Sun Life’s incentive comes at a time when insurers say corporate drug plans are becoming unsustainable.FRED THORNHILL/Reuters
The mounting cost of prescription drugs in Canada is putting employers' health care benefit plans under pressure, and one insurer is offering discounts for companies that rethink their coverage.
Sun Life Financial Inc. said Monday that it would reduce fees for companies that tailor their drug benefits to cover medicines with proven health care value as judged by data from independent physicians and pharmacists. This is in contrast to many employers' traditional method of covering prescriptions no matter how much they cost or how effective they are.
The incentive comes at a time when insurers say corporate drug plans are becoming unsustainable as new treatments for rare diseases, late-stage cancers and chronic conditions such as high cholesterol are increasingly coming to market with sky-high price tags. Insurers and employers, which pay for about 36 per cent of prescription drug costs in Canada, have all been struggling with how to pay.
Sun Life's discounts could apply to privately sponsored workplace health plans where the employer takes on the responsibility of paying claims with its own funds. More than half of workers with health care benefits are covered by this kind of plan. Employers use a third-party insurer for administration and pay for some "stop loss" insurance, which will reimburse them for outsized drug claims.
Sun Life is offering a 15 per cent discount on the "stop loss" charges to employers that work with a Toronto-based company called Reformulary Group, which pledges to lower overall prescription drug spending. It achieves that by implementing a tiered system that pays the most for drugs with the best proven health outcomes. Reformulary also negotiates agreements with pharmaceutical companies.
"Historically, I think companies and CEOs have thought benefits are sort of untouchable. But it's not just a cost of doing business," said Helen Stevenson, founder of Reformulary Group and former assistant deputy minister of health for Ontario Public Drug Programs. She argues that drug plans that are managed well "would produce better health outcomes because you're putting people on drugs that are either clinically better, or a combination of clinically sound and more cost effective."
For employees, this would mean paying more out of pocket for prescribed drugs that aren't on Reformulary's preferred list, or choosing an alternative medication that is on the list. It would also mean their drugs will be monitored more closely, so in a case where there is a more appropriate drug to treat a condition, an alternative might be recommended. Still, physicians and patients can apply for exceptions to the rules.
Ms. Stevenson said Reformulary is able to help companies save between 9 per cent and 15 per cent of their total drug spending each year, and helped one client save as much as 39 per cent of its spending. Clients using the Reformulary system include Telus Corp., Purolator Inc. and ATCO Group. Reformulary is also set to roll out the system at a large oil company in the coming months.
Where employers have been reticent to trim drug coverage, Ms. Stevenson thinks the combination of higher drug spending at companies, double-digit premium increases and the instability of the economy could be a "perfect storm" to push more businesses to look for savings.
But it may take time for companies to feel confident that their employees will accept the changes. "There are still plans out there that don't even have generic drug substitution. We've had to do a lot of explaining and convincing to plans as to why this is the only way for sustainability in the future. And secondly, why it's not a big deal," Ms. Stevenson said. "I'm not sure consumer demand is quite there yet."