The pharmaceutical industry has made significant strides in developing drugs to combat numerous disease states more effectively than ever before. Many of the drugs that have been developed over the past few years are specialty or biologic drugs. Biologic drugs provide superior treatment options for serious or rare illnesses such as cancer, rheumatoid arthritis, multiple sclerosis, and diabetes. Biologics is the fastest growing area in pharmaceutical development. Familiar drugs like vaccines and insulin are, in fact, biologics. The chart below shows how biologics differ from traditional drugs.
|Produced through chemical synthesis||Produced using living microorganisms (e.g. bacteria)|
|Smaller, less complex molecules||Large, complicated molecules|
|Differences in manufacturing processes unlikely to affect finished product||Even small changes in manufacturing process can affect the nature of the finished product and the way it works in the body|
|(Green Shield Canada Dec 2014:)|
The Cost of Biologic Drugs
While biologics offer new and more effective advances in treating serious illnesses, they are extremely expensive compared to traditional drugs. For example, Remicade®, a biologic used to treat several illnesses including Crohn’s disease, costs approximately $28,000 – $35,000 annually for one plan member. For most employers, a biologic will be the drug upon which the most plan dollars are spent. They are driven by cost, not by volume of claims. While many plans have an annual individual threshold of $10,000 before stop-loss or large amount pooling takes effect, that $10,000 (or more if there are multiple employees on biologics) may be unaffordable.
Biologics are generally not available through your local pharmacy. They require more management, vigilance and support than conventional prescription drugs. They are often administered through infusion at a hospital, clinic or by a specialty drug provider such as Bayshore Medical.
The reality is, employee benefits plans were not meant to cover these kinds of claims. Carriers are doing what they can to reduce costs such as requiring employees to go through a prior authorization process to ensure that lower cost medications have been tried first.
Generic drugs have made a huge impact in reducing the cost of mainstream drug therapies (once patents expire) but biologics are different for each patient and generics are not an option. The biologic equivalent to generic drugs are developed once the innovator brand patents have expired. These are known as Subsequent Entry Biologics or SEBs. While generic drugs are bioequivalent to the initial brand drugs, SEBs are only bio similar. SEBS, therefore, have to go through a development process and have to be approved by Health Canada, as do the innovator brands. They are not interchangeable like generics. Though they too are expensive, SEBs actually represent a cost saving over the innovator brand.
Some insurance carriers have negotiated cost reductions with various manufacturers. The cost savings have an impact on the amounts paid out by stop-loss insurance and large amount pooling, thus saving the insurance carriers money and thereby reducing rates. However, the impact on the employer, who still needs to pay the first $10,000, is negligible. The most effective options involve looking to alternate funding sources such as provincial or industry programs.
ASSOCIUM Specialty Drug Program
Our goal is to eliminate or, at least, substantially reduce the cost of biologics from benefits plans and for employees where possible. There are options; all of which involve the affected employees joining the provincial plan (Trillium, in Ontario).
- Cap the maximum on the drug plan
This involves setting a maximum amount that the plan will pay for an individual’s total annual drug claims. This amount could be $4,000 or $5,000 dollars. The balance of the cost would then be picked up by the provincial plan but not until the employee has satisfied the Trillium out-of-pocket deductible (based on 4% of net family household income). This could cost the employee more than if the plan remained at full reimbursement.
- Apply co-payment to Trillium deductible
Where a plan has an employee co-pay (20% for example) it may not take long for an employee to satisfy the provincial plan deductible. Once satisfied, the provincial plan will take on the entire balance for the year.
- The ASSOCIUM Speciality Drug Program
(Excluding Biologic class from an employer’s plan)
This option is unique to ASSOCIUM Benefits. We have identified 75 drugs that currently fall within that category (although new ones will be added over time). Bayshore Specialty Rx has been chosen as our preferred provider to assist employees by offering a seamless approach to funding options, dispensing, and treatment, as required. The drugs are excluded from the plan formulary and alternative sources of funding apply. The cost will no longer be covered by employee drug cards. Once an employee (or dependent) is set up on our program, they may remain with the program even if they are no longer with their current employer.
Biologic drugs are becoming a significant cost to employee benefit plans. Please contact ASSOCIUM Benefits for more details regarding the ASSOCIUM Speciality Drug Program or other plan options.
ASSOCIUM Benefits is a very unique employee group benefits provider, focused on supporting benefits advisors and their employer clients. We provide Brokers and Plan Sponsors with a range of solutions from traditional group benefits to more customized, cost and tax effective employee compensation. Let’s connect to find out how we can help.