Canadian Companies Should Act Quickly to Manage Drug Plan Costs and Put an End to Writing Blank Cheques

- New white paper by Helen Stevenson addresses the issue of rising drug costs and its consequence on plan sponsors and employees; Provides advice for better drug plan management -

TORONTO, May 11 /CNW/ - Canadian companies should ask some tough questions and take a closer look at the way their employee drug plans are being managed or risk further benefit cuts, cost increases and even impacts to their own product or service pricing, according to a new white paper authored by Helen Stevenson. Titled "An End to Blank Cheques: Getting more value out of employer drug plans," the white paper addresses the issue of soaring prescription drug cost and its economic impact on plan sponsors, employees and retirees alike.

According to the white paper, Canadian companies spend about $200 million per week on prescription drugs which translated into an estimated $10.2 billion last year1. But while total health spending between 1985 and 2007 grew at average rate of 6.6 per cent annually, total drug expenditure increased by 9.2 per cent for the same period2.

Ms. Stevenson points at the four main factors that drive the cost of drugs upwards including: (1) the willingness to pay for almost every new drug at any cost, (2) not fully utilizing the potential of generic drugs, (3) vast pricing and dispensing differences between pharmacies for similar drugs and, (4) employee indifference about the cost of drugs covered by their workplace plans.

The white paper states that the private sector spending on prescription drugs (both employer plans and consumers paying out-of-pocket) reached an estimated $14 billion in 2009, representing annual growth rate of seven per cent while public sector spending on prescribed drugs reached $11.4 billion for the same period, representing an annual growth rate of only four per cent3.

To tackle the issue and control drug plan costs, Ms. Stevenson offers plan sponsors a number of steps to get more value out of their drug plans. These include: clarifying the purpose of the drug benefit plan; having the right information to make decision; better managing formularies; promoting and educating employees about the appropriate use of generic and brand drugs; building buying power; driving consumerism; and, reinvesting savings back into benefits.

"Prescription drug costs can be managed but changes need to be made," continues Ms. Stevenson. "If nothing is done, the steady rise in the cost of these plans will continue and may even lead to dire consequences. The activities in the public sector have raised awareness about the drug system issues and created an undeniable momentum towards change - time for the private sector to take action."

Don Drummond, Economic Advisor to TD Bank, who provides the foreword for the white paper, also urges employers and employees to pay attention to drug cost and its impact on benefit plans. "… employers feel and act as though they are powerless to rein in the cost increases… This hurts many interests as companies pass the cost increases forward to consumers or backwards to their employees… Indeed, as it is customers and employees who are hurt by the inefficiency of these plans, everybody should pay attention."

About Ms. Stevenson
Helen Stevenson is President and CEO of Reformulary Group Inc., as well as a senior advisor to several public and private organizations. Ms. Stevenson is also the former Executive Officer of Ontario Public Drug Programs and Assistant Deputy Minister at the Ontario Ministry of Health and Long-Term Care. In these roles Ms. Stevenson spearheaded two major transformations in the prescription drug system: first with Ontario's Bill 102 (2006) and more recently, with the province's 2010 generic pricing reforms. In addition, Ms. Stevenson led many of Ontario's drug system initiatives, including Drugs for Rare Diseases Framework, Ontario Narcotics Strategy, Compassionate Access Program and many more.

1 According to Drug Expenditure in Canada, 1985 to 2009, the average annual growth rate of drug
expenditures from 1985 to 2009 was 9.0% (p. 39). 2010 expenditures were estimated based on $9.4 billion
times 9.0% average annual growth rate, equaling $10.2 billion. The $200‐million weekly drug expenditure
was calculated based on $10.2 billion divided by 52 weeks. Canadian Institute for Health Information, Drug Expenditure in Canada, 1985 to 2009 (Ottawa: CIHI, 2009).
2 CIHI, Drug Expenditure in Canada, 1985 to 2009, p, 3.
3 CIHI, Drug Expenditure in Canada, 1985 to 2009, p, V.

SOURCE Pareto Corporation

For further information:

Note to the editor - to schedule an interview with Ms. Stevenson and to obtain a copy of the white paper please contact Alex Argueta at (416)790-2352  or AArgueta@pareto.ca

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