Now that the marketplace has moved past the golden era of drug plan management, where one could do nothing and see cost trends level off (or decline), it comes as no surprise that fear is setting in as the reality of cost increases set in.
Hand in hand with this fear of rising cost trends is a growing focus on the concept of a national pharmacare strategy to save the day. If you scour national media in the last few months, you’ll see a flurry of editorials, debates and articles related to the topic.
National pharmacare is not a new story—and there are some very well-respected academics and policy experts in Canada (such as the team at UBC’s Centre for Health Services and Policy Research) who’ve been pushing this subject into the media/policy realms regularly. I don’t recall the same attention being paid to the subject when generic drug prices dropped materially from 2011 to 2014.
Read: Universal drug plan could cut spending by $7.3 billion
Nor do I recall the same volume of media coverage on the need to address drug plan sustainability during the golden era (2010 to 2014) of patent expirations (e.g., Lipitor, Crestor, Plavix, etc.) while the pipeline of innovative new therapies was relatively quiet for most of that time.
Suddenly now, hepatitis C therapies are taking the market by storm, and everyone is afraid of emerging specialty cholesterol drugs (PCSK9 inhibitors) replacing statins for many plan members. Generic prices aren’t going much lower anytime soon. The patent cliff has passed us—I suppose that means we’re now in the patent valley? So we return to asking provincial governments (and, by default, the federal government, keeper of all transfer payment fortunes) to step in and fix this. After we all got used to life with flat or negative drug plan trends, the present (and the future) doesn’t seem to be sitting well.
Speaking of sitting, if I’m sitting in a position of influence within the ranks of provincial and territorial governments or the federal government, I would be thinking about the following:
- What have a majority of third-party plans been doing to help responsibly manage drug plan expenditures—without adversely impacting the health of plan members or eroding the value of their benefits plan?
- Why would we intervene in sorting out third-party payer problems when the vast majority of plans still have wide-open, flat reimbursement structures that may have been relevant in 2001 but have long since passed their best-before date?
- Why do third-party plans (employer, multi-employer and trusteed plans) representing working-age Canadians and their dependents (in this case, all non-government plans and non-retiree plans) have generic penetration rates of only 50.8% (as of the end of 2014), up from only 49.5% in 2013 and 47.6% in 2012? (Note: these are the Cubic Health National Benchmarks for all active—non-retiree and non-government plans—based on billions of dollars of claims in each year. Certain regions of the country have higher averages than others, but this is the collective Canadian average.)
So if I’m a government stakeholder, I’m thinking, Despite the wealth of new generic drugs that came to market with the patent cliff in recent years, and generic prices that are now approximately one-third of what they used to be, on average, third-party plans for working-age Canadians have managed to grow their overall proportion of generic penetration by less than 7% since 2012? Managed plans in the U.S. are bragging about 90% generic penetration rates and, collectively, our Canadian active plans are at 51%?
I don’t think anyone can debate the impact specialty drugs and the great innovations in medicine are having on plan costs, but for non-government, non-retiree plans, specialty spending in Canada by the end of 2014 accounted for only 26% of plan spending. What about the other 74% representing 99% of plan claims? How are those claims being managed?
Read: Plan sponsors’ priorities need to be met
Again, if I’m a government stakeholder, I’m staring at this picture thinking plans are trying to manage specialty drug spending through special authorization processes they have no visibility into, and specialty preferred provider networks to manage drug markups on 26% of spending, yet significant pricing discrepancies are occurring within the 74% of their spending that plans are ignoring. Let’s consider one of the biggest drug classes in Canada and two of the top-selling products in that class. Depending on where you live and where you purchased your medication, consider these price discrepancies:
- Dexilant (60 mg capsule): up to a 17.5% difference between the unit cost that was paid for the same drug to date in 2015 by third-party plans (before dispensing fees are considered)
- Generic esomeprazole (40 mg): up to a 43.8% difference between unit cost that was paid for the same drug in 2015 to date by third-party plans (again, before dispensing fees are considered)
Why are we focusing on a national pharmacare strategy when we haven’t even addressed basic inefficiencies like these? That’s like focusing on completing a PhD on the antagonism of the phosphatase PP1 by the measles virus V protein before finishing Grade 10 biology.
The private payer industry needs to start solving its own problems, or at least attempt to do so in a meaningful way, before we can ever expect a national pharmacare strategy to become a meaningful reality. Does anyone realistically think that, in the near term, with insufficient infrastructure from coast to coast, depressed oil, gas and other natural resource prices, and a very challenged healthcare system, our governments are going to find the additional billions that could be needed annually to sort out a national pharmacare strategy? I say could because there is great debate about whether national pharmacare would cost billions or save billions, but the debate is purely academic today when nobody has a clear blueprint for how a strategy would be rolled out and how the healthcare system would evolve in the decades ahead in search of greater system-wide efficiencies.
Would we not be better positioned to start considering a meaningful private-public partnership if we began addressing some of the major deficiencies in our plans (and in the healthcare system) across the country, and free up poorly used resources to support the health of Canadians in meaningful ways?
In the short term, from a plan sponsor perspective, if you want to be in a position to invest in meaningful drug therapies and have plan resources to invest in focused, valuable health and wellness initiatives that can add tremendous value to both the plan member and plan sponsor, what’s the delay in looking at responsible design that impacts the major inefficiencies inherent in your existing plan experience? Your plans renew annually. Poorly allocated resources are lost every year in the absence of proper design. Plan designs from 1998 or 2004 don’t work in 2015 when the goalposts have completely moved on the field.
Read: What could plan sponsors do with $61.6 million every year?
Why would pricing discrepancies and plan inefficiency not be a priority? How are those pricing discrepancies outlined above acceptable to any plan sponsor?
Even for those plans with the limits of collectively bargained agreements, what are you doing to prepare for the next wave of negotiations in order to meaningfully change the conversation for everyone’s benefit? Waiting for some kind of national pharmacare solution to emerge or simply capping spending/liability in drug plans and moving on seems like a missed opportunity to drive immediate value back to the plan and its members.
There are enormous win-win potentials available for plan members and sponsors. It would be nice to see more conversations about that in the near term and less beating the national pharmacare strategy drum to address sustainability challenges.
We may absolutely arrive at a viable national pharmacare strategy someday, but in the meantime, we need to get the fundamentals in place. We need to wrap up high-school biology before we dream of sorting out measles virus V proteins.