Founder of ‘Moneyball for health benefits’ says employee plans unsustainable

by David Keelaghan18 Nov 2016

As a former pharmacist, Mike Sullivan knows better that most how much of an impact spiralling drug costs are having across Canada. That goes for patients of course, but also employers, insurance companies and, ultimately, the pharmaceutical companies themselves. Big Pharma is certainly no fan of Sullivan presently, particularly his efforts to highlight exorbitant price increases ongoing in the industry. He describes his analytics company Cubic Health as “Moneyball for health benefits,” serving employers in their efforts to try and reduce the cost of prescription drug plans. His clients tend to be larger companies, and if they are blanching at the sight of some of these drug bills, then imagine how small-to-medium sized firms are faring. 

“We are in a world now where some of these speciality drugs have a six-figure annual cost,” says Sullivan. “A group we just started working with were hit with a claim that will cost them $280,000 per year, indefinitely.”

The rise in drug costs has been linked to the emergence of new speciality medications for lesser known illnesses. As Sullivan notes, however, more common diseases such as diabetes contribute plenty to soaring prices too. 

“For diabetes, there is at least three new classes or drugs that didn’t exist ten years ago, so now the cost to treat diabetes is substantially higher. It’s a bizarre market because prices are all set on the brand side by a group called the Patented Medicines Prices Review Board. The generics are all pegged to a percentage of that, so really there isn’t a free market in drugs here.”

Having studied the data at some length, the Cubic Health founder believes the current system is unsustainable, with far reaching implications for a host of different industries. He is already seeing many employers buckle under the strain of funding drug benefit plans, so it’s not that surprising many are considering putting a cap on benefits, or even eliminating them outright. In his opinion, simply ignoring the problem will eventually make it much worse, as it would with any medical malady.

“Some people look at what we do – responsible cost containment – as a negative,” he says. “Pharmaceutical companies, insurance companies, plan advisors are traditionally not big fans of what we do. [But] a lot of people stand to lose tremendously if people [employers] start to say enough is enough. I think it is in everybody’s interest to sort this out.”


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COMMENTS

  • by Bruce 2016-11-21 3:39:49 PM

    not sure where the idea comes from that insurance companies and plan advisors are not fans of managing drug costs.
    anything that keeps plans in place is preferable to cancelling plans outright. and by the way, Stop loss protects employers from claims over (usually) $10,000 so it doesn't matter if a drug claim is $10,001 or $100,000, it makes no difference to the employer, unless they want that risk themselves, which seems to be the case with Mike's example. And what is the point of the article? That plans are unsustainable? thanks, no options or suggestions?
    there are plan maximums, there are Provincial plan formularies, mandatory (in Ontario) application to Trillium? Small to medium employers have options now. and by the way, there's a lot more to group benefits than drugs, and don't forget the effective use of the tax laws.