Cost containment strategies are a vital plan design component
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We spend a lot of money on drugs in Canada. Last year we spent over $36 billion in medications for the public plans, the out-of-pocket individual costs as well as private payers. Governments spend about 46% of that cost. Out-of-pocket is about 14% of the cost. That other orange piece of the pie is 40% of the drug plan costs or drug costs that we spend in Canada from private players.
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So why is this important? Well, basically because when we look at your drug spend, 60 to 80% of your healthcare costs are all spent on drugs. And then when we equate that to your entire benefit plan, it's usually between 35 and 50% of your total benefit spend that's on drugs. And of course, these numbers are not coming down. Inflation is having a dramatic impact on that as well as new more expensive medications that are coming into the marketplace. And we talk about private payers. We're not really talking about insurance companies that are paying.
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for the drugs. It's planned sponsors and plan members.
Support plan members with diabetes to reduce the costs of associated chronic conditions
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So this is really, really interesting data. The top therapeutic drug categories both in spend and in claims last year, a lot of this comes from the Telus report. There are big pharmacy benefit manager in Canada.
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What's really interesting about this is this is the first time in history that diabetes is now the number one in terms of spent in Canada.
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It surpassed the rheumatoid arthritis category, which is normally an autoimmune disease. It includes some Crohn's and colitis as well. And when we look at the difference between total cost and total claims, we see that for rheumatoid arthritis, the autoimmune disease is a very, very small subset of the population that takes these medications. But they're very, very expensive and that's why they've typically been #1.
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Unfortunately now in Canada, about one in four Canadians is pre-diabetic or has diabetes already. So we're seeing huge numbers on both the terms of usage and the cost. And of course, drugs like Ozempic that have come onto the marketplace are having a dramatic impact in this space as well.
Switching to generic biologic drugs has shown positive results and significant savings
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I'm just gonna spend a little bit of time talking about biologics and biosimilars as well. So when I was talking about the other medications, those are mostly chemical-based. When we're talking about biologic medications, these are made from living cells, they're naturally variable. So that means that they can't make, you can't make an exact copy of them.
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They are usually very, very expensive. They're taking a lot more technology in R&D to create and that's why they're usually one of the top, the top drugs in your plan designs because they are so expensive.
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When we talk about biosimilars,
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there are a lot of biosimilars now available on the market. They're similar to, but they are not exact copies of the biologics just because the originator biologics, because of the variability in the living cells that I mentioned earlier.
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The good news is that this is very interesting the provincial governments are leading the charge in biosimilar switching.
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This says 8 provinces. It's actually 9 now because PEI just came on board last week in terms of having an automatic biosimilar switching policy. So, what that means is the originator biologics are no longer being paid for by public plans.
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Ontario is in a transition period right now, up until the end of December. And that means that Humira has the Remicade, the umbrellas, they'll no longer be covered under the public plans.
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What's really interesting about this is that BC, which was the first province to have a biosimilar switching policy and they started it back in 2019, they've had incredible results in terms of the uptake and the switching policy. So now even just last year biosimilars represented 60% of their total biologic spent. And when we talk about the cost of biosimilars being 40 to 60%, so maybe half the cost,
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there are huge savings available here.
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What we would recommend is you talk to your consultant about what your insurer is doing. The insurers are kind of a little bit late to the game here because some of the provinces have started this a lot earlier than the insurance companies have. But some insurers have already switched to mandatory biosimilar switching. So, they won't even pay for the originator biologics anymore. Some of the other insurers are taking their time. They've got voluntary programs available. But that's going to change. We're going to see a dramatic change in that at the end of this year and probably early in 2024 about how the insurers are taking on
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biosimilar switching policies. And again, as I mentioned before, communications are really, really just making sure your employees or plan members understand that again, these are just as therapeutically effective. They're half the cost. And when we talk about plan sponsors paying for these drugs, we have to forget, can't forget that employees or plan members are also maybe paying a portion of the cost for these medications. If there's a co-share, or if they're paying a portion of their healthcare premiums, this can have a dramatic impact on their cost savings as well.
How to reduce costs and support productivity and vitality in your workforce
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So drugs are expensive. We spend a lot of money on them. We spend them on conditions that we already have. Unfortunately for illnesses, conditions we're already trying to treat. I would argue that there are a lot of different ways to look at this. There are many different ways that we can look at reducing drug costs and that's just in program plan design. As I mentioned, we have mandatory generic substitution, biosimilar switching, patient support programs, and formularies. There are a lot of ways that we can look at plan design to help save costs. But again, I would argue that maybe we should be looking at the preventative
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as well. Can we look at Wellness programs instead, trying to avoid the conditions in the first place?
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Can we promote programs to support our employees' mental health or employee’s physical health? We have virtual physical physiotherapy programs, virtual fitness programs,
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making sure the nutritionists and dietitians are part of your paramedical practitioners or even your AP program probably has sessions included with a dietitian that we should be promoting more
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personal or even lifestyle Wellness accounts. So again, a bucket of funds that members can use to buy fitness equipment or gym memberships. Looking at meditation yoga classes, there are lots of different ways that we can support our members
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on the Wellness side before we even get to the drug spend.