What are specialty drugs?
Specialty drugs consist of high cost drugs, such as biologics, that doctors prescribe to treat complex medical conditions. Most insurance companies consider a medication a specialty drug when the annual cost exceeds $10,000.
Why should employers care about speciality drugs?
Interestingly, less than 2 % of the population requires speciality drug treatment. Yet, these medications account for two thirds of overall dollars paid out in drug claims in Canada because of their high price. In other words, 1 employee in your company could be claiming a specialty medication, and this one claim could account for the majority of overall drug expenditure for your entire organization. In fact, just one specialty drug prescription has the power to put the entire plan in danger.
At Benavise, we are seeing that specialty drug claims are on the rise with our small business clients’ benefit plans in Saskatchewan. COVID-19 drove a 5.4% spike in drug cost per plan member.
What can small business clients do to control the rising costs of speciality drugs?
Fortunately, there are strategies that clients can use to address this issue:
1. Take part in a managed drug program
There are various options available with insurance carriers when it comes to managed drug programs. One carrier that we work with offers hands on support for employees faced with a specialty drug claim. As soon as the employee submits their claim, they receive a phone call from the insurer. In this call, the insurer would explain how the managed drug program works. For example, for a plan with an 80% drug co-insurance, your carrier will cover 80% of the cost only if the employee fills their prescription at a pharmacy approved by the insurer which has a: (1) low markups (2) low dispensing fees, and (3) coordination with the provincial plan, and 4) coordination with manufacturer’s plan if there is one. If a plan member chooses to not use the approved pharmacy – a lower co-insurance (example: 60% coverage rather than 80%) will apply.
This process does an excellent job of controlling claims. Some carriers include a managed drug program automatically with all their benefit plans, while others require clients to opt in.
2. Consider an annual drug maximum
One way to seize control over large claims is to implement an annual drug maximum per person. For example, the employer can put in place a per year drug cap per person per year. While this strategy limits the risk for the employer, the coverage is greatly reduced for the employee. But, in some circumstances, some coverage is better than no coverage at all. Employers should also be aware that EP3 (industry drug pooling protection) would not apply to clients who have an annual drug maximum in place.
3. Remove coverage for specialty drugs all together
Employers do have the option to carve out coverage for specialty drugs completely. We have seen clients who had to cancel their entire healthcare plan because healthcare premium rates became unaffordable due to claims paid for specialty drugs. Sometimes it’s better to have some coverage for everybody than none at all. This is a tough choice for employers to make.
4. Apply for the provincial drug program
It’s important to ensure that plan members (individual employees) apply for programs available to them such as the Sask Health Special Support Drug Program. The government will cover certain prescription drugs once a threshold spend is reached. This threshold is income based and is 3.4% of annual family income. For example, if your salary is $60,000 per year, Sask Health will pick up drug claims that are over $2,040. Sask Health will pay a portion of drug cost & they are the 1st payor. This program has its own list of drugs that it covers. You can always check to see if your drug is on the Sask Health list. Many Saskatchewan residents don’t know this program exists.
In addition, some carriers may enforce their own drug thresholds (example: $1500). Once an employee reaches the threshhold, the carrier proactively asks plan member to apply for the provincial drug program. Drug thresholds can vary between carriers and are usually automatically built in to benefit plans. This is a great example of carriers taking action to keep employer plan costs as low as possible.
Conclusion
Which strategy will the employer choose to control specialty drug costs? A thorough claim analysis and audit is required to pinpoint exactly what is happening inside your group. An advisor specializing in employee benefits will have the necessary expertise to guide employers through this process. Contact us today to learn more about plan strategies that help employers gain more control over the costs of their benefit plans in Saskatchewan!
