Ask the Expert: Thomas Holloway

Born in Scotland, Holloway learned his craft as a consumer goods marketer with Colgate – Palmolive in the Americas and in Europe. Following a term as director of marketing for Colgate in the U.K., he returned to Canada as president of Playtex Canada. He then joined London Life, spending eight years in senior marketing roles in the individual and group insurance businesses.

In 1998, Holloway started Pharmex Direct Inc., a company dedicated to finding innovative solutions to help employers and insurers with the challenge of balancing employee health with benefits plan costs. In 1999, he founded ReVue Drug Evaluation Group Inc., which carries out new drug evaluations on behalf of third-party payers in the public and private sectors.

In 2002, Holloway established Equitus Consulting Inc. Equitus operates the Reimbursement Assistance Centre to help patients obtain coverage for orphan drugs and medical devices through employer-sponsored health plans. Equitus also oversees ReVue.

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Every hour of the day, 20 Canadians learn they have cancer, and that number continues to rise. While the largest percentage of patients are 70 years old, there is also a growing number of working-age and pediatric patients—most of whom are covered by employer-sponsored health plans.

More and more drugs are coming to market for different types of cancers. While this is good news, more than 50% will be oral medications, meaning that patients will take the drugs at home and will possibly purchase them using their employer-sponsored drug plans. Also, with early detection, we are seeing expensive medications being used earlier in treatment than they were previously.

We are seeing the development of new diagnostic tests for cancers such as breast and colorectal. There is also increased off-label use of cancer medications (i.e., use of medications to treat cancers for which they are not approved). This typically occurs when the patient has run out of options, and the physician and the patient are willing to try anything to get a few extra weeks of life.

With biologics, the issues are somewhat different. There has been rapid growth in new products coming to market. In fact, it is estimated that by 2014, seven of the top 10 selling drugs—and all of the top six—will be biologics. The market leader today is Lipitor, with worldwide sales of roughly US$13 billion. With average costs of $20,000 or more per year, one biologic patient will cost his or her drug plan as much as 22 or more Lipitor users.

Unlike most synthetic drugs, biologics often have multiple indications. Remicade, for example, is approved by Health Canada to treat seven different conditions. With synthetic drugs, generic versions are very easy to manufacture. But with biologics, the manufacturing process is, in essence, the product. The slightest change in manufacturing results in a product that may be similar but is not the same as the original.

This means that when patents expire on a biologic, the subsequent entry biologics—or “biosimilar” products—that follow may not qualify for substitution in generic-only plans. Also, while generic versions of synthetic drugs represent a significant savings to employer plans, subsequent entry biologics will likely be only 10% to 15% lower in price than the original biologic.

It is difficult to determine the impact of these trends on a particular plan, as it will depend on the composition and size of the group, its location and the plan design currently in place. However, there are a number of approaches that plan sponsors can use to manage related costs.

1. Introduce annual or lifetime maximums for all drugs—or, where it can be properly adjudicated, for biologic and oncologic drugs only. This should be matched with appropriate stop-loss insurance.

2. Use special authorization or prior-authorization processes to ensure that the drug is being used appropriately and for the disease for which it has been approved.

3. Consider tiering the plan by separating cancer drugs and biologics from other medications and applying different co-pays. For example, the lower-cost drugs could have a co-pay of 30% or 40%, while the more expensive biologics could have a 10% or no co-pay.

4. Discuss with your insurance carrier and your employees how you will treat subsequent entry biologic drugs so that when they are available, you can maximize the savings.

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