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Why employers need to embrace change as drug spending increases

By Helen Stevenson

Benefit plans are a zero-sum game: there are a finite number of resources to go around. As drug spending in Canada increases, the sustainability of drug plans is at risk.

In 2017, total drug spending is forecast to be $39.9 billion, an increase of 5.5 per cent over the previous year, which is the second-largest share of health expenditure in Canada. Of this figure, $12.1 billion will be paid for by private health insurance.

Like any industry of scale, the interplay between stakeholders is extremely complex. However, unlike other industries, there is more at stake because drug benefit plans provide employees and their families with medications that can have a profound impact on their wellbeing.

In the private sector, prescription drugs are financed by private health insurance, which businesses buy into on behalf of their employees. For about a half-century, most Canadian employers have had open drug plans – meaning that plans cover every drug at any price. However, over the past decade there has been a significant and potentially unsustainable increase in drug spending, resulting in higher drug costs and increased use. As a result, many private drug plans are reaching a tipping point and need to embrace change or risk having to use blunt measures to manage costs. The solution is to strike a balance through drug plans that provide the best healthcare value for employees and employers.

A study published in 2017 suggested that employer-funded drug plans in Canada waste approximately $3 billion per year by covering expensive drugs that have cheaper alternatives. Employers can minimize waste (unnecessary cost) by covering drugs that work better or work just as well for less money. This information needs to be backed by research and recommended by experts in the field, including doctors, pharmacists and other healthcare professionals.

There are two main reasons employers are hesitant and often refuse to change. First, their drug spending has been stable for a few years and they have not yet reached a tipping point. The second point is the nature of change itself. To many employers and their employees, change means potential disruption and change is sometimes perceived as a loss – in this case, change could signify providing less coverage or taking something away.

As drug spending increases, plan members can risk losing out on other important benefits.

However, as drug spending increases, plan members can risk losing out on other important benefits. Change, in this case, is necessary and this change is for the better. A drug plan centred around value can improve health outcomes and reduce costs. As a result, savings across the plan can be re-invested in other benefits, such as wellness initiatives, mental health benefits and dental care, among others. Better-managed plans can yield savings for employers and often lower co-pays for employees.

Too often, drug plans keep employees in the dark. Now more than ever, patients want to be involved in their personal healthcare management. With advancements in technology and information at their fingertips, employees can benefit from a transparent plan that clearly lays out what is covered, and includes built-in advice as to drugs that provide the best healthcare value, co-pay options and quantity limits. In this case, change represents improved employee communication and engagement, in addition to a positive shift in the benefits provided.

The private sector has an opportunity to be a leader in drug plan sustainability, especially at a time when the discussion around universal pharmacare is pervasive in the public narrative.

Ultimately, it is an opportunity for employers to put the benefit back into drug plans. HR professionals have a special role to play when it comes to empowering employees and embracing change – one that can help all stakeholders benefit from a sustainable drug plan and getting the best healthcare value. 

Helen Stevenson is the former Assistant Deputy Minister of Health and Executive Officer who oversaw Ontario’s $4 billion drug program, where she led prescription drug reform with Bill 102, saving Ontarians an unprecedented $1.5 billion and helping spark reform across Canada. She is now the founder of Reformulary Group.

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