Transcript 5207-Negrich 296KB May 05 2006 02:54:00 PM

CIA Annual Meeting
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
•
Moderator: Ron Hoskins
•
Speakers:
• Teresa Negrich
• Brian Kassner
• Louis Bernatchez
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Benefit Plan Costs are on the rise!
Year
1980
Percentage of Payroll*
2-4%
2002
4-7%
2007 (projected)
8-12%
*Includes all benefits
Source: Mercer Human Resource Consulting 2005
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
68-70% of Healthcare Premium is Attributable to the
Drug Benefit
Reasons for Escalating Drug Costs:
• Aging Population
• Newer more expensive drugs
• Promotional spending by drug manufacturers
• Reduced Hospital Stays
• Provincial Plan Cutbacks
• Inflation
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Newer More Expensive Drugs
Type I
•
“Specialty Pharmaceuticals”
• characterized as expensive medications that treat rare,
chronic diseases inflicting a small proportion of people*
Type II
•
Newer more effective medications that cost more than the available
alternative but are more therapeutic
• eg: Celebrex, Vioxx
Source: Employee Benefit News Canada - January/February 2005
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Specialty Pharmaceuticals
Characterized by:
•
•
•
Require special handling (refrigeration)
Require special administration (injections)
May be biologically engineered
•
•
•
created in clean environments rather than assembly line of machines
Annual cost may be significant
These drugs became easier to create as a result of the mapping of
the human genome in April 2003
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Increased Focus on Specialty Pharmaceuticals
•
Not many traditional therapies are in the pipeline
currently being developed
•
•
This has prompted a shift among drug companies to specialty
drugs
Block buster drugs are being developed less frequently
•
•
Drug manufacturers have shifted their focus to “specialty” drugs
Several hundred specialty drugs are in the pipeline to be
released in the next few years
Source: Employee Benefit News Canada - January/February 2005
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
2003 U.S. Pharmaceutical Market
Total Market = $212.8B
$179.9
Traditional
$32.3
Specialty
Specialty Pharmaceutical Market
Multiple Sclerosis
2.5
Hemophilia
1.6
Hepatitis C
1.6
Rheumatoid Arthritis
1.5
Pulmonary Hypertension
1.2
RSV Prophylaxis
0.8
Growth Hormone
.4
Infertility
0.7
Oncology
12.6
HIV/AIDS
3.4
Renal
3.2
Transplant
1.5
Other
1.3
Total
32.3
Source: IMS Health, JP Morgan Industry Update “Specialty Pharmacy: Conduit of Growth for Biotechnology”,
March 14, 2003, Bear Streams Health Care Distributions, “Specialty Pharmacy Services: Among the FastestGrowing Areas of Health Care”, November 2003, Caremark Estimates.
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
What Does This Mean for Plan Sponsors?
How Are They Reacting?
• Plan sponsors have requested to exclude certain high
cost drugs or therapeutic classes of drugs
• Plan sponsors are asking insurance carriers to prior
authorize certain drugs to ensure that certain criteria is
met before a drug is approved
•
Some plan sponsors want the drug reviewed after a certain
period once initially approved
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
How Are They Reacting?
• Some plan sponsors are asking to develop their own
formulary based on the advice of an independent third
party
• Some plan sponsors are seeking contract wording to
protect them
•
•
ie: medically necessary versus reasonable and customary
treatment
Significant emphasis on co-ordinating with all/any
provincial programs
•
shift cost to public plan first
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
How Are They Reacting?
• Plan sponsors are asking insurance carriers to modify
their contract wording to exclude coverage for drugs
offered by a provincial program where the program is on
a “payor of last resort” basis
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Excluding Certain Drugs or Classes of Drugs
Considerations
• Discrimination concerns
•
•
•
•
•
Are you discriminating against a particular illness solely based
on cost?
Respect Human Rights Act
Why is my condition less important than yours?
Want to avoid class action lawsuits
Some drugs are used for multiple conditions
•
•
excluding a particular DIN may affect several conditions
Which type of client can exclude drug coverage?
•
•
Insured
ASO
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Prior Authorizing Certain Drugs
Considerations
• Negative employee perception
• What medical criteria do you follow?
• Does your contract wording support this process?
• Price impact is low, employee impact may be high
• Administrative challenges to implement
• What rationale will be followed for the selection of
future prior authorized drugs?
• Administrative cost to prior authorize
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Co-Ordinating With Provincial Programs
Considerations
• Contract wording must support your adjudication
process
• Significant administrative challenges to overcome
• Adjudication is costly to the carrier but worthwhile for
plan sponsors in terms of claim dollars saved
• Risk that provincial governments may change their
legislation to a payor of last resort position
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Increased Focus on Other Cost Controls to
Change Behavior
•
•
•
Dispense fee caps, managed drug formularies, reduced
coinsurance, per prescription deductibles, drug
maximums, generic substitution, cost shifting to
employees
Pooling protection against large individual claims
Focus on Wellness
LOOKING BACK…focused on the future
CIA Annual Meeting
Session 5207: Plan Design Issues
Plan Design Issues - Drugs
Plan sponsors are seeking multiple solutions to
help control their escalating drug costs.
Are you up for the Challenge?
LOOKING BACK…focused on the future