Our old friend Pareto (80/20 Rule) is hard at work in the Drug Benefit world, according to the 2017 Express Scripts Canada Drug Trend Report. From the report in 2017, 79% of the drug benefit costs in Canada are driven by 20% of the claimants.
This statistic is not particularly surprising as this ratio exists in many environments. What is a more interesting (and disturbing!) trend, is that 31% of the drug costs in Canada are caused by only 1% of claimants! Obviously, the drugs being used by this group are very expensive specialty drugs. What adds fuel to this concern is that the percentage of overall cost driven by the specialty drug group has more than doubled in the last 10 years from 15% to 31% of the annual drug spend.
As noted above, 79% of drug claims are driven by 20% of claimants. However, there are some other interesting facts about this “top 20%” cohort.
They have an average of:
(1) 7.8 chronic conditions
(2) 3.3 physicians
(3) 8.9 medications
(4) 49.5% are “non-adherent” to one or more of their medication regimes
Clearly, these statistics have some frightening long-term implications with regards to drug costs into the future! These folks clearly have some complex health issues, and our medical system is not designed well to help manage multiple physicians/medications effectively.
Frankly, it is also apparent that some difficult moral and ethical concerns will develop as time marches on and these costs grow increasingly larger. Specifically, who is going to pay for the increasing drug costs over time? How will a company manage a drug benefit program when the costs are being driven completely out of whack by a few individuals, which then jeopardizes the financial sustainability of the program for the remainder of the employees? These are tough questions!
Larger companies, and public sector plans have more options, and may be able to absorb the increasing health costs over time.
However, 95% of the businesses in Canada employ 49 employees or less, and in most cases are usually single owner enterprises. These businesses are now having to make hard decisions about how much of this coming drug cost concern should be their responsibility.
Most of the drug plan changes that companies have made to date have been relatively easy (ie. Sorry, next year Viagra will not be covered in the company plan). The future is going to be a little bit more complicated.
For questions or comments on these statistics and how they affect your group benefits program, please contact us!
Steve Low of Zarmac Benefits