The pharmaceutical industry has made significant strides in developing specialty 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 are 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 and Specialty 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 or even $15,000 before stop-loss or large amount pooling takes effect, that $10,000 to $15,000 (or more if there are multiple employees on biologics) may be unaffordable.
For the most part, biologics and specialty drugs are 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 provider.
Cost Containment on Specialty Drugs
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. They are also offering plans with drug caps which, while limiting the employer’s liability, puts the onus on the plan member to figure out how to pay the balance.
Subsequent Entry Biologics or SEBs
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 is 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 or more, is negligible. The most effective options involve looking to alternate funding sources such as provincial or industry programs.
ASSOCIUM Benefits Specialty Drug Program
Our goal is to eliminate or, at least, substantially reduce the cost of biologics and high cost specialty drugs 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 Specialty Drug Program
(Diverting Biologic or other high cost specialty drugs from an employer’s plan)
This option is unique to ASSOCIUM Benefits. We have identified numerous high cost drugs that currently fall within that category (although new ones will be added over time). RXInfinity has been chosen as our preferred partner to assist plan members by offering a seamless approach to funding options and even dispensing, as required. The drugs are diverted from the plan and alternative sources of funding applied. 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. Fees are based on the total amount saved by the employer in the first year.
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.