2015 Drug Data Trends and National Benchmarks

Scientific breakthroughs are delivering new treatments that don’t simply relieve symptoms, but offer cures for previously untreatable diseases. Unfortunately many of these new treatments come with a high price tag, which poses a significant threat to the long-term sustainability of private drug plans. While the cost of drugs is one important concern, it is not the sole challenge. It is no longer enough to assess plan sustainability by measuring year-over-year increases of drug costs. To get the real picture, we need to correlate other impact drivers, including medication management, disability and employee productivity. We need to find ways to reduce costs, while still ensuring patients have access to much needed treatments.This report provides key data and insights relating to claim trends, cost drivers, medication management as well as cost savings strategies that can help plan sponsors do exactly that. More than ever before, it is critical that plan sponsors ensure they are making the optimum use of traditional programs and implementing tighter controls around approval for high-cost drugs. All players in the private drug plan chain must ensure they are contributing to managing the acquisition costs of medications. Although specialty drugs have a significant impact on growing drug plan costs, they represent only a small portion of claimants with complex diseases that have few other treatment options. There are, however, a large number of plan members whose claim costs can be mitigated by innovative plan design features that can reduce costs without causing major impact on the plan member experience.

Terms of Reference

  • The information in this report is based on an analysis of prescription drug claims processed by TELUS Health who adjudicates for 12 million lives.
  • The data used for the analysis was sourced from the TELUS Health Data Warehouse as of March 2016, reflective of the age group 0 to 64.
  • Cardholder: a person who is insured by a contract provided by a plan sponsor, also referred to as a beneficiary.
  • Primary Cardholder: the employee only without dependants.
  • A Cardholder: the covered employee and dependents.
  • Certificate holder: primary cardholder.
  • Claimant: the cardholder making a claim, i.e. patient.
  • Eligible costs: the cost of the drug found eligible by TELUS Health. This measure does not take into account the deductible, co-insurance or other private drug plan features.
  • Adjudicated amount: amount paid by TELUS Health incorporating the private plan features.

2015 Retrospective: trends in claims data

2015 claims data demonstrates that the increase in number of claims is not the principle driver behind increasing drug plan costs. Drug plan costs continue to rise and are impacted by the number of claims or claimants, and the cost per claim. In 2015, on average, each cardholder had 6.2 claims per year (Chart 1), which is up slightly from 2014. The average annual eligible cost per cardholder is $424, which has increased 7.1% over the last three years (Chart 2). The average cost per claim is $68.81 (Chart 3), which has increased by 6.4% over 3 years. However, looking at these costs across Canada there is significant regional variation.

Average eligible amount per primary cardholder

The average eligible amount per primary cardholder surpassed the $1,000 mark and grew by 4% over 2014. There were significant variations in the claim amount and growth across the country; Quebec had the highest at $1,200 and Western Canada had the lowest cost at $768. Ontario has the lowest growth rate at 3.1% and Atlantic the highest at 12.4%.

2015 eligible and adjudicated cost per claim

If we compare eligible cost (what is billed by the pharmacy) versus adjudicated amount (what is payable by the plan sponsor), Quebec has the lowest adjudicated cost per claim, however on average each Quebec claimant submits over 14 claims in the year compared to 9 in Ontario. Therefore each prescription represents a smaller drug quantity and will therefore cost less.The difference between the eligible and adjudicated amount is the copayment paid by the plan member or another third party. The largest gap is in Western Canada, which is reflective of the provincial pharmacare plans that absorb much of the cost after the plan member’s out-of-pocket deductible is reached. The smallest gap is in Quebec which reflects RAMQ’s out-of-pocket maximum limit imposed on employer sponsored drug plans for products on the Quebec formulary.To better understand why drug plan costs are rising we need to take a closer look at the cost drivers behind the increases.

2015 Retrospective: cost drivers

The two primary cost drivers are an aging population and drug mix. As people age, their average eligible drug costs increase, particularly in their 50’s. Generics are showing a growth trend in their share of claims and the fastest growth in costs is for high-cost non-biologics specialty drugs.

2015 distribution by age and costs

Aging population: 50- to 60-year-olds represent 27% of all TELUS Health eligible costs.

In 2015, plan members in the 50- to 60-year-old age bracket had the highest claim expenses, representing 27% of all TELUS Health eligible costs, a growth of 6.7% from 2014. Those in the 60- to 69-year-old bracket had the highest eligible cost growth rate from 2014 to 2015 at 10.9%, but had the second highest total eligible claim costs at 21% of the total. Although aging is one factor that drives up drug plan costs, the introduction of new medications also needs to be considered. Although many of these new treatments offer significantly improved health outcomes that can positively impact productivity and the company’s bottom line, they come at a cost.

Drug mix as a share of adjudicated amount

Brand drugs can be categorized as multi-source or single source. Multi-source are brands that have a generic version on the market and single-source brands are typically newer products that still have patent protection and do not yet have a generic alternative. When we compare the adjudicated (or plan paid) amounts of generic versus brands (Chart 7), the sin- gle-source brands represent the largest cost, and their market share has increased year-over-year, whereas multi-source brands’ share has decreased. The adjudicated amount paid for generics has dropped, reflecting the much lower generic prices due to recent provincial drug reforms and lower generic prices mandated by the pan Canadian Pharmaceutical Alliance (pCPA).

Drug mix as a share of claims

When we consider the split between the number of generic claims and brand claims over the years, the number of generic claims has increased. This reflects the increased use of mandatory generic substitution in private drug plans.

Drug cost versus drug type for branded single-source specialty drugs

There are significant differences between single-source brand products when we compare them by relative cost and number of claims, as well as type of drug. High-cost or specialty drugs are those that are over $10,000 per patient annually (as defined by TELUS Health and described below) and biologic drugs are those that are derived from a living organism rather than a chemical process.High-cost non-biologic drugs had the fastest growth trend over the past three years in terms of claim costs, however the relative number of claims is low. This can largely be attributed to the recent introduction of new Hepatitis C treatments over the last 12 to 24 months.Low-cost, non-biologic drugs decreased in cost, primarily due to generic drug pricing reform and the patent cliff, where in recent years many high volume brand drugs lost their patent protection and allowed lower cost generic products to enter the market. High-cost biologic drugs saw only a small increase in cost and number of claims. Low-cost biologic drugs, which include those such as insulins and vaccines, also saw minimal changes in cost or volume of claims.Since high-cost, or specialty drugs, had such a significant overall impact on drug plan cost trends, it warrants taking a closer look at these medications.

Specialty drugs

Defining specialty drugs

Although there is no formal industry definition of specialty drug, TELUS Health categorizes it as:

  • a drug that has a high-cost based on a potential per patient amount exceeding $10,000 per year;
  • may require special medication delivery (e.g., special handling, preparation, administration, storage, or distribution);
  • may require complex treatment maintenance (e.g., complex disease, complex dosing, intensive monitoring and clinical management).

It is important to note that although many specialty drugs are biologics, not all biologics are specialty drugs Biologic drugs include insulin and vaccines, which are relatively low-cost. In addition some specialty drugs are not biologics – drugs to treat hepatitis C are high-cost, but not biologics.

When we look at what has been driving growing drug plan costs, the increases over the past seven years can largely be attributed to specialty drugs (Chart 11). The number of new specialty drugs has more than doubled in the past seven years. In 2008 biologics dominated the specialty drug category; however in 2015 the majority of specialty drugs were non-biologics (Chart 12). Specialty drugs have grown to almost a quarter of total costs but represent less than 1% of claims (Chart 13). When examining the average per claimant drug cost, the average specialty drug claim has grown from $15,000 per year in 2008 to over $20,000 in 2015 (Chart 14).

Year-over-year spending on specialty drugs has exceeded non-specialty and all drugs overall every year for the last six years. The compound annual growth rate (CAGR) for specialty drugs for the period 2008 to 2015 was 19% versus 3% for non-specialty drugs (Chart 15), a trend that is likely to continue. In 2014, the number of specialty drug approvals surpassed traditional drugs (Chart 16) and this trend is also likely to continue. Currently approximately 40% of drugs under Health Canada review are specialty and more than 60% of future new drug approvals will fall into this category.

2015 Retrospective: trends in medication management

As the population ages and new drugs come to market, the impact of different therapy classes and specific drugs can shift over time. Understanding the effect of specific conditions on drug expenses provides insight into potential areas of focus for prevention and disease management programs, as well as drug plan management tools.

Top 10 drug classes by adjudicated amount

When we examine the top ten therapy classes by adjudicated amount, immunomodulators (which includes drugs to treat conditions such rheumatoid arthritis, Crohn’s disease and psoriasis) remain the top ranked class and their market share increased from 2014 to 2015. Diabetes treatments remain second and their market share increased in 2015 due to the introduction of new drugs. Cholesterol disorders’ market share dropped to tenth place from ninth in 2015. Hepatitis is new to the top ten ranking, which is not surprising due to the impact of the new treatments introduced over the last 12 to 24 months.

Top 10 drug classes by claims frequency

When we compare the top ten classes by claim frequency, different categories rise to the top, with the rankings not having changed much between 2014 and 2015.

Top 15 single-source brands by adjudicated amount*

*Eligible cost includes mark-ups and dispensing fees

In 2015 the top fifteen single-source drugs by adjudicated amount included three immunomodulators, two drugs to treat hepatitis, two drugs that treat diabetes and two for asthma.While some conditions can be prevented by health, wellness, and disease management programs, other more complex conditions are the unfortunate result of the genetic lottery, and are neither preventable nor manageable without access to some of the newer more powerful specialty drugs. When considering how to manage a benefit plan, it is important to consider what and how different conditions will be impacted by different plan designs.

The road ahead: cost saving strategies

Plan sponsors have strategies at their disposal to save costs, and yet many do not employ them. Generic substitution, cost sharing, prior authorization, and biosimilars are all important levers that can lead to significant savings.

Levers to manage drug costs

Plan sponsors have several levers to manage drug plan costs that have been under-utilized for many years. The different plan design tools can impact the way drugs are used by their employees and can positively impact the bottom line.Yet, research indicates that despite facing drug plan cost increases, 70%1 of plan sponsors did not change plan designs, and only 42%2 of plan sponsors anticipate making drug plan design changes in the next two years. 33%3 of plan sponsors do not have programs in place to respond to claims for higher-cost specialty drugs.

Maximizing generic drug savings

Currently one of the more utilized cost savings plan design options is generic substitution.In 2015, 78% of TELUS Health cardholders had a generic plan: 31% in a traditional generic plan, and 47% in a mandatory generic plan. This is a nominal increase from 2014, with the largest growth in mandatory generic plans.

Generic substitution potential savings (Ontario claimants 2014 & 2015)

A TELUS Health case study using Ontario claimants between ages 30 and 50 years old was developed to measure potential cost savings that could be generated by implementing a generic substitution plan. This was done by comparing the average prescription cost for plans with and without generic substitution. In this situation, a regular generic plan offered 0.7% savings while a mandatory generic plan offered a substantial 6.8% savings.Actual savings would depend on the specific plan, including the province, group demographics and plan parameters, but this case study demonstrates that generic substitution offers substantial savings, with minimal impact on plan members.

Cost Sharing

Co-insurance is an easy way to share drug costs between the plan sponsor and plan member. It creates some accountability on the plan member to explore cost saving alternatives to reduce their out-of-pocket cost of the prescription.

Cardholders with a co-insurance

Despite the relative ease of sharing drug costs, 41% of cardholders do not have co-insurance and of the 59% that do, the most common co-insurance amount is 20% of the claim cost (29% of cardholders). While increased plan member copayment can generate plan sponsor savings, there is the potential to impact adherence if the out-of-pocket amount becomes unaffordable for the plan member.

Prior authorization – right drug, right person, right time

Prior authorization (PA) is used to verify patient criteria before authorizing a claim to be paid.

Prior authorization impact

The number of drugs for which TELUS Health requires prior authorization grows every year; in 2015, 107 drugs required prior authorization. In 2015, 58% of claimants that required prior authorization followed up and were approved, however not all claimants submit a form when they are first informed that they require prior authorization. Based on a sample of claimants that actually submitted forms for review, 84% were approved.

In 2013, TELUS initiated prior authorization on their own employee drug plan that generated savings of 0.9%4. (4Source: http://www.bppgcreative.ca/pdfs/b/bc-medication- management-drug-benefit-plan-cost.pdf)

Biosimilar savings opportunities

Biologic drugs have been a big driver of private drug plan costs but many popular biologic therapies have or will soon face patent expiration (Chart 25). This opens the door for the introduction of biosimilar drugs.

Biosimilars offer potential cost relief from rising private drug plan costs, but because they are not considered generics, traditional generic drug substitution programs will not work. Plan sponsors will need to consider plan design features such as prior authorization or step therapy that require plan members, who are starting on a new biologic therapy, to use biosimilars.

The pan Canadian Pharmaceutical Alliance (pCPA) negotiates on behalf of publicly funded provincial and territorial drug plans for lower confidential prices on brand-name and generic drugs. Early in 2016, the pCPA developed guidelines that require biosimilar manufacturer price reduction agreements be transparent and offered to all Canadians, including private drug plans. Brand biologic manufacturers can propose an agreement forequivalent listing status, however they must provide similar or better transparent pricing as the biosimilar. As a result Inflectra, whose initial list price was at 66% of the price of Remicade at launch, subsequently dropped to 47%.

Optimize access while managing costs

While drug plan costs continue to rise (one concern among several highlighted in this report), at the same time high-cost specialty drugs are important treatments that keep plan members productive and healthy at work. In addition, knowing that people in the 50-to-60 age group are shown to have the highest percentage of claims, there is a strong argument to be made for prevention. Well-designed wellness programs can help establish healthier behaviors within a workforce in advance of reaching their fifties.

In addition, plan sponsors can find a sustainable win-win by starting to take advantage of many existing strategies that can reduce costs without having a material impact on their plan members’ experience. Mandatory generic substitution is just one example that can offer significant savings. Yet, surprisingly, even though plan optimizing strategies such as this are accessible to most, a full 70%4 of plan sponsors made no changes to their plans and 33%5 have no strategy for high-cost drugs.

By maximizing the use of traditional drug plan management tools, as well as implementing innovative programs that manage acquisition costs and build tighter controls for high-cost drugs, plan sponsors can continue to deliver high-value, competitive plans that can be sustained.

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