At 1.9% in November, the Bank of Canada's measure of the rise in the cost of living, as measured by the overall consumer price index, prompted the Bank to lower its key interest rate to 3.25%, down from the peak of 5.00% held from July 2023 to April 2024.
So, while the rising cost of living should be less of an issue for Canadians this year, inflation is still a major problem in group insurance, due to rising drug costs. There's no sign of it slowing down in 2025.
In fact, the Patented Medicine Prices Review Board (PMPRB) has observed a sharp rise in new drugs in the pipeline, according to its Meds Pipeline Monitor report, released on Nov. 5, 2024.
Sharp rise over the past 5 years
In this report, the PMPRB reveals that over 12,000 drugs were in various stages of clinical development in April 2024. This compares with just over 9,000 in 2023. The PMPRB report reveals that the number of drugs in the pipeline has increased by an average of 19% per year since 2019.
Oncology continued to dominate the therapeutic mix in 2023, says the PMPRB report. It explains that cancer treatments accounted for one-third of medicines in all phases of clinical trials. New cancer drugs often fall into the high-cost category, those costing $10,000 or more in terms of annual treatment costs.
“Treatments for infectious diseases and central nervous system diseases held the second and third largest share of the pipeline, at 13% and 12% respectively,” adds the PMPRB in its report.
In the chart below, the report presents the number of new medicines for each phase of clinical evaluation over the last five years for which the PMPRB has complete data.
Chronic diseases
In its Cost Drivers Report 2024: Analysis of Private Drug Plan Trends in Canada, Innovative Medicines Canada points out that drugs for chronic diseases remain a major driver of claims costs. “They account for 72.3% of private drug plan claims costs, and 80.1% of the growth seen in 2023,” it states.
Innovative Medicines Canada reveals that the chronic disease category accounts for three of the four fastest-growing therapeutic areas, and 69.3% of claims for drugs under $10,000.
Wegovy and weight control
Inflation in claims for new anti-obesity drugs began to pick up steam on May 6, 2024. That's when the Wegovy brand semaglutide arrived on the Canadian market. Novo Nordisk launched this drug in a hurry to relieve the pressure on its Ozempic product.
Intended for the treatment of type 2 diabetes, Ozempic has proved popular with overweight individuals. Injections of semaglutide has the side-effect of suppressing appetite. Misuse of this diabetic treatment has led to a shortage of the drug’s active ingredient.
Negotiations with pharmas
Insurers have high expectations for their negotiations with major pharmaceutical companies. Beneva's Connecting the dots: 2024 health trends and insight newsletter, revealed that its ongoing negotiations with drug manufacturers have resulted in price reductions for more than 40 covered products within its insured groups.
In its newsletter, Beneva reports that benefit payments for high-cost drugs increased by 34% annually over the past three years (ending in 2023). Of these costs, 80% come from recent innovative treatments. These include Trikafta, manufactured by Boston-based Vertex Pharmaceuticals. Used in the treatment of cystic fibrosis, this drug, described as “groundbreaking” in the insurer's newsletter, can cost more than $300,000 per patient annually.
Beneva found that the increase in benefits paid to policyholders for all drugs averaged 7.5% over the last three years. Specialty drugs account for a large proportion of this growth. “The steady rise in prescription drug costs is significantly driven by a surge in claims for specialty drugs, particularly those costing over $100,000 per year,” it states.
According to the 2024 report from Express Scripts Canada, a payment services company for group plans, the overall increase in drug reimbursements reached 5.2% in 2023, compared with 2022. Of total reimbursements, 74.2% are for traditional drugs and 25.8% for specialty drugs.
Facts on diabetes and obesity
Specialized group insurer GreenShield produced its own claims report, 2024 Drug Trends. Among its key observations, the report reveals double-digit growth in drug costs and claims in the diabetes category, driven by the mass adoption of expensive prescriptions to treat and prevent complications.
For weight control, the cost of non-specialty drugs in the $1,000 to $1,999 range is growing the fastest, in part due to obesity drugs, whose costs have increased by 45% and the number of claimants by 48% since 2022, says GreenShield.