Specialty drugs squeeze plans

par Alain Thériault | September 21 2011 05:37PM

As patents expired, generic drugs reined in private plans’ costs in 2010. Generic drug price reform introduced in a few provinces last year also helped control costs. However, group plans are being pressured by costly specialty drugs.

Drug expenses are constantly increasing, but at a slower pace. The two largest reimbursement service suppliers in Canada report that growth in drug sales is down from previous years.

Telus Health Solutions issued 2.9 million direct or deferred payment certificates in Canada in 2010. The company reported that sales to pharmacies in Canada grew by 1.4% in 2010 compared with 2009; the lowest rate in years, Telus announced at its annual meeting this past spring.

Cholesterol drug Lipitor’s expiring patent saved the day. This drug was the biggest seller in Canada in 2009, Telus confirms.

Telus expects that the reduction in cost per prescription will be negated by the rise in pharmacists’ fees, price hikes and an influx of new patented drugs.

The cohort of expensive claimants – who claim $10,000 or more per year – has also been growing constantly in recent few years. Biologic drugs predominate in their claims. In 2010, they represented more than half of the costs for expensive claimants in the $25,000 to $99,999 bracket.

In fact, few claimants fall into the expensive category. Christine Than, Telus account executive explains. For example, in Canada they numbered 26,898 as of Oct. 1, 2010, representing 0.75% of the certificates the service supplier issued in the country. (Editor’s note: one certificate may cover all family members). Many high cost claims involve the leading anti-inflammatories, she adds.

In its 2011 Pharmacy Outcomes Webcast on May 4, ESI Canada confirmed an upward trend in drug costs. Average annual drug spending per claimant rose from $736 in 2009 to $757 in 2010, for growth of 2.8%. This trend is much more pronounced than in previous years. From 2008 to 2009, growth was 5.4%.

ESI, which is a direct payment firm, concludes that specialty drugs are putting growing pressure on plan expenses. The aging population is another key factor stoking this trend.

Specialty drugs made up 17.5% of total drug expenses in Canada in 2010, ESI said. Drugs to treat arthritis, psoriasis and cancer are the main engines of the trend. Rheumatoid arthritis alone represented nearly 40% of expenses related to specialty drugs in Canada in 2010, according to ESI. Revlimid, a cancer drug, costs more than $100,000 per year.

New specialty drugs are constantly flooding the market, achieving instant popularity, ESI points out. Kuvan, approved in 2010, is an oral drug to treat phenylketonuria (liver enzyme deficiency). It sets insurer back $108,000 per year. Intravenous Ilaris used to counter cryopyrin syndromes – immune system diseases – costs $120,000 for an annual seven-dose prescription. No fewer than 87 cancer drugs will soon hit the market.

Furthermore, traditional drugs are often supplanted by specialized drugs. This trend is very apparent in diabetes and depression, ESI reports. The company predicts that diabetes will affect up to 10.8% of the Canadian population in 2020. This common disease has spawned popular specialty drugs such as inhibitors and new types of insulin.

ESI projects that specialty drug spending may rise by 40% in the next five years, to reach 25% of total expenses.

Spending control
High-cost drugs are not the perfect storm, Christine Than told the Insurance and Investment Journal in an interview. “Many costly molecules are hitting the market, but this trend is less accentuated than it was before.”

In the early 2000s, growth in sales to pharmacies peaked at 16.8%, Telus reports. The advent of costly drugs such as Vioxx, Celebrex, Remicade and Enbrel was the main driver.

Ms. Than thinks that generic drugs should be discussed among the pharmacist, insurers and their advisors and ultimately the plan sponsor.

Sponsors should tighten control on spending within their plans. During its Webcast, ESI advised private plans to trim waste via various methods. For one, plans would gain by forming preferred pharmacy networks and setting a ceiling on fees and increases. They could also benefit from using direct reimbursement drug cards. These cards allow better control at points-of-sale.

They could also maximize the potential of generics by introducing drug management via a tiered list. Monitoring compliance with treatment and “managing” illnesses are also effective solutions.

Plan sponsors should also manage cases involving specialty drugs. Prior authorization before use and integration in a provincial plan would be steps in the right direction.

For the trend to increase at the pace seen in 2010, regulatory reforms initiated in certain provinces must continue and spread to other provinces, ESI argues. Approval of new specialty drugs should be postponed. The repercussions of new generic drugs should also be better understood.

Alain Thériault

Post-2011: some relief expected
Several provinces took measures in 2010 to reform the pricing of generic drugs. Other provinces will soon follow the lead of Alberta, British Columbia, Ontario and Québec.

30% of drugs will soon come off patent, ESI Canada points out. This year, the expiration of Diovan and Avapro patents will be a balm for ESI’s private plan clientele, with commitments valued at $800 million.

Patents for Crestor and Plavix will free up the same amount when they end in 2012. In 2013 and 2014, the expiration of the Celebrex and Cipralex patents will allow savings of another $800 million.

Top 10 medical cost drivers in Canada in 2010

1. Cholesterol disorders
2. Hypertension
3. Depression
4. Diabetes
5. Rheumatoid arthritis
6. Ulcers
7. Asthma and other inflammatory diseases
8. Antibiotics/Anti-infectives
9. Narcotic analgesics
10. Skin disorders
Source: Telus Health Solutions

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