Plan sponsors, pharmacies team up to control costs

Loblaw becomes ‘preferred provider’ for Towers Watson coalition
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 12/18/2012

As part of a continuing effort to reduce health benefits costs, plan sponsors in Canada are partnering with pharmacy groups to receive discounts and added services. That was seen recently when Loblaw Companies announced it had become the preferred pharmacy services provider for the Towers Watson Canadian Rx Coalition, a group of private sector drug plan sponsors that includes WestJet.

By participating in the preferred pharmacy network, employers will realize savings compared to the cost of a typical drug plan and manage increasing drug costs in the future, according to Towers Watson, while employees benefit from enhanced services at Loblaws’ 500 pharmacies.

Wendy Poirier, leader of Canadian health and group benefits at Towers Watson in Calgary, said the company was interested in finding a partner that was willing to be “very transparent” when it came to drug pricing.

“That’s not something that’s happened so much in the past… and, within that, they afford us a discount to use them as a preferred network,” said Poirier. “Employers are concerned not just about managing drug costs but they’re equally, if not more, concerned about making sure that they are paying attention to the health of employees.”

Preferred provider networks have been around for years but they’re becoming more formalized, according to Leanne MacFarlane, senior director of business development at pharmacy benefits specialists MHCSI in Dartmouth, N.S.

“‘Preferred provider’ is not a new concept, they have been around for a long time,” she said. “Probably the channels of communication between the plan sponsors and the providers is emerging, whereas in the past they probably didn’t talk to each other all that much. We’re starting to see more of a partnership, collaborative initiatives, that build value over the longer term, as opposed to a model of ‘Give me a discount’ — it’s much more fulsome than that.”

Preferred provider networks emerged years ago but didn’t really take off because there weren’t enough savings or motivation for plan sponsors to try them, said Poirier. But today, things are different and pharmacies are different, with more robust service offerings.

“Maybe we were helped along a lot by provincial drug reform in Ontario and we were also helped along by the fact manufacturers were coming out with really expensive drugs that need to be managed,” she said. “There’s a convergence of a number of really positive factors for change.”

Historically, inflation rates on health-care services have outstripped business growth, said Brad Fedorchuk, Winnipeg-based vice-president of group marketing at Great-West Life, which has a preferred provider partnership with Costco.

“A large driver of that has been prescription drugs and there’s been a lot of awareness in the media about generic reform and generic legislation across the provinces, and many plan sponsors are just looking for ways at being a little more efficient with their benefits dollars,” he said. “From the employer side, what makes sense about it is they’re able to manage the costs of the program while sharing some of the cost savings with plan members as well.”

How it works

With the Costco partnership, there are several ways companies can be involved, said Fedorchuk. For example, plan members can be reimbursed by Great-West Life at a co-insurance rate that is 10 per cent greater by filling prescriptions at a Costco pharmacy.

Another way is the deferential in per-prescription deductible, he said.

“One way of incenting the use of Costco is to say, ‘Instead of paying $10, at Costco you pay $3 or $5 or zero.’”

Or an employer could cap the reimbursement level at any other pharmacy to what the pricing would be at any Costco, said Fedorchuk.

“So it’s just three different flavours on how to do it.”

But it’s not just about pricing, he said, as Costco runs a lot of health services, such as administering flu shot clinics.

“We thought it was an interesting play on preventive maintenance as well, not just the cost of getting prescriptions,” said Fedorchuk.

In addition to discounts on drugs and dispensing fees, Loblaws offers a variety of patient education programs, said Poirier. The chain has a big emphasis on food and health, which includes medical clinics, physical fitness facilities and nutritionists and dieticians, along with programs around diabetes management, smoking cessation and cardiovascular health.

“(Employees will) be recognized as coalition members, part of the preferred network, so that recognition will spark, on an individual basis, more access to programs,” she said.

MHCSI offers a number of different types of plans, said MacFarlane. For example, an employer might want to offer a closed or exclusive benefits program involving Sobeys pharmacies or have a broader network with a co-pay structure.

“A lot of the value accrues from the actual management of the plan, so within our preferred network of pharmacies, we’re optimizing on things like generic fill rates, therapeutic substitution, 90-day supply rate of drugs, making sure people know how to use their medications properly and supporting them with that for a better health outcome. So it’s not purely about how the cost-sharing of the claim is… but the overall value of the pharmacy service,” she said.

The University of Ottawa has used a preferred pharmacy network for at least 10 years, according to Véronique Duvieusart, director of human resources shared services. All the pharmacies have agreed to charge a preferred negotiated rate for dispensing fees, so any employee who goes to one of these pharmacies knows he won’t pay more than that preferred rate, she said.

“Right now, we don’t have any tracking mechanism to know whether employees are using that or not. But as an employee, if you’re going to charge me, in addition to what my insurance covers me, an extra $8 per prescription and I can switch and go to one of these pharmacies and pay $2, obviously it’s to my advantage.”

Communicating to employees

Whenever a new employee joins the university, he is informed of the preferred provider network as part of the benefits package. The arrangement is also stated on the university’s website, with a link to the participating pharmacies, said Duvieusart.

“We haven’t done a lot of other promotion but it’s certainly something that we may do in the future.”

The education and communication around the total value or costs of benefit plans is probably an emerging area, said MacFarlane.

“Certainly if you were someone that needed a lot of prescription medication, you definitely value your drug benefits, you’re probably more attuned to what your overall spend is and appreciative of your plan coverage. But I would say a lot of folks are perhaps not aware of the overall investment an employer makes in their total benefit packages and to what extent drug benefits comprises that.”

As for any concerns about employee relations with preferred provider networks, most models provide member choice, she said.

“If a plan was getting to the point where it was being restrictive and saying, ‘You only have benefits if…’ that’s the place I wouldn’t want to go and you shouldn’t be going. Sometimes even members may misunderstand what the program is saying to them, so you need to be very clear.”

Some employers may have concerns about the employee reaction, said Poirier.

“There’s generally a fear in the HR department that this is going to cause quite a stir from an employee relations perspective but we’ve actually seen very little.”

Many workers are quite knowledgeable, she said.

“Employees actually are aware of drug costs and the need to manage drug costs, and they also very much value the drug benefits they have. So survey data would indicate they’re actually willing and able to help, and to support the employer in their endeavours to manage the drugs, especially if it means they don’t have any part of the benefits removed or decreased.”

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