2022 Prescription Drug Trends: What Canadian Employers Should Know
By Cindy Danielson
September 13, 2022
TELUS Health released their annual Health Drug Data Trends & National Benchmarks Report in June 2022. We dove into the data and share some highlights in this blog.
Why Do Trends Matter?
Many employers have witnessed a yearly increase in employee benefits costs, particularly with experience-rated benefits like health/drugs and dental, which are influenced by factors like: plan claims (claims experience), inflation (rising health costs), trends (changing demographics, health conditions) and insurer profit, administration costs and fund reserves. These factors are calculated by the insurer at renewal to determine your plan’s Target Loss Ratio (TLR). In short, the TLR is the break-even point for the insurance carrier.
Example: If your plan’s TLR is 75%, then 75% of every premium dollar collected is used to pay member claims. The remaining 25% of your premiums cover all the insurer's expenses noted above. If your plan claims exceed your TLR, then your premiums will likely increase at renewal.
The trends in this TELUS report will help you understand what’s going in the industry and the factors that influence plan costs. Educating yourself with research like this, and speaking with your Advisor, will help you better anticipate and prepare for plan renewal to avoid any surprises.
Interestingly, the number of claimsdecreased 3.5% in 2021 but the average amount paidper claim increased by 8.9% - higher than the past 4 years and 2.6 times higher than the Consumer Price Index (CPI) - the highest it’s been since 1991. This is interesting because, as mentioned below, expensive specialty drugs are responsible for higher drug costs per person even though only a small percent of claimants use them. In addition, the inflation rate for health benefits is typically much higher than the CPI.
2. Diabetes Medications
Over the past five years, diabetes drug claims have increased from 6.6% to 7.7% in 2021. In 2021, this drug category ranked second (see image below) on TELUS’ Top 10 Drug Categories by Eligible Amount; however, it’s predicted that diabetes medications will move to number one, due to the growing utilization of higher-cost therapies and a medical device that improves patients’ ability to manage the disease.
This is important because our workforce is aging which typically results in increased benefits usage (and costs). Employers that effectively encourage and support employees achieve a healthy diet and lifestyle (an effective treatment for Type 2 diabetes) can help boost employee engagement and control health costs.
3. Mental Health Related Medications
Unsurprising, the Covid pandemic continues to have a lasting and negative impact on many people prompting them to seek treatment for depression and ADHD.
The Depression drug category rose to fourth position on TELUS’ Top 10 Drug Categories by Eligible Amount (see below). While the volume of Antidepressant claims increased only slightly to 11% from 10.4%; the overall drug cost increase is negligible as the category is highly genericized resulting in a download trend in pricing.
Five years ago, the ADHD/Narcolepsy drug category (e.g. Vyvanse, Concerta) ranked tenth on TELUS' Top 10 Drug Categories by Eligible Amount and were 2.2% of total claims. But in 2021, this drug category jumped up to sixth ranking (overtaking cancer) and were 3.3% of total claims. This is important to know because Adult ADHD diagnosis rates are growing 4 times faster than children (in the U.S.) and is underdiagnosed in adults compared to children so it's reasonable to expect total claims may continue to increase. Also, awareness about ADHD is growing plus it often occurs with other comorbid conditions (e.g. Bipolar, depression, anxiety, etc.). This could mean that usage of both Depression and ADHD drug categories may increase with more public awareness and interest in treatment.
Interesting 👉: Some experts attribute that the increase in ADHD/Narcolepsy drugs may be because children and students have more difficulty focusing on online school and the changing classroom dynamics.
Specialty drugs are typically medications that cost greater than $10K annually.
Fewer than 2% of claimants submit specialty drug claims but these drugs dominate treatment for rheumatoid arthritis, skin disorders and cancers.
Specialty drugs account for a third of the total eligible amounts, despite only 2% of claimants taking these drugs.
Specialty drugs are solely responsible for higher drug costs per person (nearly 9.9%) year-after-year compared to the average 1.5% annual decrease for non-specialty drugs.
Did you Know? 😲 TELUS forecasts that by the end of 2026, these drugs will account for almost half of the average eligible amount per member.
The use of these drugs increase year-after-year, with a growth rate of 9.5% in 2021, compared to 8.7% in 2020.
Atlantic Canada saw the highest volume of specialty drug claims as the prevalence of certain genetic, rare diseases are higher there.
The volume of specialty drug claims submitted to private plans in Western Canada is lower than Atlantic Canada due to the Pharmacare/universal drug plans in B.C., Saskatchewan and Manitoba. Universal drug plans mitigate the impact of specialty drugs on private plans since public coverage kicks in once plan members have paid an income-based deductible.
5. Biosimilar Biologic Drugs (Specialty)
As defined by Health Canada, a biosimilar biologic drug is highly similar to a biologic branded specialty drug already authorized for sale, but at a lower cost (sometimes significantly lower).
Biosimilars are not the same as generic drugs.
Generic drugs are small molecules that are chemically synthesized. They contain identical medicinal ingredients to the referenced branded products.
Biosimilar drugs are highly similar to its referenced branded biologic drug, but not identical as biologics are often large and complex and made from living cells rather than chemicals (naturally variable).
B.C.’s Biosimilars Initiative took effect in November 2019 and gives patients a “six month switch period” to work with their physician to discuss more affordable biosimilar options resulting in immediate savings. Since then, Alberta, New Brunswick, Nova Scotia and Quebec have launched similar policies with the expectation that some private plans will follow suit.
It's important to understand the growing use and significant expense of specialty drugs so you can better anticipate what they could mean to your plan at renewal if/when an employee is prescribed one.
Important Tip 📣: Closely monitor Claims Experience reports provided by your Advisor and/or Insurer to avoid any surprise costs that could contribute to a premium increase at renewal.
Also speak with your Advisor 🙋 about Stop-Loss insurance as it helps protect employers in the event of an expensive claim to mitigate risk and potentially skyrocketing premiums at renewal.
What Can Employers Do to Control Prescription Drug Costs?
As an employer, there are things you can do to proactively manage and minimize drug costs. Your Benefits Advisor can recommend cost-saving plan designs options (e.g. mandatory generic substitution, co-insurance, drug and/or dispensing fee caps, etc.). If you aren’t working with an Advisor already, contact us and we’ll introduce you to a benefits specialist.
Educate & Support
You can also implement education and health and wellness programs to help employees learn how to improve their overall well-being. Here are a few suggestions:
Benefits Education - Most Benefits Advisors offer clients complimentary sessions for employees to teach them how to be informed consumers (e.g. pharmacists with lowest dispensing fees). Contact your Advisor to request an employee session. Download our Cost Savings Strategies resource.
The landscape of Canadian healthcare and prescription drugs is constantly changing. As employees age, health conditions increase, demanding new treatments and medications. Drug effectiveness can vary from person to person so depending on the condition, there may be numerous alternatives (including more affordable generic or biosimilar drugs) or limited drug options that require expensive specialty drugs. With an aging population and growing advancements in drug research and more sophisticated treatments, the demand for prescription drugs and increasing costs will continue so it’s important that Employers educate themselves and work closely with their Benefits Advisor to better manage their plans and control expenses.
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