Hepatitis C, an infectious and potentially fatal virus that harms the liver, is set to spur the largest drug spending growth in the country in more than a decade, a situation that could affect some health benefit plans, a group insurance seminar in Toronto was told in May.“I believe we are now in an era of what I call catapulting growth that we are going to be seeing in the next few years,” Barb Martinez, practice leader of drug benefit solutions with Great-West Life, told a Canadian Group Insurance Brokers session in Vaughan, Ontario.
Drugs that can cure Hepatitis C are generally biologics – drugs derived from living material, whether human, animal or a microorganism, rather than chemically synthesized drugs. Many biologics have proven to be very effective in treatment for everything from cancer and cholesterol to rheumatoid arthritis and Crohn’s disease.
However, they can be expensive, especially compared with generic or other chemical-based products. In 2008, biologics represented about 12% of Canadian drug spending, but grew to about 22% by the end of 2013. “We are only going to see this trend continue as new drug development leans typically to biologic drugs,” said Martinez. “That’s where the greatest opportunities are for drug manufacturers, where the greatest benefits are for patients and where future drug development is largely headed.”
Total drug costs in Canada in 2013 stood at $22.2 billion, translating into 574 million prescriptions. At that time, generic drugs made up less than one quarter of the total. A year later, total drug costs had grown to $23.3 billion and 599 million prescriptions, but with about 67% of that coming from generic drugs.
Insurers, said Martinez, are trying to encourage the use of less expensive generic drugs wherever and whenever possible. “This way we can free up the money we need for those high-cost drugs [like biologics] where there is no generic alternative and where we can make a real difference to plan members.”
Patent cliff
Part of the reason for the increase in generic drugs stemmed from what is known as the “patent cliff,” when patents for relatively new brand name drugs ended and generic pharmaceuticals rushed in at lower cost. Martinez said the patent cliff represented the loss of about $8 billion of brand name drugs in Canada.
At the same time, governments regulated the price of those generics to be lower than ever before. Martinez said about five years ago, if a brand drug cost $100, a generic would follow at about $65. Nowadays, if a brand drug costs $100, governments have mandated that the ensuing generic must cost $18-$25, unless there is an exemption.
But Canada is not likely to see another patent cliff at this time and Martinez doubted there will be another round of drug reform to lower prices of newer, more costly drugs.
Martinez said biologics that totally cure Hepatitis C are now hitting the market and will encompass a huge part of the Baby Boomer generation.
“It will probably be the No. 1 subject you will be discussing with your clients in 2015,” Martinez told the insurance brokers. “It’s going to hit a huge number of clients.”
It’s believed there are about 300,000 Canadians who are infected with Hep C, although only about half are aware of the diagnosis. Older drugs have not been very effective and many have significant side effects during the recommended 12 months of treatment.
However, she said the new generation of drugs are very effective, with a 90% cure rate and fewer side effects during a 12-24 week regimen. Costs for the Hep C biologics run about $100,000-$150,000 per person.
The Canadian Liver Foundation is recommending that all those born between 1945 and 1975 be screened in the next year. Now the industry is bracing itself for what it expects to be a large increase in the number of Hep C patients looking for treatment, putting an onus on company benefit plans.
In the past, the actual medicine in many generics was identical to that in the earlier brand name drugs. But while some second-to-market drugs try to mimic the effects of true biologics, the two are not identical. “That means we won’t be getting savings the way we have with other drugs in the past,” Martinez said.
She said insurance carriers are aware that doctors tend to prescribe the newest drugs first, especially if a patient has a drug plan. But assuming all the drugs have the same effectiveness, Martinez said they should really start prescribing with the least expensive option and work their way up.
Top-down approach
“The reality is that doctors tend to have a top-down approach to prescribing. And we as carriers want to try to reverse that and get a bottom-up approach.”
Martinez also suggested that companies encourage employees to learn about this and get them to ask for the lower priced drug first.
Cathy Fuchs, practice leader and founder of White Willow Benefit Consultants, said most employers want to keep the kind of coverage they have – at least for now. “They really do want to keep coverage for biologics.”
Fuchs has suggested to her employer clients that they encourage their employees to ask first for the less-expensive-yet-still-effective options available to them.
She said some employers may want to use the bucket imagery of who puts money into their health plan and what it’s used for. “Even though your cheque comes from the insurer, it’s really your employer [who is paying]. All services are paid for through the bucket and it’s not an unlimited source of funds.”
The CGIB seminar also had a discussion about the Trillium Health Plan. Known as a payer of last resort, it kicks in only after a household has exhausted all other sources of insurance. The plan, based in Ontario, requires a deductible of about 4% of the household’s combined net earnings before it begins.
“The scary part of all of this deals with biologics coming onto the market,” said independent financial planner Heather Freed, who attended the seminar. “On this plan, you can see that 4% can evaporate really quickly.”
As well, co-ordinating how private insurance and Trillium work, especially at the pharmacy counter, has been an issue among insurance brokers for many years.
Lack of coordination
Dave Patriarche, who founded CGIB and Mainstay Insurance Brokerage, said Trillium can handle the claims that come its way, but co-ordination with insurers isn’t there.
“As a result, many brokers take the easy way out by capping drug costs and forcing integration with Trillium if and when it will pay.”
Martinez acknowledged this has presented a challenge for carriers, especially when other health plans are involved.
“We all have different criteria. Some people may be eligible under the Ontario Drug Benefit Plan but after six months…they might have to submit some tests to show the drug is working,” she said. “We have different criteria – [such as] spousal plans that involve other insurers and it’s really difficult to co-ordinate.”
She said Manitoba, British Columbia and Saskatchewan have systems that have integrated the public and private systems.
“So when an employee submits the claim to one payor and it’s the wrong payor, it’s automatically shoved to the second payor,” she said. “Our systems don’t talk to each other. There isn’t a way for us to easily communicate and that’s the real challenge.”
