CLHIA expects premium hikes for employers

‘Unsustainable’ drug price increases predicted to drive up private insurance premiums, say industry body

CLHIA expects premium hikes for employers
The cost of private insurance benefits is expected to rise in 2017 due to higher drug prices, according to a CBC News report.

Sales of new biologic anti-inflammatories such as Remicade, Enbrel, and Humira have doubled in Canada since 2010 to hit $2.2 billion in 2015, according to the Patented Medicine Prices Review Board. Meanwhile, savings from newly introduced generics have been fully realized. Because of these cost factors, employers are bracing themselves to pay insurers more to administer their group benefit plans – a real possibility, given that the Canadian Life and Health Insurance Association is expecting premium increases from most of its members.

Adding to the inflationary pressure are pharmacists and pharmacy benefit managers, who tack on various fees as they fill prescriptions and process claims. Certain markups are proportional to the costs of the drugs themselves, creating a heavier financial burden with each transaction.

Benefiting from this trend, Canadian retail pharmacies have increased in number by 20% since 2008. However, Toronto-based insurance consultant and licensed pharmacist Mike Sullivan believes that the costs are ultimately unsustainable, even if premiums increase. “If it doesn't get fixed, everybody is going to lose,” he said.

Sullivan, whose company Cubic Health audits employee drug plans, says treatment decisions by prescribing doctors also drive up costs. He cited the case of an employee billing $220,000 for a Hepatitis C treatment that normally costs $60,000-$70,000: the markup resulted from a prescribed combination of drugs that Sullivan said wasn’t medically necessary. “This happened and nobody asked a question,” he said, adding that employers mistakenly assume that physicians would prescribe cheaper alternatives.

In contrast, public plans administered by provincial governments haggle with drug makers for lower prices. “We were the second largest plan in North America… So we were able to secure some significant discounts,” said Helen Stevenson, a former assistant deputy minister of health in the Ontario government.

Currently working with employers to reduce drug costs, Stevenson said that private insurers don’t have the same incentive to bargain as the public system does.

“Basically their employees say they're frustrated by increased premiums and no additional benefits. You're not improving our plan — you're making us pay a higher premium for the same plan," she said.

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