Managing the Cost of Chronic Illness Medications for Your Employees
Prescription coverage is an essential element of many Canadian employee benefits programs. Together with extended health, dental, and group savings, prescription drugs are an excellent way for employers to offer their employees a great deal of value without breaking the bank. While this may seem to be an excellent strategy, if you fail to account for the impact of chronic illness medications on your overall costs, you could end up with an unsustainable group benefits plan for your entire staff.
The Cost of Benefits for Long-Term Conditions
For those living with chronic health conditions, drug costs are a major consideration. According to Statistics Canada, an estimated 90% of people with major chronic conditions take at least one medication. This often translates to additional costs for benefits plan providers.
According to a 2022 report by Innovative Medicines Canada, chronic disease medications accounted for nearly 70% percent of drug plan claims costs in the preceding year. Even more noteworthy, chronic illness medications were the primary driver of 2020-2021 cost growth, accounting for a staggering 83.7% percent of growth during that period.
While chronic illness accounting for a disproportionately large percentage of costs is nothing new, the impact of these medications on overall cost growth has become more significant in recent years. Data from the IQVIA Private Drug Plan Claims Database indicate that private drug claims costs grew by 5.6% in 2021. This is not a new pandemic-correlated trend either. The Combined Annual Growth Rate (CAGR) of private drug claims rose at a steady 5.2% between 2015 and 2020.
Another factor driving recent increases is an increasing number of high-value drug claims. While lower-cost, non-chronic, non-specialty drugs (<$10,000 annually per patient) still make up 65.2% of claims, this number is decreasing.
Limiting Prescription Drug Coverage
While the above statistics may not come as a surprise to industry experts, many organizations are caught unaware of the potential cost of chronic illness medications when creating their group benefits plan. This is not to say that coverage for chronic illness medications should not be covered; on the contrary, offering some level of coverage for chronic illness is central to a complete benefits plan.
In most cases, the best strategy is to include limits on total annual drug coverage per employee. Rather than leaving employees on the hook for their own medications, these gaps are often then filled by federal and provincial health plans. This type of drug coverage is also a far better solution than implementing a cost-sharing plan, which further increases coverage prices.
Under the Canada Health Act, prescription drugs administered in Canadian hospitals are provided at no cost to the patient. Outside of hospital care, provincial governments typically provide some measure of drug coverage, which, coupled with the plan you provide, can be sufficient to cover your employees’ medication needs.
Create Sustainable Benefits with Zarmac
Zarmac Benefits has been providing benefit programs to both new and established businesses for over 20 years. We take the time to analyze what you need and customize a benefits package specifically for your business style, now and for the future.
Zarmac provides critical analysis specific to your business to deliver real choices, advise on trends, streamline renewals, and optimize your plan design. We make it easy for you and your team by supporting the management of your program. We also proactively educate and eliminate questions to ensure there are no surprises.
Ready to protect your business and your team? Find out more about the Zarmac difference!