With drug plan costs back on the upswing amid unprecedented increases for stop-loss or pooling insurance, benefits advisors and insurers are seeing more plan sponsors voicing concerns over sustainability and showing a greater willingness to take actions beyond seeking the best rates at renewal time.
“The industry is in the process of reacting to what’s going on, and [I am seeing] a monumental shift happening in drug plan management discussions,” says Rob Taylor, managing director at TRG Group Benefits & Pensions Inc. in Vancouver.
“We do see more plans are concerned with rising costs and looking to take, in some cases, a bit of a knee-jerk reaction by putting an annual cap in place or possibly going so far as to not cover specialty medications,” says John Herbert, director of strategy, product development and clinical services at Express Scripts Canada.
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To counter the consideration of options that steer away from group insurance and potentially put plan members with serious illnesses at risk, benefits providers are stepping up efforts to promote ways of managing costs for the 98 per cent of claims that aren’t for specialty drugs. “Plans may be able to reduce waste on their traditional medications, in order to fund access to these new specialty medications,” says Herbert.
The experience of Concord, Ont.-based Toromont Industries Ltd. gives credence to that claim. The supplier of construction equipment has seen positive results since it began implementing a range of measures in 2009. “We are saving money so we can cover the costs of high-cost medicines, as well as reinvest in proactive health-care programs,” says David Wetherald, vice-president of human resources and legal. “While maintaining sustainability of drug plans is seen to be the big thing, we would characterize it differently. What we’re trying to do is be most efficient with our investment in employees’ health care.”
Back to basics
When it comes to the cost pressures, Sandra Ventin, associate vice-president at Accompass Inc. in Toronto, agrees she’s spending more time calming clients down. “A big question from a lot of our employers is, ‘Do I need a complete redesign?’” she says. Most come to realize, however, that they “can dust off our current tool kit” for managing costs for the whole plan, rather than make changes aimed only at specialty claims.
“There is a renewed interest in tools that are already out there, which is encouraging because it shows that plan sponsors are trying to do something. They are becoming more educated,” says Karen Kesteris, director of product and pharmacy management at Telus Health.
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One common measure for traditional drugs, mandatory generic substitution, appears to be taking hold. Data from Telus Health’s 2015 drug data trends and national benchmarks report indicate that 47 per cent of cardholders were in plans with mandatory substitution in 2015, up from 33 per cent in 2013. “We should see more of a shift in 2016,” says Kesteris.
Sun Life Financial, for example, began including mandatory generic substitution and prior authorization as standard features several years ago. “Historically, we left it to the client and their advisor to decide [what to include in their plans]. Now, because of the delicate balance for sustainability, we are imposing more of what we think should be the norm. If you’re not interested, it’s an opt out instead of an opt in,” says Jean-Michel Lavoie, assistant vice-president of product development at Sun Life.
Most plans appear to be getting on board with the new approach. By the end of 2016, 90 per cent of Sun Life’s plans included mandatory substitution — compared to just one per cent in 2010 — and 88 per cent had prior authorization.
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As for prior authorization, the past few years have also seen a systematic tightening of the criteria based on clinical guidelines. “Definitely, we are seeing a more robust approach to prior authorizations, so they’re not just a form [for the physician] to sign off on but really explore the circumstances of the need for that medication,” says Herbert.
Advisors and insurers also report more interest in managed formularies, a tool long used by public plans. Currently, four out of five plans still use open formularies, Kesteris estimates.
However, most plan sponsors are still hesitant about switching. “A concern that we frequently hear about managed formularies is employee disruption,” says Lisa Callaghan, associate vice-president for group benefit products at Manulife. “This speaks to concerns about change for members who are already on drugs. But when you properly implement change, it can be managed to support plan sustainability and, at the same time, deliver good member experiences.”
At Toromont, a managed formulary — with 100 per cent coverage for Tier 1 drugs and an out-of-pocket maximum of $1,000 for the second tier — has been in place for more than seven years. Mandatory generic substitution began in 2013, and the company has moved more recently to introduce a more rigorous prior authorization process.
Read: Toromont’s story of continued drug plan redesign
The key to employee acceptance is “communicate, communicate and communicate and be transparent,” says Wetherald. “We show exactly the savings that we expect to reinvest and we show exactly what employees would spend out of their own pocket if they don’t choose wisely as good consumers.”
Debating drug caps
While providers and some advisors argue that drug plan caps are un-Canadian because they go against the philosophy of group health insurance, they’re a growing reality, particularly for small- to mid-size employers with administrative services-only arrangements.
“I don’t like them and I don’t recommend them but I’ve had more discussions about hard drug caps in the last month than I’ve had in my entire 27-year career,” says Taylor. In his experience, caps typically range from $5,000 to $10,000 per year.
Most often, the caps are a backlash against rising costs for stop-loss insurance and a reflection of uncertainty about catastrophic claims. “For decades, stop loss has been marketed as pure insurance. Recently, though, insurers are framing stop loss as an in-year cap. This means that at renewal time, instead of pricing for a known risk, the risk may be transferred from the insurer to the plan sponsor. This is a game changer,” says Taylor.
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Plan sponsors may also be trying to force the hand of public payers. “When it comes to health care, whose risk is it really? Should it not fall under the Canadian health-care system?” asks Taylor. “If you want to truly offload the risk of the costs of specialty drugs, then you need a hard drug cap to force the government to be the last payer. Plan sponsors are beginning to see it as the only option.”
In British Columbia, such an approach has merit. The province’s universal drug program automatically kicks in when plan members reach an annual deductible based on income. Saskatchewan and Manitoba have similar systems in place. Statistics reflect the impact of such provisions: the 2015 Express Scripts Canada drug trend report indicates that claims for specialty drugs accounted for less than 20 per cent of spending by private plans in Western Canada. That compared to more than 30 per cent in the Atlantic provinces.
Where universal plans don’t exist, however, drug-plan caps are a gamble since there’s no ready mechanism to switch to public coverage. And while all provinces have some level of protection for catastrophic drug costs, restricted formularies, eligibility criteria and paper-based systems can translate into negative experiences for plan members, all of which can affect health and productivity.
Read: A primer on some of Canada’s catastrophic drug programs
There’s good news from Ontario, however. The government’s plan to automate its paper-based Trillium program by the fall of this year will significantly improve insurers’ ability to co-ordinate coverage with the public plan once plan members’ drug costs exceed a certain percentage of their income.
“This is a huge movement forward and very, very positive for private drug plans,” says Stephen Frank, senior vice-president of policy at the Canadian Life and Health Insurance Association.
Deals with drug companies
Among insurance carriers, product listing agreements providing for negotiated discounts from list prices with pharmaceutical manufacturers are a definite trend, most often for high-cost specialty medications. Research by PDCI Market Access Inc. and H3 Consulting in 2016 revealed that 56 per cent of 25 surveyed manufacturers, and four out of five participating insurers and pharmacy benefit managers, had completed at least one product listing agreement. By the middle of 2016, the manufacturers had completed or were negotiating an average of five agreements. As for the providers, they had completed or were negotiating close to seven agreements.
“We’ve been doing them since 2014, and this is going to be a huge focus going forward because so many biologic drug patents are expiring,” says Barbara Martinez, practice leader for benefits solutions at Great-West Life Assurance Co. “We expect to see very significant savings as a result.”
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An increasingly sticky point, however, is the inability of carriers to disclose the details of the agreements due to manufacturers’ requests for confidentiality. “Clients are becoming distrusting of insurance companies and big pharma companies,” says Ventin. “I believe that both organizations fundamentally want to do good, but there is a disconnect because they aren’t transparent with pricing. It makes clients doubt their intentions.”
Taylor is hearing similar concerns. “There is a growing lack of confidence and a real undercurrent of frustration due to lack of transparency. I’ve never experienced a time like this,” he says, adding that confusion over stop-loss or pooling insurance is also playing a part.
The feelings of distrust appear to be building now that the first significant product listing agreement has been in place for at least two years with most major providers.
“My clients know they’ve paid [a certain] price for a certain drug in Year 1 and they know that an agreement was put in place in Year 2, but their costs continue to escalate. It begs the question of what’s going on,” says Ventin.
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Insurers report what they can in terms of overall savings, but that may not be enough for plan sponsors concerned about their own claims rather than the providers’ entire book of business, says Ventin.
The confidentiality of product listing agreements “can be a tough spot” for insurers, says Martinez. “We are very transparent about what we can be transparent about,” she adds. “We are giving clients and advisors enough information to be confident that these agreements are real and are saving money.”
Callaghan expresses a similar sentiment. “The savings are real . . . and go directly back to plan sponsors and employees,” she says.
Going beyond drugs
No discussion of drug plan trends today is complete without addressing adherence and chronic disease management. The buzzword is targeted communications, and Canada’s three largest insurers confirm the availability or the imminent launch of programs that deliver health-related messages and reminders directly to plan members — by email, text message or mail — based on personal claims data.
“Based on what you claim and the disease we know you have, you receive pertinent information that could help with the disease or being adherent to treatment,” says Lavoie.
Read: Non-adherence a concern for plan sponsors
“And for prevention, we know a lot based on the person’s demographic and can send reminders for things like screenings and vaccinations. We have a couple of pilot projects on the go.”
Green Shield Canada has been sending medication reminders to consenting plan members by text message or email for about three years now, and preliminary data show improved refill rates and fewer cases of people filling prescriptions for chronic medications only once, says Ned Pojskic, pharmacy strategy leader at Green Shield.
Insurers emphasize, however, that medication reminders are just half of the equation.
“Managing disease is complex, and you really need to get at the root of it at an individual level,” says Callaghan.
As a result, some insurers are promoting the value of one-on-one coaching, particularly for plan members submitting claims for multiple medications for chronic conditions. Following a pilot project targeting plan members with diabetes, for example, Great-West Life is working with at least one national pharmacy retailer to bring in individualized coaching support for plan members. “Some very exciting new disease management programs are coming,” says Martinez.
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Other insurers, such as Green Shield and Medavie Blue Cross, already administer plans with disease management programs as standard benefits. And last fall, Green Shield announced a benefit for dietitian coaching in partnership with Loblaw and Sobeys.
Back at Toromont, such wellness programming is also a key focus. “At the end of the day, if we really want to reduce this investment, we need to invest more in keeping our employees healthy in the first place, so they don’t get sick and don’t incur the costs of medicine,” says Wetherald.
“I’m pretty passionate about this because . . . I’m seeing that it can be done.”
Karen Welds is a freelance writer based in Buckhorn, Ont.
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