Drug Pooling Option For Plan Affordability

Drug Pooling Option For Plan Affordability A Special Industry Event held by: MONITOR

Drug Pooling Option For Plan Affordability was about 1.3 per cent; considerably larger than expected. Created as a not-for-profit company, CDIPC doesn t make a penny, he said, and the money is redistributed to the insurers it s just a sharing mechanism. It went live in 2013 with 24 companies and all fully insured plans at that time were grandfathered in, whether they had claims or not. However, there are misconceptions about CDIPC. To start, it does not drive down the cost of drugs, what it does is share the cost. If one plan has a spike in cost due to a high cost drug, it is shared across the board. The drug cost is the same. Some people think it defines a criterion for coverage, he said. However, for the most part, insurers can still define their From left, Mike Sullivan, Chief Executive Officer of Cubic Health; Anjila Arora, Director of Pharmaceutical Benefits at Sun Life Financial; and Dan Berty, Executive Director of the Canadian Drug Insurance Pooling Corporation (CDIPC); were the featured experts at the Monitor Drug Pooling and Supplemental Drugs event. Self-insured (ASO) plan sponsors have to get creative in addressing the challenges of escalating drug costs and stop-loss premiums. The Meetings & Events Drug Pooling and Supplemental Drugs session focused on what plan sponsors are doing to address these issues, maintain best practices, and build strategies to maintain plan viability. Dan Berty, Executive Director of the Canadian Drug Insurance Pooling Corporation (CDIPC), provided his insights on the CDIPC s efforts to maintain the viability of drug plans when they are hit with one time and recurrent high cost drugs. Anjila Arora, Director of Pharmaceutical Benefits at Sun Life Financial, looked at drug costs and trends shaping pharma as well as strategies to mitigate these trends. Mike Sullivan, Chief Executive Officer of Cubic Health, discussed what plan sponsors are doing with plan-specific predictive analytics, custom plan designs, and disease-state based approaches to managing high-cost drugs and optimizing how they are structuring stop-loss coverage. In 2012, the Canadian Drug Insurance Pooling Corporation (CDIPC) was created, first and foremost to maintain plan affordability and then to avoid non-coverage impacts and ensure employers wouldn t be faced with not having to cover employees, which in the older arrangement would have occurred on a stop-loss arrangement because of experience rating, said Dan Berty, Executive Director of the CDIPC. Typically, small employers wouldn t have been able to cover those costs. It would have bankrupted them because the insurance companies would increase rates to pick up the cost of those recurring claims. Sharing Costs CDIPC is a means of sharing costs by creating an industry insurer at certain thresholds across all the insurers who offer fully-insured drug plans. It was anticipated that it would cover about 0.25 per cent of total drug claims. However, as of 2016, it plans and designs as they see fit within the marketplace. It also doesn t eliminate the cost from plans, it just smooths them. It doesn t determine what insurers can charge. That is up to the insurer to cover these costs on the re-insurance basis or the Extended Healthcare Policy Protection Plan (EP3) or pooling charge basis. The CDIPC regime doesn t force insurers to bid on plans that come to market. Insurers can still choose to bid on plans or not. There is considerable movement of plans between insurers when employees or their family members (certificates) 1 BENEFITS AND PENSIONS MONITOR November 2017

have recurrent high cost drug claims below $150,000. While there is some movement of plans with drug claims above $150,000, this plan movement is more because the introduction of new treatments has been more rapid than anticipated. Consequently, this has caused the ability to absorb the recurrent claim by the new insurer, even with industry level pooling, more challenging than was anticipated when CDIPC began. It is important to note that the framework of CDIPC regime does not allow for insurers to experience rate plans. Nor can they say: If you have a claim now, you re not covered. But if an ASO or a refund accounting plan wants to become fully insured and join CDIPC, certificates with pre-existing high cost drug claims will be Specialty Drug Spend Digging a little bit deeper, not surprisingly, she said, the specialty drug spend continues to increase. Specialty drugs on average cost 44 per cent more than traditional drugs. From 2013 to 2016, the cost increased by 33 per cent and this is likely to continue as the number of specialty drugs being approved is significant. Traditionally, specialty drugs affected diseases that had low prevalence. Now, we are seeing high-cost drugs coming to marabove $32,5000 at 15 per cent in the second year up to a maximum industry pool coverage of $500,000. Above that, insurers have to underwrite the cost as they do the 15 per cent and all first-year costs. Insurers can also, if they like, back some of this with their own re-insurance. Berty said he is not a drug expert, but there are clearly more high cost drugs cost coming. This is good for Canadians, it s good for living longer, and it s good for health generally, but the ability to afford it becomes the challenge. While some relief is coming from biosimilar drugs, and new drugs treatments offering choices of treatment for the same illness, the upward trending pressures from high cost drugs will likely be only modestly abated. previous year, said Anjila Arora, Director of Pharmaceutical Benefits at Sun Life Financial. These increases in drug costs are coming from several areas including orphan and rare disease drugs which are high cost, specialty medications. We also have oncology which remains a dominant therapy segment. Secondly, demographics and chronic therapies have an impact. As the Canadian population ages, there has been an increase in the number and cost of drug claims. We also have to keep in mind that innovation is continuing on chronic diseases such as diabetes and cardiovascular conditions, she said. Looking at overall claims, single source drugs were responsible for 29 per cent of the number of claims, but make up 66 per cent of the cost a significant portion, excluded until they have two years of no longer having a high cost claim. Two Pools In terms of structure, there s essentially three levels of risk management, including two levels of pooling in the CDIPC regime. Core is typically below $8,000 to $12,500, the basic premium for drug costs. Next is EP3 pooling. It is pooling by the insurer between the top of the core insurance and $32,500. After that, when certificates exceed $65,000 for two or more years, the industry pool, which is shared by all insurers belonging to CDIPC, picks the cost More and more prior authorizations are coming into play, he said. Caps are being talked about to avoid the pooling charges or somewhat negate increases. However, these things restrict drug coverage, he said, and generally insurance company members of CDIPC are not in favour of these approaches. Data from the Canadian Institute for Health Information shows the prescription drug spend for medications reached $32.2 billion last year, up from $29.2 billion the she said. Generic drugs make up 64 per cent of claims with 27 per cent of the cost. November 2017 BENEFITS AND PENSIONS MONITOR 2

ket for diseases that have high prevalence and longer duration of therapy like high cholesterol and migraine prevention. A growing driver is chronic conditions. The top chronic conditions combined represent 42 per cent of the total drug spend on Sun Life s book of business. And, although rheumatoid arthritis affects a small percentage of claimants, the high-cost medications make it the most expensive chronic disease affecting plans, said Arora. As well, the cost per claimant for diabetes has increased over the past four years, on average by six per cent due to the introduction of new, more expensive classes. Compounding this is the prevalence of diabetes, cancer, cardiovascular disease, and hypertension all increase with age and if we continue to introduce specialty drugs for these conditions, the drug spend will continue to increase. But it s not all doom and gloom. When we switch our focus to treatment options, we can see from 1996 to 2016 how our treatment options have increased. For example, if we look at breast cancer, in 1996 there were eight options; in 2016, this had increased to 19. There are also therapeutic vaccines in development for cancer that are targeted to treat a person who is sick, she said. Indeed, of the 259 vaccines in clinical development, 103 are traditional preventative vaccines, mostly against infectious diseases. The other 156 are therapeutic vaccines in such areas as Alzheimer s, cancer, and allergies. Health 3.0 Sun Life is transitioning into Health 3.0, a patient-centric approach, she said. It has evolved from Health 1.0 where there was only a one-way flow of knowledge from healthcare professional to patient. In Health 2.0, patients started to get more involved in their health and taking part in online communities and blogs, looking at websites which enabled them to selfdiagnose and the conversations they were having with their physicians changed. With Health 3.0, patients are no longer passive recipients of healthcare, but are actively involved and empowered to participate in their own healthcare through technology focused on patient engagement and digital information to help them manage their own health and wellness. There s a huge misperception that somehow large ASO (Administrative Services Only) plans in this market have access to all this wonderful insight that small and medium sized employers don t have, said Mike Sullivan, Chief Executive Officer, Cubic Health. And that s not the case. They also struggle with having to make important financial and coverage decisions with limited high-level aggregate information. And ASO plans where organizations fund their own employee benefit plan program, but hire outside firms to perform specific administrative services is a marketplace we need to pay attention to, he said. There are more fully insured plans in Canada, but ASO plans dominate the landscape in terms of spend and they typically have more open plans that are subjected to greater catastrophic risk. Paralyzed However, the first issue is that ASO plan sponsors have no idea what s happening with their own stop-loss premiums and they re paralyzed because they have very little information. They are being told their experience is a certain way and as such here are their new premiums. Everybody is relying on retrospective information which is totally useless outside of assessing current disease state prevalence in a given plan population in healthcare and drug plan management because the past is absolutely no indicator of the future, he said. Yet, larger ASO plans aren t looking to quantify their own plan-specific risk because they re stuck in that same-aslast-year mode, said Sullivan. The annual game begins with carrier quoting a stop-loss charge of X per cent and an internal or external plan advisor trying to negotiate that down using the same limited insights the carrier has. The end result is everyone is negotiating blindly one based on a what the market will bear and the other on what will be a good story to management about moving down the rates by some amount. On the carrier side, they are still relying on relatively high-level information to price stop-loss because they re not using predictive data the way that they should be. In the ASO market, they re not looking at plan-specific factors and that s a problem because there s a big disconnect between what plans are perceiving as catastrophic risk and what s actually being quoted. There also a credibility issue. When we talk about the rates for stop-loss, how exactly are these rates being calculated if we can t get some relatively basic risk parameters straight? For example, are we talking about total spending for members at a given attachment point or existing spending above that point? How much is Hepatitis C risk still being priced into groups after the fact for 2018 to make up for being blind to the risk initially? Another credibility issue revolves around promises of reducing stop-loss premiums by uptaking a specific program like a preferred specialty pharmacy provider network that seeks to control where a drug is dispensed. How does saying yes to who dispenses the medication change a catastrophic risk profile by 10 or 15 per cent? It doesn t make any sense. When you start doing that, the credibility of the numbers starts to get challenged because there s no correlation between doing that and risk mitigation, said Sullivan. The path leading plans are on starts by answering three very important questions. First, they want to know how well is their current plan is performing, what are they seeing, and what s changing. Next, they are looking for areas in the plan where money is being wasted and can be redirected to support the cost of high-cost drugs or reinvested in other areas that have greater benefit to the plan and its members. Finally, they are thinking about how to shelter the plan from unnecessary catastrophic risk. This can start with conversation more about predictive risk that s plan specific. The core pieces here include knowing the prevalence of key diseases in a plan, the current severity profile within a given disease, and the impact of current plan design in mitigating catastrophic risk. Finally, sponsors are not looking at the impact of their current plan design in terms of what that means for us as a plan sponsor, and what it means for our plan-specific risk. If you don t factor in your plan design, you can t even begin to understand what that number is going to be, said Sullivan. BPM Monitor would like to thank the Sponsor of this Event 3 BENEFITS AND PENSIONS MONITOR November 2017

SPECIAL EVENT TOPICS Pension / Investment Events: Pension Investment Strategies April 24, 2018, Vantage Venues Toronto. Today s pension plans face paying out retirement benefits to their youngest employees up to 50 years from now. This session will examine how investment strategies can meet these future liabilities in a changing environment. Pension Risk Strategies September 25, 2018, InterContinental Toronto Centre Toronto. Major trends are reshaping Canada s pension plans and their risk strategies as employers look to share or off-load pension risk and focus on de-risking. How these work and what risk strategies are on the horizon will be the focus of this session. Pension Investment Trends November 13, 2018, Vantage Venues Toronto. The continuing low interest rate environment is prompting pension plans to seek new investment opportunities to generate the returns they need to match their liabilities. Industry experts will provide their insights on how pension funds are investing their money now and what they will be considering in the future. Benefits Events: Benefits 2018 March 20, 2018, Vantage Venues Toronto. In 2018, cost will again be the primary challenge facing plan sponsors. How this challenge will be addressed in the coming year will be the focus of this event. Benefit Trends & Insights May 8, 2018, Vantage Venues Toronto. The one constant when it comes to benefits is change. This session will examine areas such as the impact an increasingly global workforce is having and will have on benefit plans and how new approaches to providing benefits can be used to meet the needs of employers and employees. The Future of Benefits October 18, 2018, InterContinental Toronto Centre Toronto. What will the benefits plan of tomorrow look like? Our speakers will gaze into their crystal balls and share their thoughts on the future of areas such as paramedical coverage in benefits plans and managing the soaring cost of drugs. FOR MORE INFORMATION or additional sponsorship opportunities, please contact Joelle Glasroth at joelle@powershift.ca or 416-494-1066 ext 11 MONITOR Mee tings & Events Monitor, A Publication of Powershift Communications Inc. 245 Fairview Mall Drive, 5 th Floor, Toronto, ON M2J 4T1 www.bpmmagazine.com