January 2016
The ten most important developments in drug insurance in 2015
It can be stated unequivocally that 2015 has been the busiest year in terms of legislative changes since Quebec’s basic prescription drug insurance plan was established almost 20 years ago. Several new prescription drugs also hit the market, having major financial impact on plan costs and posing significant risks for the future. Because 2015 was nothing short of spectacular, we thought it fitting to present a chronology of the ten developments that we feel most affected private drug insurance plans in Quebec.
1. New services provided by pharmacists
2. Brand name drugs reimbursed at the cost of the lowest priced generic equivalent
3. Confidential agreements with pharmaceutical companies
4. Pfizer Préférence loyalty program
5. Drugs for treating Hepatitis C
6. Drugs for treating high cholesterol
7. Increase in pooling fees charged by insurers
8. End of the public subsidy for assisted reproduction
9. Implementation of a request for proposals process for generic drugs
10. Grouping of plan sponsors
Last year started off with parliamentary committee sessions on Bill 28, which was finally passed in the spring of 2015, impacting private plans in three ways:
As of June 20th, pharmacists have been able to provide services previously provided exclusively by physicians. Four of these seven new pharmaceutical services entail fees charged to the patient that can be reimbursed under drug insurance plans. This is a case where public plan costs are transferred to private plans.
As of October 1st, private drug insurance plans have been able to reimburse brand name drugs at the cost of the lowest priced generic equivalent without being limited to the minimum reimbursement of 66% of the purchase price. Plans that have a mandatory generic substitution clause can thus strive to maximize their savings, as most plans outside Quebec and Quebec’s public plan do.
When the bill was passed, the government put in place a structure allowing it to negotiate confidential agreements with pharmaceutical companies to get discounts on the cost of drugs covered by these agreements. Private plans will not be able to benefit from the savings generated from these agreements. This poses a significant cost transfer risk from the public plan to private plans. However, because these agreements are secret, these costs will be difficult to assess.
Across Canada, after witnessing the introduction of generic drug consumption incentives, pharmaceutical companies have developed strategies for maintaining their market share through the sale of drugs whose patent has expired. Below is a very good example of this:
In June, Pfizer launched its loyalty program, Pfizer Préférence, that directly targets Québec consumers. Insured individuals can purchase at the pharmacy any of the 14 drugs eligible for the program, submit their invoice to Pfizer online and receive reimbursement for a portion of the cost not covered by their group benefits plan. This program encourages the purchase of brand name drugs, going against initiatives promoting judicious behaviours, and results in cost increases for plans. The only way to avoid these increases is to implement a mandatory generic substitution clause.
Pharmaceutical companies are also investing heavily in the development of biologics. These specialized drugs are very expensive.
Since 2014, more effective Hepatitis C treatments with far fewer side effects have arrived on the market. Treatment costs range from $70,000 to $150,000 depending on duration. According to the Public Health Agency of Canada, one out of 125 people covered by public and private plans suffer from this illness. Last July, recognizing the potential significance of the impact of the reimbursement of these drugs on public finances, the RAMQ decided that, at first, only the most affected patients would be reimbursed for this treatment. As regards private plans, there was no consensus among insurers to follow suit. Only a few insurers will limit reimbursement eligibility for these drugs.
In September, Health Canada approved Repatha, a new drug for treating high cholesterol. It should be noted that 40% of Canadians between the ages of 40 and 59 have unhealthy cholesterol levels, and approximately 15% of them could eventually be taking Repatha. The annual cost for Repatha is estimated at around $10,000. The financial impact on private plans could be considerable given the number of members potentially affected. This drug is a complement to statin therapy whose annual cost is around $500. Similar drugs such as Praluent will also be hitting the market soon.
Because of the impact that these high cost drugs will have on drug claims, pooling fees for catastrophic drug claims for group plans are increasing.
In October, the Quebec Drug Insurance Pooling Corporation (QDIPC) published the recommended pooling terms and conditions for 2016, which included significant increases for all group sizes. Insurers have made adjustments similar to those made by the QDIPC, resulting in a significant increase in pooling fees for private plans in Canada.
In November, two additional bills impacted private plans.
Because private drug insurance plans must reimburse, at a minimum, what is covered by the public plan, the passing of Bill 20 that puts an end to the public subsidy for assisted reproduction, eliminated private plans’ obligation to cover these expenses. Given that one treatment can cost up to $25,000, this could result in savings for private plans if the plan only reimburses prescription drugs eligible in the public plan.
If passed, this bill will allow the government to negotiate prices for generic drugs that will be covered on the list for Quebec’s basic prescription drug insurance plan. In contrast to the previously mentioned confidential agreements established between the government and pharmaceutical companies, the results of the negotiations would be known and private plans could benefit from the reduced drug cost. However, professional fees could increase under private plans because there would be less incentive for generic companies to provide kickbacks to pharmacists. This could cancel out the benefit of the negotiations, and could even increase costs for private plans.
In view of the cost increase threatening the sustainability of private drug insurance plans, a group of plan sponsors was created in December. Their goal is to demonstrate to the government the existence of certain inequities between private plans and the public plan.
On December 18th, a letter signed by more than 40 large organizations representing over 100,000 employees or members, was sent to the ministers of Health and Justice. This letter addressed the following issues: a framework for and the transparency of fees charged by pharmacists, access for private plans to the benefits resulting from the agreements negotiated by the government with pharmaceutical companies and the possibility of allowing private plans to negotiate agreements directly with pharmacists or their representatives.
It should be noted that seven of the ten most important developments in 2015
result in upward pressure on private plan costs.
The legislative context will continue to evolve in 2016. Several new high cost drugs are also expected to hit the market. We will continue to monitor these developments and will keep you informed.
To learn private plan sponsors’ reaction to the upward pressure on costs, Normandin Beaudry conducted a survey of about 60 organizations in late 2015. This survey revealed that most organizations would not be able to absorb cost increases exceeding 20%. In this context, the use of indicators allowing for the identification of risks associated with drug utilization for each plan would be beneficial so as to develop a risk management strategy focused on plan design, communication and prevention. The Normandin Beaudry consultants can provide you with different solutions.
Please feel free to contact us for additional information.