Runaway drug costs make benefit upgrades impractical

Fundamental changes to Canada's prescription drug system needed

Employers will find it very difficult to improve benefit packages unless fundamental changes are made to Canada’s prescription drug system, says a Canadian benefits expert.

People may be looking for better benefits but employers simply won’t have the money to do it, said Richard Leberge, managing director of the Ottawa office of Buck Consultants.

Benefits costs are increasing mainly because drug costs have been rising at an unsustainable rate, he says. Costs have been rising by about 16 per cent annually and drug costs represent as much as 70 per cent of health-care benefit expenditures, excluding dental and vision-care costs.

Many Canadian businesses are too busy addressing solvency issues and funding pension shortfalls to improve benefits. Employees may grumble that benefit plans are not improving, “but they also want a job,” said Leberge.

“I think right now the private enterprise will be hard-pressed to come up with additional money to pour into additional benefits.”

A study from Statistics Canada released last month said benefits now represent one-third of total labour costs, up from about 15 per cent in the 1950s. In recent years, increases have also been driven by two-income families with aging parents looking for benefits like on-site day care, extended parental leave, leave for parental care, on-site fitness centres and employee assistance programs.

The problem of runaway drug costs is uniquely bad in Canada, said Leberge.

Some people may say that is because Canada has a better system and therefore it costs more, but that doesn’t explain why the costs are increasing at a rate higher than that of comparable industrialized nations. If the system is more expensive it should cost more but costs shouldn’t increase at these rates, he said.

Simply put, Canadians are taking too many pills, he said. He blames the overly exuberant marketing of big drug companies, the willingness of doctors to prescribe drugs unnecessarily and the Canadian custom of running to the emergency room for even trivial problems.

This is a big problem for employers but they aren’t saying much about it, he said. Leberge participated in an International Foundation of Employee Benefit Plan conference on the Canadian benefits industry in early May, and few employers were complaining about the systemic problems in the drug system or irresponsible behaviours of the pharmaceutical companies.

If the same amount of money that pharmaceutical companies spend on marketing their latest drugs was spent on education and increasing awareness, costs would come down and people would still be healthier, he said.

The government should intervene to establish some guidelines about what is reasonable drug usage, he said. There has to be a concerted effort to raise the awareness about the costs of drugs and what current habits mean to the system.

People shouldn’t be running to the doctor or asking for pills every time they feel slightly unwell, he said. “Just because your kid has a cold it doesn’t mean he needs penicillin right away.”

The Statistics Canada report Benefits of the Job also said one-half of all Canadians now have access to extended medical, dental and life/disability insurance. But 38 per cent of all workers still have no extended employer-sponsored medical coverage.

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