The high cost drug landscape
Over the past decade, on average, prescription drug plan costs have increased between 9-12% each year. These increases have largely been driven by blockbuster drugs such as Lipitor and Crestor. However, the face of the prescription drug landscape is changing. Recently, cost increases have slowed due to drugs coming off patent and legislative changes to generic drug prices. Meanwhile the cost and claiming frequency of high cost biologic drugs continues to increase.
In fact, according to our 2010 data, the total annual cost associated with specialty medications was 97% of the total annual cost of acute medications (such as antibiotics). Based on our figures, the average annual cost per claimant for specialty medications claims is over 136 times higher!
Medical advances have led to a significant increase in the number of high cost prescription drug therapies. Although their annual costs can be considerable (sometimes well over $50,000 per year), these medications are often life-changing.
Forecasted growth in the number of high cost drugs available and prescribed in the Canadian market is causing concern among plan sponsors and insurers. This scenario could result in strain for both the plan sponsor trying to control the rising cost of a renewal, and the plan member who may be facing a reduction in coverage of his or her drug therapy. Given the life-changing nature of these blockbuster drugs, we believe the best approach to managing these costs is the combination of a strong prior authorization process and a mechanism to spread the potential costs across the industry.
The industry solution
Canadian life and health insurers have come together to offer a new drug pooling framework, designed to help protect private benefits plans from the impact of high cost drugs.
