A Special Industry Event held by:

MONITORBenefits and Pensions

Drug Pooling anD SuPPlemental DrugS

Benefits and Pensions Monitor Meetings & events

Drug Pooling oPtion For

Plan aFForDability

In 2012, the Canadian Drug Insur-ance Pooling Corporation (CDIPC) was created, first and foremost to maintain plan affordability and then to avoid non-coverage impacts and

ensure employers wouldn’t be faced with not having to cover employees, which in the older arrangement would have oc-curred on a stop-loss arrangement because of experience rating, said Dan Berty, Ex-ecutive Director of the CDIPC.

“Typically, small employers wouldn’t

have been able to cover those costs. It would have bankrupted them because the insur-ance companies would increase rates to pick up the cost of those recurring claims.”

Sharing CostsCDIPC is a means of sharing costs

by creating an industry insurer at certain thresholds across all the insurers who offer fully-insured drug plans. It was anticipated that it would cover about 0.25 per cent of total drug claims. However, as of 2016, it

was about 1.3 per cent; considerably larger than expected.

Created as a not-for-profit company, CDIPC doesn’t make a penny, he said, and the money is redistributed to the insurers ‒ “it’s just a sharing mechanism.”

It went live in 2013 with 24 companies and all fully insured plans at that time were grandfathered in, whether they had claims or not.

However, there are misconceptions about CDIPC. To start, it does not drive down the cost of drugs, what it does is share the cost. If one plan has a spike in cost due to a high cost drug, it is shared across the board. The drug cost is the same.

Some people think it defines a crite-rion for coverage, he said. However, for the most part, insurers can still define their

plans and designs as they see fit within the marketplace.

It also doesn’t eliminate the cost from plans, it just smooths them.

It doesn’t determine what insurers can charge. That is up to the insurer to cover these costs on the re-insurance basis or the Extended Healthcare Policy Protection Plan (EP3) or pooling charge basis.

The CDIPC regime doesn’t force insur-ers to bid on plans that come to market. Insurers can still choose to bid on plans or not. There is considerable movement of plans between insurers when employ-ees or their family members (certificates)

BENEFITS AND PENSIONS MONITOR | November 20171

Drug Pooling anD SuPPlemental DrugS

Benefits and Pensions Monitor Meetings & events

Self-insured (ASO) plan sponsors have to get creative in addressing the challenges of escalating drug costs and stop-loss premiums. The Benefits and Pensions Meetings & Events ‘Drug Pooling and Supple-mental Drugs’ session focused on what plan sponsors are doing to address these issues, maintain best practices, and build strategies to maintain plan viability. Dan Berty, Executive Director of the Cana-dian Drug Insurance Pooling Corporation (CDIPC), provided his in-sights on the CDIPC’s efforts to maintain the viability of drug plans when they are hit with one time and recurrent high cost drugs. Anjila Arora, Director of Pharmaceutical Benefits at Sun Life Financial, looked at drug costs and trends shaping pharma as well as strategies to mitigate these trends. Mike Sullivan, Chief Executive Of-ficer of Cubic Health, discussed what plan sponsors are doing with plan-specific predic-tive analytics, custom plan designs, and disease-state based approaches to managing high-cost drugs and optimizing how they are structuring stop-loss coverage.

From left, Mike Sullivan, Chief Executive Officer of Cubic Health; Anjila Arora, Director of Pharmaceutical Benefits at Sun Life Financial; and Dan Berty, Executive Director of the Canadian Drug Insurance Pooling Corporation (CDIPC); were the featured experts at the Benefits and Pensions Monitor ‘Drug Pooling and Supple-mental Drugs’ event.

Drug Pooling option For Plan affordability

Drug Pooling anD SuPPlemental DrugS

Benefits and Pensions Monitor Meetings & events

2November 2017 | BENEFITS AND PENSIONS MONITOR

have recurrent high cost drug claims below $150,000. While there is some movement of plans with drug claims above $150,000, this plan movement is more because the introduction of new treatments has been more rapid than anticipated. Consequently, this has caused the ability to absorb the re-current claim by the new insurer, even with industry level pooling, more challenging than was anticipated when CDIPC began.

It is important to note that the frame-work of CDIPC regime does not allow for insurers to experience rate plans. Nor can they say: ‘If you have a claim now, you’re not covered.’ But if an ASO or a refund accounting plan wants to become fully in-sured and join CDIPC, certificates with pre-existing high cost drug claims will be

excluded until they have two years of no longer having a high cost claim.

two PoolsIn terms of structure, there’s essentially

three levels of risk management, includ-ing two levels of pooling in the CDIPC regime. Core is typically below $8,000 to $12,500, the basic premium for drug costs. Next is EP3 pooling. It is pooling by the insurer between the top of the ‘core’ insur-ance and $32,500. After that, when certifi-cates exceed $65,000 for two or more years, the industry pool, which is shared by all in-surers belonging to CDIPC, picks the cost

More and more prior authorizations are coming into play, he said. Caps are being talked about to avoid the pooling charges or somewhat negate increases. However, these things restrict drug coverage, he said, and generally insurance company members of CDIPC are not in favour of these ap-proaches.

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Data from the Canadian Institute for Health Information shows the prescription drug spend for medications reached $32.2 billion last year, up from $29.2 billion the

she said. Generic drugs make up 64 per cent of claims with 27 per cent of the cost.

Specialty Drug Spend“Digging a little bit deeper, not surpris-

ingly,” she said, “the specialty drug spend continues to increase. Specialty drugs on average cost 44 per cent more than tradi-tional drugs. From 2013 to 2016, the cost increased by 33 per cent and this is likely to continue as the number of specialty drugs being approved is significant. “

Traditionally, specialty drugs affected diseases that had low prevalence. Now, “we are seeing high-cost drugs coming to mar-

above $32,5000 at 15 per cent in the sec-ond year up to a maximum industry pool coverage of $500,000. Above that, insurers have to underwrite the cost as they do the 15 per cent and all first-year costs. Insurers can also, if they like, back some of this with their own re-insurance.

Berty said he is “not a drug expert, but there are clearly more high cost drugs cost coming. This is good for Canadians, it’s good for living longer, and it’s good for health generally, but the ability to afford it becomes the challenge. While some re-lief is coming from biosimilar drugs, and new drugs treatments offering choices of treatment for the same illness, the upward trending pressures from high cost drugs will likely be only modestly abated.”

previous year, said Anjila Arora, Director of Pharmaceutical Benefits at Sun Life Finan-cial. These increases in drug costs are coming from several areas including orphan and rare disease drugs ‒ which are high cost, specialty medications. “We also have oncology which remains a dominant therapy segment.”

Secondly, demographics and chronic therapies have an impact. As the Canadian population ages, there has been an increase in the number and cost of drug claims. “We also have to keep in mind that innovation is con-tinuing on chronic diseases such as diabetes and cardiovascular conditions,” she said.

Looking at overall claims, single source drugs were responsible for 29 per cent of the number of claims, but make up 66 per cent of the cost ‒ “a significant portion,”

BENEFITS AND PENSIONS MONITOR | November 20173

Drug Pooling anD SuPPlemental DrugS

Benefits and Pensions Monitor Meetings & events

ket for diseases that have high prevalence and longer duration of therapy” like high cholesterol and migraine prevention.

A growing driver is chronic conditions. The top chronic conditions combined rep-resent 42 per cent of the total drug spend on Sun Life’s book of business. And, “al-though rheumatoid arthritis affects a small percentage of claimants, the high-cost medications make it the most expensive chronic disease affecting plans,” said Arora.

As well, the cost per claimant for diabetes has increased over the past four years, on av-erage by six per cent due to the introduction of new, more expensive classes. Compound-ing this is the prevalence of diabetes, cancer, cardiovascular disease, and hypertension all increase with age and “if we continue to in-troduce specialty drugs for these conditions, the drug spend will continue to increase.”

But it’s not “all doom and gloom. When we switch our focus to treatment options, we can see from 1996 to 2016 how our treat-ment options have increased. For example, if we look at breast cancer, in 1996 there were eight options; in 2016, this had increased to 19. There are also therapeutic vaccines in development for cancer that are targeted to treat a person who is sick,” she said. Indeed, of the 259 vaccines in clinical development, 103 are traditional preventative vaccines, mostly against infectious diseases. The other 156 are therapeutic vaccines in such areas as Alzheimer’s, cancer, and allergies.

‘Health 3.0’Sun Life is transitioning into ‘Health

3.0’,’ a patient-centric approach, she said. It has evolved from ‘Health 1.0’ where there was only a one-way flow of knowledge ‒ from healthcare professional to patient. In ‘Health 2.0,’ patients started to get more involved in their health and taking part in online communities and blogs, looking at websites which enabled them to self-diagnose and the conversations they were having with their physicians changed.

With ‘Health 3.0,’ patients are no lon-ger passive recipients of healthcare, but are actively involved and empowered to par-ticipate in their own healthcare through technology focused on patient engagement and digital information to help them man-age their own health and wellness.

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“There’s a huge misperception that somehow large ASO (Administrative Ser-

vices Only) plans in this market have access to all this wonderful insight that small and medium sized employers don’t have,” said Mike Sullivan, Chief Executive Officer, Cubic Health. “And that’s not the case. They also struggle with having to make important financial and coverage decisions with lim-ited high-level aggregate information.”

And ASO plans ‒ where organizations fund their own employee benefit plan pro-gram, but hire outside firms to perform specific administrative services ‒ is a mar-ketplace “we need to pay attention to,” he said. “There are more fully insured plans in Canada, but ASO plans dominate the landscape in terms of spend and they typi-cally have more open plans that are sub-jected to greater catastrophic risk.”

ParalyzedHowever, the first issue is that ASO

plan sponsors have no idea what’s happen-ing with their own stop-loss premiums and they’re paralyzed because they have very little information. They are being told their experience is a certain way and as such here are their new premiums. Everybody is re-lying on retrospective information which is “totally useless outside of assessing cur-rent disease state prevalence in a given plan population” in healthcare and drug plan management because “the past is absolute-ly no indicator of the future,” he said.

Yet, larger ASO plans aren’t looking to quantify their own plan-specific risk because they’re stuck in that “same-as-last-year mode,” said Sullivan. The an-nual game begins with carrier quoting a stop-loss charge of X per cent and an internal or external plan advisor trying to negotiate that down using the same limited insights the carrier has. The end result is everyone is negotiating blindly ‒ one based on a what the market will bear and the other on what will be a good story to management about moving down the rates by some amount.

On the carrier side, they are still rely-ing on relatively high-level information to price stop-loss because they’re not using predictive data the way that they should be. In the ASO market, they’re not looking at plan-specific factors and that’s a problem because there’s a big disconnect between what plans are perceiving as catastrophic risk and what’s actually being quoted.

There also a “credibility” issue. “When we talk about the rates for stop-loss, how exactly are these rates being calculated if

we can’t get some relatively basic risk pa-rameters straight? For example, are we talking about total spending for members at a given attachment point or existing spending above that point? How much is Hepatitis C risk still being priced into groups after the fact for 2018 to make up for being blind to the risk initially?”

Another credibility issue revolves around promises of reducing stop-loss pre-miums by uptaking a specific program like a preferred specialty pharmacy provider network that seeks to control where a drug is dispensed. How does saying ‘yes’ to who dispenses the medication change a cata-strophic risk profile by 10 or 15 per cent? “It doesn’t make any sense. When you start doing that, the credibility of the numbers starts to get challenged because there’s no correlation between doing that and risk mitigation,” said Sullivan.

The path leading plans are on starts by answering three “very important” questions. First, they want to know how well is their current plan is performing, what are they seeing, and what’s changing. Next, they are looking for areas in the plan where money is being wasted and can be redirected to sup-port the cost of high-cost drugs or reinvest-ed in other areas that have greater benefit to the plan and its members. Finally, they are thinking about how to shelter the plan from unnecessary catastrophic risk.

This can start with conversation more about predictive risk that’s plan specific. The core pieces here include knowing the prevalence of key diseases in a plan, the current severity profile within a given dis-ease, and the impact of current plan design in mitigating catastrophic risk.

Finally, sponsors are “not looking at the impact of their current plan design in terms of what that means for us as a plan sponsor, and what it means for our plan-specific risk. If you don’t factor in your plan design, you can’t even begin to understand what that number is going to be,” said Sullivan. BPM

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MONITORBenefits and Pensions

Meetings & events

Pension / Investment Events:

◆ Pension Investment Strategies – April 24, 2018, Vantage Venues – Toronto. Today’s pension plans face paying out retirement benefits to their youngest employees up to 50 years from now. This session will examine how investment strategies can meet these future liabilities in a changing environment.

◆ Pension Risk Strategies – September 25, 2018, InterContinental Toronto Centre – Toronto. Major trends are reshaping Canada’s pension plans and their risk strategies as employers look to share or off-load pension risk and focus on de-risking. How these work and what risk strategies are on the horizon will be the focus of this session.

◆ Pension Investment Trends – November 13, 2018, Vantage Venues – Toronto. The continuing low inter-est rate environment is prompting pension plans to seek new investment opportunities to generate the returns they need to match their liabilities. Industry experts will provide their insights on how pension funds are investing their money now and what they will be considering in the future.

Benefits Events:

◆ Benefits 2018 – March 20, 2018, Vantage Venues – Toronto. In 2018, cost will again be the primary challenge facing plan sponsors. How this challenge will be addressed in the coming year will be the focus of this event.

◆ Benefit Trends & Insights – May 8, 2018, Vantage Venues – Toronto. The one constant when it comes to benefits is change. This session will examine areas such as the impact an increasingly global work-force is having and will have on benefit plans and how new approaches to providing benefits can be used to meet the needs of employers and employees.

◆ The Future of Benefits – October 18, 2018, InterContinental Toronto Centre – Toronto. What will the benefits plan of tomorrow look like? Our speakers will gaze into their crystal balls and share their thoughts on the future of areas such as paramedical coverage in benefits plans and managing the soaring cost of drugs.