, which is often treated with high-cost glucose monitoring systems. “It’s giving the plan more opportunity to use the limited drug spend,” said Viegas.

4. Consider biosimilars if you have many biologic drug claims

Biosimilar drugs have seen a lot of pick up among public payers in certain provinces. And that’s led to success from a benefits plan perspective. As a result of B.C.’s switching policy for biologics, private drug plans in that province saw biosimilar drugs’ share of the eligible amount for biologics with biosimilar options soar to 65 per cent by the end of 2021 from seven per cent in January 2019, according to TELUS Health’s report.

“Biosimilars are starting to take up a larger share of the market,” said Viegas. “It’s something you should be taking advantage of.”

5. Utilize virtual pharmacy

Virtual pharmacy options can be an effective tool in an employer’s cost-savings strategy.  Canadians are seeking digital healthcare solutions now that the pandemic has forced them to seek care virtually, said Viegas. As a result, many would be open to exploring virtual pharmacy offerings, in which a pharmacist can partner with employers and work with benefits plan members to boost medication compliance, reduce adverse events, and ultimately curb short-term and long-term disability rates.

“People are busy,” said Viegas. But virtual pharmacy can ensure they’re getting access to the right medications quickly. 

Whatever options they choose, plan sponsors have a wide range of strategies they can employ to reduce the ever-increasing pressure on their benefits plan. “The end goal is to curb that drug cost increase,” said Viegas.

*The TELUS Health 2022 Drug Data Trends & National Benchmarks report captures the claims activities of more than 5.2 million certificate holders in 2021.