Session 88 PD, Drug Claim Management. Presenters: Daniel Berty Suzanne Lepage. SOA Antitrust Disclaimer SOA Presentation Disclaimer

Transcription

1 Session 88 PD, Drug Claim Management Presenters: Daniel Berty Suzanne Lepage SOA Antitrust Disclaimer SOA Presentation Disclaimer

2 Industry pooling solution Outcomes and opportunities Dan Berty, Executive Director Canadian Drug Insurance Corporation (CDIPC) June 13, 2017 SOA Health Meeting Session 88: Drug Claim Management (C) Canadian Drug Insurance Pooling Corporation - June

3 Agenda Fully insured plan drug pooling in Canada The story so far Tends and results What CDIPC it is and isn t Observations The eco system s players and awareness Industry challenges Crystal ball (C) Canadian Drug Insurance Pooling Corporation - June

4 Who s in the room? HEALTH INSURER RE-INSURER PHARMA ADVISER, BROKER, CONSULTANT Who s heard me speak on drug pooling before? (C) Canadian Drug Insurance Pooling Corporation - June

5 Time for some exercise in our people pool.. 1) Everyone please stand up 2) Sit down if you don t personally know someone who is taking drugs that cost more than $10K per year 3) Those standing, raise your hand if you think one of the person take drugs costing more than $32,500 per year 4) Those standing, with your hand up, grab the flag and hold it up if the person has had 2 consecutive years of drugs costing more than $65,000 (C) Canadian Drug Insurance Pooling Corporation - June

6 Start with: History / perspective Source: Shoppers Drug Mart (C) Canadian Drug Insurance Pooling Corporation - June

7 Extended health insurance the recent past (through 2005 ish) Largest recurrent claims were typically hospital or nursing. Often with annual or lifetime caps to limit risk exposure. Frequency: Low Annual cost $10-25K Drugs have crept up Annual inflation outpacing CPI at double or triple largely driven by new drugs & patent protection. Largest drug cost approx. $10K per patient per annum. (C) Canadian Drug Insurance Pooling Corporation - June

8 Incidence rate Source: Express Scripts Canada Drug Trend Report 2016 (C) Canadian Drug Insurance Pooling Corporation - June

9 High cost drug trend ($10K-30K / certificate estimated by CDIPC) Estimate: Likely looks something like. EP3 / pooling charge impact (C) Canadian Drug Insurance Pooling Corporation - June

10 CDIPC claims paid by drug trend (C) Canadian Drug Insurance Pooling Corporation - June

11 Worst case risk extended health insurance (excl. travel health insurance risks) $3,000,000 6 $2,500,000 Risk driven by drug coverage $2,500,000 5 $2,000,000 $2,000,000 4 $1,500,000 $1,200,000 3 $1,000,000 2 $500,000 $0 $15,000 $30,000 $100, Largest annual EHC expense by certificate Recurrency risk impact index (1-5) 1 0 (C) Canadian Drug Insurance Pooling Corporation - June

12 Ergo need for fully insured drug claim pooling in Canada Why Orphan, biologic, and other drug advances at very high cost for specialized treatments. Advances in science = growing pipeline Sustainability & viability in the face of high cost recurrent drug claims. Public relation concerns. Who What When Canadians / plan members and dependents Plan sponsors Insurers 24 member companies All fully insured drug plans (not ASO, not refund) 2 tier pooling structure breaking out LAP risks at a) Insurer and b) Industry levels Not for profit industry created and owned. CDIPC administers and oversees adherence to CDIP framework Not government mandated. First year of industry pooling was 2013 (C) Canadian Drug Insurance Pooling Corporation - June

13 Landing place: Fully insured drug pooling regime or CDIPC framework Insurer Industry Industry pool sharing costs between insurance company members for certificates with recurrent high cost drugs. Proprietary Extended drug Policy Protection Plan Pool or Pools (formerly referred to as Large Amount Pooling / LAP) In a rapidly evolving Rx drug world, CDIPC is intended to be a short term (10-15 year) solution, buying time to protect the availability and solvency of small / mid-size plans. (C) Canadian Drug Insurance Pooling Corporation - June

14 CDIPC regime components deeper dive Pooling of high costs across employers in designated EP3 pool Pool entry point defined by insurer - typically between $10K and $15K per certificate. Pool up to CDIPC initial threshold - $32.5K in Can be multiple EP3 pools within an insurer s offering. Plans that move between insurers have pooling certificates tracked and pooling continues. EP3 pools are prohibited from experience rating customers. Each customer rated the same way in the pool. Pools can not be anti-selective (ex: no good, bad, ugly). CDIPC or industry pooling To share recurrent drug costs by certificate from year 2 of occurrence and beyond. Pool entry point is CDIPC Ongoing threshold ($32.5K in 2017) after 2 years of drugs at $65K or more. Pooling at 85% in industry pool up to $500K per certificate. Allows movement of plans with certificates who have repeating high drug costs by continuing industry pooling if employer plan moves to new insurer. (C) Canadian Drug Insurance Pooling Corporation - June

15 CDIPC framework risk design Insurer risks components: Shown: Amounts of claims below EP3 threshold EP3 pooling 15% of claims qualifying for CDIPC pool Insurer s share of CDIPC pool 100% of claims exceeding CDIPC pool maximum Not shown: Claims that don t qualify for CDIPC pooling 1 st year of claims that do qualify for CDIPC pooling but not pooled till 2 nd year it occurs Claims exceeding CDIPC pooling maximum CDIPC Industry pool Insurer EP3 pool(s) Insured plan sponsor CDIPC pooling structure: EP3 pooling threshold ($7,500- $15,000 is often typical) Industry/CDIPC pool threshold ($32,500 in 2017) Industry/CDIPC pooling maximum ($500K in 2017)

16 Industry pool allocation A. % paid drug market share per CDIPC insurer is determined B. A is multiplied against total of industry pool for each CDIPC insurer to establish its share by paid claim weight. C. CDIPC tallies the amount pooled in the industry pool by establishing the certificates that qualify for pooling. D. C is subtracted from B If negative, this amount is the member pays into the pool. If positive, this is the amount the member receives once all members who pay into the pool have contributed their share. Example: Canprotect Life Co A. 15.6% of paid fully insured drug claims in Canada. B. Industry pool total is $14.2M * 15.6% = $2.21M ins Canprotect s share of pool. C. Canprotect s qualified claims for pooling is $1.9M D. $1.9M $2.21 = -$0.31 that Canprotect pays into industry pool. (C) Canadian Drug Insurance Pooling Corporation - June

17 EP3 and CDIPC successes CDIPC is now in its 5 th operating year of pooling. For insured plans, the program is helping insurers and employers manage catastrophic drug costs and maintain plan affordability as evidenced by: Measure Total paid drug claims from fully insured plans $1,327.9M $1,379.9M $1,463.3M Claims where certificate's drugs exceed initial threshold of $170.3M $189.0M $288.7M $25K in 2013, $27.5K in 2014, and $30K in 2015 Catastrophic plan risk averted and plan viability Direct impact maintained of risk averted: EP3 level Drug pooling plan viability that might maintained not have existed despite for material many risk small/mid exposure size increase employers. from new drugs. Eligible amounts of claims that qualify for pooling (2 or more yrs greater initial threshold or- 2 yrs greater than initial threshold and subsequent yrs greater than initial threshold) $16.3M $24.5M $31.6M CDIPC pool shared by insurers from qualified claims $8.9M $13.0M $16.7M # of certificates exceeding initial threshold 4,205 4,018 4,093 # of certificates in pool # of by duration of pooling 1 yr = or 2 yrs = yrs = 89 3 yrs = 306 # of leading drugs in the pool # leading drugs not pooled in prior year (C) Canadian Drug Insurance Pooling Corporation - June

18 and CDIPC drug pooling: What it is and isn t Is EP3: Standardized risk sharing approach within the insurer's book of business of high cost drugs (typically greater than $10K per year per certificate). EP3: Ensures experience rating does not occur and ensures bad risks are not selected against by the insurer. CDIPC: Standardized approach to share costs for paid drug claims over $32.5K from year two onward, up to $500K annually. A means to ensure the extended health care private insurance market remains competitive. Is not A means to mute inflationary pressures on drug plans. Like all pooling programs, it spreads the risk to a wider pool and shares the impact when realized. An industry vehicle to provide alternatives to ASO and Refund plans with recurrent large drug claims. When ASO or refund moves to CDIPC, those plan members are excluded from CDIPC coverage. A means to reduce the cost of drugs or address inherent challenges in the pharma / pricing system. A vehicle to advance socio/political agendas in drug spending and health care. (C) Canadian Drug Insurance Pooling Corporation - June

19 Observations after 3 years of pooling (C) Canadian Drug Insurance Pooling Corporation - June

20 The leveraged effect of high cost drug inflation on pooling Capital sewage and drainage Keeping the nation s capital blockage free since confederation - 46 employees - 6 locations in Ottawa - $7.8M in annual revenue Fictitious company but this kind of situation occurs with regularity. Year Stop loss / LAP threshold Annual total drug inflation on plan Howard Sheila Rubby Godfrey Total impact above stop loss threshold Stop loss % increase over prior year Stop loss % increase over prior year Stop loss % increase over prior year Stop loss % increase over prior year Net value over stop loss threshold Net inflation above stop loss threshold over prior year Net cumulative inflation above stop loss threshold Paid claims Stop loss impact Paid claims Stop loss impact Paid claims Stop loss impact Paid claims Stop loss impact 2013 $10, % $11,000 $1,000 N/A $13,500 $3,500 N/A $375 $0 N/A $4,500 N/A N/A 2014 $10, % $12,100 $2, % $16,500 $6,500 86% $25,000 $15,000 N/A $264 $0 $23, % 424% 2015 $10, % $12,500 $2,500 19% $16,750 $6,750 4% $27,500 $17,500 17% $30,000 $27,900 N/A $54, % 1114% 2016 $10, % $12,850 $2,850 14% $16,600 $6,600-2% $27,900 $17,900 2% $31,250 $28,750 3% $56,100 3% 1147% (C) Canadian Drug Insurance Pooling Corporation - June

21 Observation: Consequence of pooling & leverage effect Marketplace: A. Perception that extended health insurance, especially drug, is very profitable for insurers. B. Pooling not well understood outside of actuarial community including brokers, insurer account execs, and some marketing team members. There hasn t really been a need in a material way to explain pooling until high cost drugs. Situation is compounded by lack of transparency to a degree. Explaining pooling is reasonably complicated and could compromise (to a degree) an insurer s competitiveness. C. Leverage effect largely not understood. (C) Canadian Drug Insurance Pooling Corporation - June

22 Observation: Insurer organizational design can cause gaps in market messaging around pricing focus. Who tells the story? What is the story? Group benefits Finance & actuarial Business Development Operations Finance Actuarial (prime focus is LTD and Life) Underwriting Marketing Sales Claiims (C) Canadian Drug Insurance Pooling Corporation - June

23 Snapshot of drug trend: Leading drugs pooled by CDIPC Observations: This is only drugs pooled at industry level. What about those that pool only in EP3? New drugs (even factoring in recurrent nature 1 yr lag) Predicting risk of occurrence: To a degree / unluckiness factor underwriting / pricing? (C) Canadian Drug Insurance Pooling Corporation - June

24 Drug pooling future / rapidly shifting (by insurance standards) landscape Environment continues to get more complex with many moving elements impacting both public and private payors. Issue Public payor significance Private payor significance Pharma strategies High High Pharmacy strategies N/A Medium Patent medicines pricing review board (PMPRB) direction High High Risk tolerance of underwriter Medium High Specialty drug pipeline Medium High Pharmacare directions or not High High Drug cost management strategies High High Drug prior authorization strategies N/A Medium Drug eligibility / coverage strategies High High (C) Canadian Drug Insurance Pooling Corporation - June

25 Crystal ball (C) Canadian Drug Insurance Pooling Corporation - June

26 Fearless predictions Many more biologics and orphan drugs coming More approved uses of newer high cost drugs Greater emphasis on drug risk analysis Pipeline and likeliness of occurrence Potentially new drug pooling innovations for ASO and possibly Refund lines Considerably more drug risk management approach innovation coming PBM based (and possibly shared amoungst PBM users) Insurer based likely competitive differentiator Mobile devices will somehow play a role It s a matter of time before the big one hits the press and in a slow news cycle. (C) Canadian Drug Insurance Pooling Corporation - June

27 (C) Canadian Drug Insurance Pooling Corporation - June

28 Canadian Drug Trends Examining drug costs and levers that influence them Health Meeting of the Society of Actuaries (SOA) Diplomat Resort, Hollywood, FL June 13, 2017 Presented by: Suzanne Lepage, Private Health Plan Strategist

29 Overview 1. Drug cost components 2. Patented Medicine Price Review Board (PMPRB) 3. Pan Canadian Pharmaceutical Alliance (pcpa) 4. Drug Mix new vs old drugs 5. Drug Choice - influencers 6. Drug Acquisition Cost - Pharmacy Agreements and Preferred Networks 7. Cost Shifting

30 Drug Cost Claims Volume Dispensing Fee Mark-up Drug Price Age Health Industry Location Gender

31 Drug Plan Savings Savings can be generated by Reducing purchase price of prescribed drug Cost shifting to patient or government Reducing or eliminating claims Changing prescription to lower cost medication

32 Patented Medicine Price Review Board (PMPRB)

33 Dispensing Fee Mark-up Drug Price PMPRB Patented Medicine Price Review Board (PMPRB) Regulatory mandate : To ensure that prices at which patentees sell their medicines in Canada are not excessive Regulates pharma list prices for Brand Name Drugs ONLY (NOT markup or dispensing fee or generic drugs) Determines maximum price at which a drug can be sold in Canada Key factors: a. Therapeutic improvement relative to standard of care b. Therapeutic class comparators c. Canadian prices of comparators d. International prices Drug prices cannot increase by more than the Consumer Price Index (CPI) Price can never be higher than highest international price of: France, Germany, Italy, Sweden, Switzerland, UK and USA

34 Pricing International comparisons Many countries reference other countries prices Complex and constantly changing Requires active monitoring and management Significant financial implications May delay or forego product launch in a country if international impact determined to be net negative Canadian pricing teams must consider impact of Canadian prices on other countries Price often a global head office decision

35 PMPRB Reform Recent and significant changes in the Patented Medicine Prices Review Board s (PMPRB) operating environment necessitate corresponding changes to modernize and simplify its regulatory framework. PMPRB consultation on guidelines reform Discussion Paper and public submissions (2016) 67 Submissions as of deadline (October 31, 2016) Objectives: informed discussion on changes that have taken place in the operating environment identify areas of the guidelines that may be particularly in need of reform encourage public participation to obtain a diverse array of viewpoints PMPRB Guidelines Modernization Discussion Paper June 2016

36 May 16, 2017 Federal Health Minister Addressed Economic Club to discuss proposed changes to drive down unacceptably high drug costs

37 Proposed Amendments to PMPRB Regulations Highlights: Introduce three new factors to determine excessive drug price: Pharmacoeconomic evaluation for the medicine and others in the same therapeutic class in and outside of Canada Size of the market for the medicine in Canada and other countries (estimated uptake of by approved indication) Gross Domestic Product in Canada Require drug companies to report to the PMPRB all indirect price reductions (rebates, discounts, free goods)

38 Proposed Amendments to PMPRB Regulations Change Comparator Countries Current Proposed France Germany France Germany No Change Italy Italy Sweden Sweden Switzerland United Kingdom Switzerland United Kingdom Australia Belgium Japan New Netherlands Norway South Korea Spain Removed United States United States Additional potential changes noted: Increase capacity of pcpa Align Health Canada and CADTH review process to run concurrently to provide faster access to new medications Expand Priority Review process for new drugs that meet special needs Common National Formulary Improved data analysis via CIHI Improve monitoring and analysis of real world evidence during drug life cycle Canada Health Infoway introduce national electronic prescribing Health Canada is currently seeking input from stakeholders and the public on these proposed amendments. The online consultation runs through June 28,

39 Pan Canadian Pharmaceutical Alliance pcpa

40 Dispensing Fee Mark-up Pan Canadian Pharmaceutical Alliance (pcpa) Joint confidential negotiations for brand name drugs for publicly funded drug programs ONLY Generic Value Price Initiative and Biosimilars First Principles lowered prices for all Canadians CLHIA lobbying for private payers to be included in negotiations Drug Price PCPA

41 Did you say lower drug prices? Why not have private plans be part of pcpa?

42 Considerations - Private Plans joining pcpa Private plans may be required to harmonize drug plan designs be limited by government listing recommendations cover fewer drugs face listing delays pcpa negotiations Listing Delays 1 40% of drugs remain at six months 25% remain at nine months Two drugs beyond one year 1 - Research conducted by Roubaix Strategies Inc (as of December 31, 2016)

43 Considerations - Private Plans joining pcpa Skinner et al. Pharmacare: what are the costs for patients and taxpayers? (2015)

44 Considerations - Private Plans joining pcpa Private plans may be required to harmonize drug plan designs be limited by government listing recommendations cover fewer drugs face listing delays have different objectives than government plans be first and only payer (in pcpa for certain drug and competitor(s) or province(s) that are not) lose competitive advantage may get less savings than individual negotiations potential to dilute overall potential savings due to consensus based negotiating require additional resources to manage pcpa participation

45 Potential Impacts of Private Plans joining pcpa? Would private plans be better served by negotiating their own agreements with pharmaceutical manufacturers? Individually (e.g. Remicade) Collectively (buying group) Potential Challenges Competition Law Harmonization of plan designs Reduced competitive advantage Resourcing and expertise

46 Drug Mix

47 Dispensing Fee Mark-up Drug Price Drug Mix Drug Mix New drugs enter the market at higher cost than existing treatments Shifts use from lower to higher cost drugs Why do we need new treatments? Incremental innovation Improved outcomes Scientific advancements Unmet need Impact 1 increased costs by 5.6% in 2015 up from approx. 3% per year in 2008 to Private Drug Plans in Canada: Cost Drivers, 2008 to 2015, National Prescription Drug Utilization Information System (NPDUIS), (Partnership between the PMPRB and the Canadian Institute for Health Information (CIHI))

48 Drug Choice

49 Dispensing Fee Mark-up Drug Price Drug Choice

50 72% of Drs say a patient having private prescription drug coverage has an impact on their approach to patient care and prescribing prescription drug Dispensing Fee 52% more likely to prescribe brand name drugs The Group Benefits Prescription Drug Outlook (2014) Physicians are the gatekeepers for prescriptions Most physicians have limited knowledge of relative drug pricing Mark-up Drug Price Drug Choice Pharmacists can have a role to influence drug choice Expanding scope of practice - may be able to adapt Rx Contact Dr to change Rx Unfortunately, current pharmacy systems and physician EMR provide limited or no information about private coverage, plan designs and lower cost alternatives

51 Generic Substitution Vs Switching Generic substitution Health Canada determines generic and brand are interchangeable Pharmacist can switch to generic drug without notifying doctor Switching (Therapeutic Substitution) pharmacist dispenses different drug than prescribed by doctor Why? Medical: tolerability, adverse event Non Medical: plan design, affordability consult with doctor and patient to dispense a different drug some provinces now allow pharmacists to substitute different medication without consulting doctor

52 Dispensing Fee Mark-up Drug Price Drug Choice Plan Designs influence drug choice Managed Formularies Tiered Formularies Provincial Mimic Plans Prior Authorization Step Therapy MAC /Reference Pricing Case Management Preferred Pharmacy Network

53 Deciding which drugs to cover Why are certain therapies covered versus others? Why do different payers come to different coverage decisions about the same drug?

54 Deciding which drugs to cover Determining value depends on: perspective of the evaluator what is included in benefit and cost

55 CADTH - CDR Through the CDR process, CADTH conducts thorough and objective evaluations of the clinical, economic, and patient evidence on drugs, and uses this evaluation to provide reimbursement recommendations and advice to Canada s federal, provincial, and territorial public drug plans, with the exception of Quebec. The perspective chosen for the evaluation should fit the needs of the target audience. The perspective in the Reference Case should be that of the publicly funded health care system.

56 Value is in the eye of the beholder Improved health outcomes Reduce Dr Visits Reduce hospital stays Reduce tests required Reduce health care staff costs Societal Benefits Population Health Improved productivity Reduce absenteeism Prevent long term disability Public Plan QC Private Drug Plan? Patient

57 Preferred Pharmacy Network (PPN)

58 Pharmacy Agreement Terms 1. Drug Price Source 2. Allowable Markup 3. Allowable Dispensing Fee Dispensing Fee Mark-up Pharmacy Agreements PBM ~3 Insurers ~15 Plan Advisors ~3,000 Drug Price Plan Sponsors ~ K Pharmacies ~9K Plan Members ~ 19M

59 Preferred Pharmacy Network (PPN) Dispensing Fee Mark-up Preferred Pharmacy Network PPN A network of pharmacies that agree to provide guaranteed levels of service, competitive dispensing fees and markups for the plans that participate in the network. Less Potential Savings More Drug Price Optional Use of PPN is optional for member Incentive Provide a higher reimbursement % for members who choose PPN Mandatory Require members to use the PPN to be reimbursed

60 Cost Shifting

61 Plan Member Copayment Cost Shifting Plan Designs that shift cost Coinsurance Dispensing fee caps Maximums Tiered Formularies Plan Pays Potential Challenges Member/patient affordability Poor adherence Impact on health outcomes

62 Provincial Drug Plan Integration Cost Shifting Government Cost Shifting Challenges Lack of alignment between Private vs Public Provincial plans cover less drugs Different clinical criteria Satisfying deductibles

63 Provincial Drug Plan Integration Challenges Example ON Trillium Drug Program To satisfy deductible ONLY out-of-pocket expenses borne strictly by the plan member (no COB or pharma PSP) Deductible ~4% of household income Median income of $78,790 = ~$3,000 per year deductible Potentially only 9% of plan members would be eligible for Trillium 1 Two application processes 1. Trillium Financial Eligibility 2. Exceptional Access Program (EAP) Clinical eligibility Not all private plan drugs covered by ODB ODB EAP criteria may be different that private plan criteria 1 - De-mystifying the Trillium Drug Program (TDP)

64 Plan objectives should drive decisions

65 Plan objectives should drive decisions Insurance protection for employee s unexpected serious illness? (risk management) Tax effective compensation? Health care costs - cash flow / expense management? Line item expense to be budgeted and managed?

66 Summary 1. Drug cost components 2. Patented Medicine Price Review Board (PMPRB) 3. Pan Canadian Pharmaceutical Alliance (pcpa) 4. Drug Mix new vs old drugs 5. Drug Choice - influencers 6. Drug Acquisition Cost - Pharmacy Agreements and Preferred Networks 7. Cost Shifting

67 Questions and Discussion (B)