January 15, 2013
Are Private Sector Formularies Set to Align with Public?
This first meeting of 2013 was held in conjunction with the Canadian Association of Healthcare Reimbursement and was moderated by George Wyatt, the managing director of Wyatt Health Management. George was an excellent choice as moderator for this event as he has worked in provincial government as well as various pharmaceutical and biopharmaceutical sectors and serves on the board of directors of the Canadian Association of Healthcare Reimbursement. George introduced the speaker for tonight’s event, Helen Stevenson, the President and CEO of Reformulary Group Inc. Helen is also the former Executive Officer of Ontario Public Drug Programs and Assistant Deputy Minister of Health in Ontario. The Reformulary Group is a company dedicated to managing drug costs for employee drug plans.
Helen began her talk by polling the audience with questions about their company drug plans. About half of the attendees said that they already have a managed drug plan; of those with managed plans, 77% have managed formularies. About 86% of attendees contribute to their drug plan; 75% indicated that their drug plan premium had increased over the past 5 years. Helen explained that this was not surprising, given that worldwide prescription drug sales and costs are projected to continue increasing. In 2011, spending in the Canadian private sector was $15.1 billion, representing a 6.8% growth rate over 2010. In addition, Canadians are among the most enthusiastic consumers of prescription drugs in the world, with the second highest per capita spending in the world after the US. This growth in spending is coming from the increasing use of very costly biologic and specialty medicines. This large shift toward higher cost medications will inherently increase costs for employers. For example, one employee on a speciality drug (such as a biologic) could increase drug plan costs by 20-30% in a company of only 30 employees.
Helen quoted a 2012 article by Karla Thorpe called “The Dragon Will Soon Awake” that outlined the gaining attraction of cost containment as one of the top short-term priorities in the private reimbursement sector. Helen provided some examples of how Canadian insurance companies have taken cost containment measures. For example, Sun Life, Great West Life and Manulife have each introduced new strategies; strategies such as generic substitution, specialty drug preferred provider arrangements and mail order. Employees are also recognizing that they have to accept changes in their plans. This was evidenced by a survey that showed that 7 in 10 Canadian employees acknowledged that rising costs will make it difficult for employers to maintain their current drug coverage.
Employers are looking for solutions to maintain drug plan coverage while managing increased costs, but the reality is that some companies are cutting their benefits altogether. What does this mean for pharmaceutical companies? It means that there is a new focus on a new payer for them. Gone are the days when the private sector could be ignored because all approved products were immediately listed on a formulary. With new biologics and increasingly personalized medicines entering the market, we are fast approaching the tipping point whereby active plan management will become the new normal. More than ever, insurers, benefit consultants and employers are increasingly focused on managing drug costs resulting in the implementation of cost management mechanisms.
As a result, there is a significant opportunity for pharmaceutical manufacturers to support the best and most strategic formulary-managed solutions, including managed evidence-based solutions that include price listing agreements (PLAs) in the private sector. Helen encouraged pharmaceutical companies to come to the table with solutions that recognize the need faced by the private sector to better manage these types of plans.
An evidence-based formulary is one that considers clinical and cost evidence for each drug and, based on the evidence, places that drug into a tier with a specific reimbursement level. This notion of “any drug, any tier” means that the drug representing the best healthcare value (clinical and cost) will be the most affordable regardless of whether if it is a brand name drug or a generic. Helen argued that an evidence-based formulary is a smarter drug plan, because drug plans pay for value and this type of plan drives return on investment. In addition, these types of plans have a proven track record in managing costs. All publicly funded plans in Canada and virtually all plans in the US follow an evidence-based formulary.
Helen explained that the Reformulary is an evidence-based formulary. Also, Reformulary Group takes on a central role for insurers by acting as a catalyst between them and manufacturers. Her group leads all the product negotiations on behalf of an insurer and determines placement on the Reformulary. She also explained that insurers typically have a gold mine of claims data , which is not being used to its full potential. Her group can help to mine and interpret those data and use them to evaluate outcomes, drug plan return on investment and inform future decisions.
Helen summed up her presentation by stating that there are opportunities to better manage plans, which can result in reduced premiums, reduced plan members co-pays, the provision of clinical/wellness programs, and savings that may help employers continue providing current benefits. Employer-sponsored plans can also be a unique vehicle to deliver disease management programs to help engage employees, which in turn could improve plan member productivity, presenteeism and help employers measure their return on investment.
Helen concluded her talk with a quote from Christina Blizzard of the Toronto Sun, who said “Call me crazy, but when the day comes that my premiums decrease, I’ll eat my laptop computer.” While increased premiums may have historically been the norm, Helen felt there is now an opportunity to better manage those drug costs and thereby help ensure the sustainability of employer drug benefit plans.
The evening finished with a question and answer session during which Helen fielded questions about tiers within formularies and their rating strategies, the differences between Canadian private and public drug sectors, how she would advise Quebec clients and how her group is managing the costs of biologics and specialty drugs.