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Biologic drugs must be managed to contain costs

By Susan Yellin | August 17 2012 08:06PM

An aging population plus the growth of new “biologic” drugs are increasing the cost of drug plans for many participants. But a recent conference held in Toronto was told that plan sponsors willing to provide meaningful information and communicate changes effectively with participants should see sustainability for those plans over the long term.and procedures have increased over the past years, but the share of one cost in particular, those of biologic drugs, has grown to 12.3 per cent of total business in 2011 from 9.4 per cent in 2007, said Steve Moffatt, chief operating officer at Green Shield Canada.

Biologics make up a growing class of drugs. Unlike chemically synthesized drugs, biologics are generally derived from living material, whether human, animal or a microorganism. While biologics are not new – insulin was first created in Canada in 1923 – their numbers have increased in recent years and include products such as Herceptin, a breast-cancer drug, Enbrel, a rheumatoid arthritis and psoriasis treatment, as well as drugs that help relieve symptoms from Crohn’s disease and ulcerative colitis.

Many of these new drugs have been found to be very effective, but they come with a high price tag. One cost cited during the conference was $450,000 a year for the drug Solaris, which is used to treat a rare blood disorder. Recent public stories on Herceptin give $40,000 as the amount for a course of treatment for a breast-cancer patient, consisting of intravenous medication provided every three weeks for one year.

Aging population

An aging population has also added to the increased use of drugs, with about 80 per cent of the $31 billion spent annually on drugs used for the cost of medications to help those with age-related illnesses including diabetes, respiratory ailments, depression and hypertension. About 50 per cent of Canadians are obese, he said.

Mr. Moffatt told a Benefits & Pensions Summit that both employees and employers highly value their drug programs, and in fact, 75 per cent of plans have no annual maximums for drugs. But both sponsors and participants of these plans are now concerned about the sustainability of their plans. The cost of both biologics and regular drugs needs to be managed to prevent skyrocketing prices that would significantly alter the current makeup of many prescription drug plans, he said.

Good health is a start, said Mr. Moffatt, noting that companies should try to inspire behavioural change. Step one is communicating and promoting good health to employees and their families who are also covered under the programs.

Managed drug formularies

He suggested that the cost of biologics to health-care providers can be contained through managed drug formularies, which work to find the lowest cost drug first. If the first product doesn’t work, the patient could then move up the tier to progressively more expensive drugs until the desired medical treatment is attained.
“Biologics can be managed,” said Mr. Moffatt. “It’s a must.”

He said despite the 2008 economic crisis, many plan sponsors made no changes to their plans. But the crisis dealt the manufacturing sector a setback of major proportions and changes had to be made to reduce costs to their drug plans. Since that time, many companies in the manufacturing sector have been able to reduce their spending throughout 2008, 2009, 2010 and 2011 – by capping out of pocket fees, moving from brand name drugs to generics and reducing co-pay fees, Mr. Moffatt explained.

A subset of that sector, the Canadian Automobile Dealers Association (CADA), also has some worries about the rising costs for its plan, called CADA 360. “The program was specifically designed to make plans affordable...and we were concerned that small employers faced with higher costs would drop out,” said Catherine Jay, director, governance and plan management with Benefits 360 Health and Welfare Trust with the CADA. A committee of dealer trustees manages the CADA plan. However, each dealership policy is renewed individually and each dealership chooses its own plan design.

Drug pooling costs were increasing annually and members were also concerned about the rising costs of biologics, Ms. Jay told the conference.

CADA had a number of major audiences it needed to convince that changes were needed to the plan: the committee of dealer trustees, advisors who work with dealer-clients, the dealers themselves, administrators and the dealer employees.

One part of the proposal being put forward is to implement less expensive drug substitution through generic drugs. Some 51 per cent of its drug claims came from brand names, representing more than 70 per cent of the claim dollars, said Ms. Jay. On the flip side, the remaining 49 per cent of generic claims represented only 28 per cent of the claim dollars.

Meanwhile, a number of major brand name drugs are expected to reach the end of their patents in the next few years, which could provide a potential savings of as much as $3 million.

Ms. Jay said the proposal, which includes a cap on dispensing fees and a $2 million lifetime health maximum, has been communicated to all the groups for the past six months through email and paper mailings. While there was been some initial opposition from advisors, there has not been one complaint from dealers.
“The pushback from advisors was quite surprising, but it has settled down [with more communication and education],” she added.

Work still needs to be done on the plan, including deciding on the timing of the plan and education to advisors, dealers and employees.

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