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The cost of workforce drugs on your bottom line

June 21, 2017 | By Anthea Gomez

June 21, 2016 – It may be the most agreed-upon concept in business: to build a great company, you must be able to attract and retain great people. However, in the Western world, demographic shifts are making that goal harder to achieve each year.

A recent PwC study found more than half of global CEOs see skills availability as a threat to future growth.1 In the power and utilities sector—a major employer of electricians—80% of CEOs planned to address this threat by working to enhance engagement and 63% planned to invest in initiatives designed to help sustain a skilled workforce.

In Canada, the stakes are particularly high: A recent Distribution & Supply article pointed out that baby boomers make up almost a third of our current workforce and the youngest are within 13 years of age 65 (D&S Spring 2016, p.10).

Preparing for history’s biggest shift change
Competing to replace retiring workers in the electrical industry requires that employers know what employees want… and it probably isn’t higher earnings. The 2011 Sanofi Canada Healthcare Survey found that most Canadians preferred their benefits to $20,000 in cash. Moreover, a 2015 Glassdoor survey found that Millennials value benefits even more highly—almost 90% of respondents aged 18 to 34 preferred benefits to a raise.2


And what is the most highly valued benefit? Prescription drug plans.

The 2016 Sanofi Canada Healthcare Survey finds 81% of plan sponsors were very satisfied with their drug benefit, and 94% of plan members felt their drug plan was “very/somewhat important,” with dental care coming second.3

At the same time, Canadian employers spend more on prescription drug coverage than any other benefit, and that spending increases each and every year.4 According to the Canadian Institute for Health Information (CIHI), drug spending by the private sector has doubled from $8.8 billion in 2003 to $17.6 billion in 2015. Not surprisingly, the 2014 Sanofi study finds 70% of plan sponsors were concerned about the sustainability of their drug plan.5

“Employers are in something of a Catch-22,” says John Herbert, director of Strategy, Product Development & Clinical Services with Express Scripts Canada, a provider of health benefits management services. “The benefit that employees care about most is also the benefit most threatened by unsustainable cost increases.”

Fortunately, says Herbert, research shows there is a way to protect the sustainability of the drug benefit without undermining employee health or productivity… or loyalty. “We have been able to prove it is possible. As with many of the critical challenges that businesses face today, it comes down to engaging patients and influencing better decisions to drive lower costs and healthier outcomes.”

Rising costs, and what they mean for the workforce
The most commonly cited drivers of drug spending inflation are increasing utilization due to an aging population with rising rates of chronic disease, as well as a shift to the use of newer high-cost drugs.

Rising chronic disease rates, aging workers
The Sanofi Canada Healthcare 2016 study finds 59% of employees have one or more chronic conditions, such as high blood pressure (21%), mental illness (19%) and arthritis (17%).

Age is a critical factor. Among employees aged 18 to 34, 40% have at least one condition. Among those aged 55 to 64, the percentage of employees with at least one chronic condition rises to 79%; and, in the last decade, the number of Canadian workers over age 55 climbed by 67%.6

Not surprisingly, then, the Express Scripts Canada 2015 Drug Trend Report (DTR) reveals more than half of plan members with a drug claim suffer from multiple chronic conditions, and one in five has four or more. Plan spending for these members averaged $2296 in 2015—4.7 times that of other members.

“Understandably, these individuals are often unable to manage their complex treatment plans, and they experience gaps in care,” says Priscilla Po, Express Scripts Canada’s senior manager of Clinical Services & Drug Plan Management. “As a result, their claims show their health worsening over time. As they get sicker, more and more costly medications are often required.”

High-cost drugs
In 2015, Express Scripts Canada research shows 16% of total spending was for new, brand-name drugs approved by Health Canada in the previous five years alone. As patents expire on blockbuster drugs such as Lipitor, the pharmaceutical industry has pivoted toward developing medicines aimed at less common conditions, but with astronomically higher price tags. These specialty drugs are taking up an ever-larger portion of overall plan spending—from 13.2% of plan spending in 2007 to 29.5% in 2015.

This trend has huge implications for the Canadian workforce and employers.

For example, two in five Canadians are expected to develop cancer during over the course of their lives.7 New oncology drugs are saving lives, transforming formerly fatal diseases into chronic conditions, but the cost burdens are startling.

Two such promising drugs were recently introduced in Canada, and studies show they are extending lives by strengthening the immune systems of patients with advanced cancer. Their cost? $115,000 and $123,000 per year of treatment. Given their effectiveness and side effects that are much less disabling than those of chemotherapies, it is likely the use of these drugs will continue to expand. Less than a year after their initial approval, Health Canada has already approved additional applications for both drugs.

Also underway is a shift that makes it possible to administer cancer drugs outside of hospitals, shifting the cost burden from government health plans to private plans and patients. About 72% of all cancer drugs in development are designed to be self-administered.

Hepatitis C treatments also come with a hefty price tag, costing between $47,000 and $268,000. In 2011, Health Canada estimated that between 210,000 and 275,000 people were infected, with an additional 30% undiagnosed. Before 2011, the first-line treatment—interferons—cured only 6% of patients treated, many of whom experienced incapacitating side effects. The new antivirals introduced since late 2014 have consistently cured 90% of patients, with few side effects and shorter treatment times. As a result, plan spending for hepatitis C treatment tripled in 2015.

These trends are expected to escalate. Of the 7000 potential new drugs in development, most are designed to treat cancer, neurological disorders and infectious diseases—illnesses affecting numerous Canadian employees and their families.

 Take control of your prescription drug benefit plan!
Prescription drug benefit plans play an important role in employee satisfaction and retention, but their costs continue to rise… Can you sustain them?


Join Express Scripts Canada’s Steve Nowak in an upcoming webinar, October 2017, to learn about the costs and some of the options available to reduce them.

REGISTER at EBMag.com/webinars.

Managing the way forward
Yet despite the factors outlined so far, the primary threat to sustainability of the drug benefit in 2017 is not an aging workforce, chronic disease or high-cost drugs, but rather poor decision-making.

Our research shows that optimizing spending on traditional maintenance drugs through pharmacy services that engage patients and influence better decisions can, indeed, help fund access to new high-cost drugs.

Through retrospective analysis of the claims the company manages for more than seven million Canadians each year, we find up to one-third of every plan dollar spent on maintenance medications does not necessarily improve health outcomes. While this finding may be shocking at first glance, it is also good news, because this level of spending can be recaptured by engaging patients and influencing better decisions.

Claims analysis shows that, without help, plan members:

• Often unknowingly use costly medications when more affordable alternatives are available.
• Do not take their medications as prescribed, which leads to worsening health and the need for more expensive treatments.
• Pay more for prescription services than necessary.

Express Scripts Canada research shows employers and employees both want the best care and the best value, but pharmaceuticals are now so complex that members simply can’t make sound decisions without the right kind of support, says Po. “When plan sponsors have engaged us to give members the information and support they need—in the right way and at the right time—member treatment decisions almost invariably align with best practices.”

With this knowledge, we’ve used our claims research, behavioural science and clinical expertise to develop plan management solutions that deliver this targeted intervention, providing support at key decision points along the treatment path.

The result, says Herbert, is better health outcomes as well as a reduction in plan spending. These savings make funding available for potentially life-saving, high-cost specialty drugs when they are needed.

DTR 2015 data reveals that best practice utilization and clinical management have become vital in today’s pharma environment, says Po, pointing to hepatitis C treatment as an illustration.

“For two patients with the same genotype, therapy costs ranges from $47,000 when Harvoni is prescribed for eight weeks to $268,000 when combination therapy with Daklinza and Sovaldi is required for 24 weeks, which may be the case for those with cirrhosis who require dose adjustments due to drug interactions.”

In other words, if the patient does not get the most appropriate treatment for their specific situation, incremental spending can exceed $220,000. To prevent this, an extensive assessment must be conducted, well beyond the traditional prior authorization process generally in place today.

“Utilization management should include a review of genotype, fibrosis and cirrhosis status, viral loads, liver function tests and medication history,” explains Po. “Guiding the member and doctor toward the optimal treatment could mean significant savings for the drug plan—and for the patient.”

While opportunities for optimizing spending do not usually amount to hundreds of thousands of dollars, recapturing smaller amounts thousands of times has an even greater overall impact, she adds.

Clinical management solutions that leverage specialized, treatment-specific care to ensure safety and effectiveness are also essential, says Po. “Ongoing monitoring and follow-up help the patient get the full benefits from their treatment. They come to understand how following their doctors’ direction affects the outcome, and they learn to recognize and minimize side effects. By guiding them throughout the treatment journey, we can help prevent relapse and the need for re-treatment.”

Tightly managed plans that engage patients and influence better decisions may also enhance the member’s experience of their benefits, says Herbert. “When a doctor prescribes a drug in a class where a lower cost clinically effective alternative is available, we can reach out to share this insight with the plan member and their prescribing physician in order to drive a better decision.”

“Too often, employees just end up paying out-of-pocket for the needlessly expensive drug while cursing the limitations of their plan. With the right solutions in place, we ask their permission to contact their doctor in order to recommend a switch to the more cost-effective option. The process reassures members they are getting the right treatment along with the best value—and that they don’t have to figure it all out alone.”

Plan members get better care and lower costs. Plan sponsors get better return on investment.

For employees, these benefits are exponential: with proactive, supportive treatment plans in place, financial and emotional stress is reduced. Time, money and energy are freed up to focus on improving health through better nutrition and physical activity. Complications don’t have to happen; conditions don’t have to get worse. Aging doesn’t have to mean getting sicker.

“All the financial metrics we measure point in the same direction: traditional approaches to plan management have failed,” says Steve Nowak, director of Sales & Marketing at Express Scripts Canada. “Interventions such as spending caps that simply transfer costs to employees can have devastating side effects when employees don’t take their medications because they feel they can’t afford them.”

“Proven alternatives are available, but plan sponsors must be proactive about implementing them before it’s too late,” Nowak stresses. To that end, he is conducting a free webinar for plan sponsors in October at on the subject of sustaining your prescription drug benefit (see below). The answer is, Yes, absolutely, but not unless you take action… sooner rather than later.

“Employers save money on the drug benefit but end up paying significantly more for costs relating to productivity, absenteeism and disability,” says Nowak. “Or their plan is perceived as second-rate, so they can’t attract the best employees, which has a profound impact on future success.”

1. “When it comes to competition, talent comes first”, PWC, tinyurl.com/lt8jcvn.
2. “The perks and benefits that employees want more than a raise”, Canadian Business, tinyurl.com/l92q7ht.
3. Sanofi Canada Healthcare Survey, tinyurl.com/qz46qex.
4. “Reforming private drug coverage in Canada”, tinyurl.com/lteb32v.
5. “The dilemma of expensive drugs”, Benefits Canada, tinyurl.com/of7ewf6.
6. “Boom, bust and economic headaches”, Globe and Mail, tinyurl.com/q5kdwl4.
7. Canadian Cancer Statistics 2016, Canadian Cancer Society, tinyurl.com/khl6fvy.

Anthea Gomez is director of Human Resources & Corporate Services for Express Scripts Canada, a provider of health benefits management services. HR Reporter has recognized Anthea as one of Canada’s Top 25 HR Professionals.

This column originally appeared in the Spring 2017 edition of Distribution & Supply.

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