Canadian companies should ask some tough questions and take a closer look at the way their employee drug plans are being managed or risk further benefit cuts, cost increases and even impacts to their own product or service pricing, according to a new white paper authored by Helen Stevenson.
Titled An End to Blank Cheques: Getting more value out of employer drug plans, the white paper addresses the issue of soaring prescription drug costs and their economic impact on plan sponsors, employees and retirees alike.
“Prescription drug costs can be managed, but changes need to be made,” said Stevenson. “If nothing is done, the steady rise in the cost of these plans will continue and may even lead to dire consequences. The activities in the public sector have raised awareness about the drug system issues and created an undeniable momentum toward change—time for the private sector to take action.”
Canadian companies, according to the white paper, spend about $200 million per week on prescription drugs, which translated into an estimated $10.2 billion last year. But while total health spending between 1985 and 2007 grew at an average rate of 6.6% annually, total drug expenditure increased by 9.2% for the same period.
Stevenson points at the four main factors that drive the cost of drugs upward:
• the willingness to pay for almost every new drug at any cost;
• not fully utilizing the potential of generic drugs;
• vast pricing and dispensing differences between pharmacies for similar drugs; and
• employee indifference about the cost of drugs covered by workplace plans.
To control drug plan costs, Stevenson offers plan sponsors a number of steps to get more value out of their drug plans. These include clarifying the purpose of the drug benefits plan; having the right information to make a decision; managing formularies better; promoting and educating employees about the appropriate use of generic and brand drugs; building buying power; driving consumerism; and reinvesting savings back into benefits.