Canada among most expensive countries for prescription drugs – and costs expected to rise

Organizations need to implement cost-control measures: Survey
|hrreporter.com|Last Updated: 12/04/2014

When it comes to prescription drug costs, Canada can be a pretty pricey place to live, according to Bill Bright, leader of Towers Watson’s Canadian pharmacy practice.

“Canada is one of the most expensive countries in the world for prescription drugs — and prices are going to rise,” he said.

And as prices rise, employers will see a significant impact to their benefits budgets. But implementing certain drug plan management strategies can help offset that impact, found Towers Watson in a survey of 196 organizations representing 940,000 active and retired employees.

“Our survey results show that pharmacy management strategies help control health care costs. Employers have quite a number of options available to them, and our research shows that as these options are combined, the effectiveness from a cost management perspective improves,” said Bright.

Strategies such as pay-direct cards, generic substitution or dispensing fee caps can lower drug plan costs significantly, found the 2014 Canadian Health Care Cost survey.

Currently, organizations without a formal drug plan management strategy pay an average annual cost of $1,124 per active employee. But that cost is 24 per cent lower, or $266 less per employee, for plan sponsors with three or more drug plan management strategies in place. Implementing two strategies lowered annual costs by an average of 12 per cent or $135 per employee.

Employers have not seen significant increases in drug costs over the past few years — the cost trend for drugs has come in at 0.2 per cent year-over-year, found the survey.

“Drug cost trends have been moderate in the past few years, primarily due to a greater availability of lower-cost generic drugs and a lack of new-entry brand names,” said Karen Millard, a senior consultant at Towers Watson.

“However, employers may see increases in the near term due to greater use of high-cost and specialty drugs, a growing demographic of employees with more chronic conditions, and government shifting of public costs to private payers.”

Even if a small proportion of employees use high-cost drugs, it can have a major impact, said Bright.

“High-cost or specialty drugs are typically used by fewer than five per cent of employees, but can account for 15 to 25 per cent or more of an employer’s total drug spend. For example, a specialty drug therapy for Hepatitis C is effective at reducing the virus, but creates budget challenges for employers, as the typical cost is about $55,000 for a 12-week treatment. New drugs now in the pipeline may drive costs even higher. Our forecasts suggest that new high-cost therapies will account for close to 30 per cent of drug plan expense within the next three to five years,” he said.

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