| Mike McClenahan, GBA, CEO
In the April 2011 bulletin, I outlined the rapidly changing drug landscape in Canada and some of the implications these changes have for employer sponsored group insurance programs. In the second article I will focus on strategies employers can pursue to help safeguard the affordability of drug plans while maintaining protection for their employees.
To recap my previous article, employers are faced with both challenges and opportunities with respect to their benefit plan's drug coverage. Recently, many provincial governments, including B.C., Alberta and Ontario, have enacted legislation focused primarily on reducing the cost of generic drugs for both public and private plans. Longer term, the introduction of more speciality or biologic drugs will put significant upward pressure on the cost and affordability of these programs.
In an attempt to respond to this dynamic drug environment, the stakeholders, including insurers, pharmacy benefit managers, consultants, third party administrators and employers, are exploring and implementing innovative strategies. As Mike Sullivan, President of Cubic Health Inc., states "this is an exciting time for Canadian plan sponsors with respect to the solutions available to manage prescription drug plan costs. There has been more innovation emerge in the last year than over the past 8 to 10 years combined. Stakeholders are lining up to deliver better relationships with private payers, and the technology exists to support these innovations". Sullivan contends "this should allow plan sponsors the ability to extract far more value from their investments, and result in better health outcomes for their members".
There are a number of steps employers need to consider when designing their drug plan, including:
· Deciding on their drug plan philosophy
· Partnering with an effective pharmacy benefit manager (PBM)
· Employing plan design tools and communication tactics to help make employees better consumers of the plan
Drug plan philosophy
There are two key players in drug plan management: the plan sponsor and the PBM, and they both have a responsibility to drug plan management. First, at any given time, plan sponsors need to know their drug plan philosophy. Are they paternalistic - covering everything for everyone - or are they more restrictive - covering for only those who need it? If you don't have a plan philosophy, then plan sponsors should work with their advisors, and PBMs, to develop one. And, for those who do have a clear drug plan philosophy, it's always a good time to revisit, especially given the trends anticipated over the next 5 years - no more blockbusters, no more generics, more biologics.
In speaking with Sal Cimino, Director of Pharmacy Services for Green Shield Canada, he had some words of caution for those plan sponsors who don't think they need to make any adjustments to their philosophy. "A plan sponsor whose philosophy is more paternalistic - wanting to cover everything for everyone - may have to change their philosophy in the near future as drug plan costs are going to become unsustainable."
Choosing the right PBM
Not all PBMs are created equal. Within the cost of any prescription there are three components, being the manufacturer's price, markup and pharmacy dispensing fee. Where any part of the drug price is unregulated, PBMs negotiate with the pharmacies. Therefore, it would bode well for the employer to ensure that the PBM has favourable pricing agreements with the pharmacy. For example, can they track generic pricing and exceptions and do they have fee and markup controls in place?
Next, explore what plan design options the PBM offers for controlling drug costs. As Keith Foot of Automated Administration Services explains, "generally, employers can't control the cost of the drug but they can influence the cost of delivery". For example, Foot promotes the value of using a pay direct drug card. He adds, "although some PBMs still charge higher premium for direct pay cards, the old 'shoebox' theory of cost control associated with paper reimbursement plans no longer applies. Only with a pay direct system can the PBM and employer take advantage of the point of sale tools, such as coordination of benefits and concurrent drug utilization review, which reduces the risk of waste as a result of a drug conflict.
Plan design tools
Most employers have become more agreeable to the concept of a user-pay model. Common plan design features include a copay (e.g. Dispensing fee deductible) or coinsurance (e.g. Employee pays 20% of the cost of the drug).
The PBM also needs to be managing high cost drugs - as this is the fastest growing trend that is going to cripple some plan sponsors' benefit plans. A Prior Authorization program must be in place, and specifically biologics are a must for any PBM to be managing. As Camino comments, "Green Shield introduced a Biologic Management Policy because we could see the trend developing." Camino adds, "the important thing to note here is that it looks like plan sponsors are saving - but not at the detriment of plan member care. That is key."
The final but essential step in the process is developing an effective communication strategy. As the plan design techniques become more complex (e.g. Managed formularies), the advisor must work closely with the employer to ensure their employees are aware of the plan philosophy and how they can manage their coverage.
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