Employers getting in the way of lower pharmaceutical costs

by Will Ashworth08 Jan 2016

It’s not intentional by any means but in an effort to keep employees happy, says one industry expert, employers are actually doing the opposite.

The good news is the problem is entirely solvable.

“The issue in the Canadian environment is not that the providers can’t do this [lowering costs for group plans through different formularies] but are the plan sponsors ready to communicate this to their employees and why it’s so important,” said Stephen Frank, CLHIA vice president of policy development and health. “Are the employers ready to take this on? We’ve seen employers move a bit more slowly than we had hoped and lot of this is a nervousness about upsetting employees.”

It’s understandable for employees to be hesitant about changes to formulary, Frank suggests.

“When you say to someone your physician’s prescribed you drug A, but we’re going to make you take drug B for 6 months to see if it works, you have to do some explaining to people as to why that’s the right thing to do. Why we want to push them through these steps and why costs are important. Some [employers] are ready to take this on and some aren’t there yet.”

But assuming a plan sponsor is on board with actively managing and designing the group plan to mitigate costs, the solutions are numerous and easily implemented.

“It can be very simple things like ensuring that you’ve got generic substitution so you’re using generics to the greatest extent you can,” said Frank. “A generic drug in Canada is roughly 20% of the cost of the brand. Those are enormous savings that plans can get if they move aggressively into generics. More plans do that but still a lot don’t.”

Beyond the obvious move to generics there are other things that plan sponsors can use to mitigate costs including pre-authorization of certain drugs, step therapy where a cheaper drug is first used before moving to a more expensive one as Frank described earlier, case management, etc.

None of these solutions would have been available five years ago but today almost every insurer in Canada can provide all of them; the question is whether they will or not.

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