FROM THE TEAM
Plan Sponsors Are Losing the Race
The developments in Ontario with respect to the recently introduced "Competitive Agreements" (which are discussed in more detail in this issue of Cubic Health Monthly) are another shining example of where the public sector is light-years ahead of the private sector in containing prescription drug costs. What is most concerning about this trend in the battle between private and public sector cost-sharing is that private sector plan sponsors, in general, do not seem to be overly concerned.
If stakeholders in the manufacturing and distribution of prescription medications are getting squeezed more significantly by public sector plans across the country, does it not stand to reason that they will be looking to grow revenues on the private side to compensate? There is nothing wrong in doing so - it happens all the time in business: macroeconomic issues and policy decisions impact one line of the business, so the company must be proactive in making up for lost revenues elsewhere.
According to the Canadian Institute for Health Information (CIHI), of the $27 billion spent in Canada in 2007 on prescription and non-prescription drugs (of which prescription drugs made up about 85% of the total), the public sector made up less than half of the overall spending (48%). This means individual cash paying customers and private plans spent over $14 billion in this area in 2007. Therefore, this is by no means an insignificant issue, yet it is incredible how little attention it gets.
Canadian plan sponsors need to appreciate how public policy and the volatility of drug pricing in Canada is impacting their plans, and what they can do about it. Obtaining transactional drug claims data over a two- to three-year period affords groups the ability to translate that data into tangible financial information. This information can be is very useful in allowing key internal stakeholders - Human Resources, Finance, and Senior Management - to interpret the impact of dated plan designs in concrete and uniform terms.
Some plan sponsors continue to sit on the sidelines in this multibillion dollar race, content to finish second in a two-party race, and hoping that solutions like a National Pharmacare program will solve these issues over time. This is as financially irresponsible as not changing the way one's business relies on other inputs like oil - assuming that current oil prices are just a temporary anomaly and that 2002 oil prices are on the horizon. Sure it may not be as significant in many cases, but the principle is the same.
We hope this edition of Cubic Health Monthly finds all of our readers enjoying their summer despite the less than cooperative weather from coast-to-coast this year.
To pass along any comments on Cubic Health Monthly, or to see back issues of our publication, please visit our website at http://www.cubichealth.ca
Sincerely,
Mike Sullivan
President
| LATEST NEWS |
Ontario's New Competitive Agreements for Generic Drugs - What Are the Implications for Plan Sponsors?
The Ontario government announced the launch of its "Competitive Agreements" initiative in early July. This follows on changes that were ushered into the system with the passing of the Transparent Drug System for Patients Act. Essentially, this move is looking to assist the provincial government decrease the amount it pays for generic drugs.
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| FOR THE PLAN SPONSOR |
Generic Substitution & Therapeutic Substitution
It is important for plan sponsors who are considering plan changes to understand the difference between the various plan design features that are available. Two design features that in our experience cause a great deal of confusion are generic substitution and therapeutic substitution. These design features are similar in that they reduce costs to the plan sponsor by switching drug utilization to cheaper alternatives, however, they are very different in what they do and how they impact the plan members.
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