An End To Blank Cheques, May 2011

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An End To Blank Cheques, May 2011

  1. 1. BY HELEN STEVENSONPresident and CEO, Reformulary GroupFormer Executive Officer, Ontario Public Drug Programs andFormer Assistant Deputy Minister of Health, Province of OntarioFOREWORD BY DON DRUMMONDEconomics Advisor to TD BankMatthews Fellow in Global Policy and Adjunct Professor, Queen’s UniversityFormer Associate Deputy Minister, Finance, CanadaFormer Chief Economist and SVP, TD Bank
  2. 2. lower costs. Cheaper generic drugs are often a perfectly satisfactory answer toAlarm bells are ringing about employees’ health needs. It isn’t necessarilythe soaring costs of Canada’s cheaper to simply reimburse employees forhealthcare system as it crowds out their own purchases as opposed to acting more directly. These are but a few of Msother valued public services and Stevenson’s ideas on how employers canthreatens ever-increasing taxes. cut costs. All employers with drug plans should studyDrug costs are a prime culprit. Provinces An End to Blank Cheques: Getting moreare finally acting on their part through value out of employer drug plans. Indeed,negotiating discounts, greater use of as it is customers and employees who aregeneric drugs and limits to the fees they hurt by the inefficiency of these plans,are prepared to pay. But much of the cost everybody should pay attention. In theof drugs is borne by private sector case of employees, they should heedemployers through their employee benefit Ms Stevenson’s advice to take moreplans. These employers feel and act as responsibility for their health and wellness,though they are powerless to rein in the including being more proactive in ensuringcost increases that have been running that drugs they are taking are clinically andaround 10 percent per year. This hurts cost effective. After all, the benefits andmany interests as companies pass the costs are ultimately theirs.cost increases forward to customers orbackward to their employees through cuts Don Drummondto other benefits or wages. Companies Economics Advisor to TD Bankpassive reaction to soaring drug costs is Matthews Fellow in Global Policy andunderstandable because the information Adjunct Professor, Queen’s Universitythey need to act is hidden in a deep fog. Former Associate Deputy Minister, Finance CanadaAfter leading Ontario’s charge against Former Chief Economist and SVP, TD Bankdrug costs, Helen Stevenson has thankfullyturned her attention to showing privatesector employers how to cut through thefog. Her report is full of advice employersshould absorb. Many new andextraordinarily expensive drugs providelittle net benefit. As the provinces havelearned, leveraging buying power can AN END TO BL ANK CHEQUES 2
  3. 3. INTRODUCTION The simple fact is that until very recently the entire system of prescription drug insuranceEveryone knows what a prescription drug is, – be it public or private – has been shroudedand almost everyone has taken one. However, in secrecy, devoid of transparency, and atbecause a reported 98 percent of Canadians1 times financially inscrutable.benefit from some form of insurance planthat helps them absorb the cost of these Over the past five years, the public sectorprescriptions, very few people in this country has been moved to action. Provinces haveunderstand how much medications really leveraged their purchasing power andcost, who is bearing that cost, and how. law-making capability to impose a measure of restraint on the system, to make funding decisions based on evidence and budget considerations, and to bring prices under control, thereby incurring savings for the taxpayers who fund them. There is still a long way to go in this regard, but a great deal of progress has been made. More specifically, the Ontario Government has demonstrated that there are savings to be had that are already measuring in the billions of dollars. Savings are available in the private sector asDrug prices are a concern across Canada. well, and they need to be found. Yet to date,Academics, organizations such as the employer drug plans appear to have beenConference Board of Canada, the managed very lightly, or have implementedHealth Council of Canada, and the limited measures to control costs, such asCompetition Bureau Canada, not to cutting retiree benefits. I would argue thatmention newspapers, magazines, and there are other, better measures that can betrade publications, have all noted that taken. This paper will explain what is wrongdrug prices have been rising steadily in with the current system, and suggest doablethis country for decades. In fact, drugs ways to get more value out of employer drugare the second largest healthcare expense, plans. It begins and ends, as the title of theafter hospitals. Drug costs have become paper suggests, with putting an end tothe elephant in the room in health care. writing blank cheques.Unavoidable and unmanageable. A BIG, ACKNOWLEDGEDMy goal for this paper is neither to criticize PROBLEMnor judge how drug costs have beenmanaged in the private sector.* But as Canadian companies spend about $200someone who transformed and managed the million per week on prescription drugs.largest drug plan in the country, I am in a In 2010, that translated into an estimatedposition to say with some confidence that $10.2 billion2 in costs incurred by employerprescription drug costs can be managed, that drug plans. We are seeing more andthere are changes that need to be made in more spending, and yet there is littleemployer drug plans, and that, naysayers not evidence that the full $10.2 billionwithstanding, those changes can be made. spent is justified.* For the purposes of this White Paper, the terms ‘private sector drug plans’ and ‘employer drug plans’ are used interchangeably. AN END TO BL ANK CHEQUES 3
  4. 4. A recent Conference Board of Canada absorbed by insurance companies. Theyreport expressed alarm about the are passed back to employers, who in turnsituation in this way: “Benefit costs have may be forced to shift some of that burdenescalated by 10 per cent year-over-year… – for example, through increasing prices ofif costs cannot be contained, the long- the company’s products and services, orterm sustainability of employer-sponsored through cutting back retiree drug benefits,benefit programs will be in jeopardy.”3 or possibly even by limiting salary and/or benefit increases to employees.The Canadian Institute for HealthInformation has also flagged the steady Ultimately that road leads to more peoplerise in prescription drug expenditures, paying some or all of the costs ofas have the Competition Bureau Canada prescription drugs out of their own pockets.and the Health Council of Canada. I believe as a society this is not the directionInvestment and benefit consultants of we want to go, because in the end moreall stripes are eyeing the situation and people will be forced to decide betweensuggesting that private plans need to buying the drugs they need and buyingadapt to changing times. Noted food. Or paying rent. This already happenshealthcare journalist André Picard in this country among the thousands ofrecently wrote on this theme, people who do not have drug insurance“Consumers who use prescription of any kind. And when you meet a person –drugs, and the drug plans that are as I have – who has just opted to go withoutthe principal purchasers, need to diabetes medication so that shestart questioning the ’facts’ and asking can buy groceries for her family, the questionsome tough questions.”4 of cost containment in private sector drug plans becomes less an intriguingAs this paper will demonstrate, the academic exercise than a matter ofreasons for the steady increase in drug urgent public interest.expenditures and the steady rise in thecost of drug plans have far less to do WHAT IS WRONG WITH THEwith the number of people in this country CURRENT SYSTEM?or how old they are, and a very greatdeal to do with how these plans are Drug costs are soaring, and there isbeing managed. every sign in the current Canadian drug landscape to indicate that the rise will continue. The Canadian Institute forSO WHY SHOULD WE CARE Health Information (CIHI) offers thisABOUT EMPLOYER DRUG PLANS? gloomy assessment:On the surface, it isn’t readily apparent “Drugs have been one of the growingwhy most of us should care about how components of total health expenditure inprivate sector drug plans manage their Canada. From 1985 to 2007, total healthcosts. They are, after all, private sector spending grew at an average annual rateplans, operated by employers with the of 6.6%. During this period, total drughelp of insurers, and offered to employees expenditure increased at an average annualas part of their compensation. Why should rate of 9.2%.”5 As a point of reference,we care? The reason: because continually Canada’s real GDP growth rate in 2009rising drug prices are not magically was -2.5% and 3.5% in 2010.6 AN END TO BL ANK CHEQUES 4
  5. 5. of drugs is the top factor contributing to an increase in annual benefit costs.8 To repeat what I stated earlier, these increased benefit costs to employers don’t just disappear – they are often passed on into the economy through price increases on a company’s products or services, or passed down to employees. As a Health Council of Canada report explains, “Private drug plans are funded, in part, by employees, albeit indirectly…. Regardless of the mechanism, from the employer’s perspective drug insurance is an additionalFrom an outsider’s point of view, it seems cost of employing a person. Hence, it canclear that the private sector has been translate to lower wages for employees.slower than the public sector to deal with Some employee sponsored plans requirethe problem of rising drug costs. In the the employees to share in the premiums…past four years, growth in private sector [and] out-of-pocket expenses throughspending on prescription drugs has co-payments and deductibles.”9outpaced that of the public sector.Private sector spending on prescription For obvious reasons, it is in the interestsdrugs reached an estimated $14 billion in of both employer and employee to slow2009, representing an annual growth rate or reverse the rising cost of maintainingof 7.0 percent, while public sector spending a drug plan.on prescribed drugs reached an estimated$11.4 billion in 2009, representing an annual What, then, are the factors that contributegrowth rate of 4.0 percent.7 to the steady rise in the cost of these plans? Plainly, the rise in the cost of drugEmployers have historically been slow to plans is partially due to the increased usetake action to manage drug plan costs. of drugs – both number of prescriptionsThe problem is not necessarily complacency. and length of prescription. However, theRather, it is a lack of awareness. Until about steady rise is also due to factors that canfive years ago, drug costs were not high on be broken down into four main areas:most radar screens. But recently, some verysignificant changes have taken place in the Any drug at any pricepublic sector, bringing drug costs and Almost every new drug approved by Healthtransparency into the public eye. And that Canada gets added to the formulary ofmeans there is now a public policy most employer drug plans. And the flowframework in place to give the private sector of new drugs onto the market is unending.the means and the moral authority to follow There is no question that the value ofsuit. In the face of costs that could soon certain innovative new brand name drugsmake maintaining their drug plans is nothing short of spectacular. Asimpossible, the private sector needs examples, the death rate fromto take action. cardiovascular (heart) disease has dropped 64 percent since 1981 thanks toAccording to the Conference Board cardiovascular drugs; and death rates dueof Canada, 73.4 percent of employers to HIV/AIDS have dropped by 80 percentsurveyed report that the rising cost over the past 30 years.10 AN END TO BL ANK CHEQUES 5
  6. 6. However, a large portion of new drugs Currently, approximately 57 percent of alloffer little in the way of added benefits prescriptions in Canada are for genericthat existing products do not already drugs, yet generic drugs represent only 25offer. One landmark study showed that percent of drug costs. In contrast, in the84 percent of all new drugs have minimal U.S., the rate of generic prescribing reachedvalue or no new advantage.11 And yet for 75 percent in 2009 for all prescriptions.13the most part these new drugs are more If generic penetration increased by justexpensive. More specifically, the problem one percent – to 58 percent – drug plansis that “private drug plans’ formularies would save an estimated $229 millionwelcome all new expensive drugs even annually in Canada.14 Despite this clearif they are no more beneficial to patients potential for savings, however, there arethan cheaper existing drugs.”12 In these still plans that do not mandate genericcases, there may be little need for new substitution.* And for those plans that dodrugs for certain diseases unless they are require generic substitution, there ispriced competitively with existing drugs. sometimes enough ambiguity built into plan designs that generic drugs areFor that smaller portion of new drugs that not always substituted.do offer benefits over existing drugs or An obvious example of this is Lipitor, thetarget a specific group of the population, billion-dollar cholesterol-lowering drug.they may well justify a premium price. When a generic version of Lipitor became available in May 2010, employer drug plansNot making the most of our should have realized savings in tens ofgeneric potential millions of dollars, as employees takingIt isn’t hard to understand the attraction Lipitor were simply given the genericthat generic drugs should have for drug version of Lipitor, at about 50 percent ofplans. They offer precisely the same health the original brand price. Instead, a verybenefits as their brand name equivalents, significant number of people who hadat a greatly reduced price. been taking Lipitor were switched not to the generic version of Lipitor, but to a completely different brand name cholesterol drug. The result: employer drug plans continued paying brand name prices rather than paying for the lower-priced generic version of Lipitor. Pricing and dispensing fee antics Public drug plans typically publish a price for each drug – sort of like a retail selling price. For private plans, however, there are vast differences in this price, many of which are devoid of transparency.* Generic substitution requires pharmacists to dispense the generic equivalent of the brand name drug prescribed, where a generic version is available. AN END TO BL ANK CHEQUES 6
  7. 7. Case in point: the price of an expensive get paid a dispensing fee for everyspecialty drug differed by $2,528 prescription filled. Typically, people with($6,664 compared to $4,136) for exactly chronic diseases – such as high bloodthe same dose dispensed at two different pressure, high cholesterol, ulcers, etc. –pharmacies in the same city. The $2,528 receive a 90-day supply of theirdifference for just one drug for one medications. It could be argued that it is inperson, or more than 50 percent difference, a pharmacy’s interest to dispense morehad to be absorbed by the consumer, the frequently. Occasionally it is in the bestemployer, or the insurance company. interests of patients as well. However, when it is not, it is simply a cost driver. And as theIn another claims review of a large employer, Ontario Ministry of Health and Long-Termdrug prices submitted by pharmacies for Care reports, it iscertain brand drugs ranged from 9.2 a cost driver that is growing:percent to 37.2 percent more than the “…[T]he number of chronic medicationsmanufacturer’s list price; and certain dispensed weekly and more frequently hasgeneric drugs were priced between 45 increased dramatically over the past severalpercent and 102.9 percent more than the years despite a lack of evidence that suchmanufacturer’s list price. In other words, increases…are necessary…. In 2007, thesome pharmacies charged 102.9 percent Ministry paid almost $170 million in weeklymore for the same drug, in the same dispensing fees and $7 million in fees forquantity, to the same drug plan.15 medications dispensed on a daily basis.”16In addition, there are a concerning number Employee indifference –of questionable practices and activities shooting themselves in the footsurrounding the buying and dispensing of The truth is that insurance companies, togeneric drugs, which have inflated generic paraphrase Rodney Dangerfield, don’t getdrug prices and created instability and no respect. When it comes to drug plans,confusion in the system. This is particularly that lack of respect extends to employers astrue in the area of rebates paid to well. It seems that we all have enough of apharmacies by the makers of generic drugs. sense of entitlement to assume that as long as we are not being handed a bill, we oughtIn 2009, the Ontario Government took legal not to worry about the cost. Insuranceaction against a number of pharmacies, company, employer – no matter. Somebodygeneric manufacturers, and wholesalers, else is paying. It seems to be an assumptionafter a forensic audit uncovered a scheme made by everyone. How often do doctorsunder which drug products were being ask their patients if they have private drugsold and resold several times in order to plan coverage before writing aincrease the ‘rebates’ being paid. The prescription? It is a considerate gesture onOntario Government moved to eliminate the surface, but actually shortsighted.rebates completely in the spring of 2010. Because in the long run, somebody else isn’t paying: we are. Employees have to beJust as the business of rebates has aware that employers will not sit by forever,traditionally forced higher generic drug watching drug plan costs spiral upwards.prices, with a resulting impact on healthplans, so too has the practice of increasingthe frequency of dispensing. Pharmacies AN END TO BL ANK CHEQUES 7
  8. 8. FOLLOW THE LEADER is arguably not well engaged. We have yet to see a concerted effort by employersAs described in an article in The Economist to better manage the costs of their druglast year, Canada’s provinces have been plans, despite the fact that the trail hasleading the way in managing the costs of been blazed by the public sector. Intheir drug plans through a series of Ontario, for example, governmentsweeping reforms.17 My own experience reforms were hailed not only for theirwas in Ontario, where I first headed a benefit to taxpayers but for theirreview of the province’s drug system, and potential benefits to private plans.then twice helped reform it. “[The reforms are the] single largest, mostThe Ontario Government introduced Bill positive, change in employer sponsored102, or the Transparent Drug System for benefit plan costs in decades.”18Patients Act, 2006 (Ontario). Bill 102was the first major transformation of the And yet, as the Conference Board ofprescription drug system in Ontario in Canada bemoans, very little is beingdecades. It lowered generic prices,attempted to control rebates through a done. “Despite the current economicsystem of professional allowances, and climate, most organizations (79 per cent)created an executive officer position have not changed their organization’sresponsible for managing the system and benefits strategy.”19negotiating better pricing agreements withbrand name and generic companies. This is without question at least in part because any attempts to lower costs,Because we continued to see abuses within through negotiated agreements or by onlythe system in Ontario, the government funding preferred drugs, have been metmoved to eliminate allowances altogether with huge resistance by pharmacy andand further lower the price of generic pharmaceutical companies. That beingdrugs. The media called this latter set said, the public sector reforms successfullyof reforms the “drugstore wars.” launched by provincial governments across the country were launched in the face ofSimilar reforms have swept across B.C., massive resistance, but they have by andAlberta, Nova Scotia, and Quebec. The large succeeded.public sector in Canada is well and trulyengaged. The private sector, however, AN END TO BL ANK CHEQUES 8
  9. 9. The activities in the public sector have raised awareness about drug system issues, creating a certain undeniable momentum towards change. How, then, should the private sector proceed? While it is not my intention in this paper to be overly prescriptive, I do offer an eight-point plan to help employers get better value out of their employee drug plans. They all have the general effect of putting a stop to the blank cheques that are being written in so many private sector drug plans.To their credit, some companies in theautomotive sector have been activelymanaging their drug plans; for example, 1 Be clear on the purpose of your drug benefit plan Employers should understand what theythe ‘Big Three’ automakers introduced a are trying to accomplish with their drug‘Conditional Formulary Plan’ in 1993.20 Yet plans, and should regularly do a thoroughwhere most employers have made changes, review to make sure the plan is achievingas noted at the outset, is in the area of its goals. Some obvious goals of a drugretiree benefits. According to research benefit plan would be to:conducted by Mercer in 2008, more thanhalf of organizations with retiree benefits • attract and retain employees;had already made reductions in those • provide access to specialty, high-cost drugs;benefits, and another 26 percent planned • promote good health and wellness; andto make them in the coming years.21 • support workplace efficiency by helping employees obtain the drugs they needEmployers need to know that the time is to stay healthy.right. There are solutions to spiralingdrug costs that do not involve curtailing In a perfect world, all plans would achievebenefits or flat-lining salaries, and employers all those objectives, but in reality most areshould consider them – for the good of weighted in one direction or another. Sometheir organizations, and for the good plans, for example, have been designedof their employees. specifically to attract and retain talent in competitive sectors. In other cases, employee drug benefit plans are legacyPRACTICALLY RADICAL: plans that were designed decades agoDOABLE WAYS TO GET MORE and simply evolved over the years.VALUE OUT OF EMPLOYERDRUG PLANSThe truth is that the private sector has atremendous opportunity here – it couldeven be argued that employers have afiduciary responsibility to make changes. AN END TO BL ANK CHEQUES 9
  10. 10. funding drugs that cost more, but offer little or no clinical benefit than drugs that are already being paid for. Employers should require that their formularies are actively managed – in other words, employers should mandate that drugs be evaluated based on clinical and cost- effectiveness evidence and, more specifically, whether they have added benefit over existing drugs. In addition, there is much to be said for whatAnd just as companies do a critical review is known as an incentive-based formulary.of the effectiveness of different strategies An incentive-based formulary implies thatwithin their organizations, so should they drugs are included under different tiers –critically review the effectiveness of their most drugs are covered, but employees paydrug benefit plans. For example, is the different co-payments depending on whichplan achieving maximum potential savings? drugs. For example, employees may have aIs the plan benefiting from generic higher co-payment or co-insurance shouldsubstitution? These questions should be they insist on a more expensive drug thatasked, and if employers are clear about the provides no added benefit. These types ofanswers, they will be well on the way to incentive-based systems exist and areextracting better value from their plans. effective the world over.2 Get good data for great decisions Finally, employer health and drug plans should provide comprehensive clinical programs to help employees betterMost companies do detailed analyses as manage chronic conditions, and particularlypart of the decisions in their day-to-day as it relates to prescription drugs andoperations. Yet too often it seems, with adherence. Programs such as a diabetesrespect to plan design, employers care program or a pain managementhave very little information at hand to program, among others, will drive betterinform their decisions. Having the right outcomes for employees and help manageinformation is critical to making good prescription costs.decisions. Plans should be carefullymonitored – by employers, insurers, orthird party organizations. You can’t fixwhat you can’t measure. In fact, you 4 Promote appropriate use of both brand and generic drugsmight not even know it needs fixing. Clearly, there are times when the best andGood data for great decisions. only drug is a new brand name drug, and in those situations it is right and proper3 Better manage formularies that plans should pay for those drugs. But again, these decisions should be based on clinical and cost-effectiveness evidence.No more blank cheques. It really is thatsimple. As mentioned above, most privatesector drug plans seem to have an openformulary door policy, which includes AN END TO BL ANK CHEQUES 10
  11. 11. At the same time, employers should companies – the Competition Bureaumandate paying for the lowest-cost Canada cautiously identifies bargainingproduct – typically the generic drug – and power and incentives needed to supportthey should ensure that this is enforced. To the deployment of alternative deliveryput numbers behind this opportunity: the models.24 They would, in fact, have a realgeneric drugs expected to be launched chance at success. This already happens inin 2011 would generate $1.275 billion in the United States, and I am aware thatsavings for public and private drug plans if some insurers in Canada are contemplatingthey mandated paying for (substituting) the moving in this direction – employers shouldlowest-cost drug. In 2012, the savings could jump on board as quickly as they can.be $1.2 billion, and in 2013, the savingsare estimated to be $541.7 million. Thecumulative three-year savings for generic 6 Implement pay direct drug plans Drug plans work in one of two basicproducts launched between 2011 and 2013are estimated to be $6.774 billion.22 By ways – reimbursement or pay direct. Withcomparison, in the U.S., the savings are reimbursement plans, employees pay forestimated at a staggering $70 billion over their prescriptions up front, and submitthe years 2011 to 2014.23 receipts to the insurance company for reimbursement. For pay direct plans, theThere is a small but growing number of pharmacy automatically submits the claimbrand name drugs that are maintaining to the insurance company, leaving thetheir position on formularies post-patent, employee to pay whatever amount iscompetitively priced compared to the not covered.generic drugs. This would imply that brandname pharmaceutical companies are taking Some employers have assumed thatan innovative view on the lifecycle of their reimbursement plans are less expensive,products and are prepared to negotiate primarily because employees sometimesdiscounts in exchange for long-term, forget to submit their receipts – this ’shoe-predictable formulary listings. boxing’ effect amounts to on average four percent of total plan spending, so it is by5 Build buying powerOne of the reasons that provincial no means insignificant.25 The fact is, however, that pay direct plans aregovernments have been able to make the really the way to go. When pharmacieschanges they have is that some – such as submit the claim directly to the insuranceOntario – have extraordinary leverage as company, as they do under direct pay, thebuyers of prescription drugs. While amount they can charge is fixed. However,individual companies do not enjoy that they can and do charge more when theluxury, there is leverage to be had. Some employee is on a reimbursement plan. As ainsurers have attempted to negotiate result, employers end up paying much moreagreements with pharmaceutical for drugs under reimbursement plans, and,companies and have met fierce resistance in future, would forfeit any ability to benefitat the pharmacy level. That resistance from buying power described above.would be easier to overcome if severalemployer plans banded together tonegotiate pricing agreements with drug AN END TO BL ANK CHEQUES 11
  12. 12. 7 Drive consumerism 8 Reinvest savings in benefitsEmployees – consumers – should be more Every good business understands theaware of the notion that some drugs cost importance of reinvesting savings, andmuch more than others and yet have this is as true when it comes to employeevirtually the same clinical impact. To drug plans as anywhere else. Better-relate it to everyday life, one gas station managed plans will yield significantcharges $1.40 per litre and the other gas savings to employers. This in turn willstation charges $1.10 per litre for virtually give them the opportunity to createthe same gas, and we frequently hear a better and more desirable workabout the line-ups for the $1.10/litre gas environment for existing and potentialstation…why not with drugs? Part of the employees, by reducing out-of-pocketanswer, of course, is drugs are insured expenses, and investing in value-addedso people often don’t care what they initiatives like wellness programs.cost. That’s why it is so important thatemployees be educated about theprice of drugs and the resulting effectson benefits. It is probably only whenthey understand that they really doeventually end up paying that they mightbe encouraged to do a better job ofcomparison-shopping.Ultimately, we need to shift people’sminds from a mentality of entitlementto a mentality of empowerment, thelatter implying greater self-responsibilityand behavioural change – for example,exhausting non-drug treatment optionsbefore starting drug treatments. AN END TO BL ANK CHEQUES 12
  13. 13. Economists talk about a burning plat- Employers have a real opportunity hereform as being a necessary impetus to to improve benefits for their employees,change. It is not for me to yell “fire,” introduce accountability into their plans,but I would certainly suggest that and save themselves money in theemployers who run drug plans start process. Anyone doubting that shouldsniffing the air for smoke. Because I do the math on what a 10 percent costcan state for a certainty that if nothing reduction would yield on a $500,000,is done, the steady rise in the cost of $10-million, or $50-million plan. In manythese plans will continue. The shifting ways, the public sector has done muchof benefit costs from hospitals and of the heavy lifting. Certainly, it hasgovernments to employers, which has demonstrated what can work. Ifbeen underway for decades, is not employers can now pick up that ballgoing to change. and run with it, they will have better- managed plans that are much more sustainable. Time to take action. No more blank cheques. AN END TO BL ANK CHEQUES 13
  14. 14. ABOUT THE AUTHORHelen Stevenson is President and Chief Helen is a member of the Board of TrusteesExecutive Officer of Reformulary Group of the Auto Sector Retiree Health CareInc., a company dedicated to helping Trust, a member of the Board of North Yorkmanage prescription drug costs for General Hospital, and on the board of aemployer drug plans, and to promoting private company. She has a Bachelor ofbetter patient health outcomes. She was Commerce from McGill University, and aformerly Executive Officer of Ontario Public Master of Science in Management fromDrug Programs by Order-In-Council as well Boston University Brussels. She is aas Assistant Deputy Minister at the Ontario candidate for ICD.D certification.Ministry of Health and Long-Term Care.Helen led two major transformations in the Helen.Stevenson@reformulary.comprescription drug system: first with Ontario’s www.reformulary.comBill 102 (2006) and, more recently, with theprovince’s generic pricing reforms (2010).In addition, she led many of Ontario’s drugsystem initiatives, including Drugs for RareDiseases Framework, Ontario NarcoticsStrategy, Ontario Citizens’ Council,MedsCheck medication review program,Compassionate Access Program,Competitive Agreements Framework,and the Drug Innovation Fund. AN END TO BL ANK CHEQUES 14
  15. 15. 1 C. Bell, D. Griller, J. Lawson, D. Lovren, Generic Drug Pricing and Access in Canada: What are the Implications? (Toronto: Health Council of Canada, 2010), p. 112 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)3 K. Thorpe, Benefits Benchmarking 2009: Balancing Competitiveness and Cost (Ottawa: The Conference Board of Canada, 2010), p. ii4 André Picard, “SECOND OPINION: How much does it really cost to bring a new drug to market?” The Globe and Mail, February 24, 2011, p. L15 CIHI, Drug Expenditure in Canada, 1985 to 2009, p. 36 Trading Economies, “Canada GDP Growth Rate,” (New York: Trading Economies, undated) accessed on March 10, 2011: http://www.tradingeconomics.com/Economics/GDP- Growth.aspx?Symbol=CAD7 CIHI, Drug Expenditure in Canada, 1985 to 2009, p. v8 Thorpe, Benefits Benchmarking 2009: Balancing Competitiveness and Cost, p. 279 Bell, et al, Generic Drug Pricing and Access in Canada: What are the Implications?, p. 2610 R&D, “Where We Stand; Access to Medicines” (Canada’s Research-Based Pharmaceutical Companies [R&D], June 2010) accessed at https://www.canadapharma.org/en/research/ documents/WhereWeStand_AccesstoMedicines_000.pdf11 International Society of Drug Bulletins, “Increasing Drug Costs: Are we getting good value?” (Therapeutics Letter, issue 59, April – July, 2006), accessed at http://www.ti.ubc. ca/pages/letter59.htm12 Marc-André Gagnon, The Economic Case for Universal Pharmacare: Costs and Benefits of Publicly Funded Drug Coverage for all Canadians (Ottawa: Canadian Centre for Policy Alternatives, 2010), p. 613 Office of the Assistant Secretary for Planning and Evaluation, ASPE Issue Brief, Expanding the Use of Generic Drugs (Washington: U.S. Department of Health and Human Services, December 1, 2010), p. 2 AN END TO BL ANK CHEQUES 15
  16. 16. 14 Data on file. Canadian Generic Pharmaceutical Association15 Cubic Health, March 2011; approval to publish received from both the employer and its claims processor16 Ontario Public Drug Programs, “Questions and Answers, Ontario Public Drug Programs, Amendments to Ontario Drug Benefit Act regulation regarding the Payment of Dispensing Fees, Effective Date: August 1, 2008” (Toronto: Ministry of Health and Long-Term Care, 2008), accessed at http://www.health.gov.on.ca/english/providers/program/drugs/ opdp_eo/notices/dispensing_fees_faq.pdf17 “Follow the leader, The provinces crack down on prescription-drug spending,” The Economist, July 8, 201018 Ontario Fills a Big Prescription for Generic Drug Savings for Employers. Hewitt. June 2010, p. 619 Thorpe, Benefits Benchmarking 2009: Balancing Competitiveness and Cost, p. 2820 In 1993, the ‘Big Three’ automakers negotiated a ‘Conditional Formulary Plan’ through Green Shield Canada. The Conditional Formulary Plan is comprised of drugs assessed according to need, safety, efficacy, and cost. CAW Submission on Bill 102: The Transparent Drug System for Patients Act. Standing Committee on Social Policy, May 29th, 200621 E. Whelan and E. Brown, “Rethinking Retiree Benefits,” BenefitsCanada.com (November 2009), p. 5122 Data on file; based on 30% to 35% generic prices for most new products. Canadian Generic Pharmaceutical Association23 Lewis Krauskopf and Bill Berkrot, “Generics to cut U.S. drugs bill by $70 billion,” Reuters [New York], November 8, 2010, accessed at http://www.reuters.com/article/2010/11/08/ us-summit-generics-idUSTRE6A73XJ2010110824 Competition Bureau Canada, Benefiting from Generic Drug Competition in Canada: The Way Forward (Ottawa: Industry Canada, 2008), p. 2825 Cubic Health, February 2011 AN END TO BL ANK CHEQUES 16

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