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Passing the drug test

Posted by on Mar 18, 2009 in Employee Benefit News, Health | 0 comments

By: Sheryl Smolkin

Read this article at ebn.benefitnews.com 

Drug plan sponsors in this country are getting a raw deal, and some of them are finally mad enough to do something about it.

Data from the Canadian Institute for Health Information reveals that private insurers, including group and individual insurance, paid out $7.8 billion in 2007 and their share of prescribed drug expenditures was 34.7%.

While ESI Canada reports that plan designs encouraging generic substitution helped to mitigate the 7.1% increases in the overall drug spend in 2007, in fact, generic drugs in Canada are still about 112% more expensive on average than the same generics in the United States.

Initially, both private and public payers were in the same boat, because the primary reason for the price differential was manufacturers’ rebates to pharmacies for stocking generic drugs that were not passed on to either group.

Then several provincial governments began aggressive cost controls in public plans. And lo and behold, their actions drove up prices for everyone else, including private plan sponsors!

Now granted, we want governments to manage wisely when they spend our tax dollars on health care, but continuously downloading costs to companies that are the economic engine we desperately need to drive us out of this recession doesn’t make a whole lot of sense either.

So how can drug plan sponsors fight back?

Mike Sullivan, president of Cubic Health, says first of all, organizations need to have a better understanding of what is going on in their plan.

“They have to understand what they are spending in each jurisdiction, the range of amounts for the same drugs being charged to their plan and how this compares to what governments and U.S. parents are paying,” he says. “I’ll bet both of my arms and legs that if you put 50 very large plan sponsors in a room, they would not be able to answer these questions because they’ve never asked them before.”

Nevertheless, he recognizes that individual plan sponsors do not have the clout or the time to drive the issue. “Many of our people are HR people, and they have lots on their plate.”

That’s why PEI-based drug consultant Hugh Paton is spearheading the Health Plan Sponsor Coalition of Atlantic Canada employers looking for answers. He says: “Our problem right now is we are basically getting ripped off for drugs. What I want to do is sit down with government and say, ‘What was your thinking? Why don’t we collaborate — bust out of our silos and change our business together?’”

At the first organizational meeting of the Coalition, held earlier this year, participants represented an annual drug spend of over $150 million.

“We had two provincial governments at the table — one representing their public plan for seniors and low income people, the other for their employee plans. There were also three private-sector employers with 10,000-15,000 plan members and several others interested who couldn’t make it.”

Paton is confident that the group can double or even triple its size. “Then we can start to act like a purchaser who goes to a garage or buys groceries. He can leave that garage and go to another one if he doesn’t like how they fix his car.”

He also thinks that if the group is big enough, they can challenge how PBMs are adjudicating their claims. “We can say, ‘You are allowing claims to come through at full price with markups on top of that price, and markups on top of the markups, plus dispensing fees, and we’d like to talk to you about that.’ Maybe we’d like to pay pharmacists for consultative services just like Ontario did, and we’d like to have our PBM structure their remuneration that way.”

The Competition Board’s November 2008 report says Canadian taxpayers, consumers and businesses could save up to $800 million a year if changes are made to the way private plans and provinces pay for generic drugs. The possible reduction in drug costs are particularly large for private payers — businesses, employees and individuals — who account for 52% of generic drug expenditures. Obtaining generic drugs at competitive prices could save them up to $600 million per year, with the potential for hundreds of millions of dollars in additional savings as more major drugs lose patent protection.

For private drug plans, these costs could be redirected to reduce drug plan costs or expand employee coverage. Just think of all the ways you could spend that money to enhance benefit plans and improve employee wellness!

It’s time for private drug plan sponsors across the country to become better consumers. By working together with other employers and industry stakeholders they can ensure they are getting the best possible bang for the big bucks they spend on their drug plans. For more information about the Health Plan Sponsor Coalition forming in Atlantic Canada, contact Hugh Paton at hgrpaton@gmail.com.


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