Distinct Benefits

Drug Insurance and RGAM
The rate of drug cost increase has slowed as several leading products, such as Altace, Effexor, Losec and Pantoloc, have lost their market exclusivity. Quebec benefits from the Ontario provisions that limit ingredient costs to 50% of the price of brand name drugs since manufacturers cannot sell generic drugs at a price higher than the lowest one in Canada.

However, the latest Brogan statistics confirm that drug costs have increased more in Quebec (10.4%) than in Canada overall (8.3%). The increase in the costs of ingredients is slightly higher (3.7% versus 3.2%), and the number of claimants has increased by 7.0% in Quebec, compared to 4.0% in all of Canada. Although 40% of respondents to the Aon survey intend to search for a more competitive insurer, looking at more advanced and creative cost-containment methods may be more fruitful.

Finding solutions requires a good understanding of today’s environment. For example, one reason why costs increase more in Quebec may be the lifting of the 13-year freeze on the cost of prescription drugs. Also, unlike other provinces, Quebec is just an observer on therapeutic committees such as Common Drug Review or Cancer Care Ontario and is not bound by their recommendations. The mandatory coverage of expensive drugs partly explains why a growing number of individuals benefit from 100% reimbursement once they reach the out-of-pocket annual maximum.

Sponsors can adopt controlled or frozen formulary (developed by pharmacy benefit managers) to prevent new drugs that are not listed on the mandatory formulary and do not offer a good cost-benefit ratio from automatically being added to the coverage. Plans can exclude non-RAMQ drugs from coverage or out-of-pocket annual maximum calculations, and they can implement prior authorization or step therapy for RAMQ exception drugs to reimburse only claims that satisfy clinical protocols.

Designing consumer-driven flex plans that are financially balanced in terms of employer and employee contributions and that encourage responsible drug consumption is a challenge, given the RGAM rules. For example, mandatory generic substitution is less prevalent and generates fewer savings in Quebec namely because doctors prescribe more single-source brand name drugs, knowing that all Quebecers benefit from mandatory drug insurance, the 69% minimum co-insurance rule limits the ability to cut back the reimbursement to the lowest cost available, and private plans cannot delist generic RAMQ drugs as a result of a tender.

Sponsors can redesign their plans to increase the contribution for single- and multisource brand name drugs—ideally, with a per-prescription deductible to overcome the minimum 69% rule. This also encourages patients to buy a 90-day supply and to play an active role in the doctor’s office and the pharmacy. According to Brogan, the number of prescriptions per claimant has decreased by 0.5% in Quebec compared to an increase of 0.9% across Canada, perhaps due to a number of large employer plans adopting this solution.

The Quebec government negotiates the costs of ingredients for public and private plans, and it forbids manufacturers from having two pricing lists. However, drug card providers do not offer a fee and margin cap in Quebec. Therefore, plan sponsors do not automatically benefit from the reduction in generic drug costs and can be charged much more than RAMQ for the same prescription.

Plan sponsors can implement a personalized algorithm to manage a maximum eligible price. This plan design feature requires communication with participants, who must pay for the difference between the amount claimed by the pharmacist and the maximum eligible price. However, it eliminates the significant discrepancies between what public and private plans are charged for the same prescription. It also ensures that any official reduction in generic prices will be passed on to patients and that only one fee will be charged whenever the drug is dispensed for 90 or 100 days.

The overall direct savings resulting from both cost transfer and lower amounts claimed by pharmacists vary with the algorithm and with the plan’s parameters, as private plans are constrained by the minimum 69% co-insurance and the maximum $927 out-of-pocket rules.

Motivation for Change
The gap between revenue growth and healthcare spending in today’s economic turmoil may force plan sponsors to find new solutions. To start, it may be a good idea for them to revise their contracts and audit their benefits management practices to ensure they are compliant with Quebec legislation.

The attention that employers pay to controlling healthcare costs has led to a growing appreciation of the value that improved employee health has on reducing health, disability and absenteeism costs. And, in Quebec, being certified as a Healthy Enterprise may be a competitive edge in attracting and retaining employees.

As more sponsors intend to switch to flex plans and HCSAs, covering non-mandatory services such as private healthcare or non-RAMQ drugs such as vaccines may help to differentiate options while satisfying the emerging needs of employees. Plan design should focus on modifying behaviour, as opposed to transferring cost to employees. In light of the growing importance of costs related to preventable chronic diseases, these measures have the benefit of making employees more responsible for their health and using their benefits wisely.

Lastly, stakeholders such as sponsors, consultants and carriers have not mobilized in Quebec to have more of a say in the RGAM rules and government decisions. Unlike the government, private payers have not leveraged their drug volume with brand name and generic manufacturers. For example, the sponsor coalition recently formed in the Atlantic provinces may be one way to go.

Johanne Brosseau is a senior consultant with Aon Consulting in Montreal.
johanne.brosseau@aon.ca

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