Employee Benefits

How Can Employers Manage Rising Biologic Drug Prices?

By Kandy Cantwell on November, 30 2017
5 minute read

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Chronic disease is an unfortunate growing reality in Canada. Why? First, the population is aging. Second, many people are adopting unhealthy lifestyles.

Today 25 percent of adult Canadians have clinical obesity, which is a major cause of type 2 diabetes, hypertension, heart disease, stroke, and cancer.

rising-biologic-drug-prices.jpgImage source: Flickr

According to the 2017 Canadian Cancer Statistics report, nearly 50 percent of Canadians are expected to develop cancer in their lifetimes. Further, many people struggle with debilitating autoimmune conditions, such as rheumatoid arthritis and psoriasis.

What does this mean for you, as an employer?

Chances are that sooner or later, you will have an employee with some form of ongoing illness. Taking an active role in supporting employees with chronic illness will help ease the burden for them.

And part of this support involves providing an employee benefits plan that includes prescription drug coverage. Increasingly, the most common types of drugs used in the treatment of chronic disease are biologic drugs.

The Role of Biologic Drugs in Managing Chronic Disease

Biologic drugs (also called biopharmaceuticals) have revolutionized the treatment of chronic disease.

Unlike traditional drugs, which are chemically synthesized compounds, biologic drugs involve living microorganisms, such as bacteria or cells. Biologics are wide-ranging and can include vaccines, blood components, allergenics, somatic cells, gene therapy, tissues, and recombinant therapeutic proteins.

You're likely to encounter well-known biologics including Humira, Enbrel, Remicade, Lucentis, and Avonex. Humira, an anti-inflammatory drug that treats rheumatoid arthritis, psoriasis, and Crohn's disease, is the best-selling biologic in the world.

Skyrocketing biologic-drug costs

Biologics are highly effective, and can lead to life-changing results, making them a necessary choice for employees with chronic disease. Unfortunately, they come with steep price tags, which can put a burden on employers.

Click here to download our comprehensive guide on effective drug cost  management  >>

Smart employers must manage their drug plan costs while serving their employees' legitimate health needs.

Why do biologic drugs cost so much?

Biologic drugs have a complex manufacturing processes. Manufacturing consistency is imperative—and very costly since biological raw materials are fragile.

On the other other hand, conventional chemical drugs have clearly defined structures. Different manufacturers can make them with different processes, as long as the finished product is the same.

In sheer numbers, developing a non-biologic generic drug (for example, a chemical clone of Advil or ibuprofen) costs about $1 million. Creating a biologic can cost more than $1 billion.

Biologic drug costs are high for another reason: They can be self administered at home, unlike most conventional drugs used to treat chronic conditions, which typically require hospitalization. This is preferable for the patient's quality of life, but drugs not administered at a hospital are less likely to be covered by the province.

The result of this is, employers are facing an onslaught of claims as never before.

How employers can deal with increasing biologic-drug claims

Cost-saving options

Biosimilar drugs offer generic-like alternatives to biologic drugs—and can lead to savings in the 20-40% range. A biosimilar product must be "therapeutically equivalent"—and have the same levels of efficacy and safety to the original product—to be approved.

With complex biologic drugs, producing identical results is a daunting task. But, as patents for successful biologics expire, many companies are racing to do just that. Biosimilars for Humira and Lucentis are expected to be approved in Canada in mid 2018.

Risk-management strategies

Choosing a managed formulary, rather than an open formulary, can result in better decision-making in drug choices. A managed formulary puts requirements on the claims that can be made. Here are a few examples of claim requirements:

  • Tiered reimbursement formulas for different classes of drugs
  • Caps on dispensing fees
  • Cost-sharing via co-insurance levels

In addition, if your company participates in healthcare pooling, be aware of your insurer's pooling limits. Nowadays, high-cost drug claims are often repeating or ongoing events—and pose great risks for insurers and for employers. Know exactly how much liability your company might face.

Employee wellness programs

The effectiveness of employee wellness programs for preventative health cannot be overstated. A wellness program might include yoga or fitness classes, stress-reduction training, massage therapy, or workshops on healthy living. Employers might also provide nutritious snacks instead of soda, candy, and other junk food.

If your team is healthy, you will likely see happier and more productive employees—with fewer sick days and health plan claims. If employees can avoid going on prescription drugs, everyone wins.

The Bottom Line

As Canada's population ages, more and more people are being diagnosed with chronic disease. Biologic drugs have proven miraculous in treating various conditions, but they're extremely expensive.

Exploring biosimilar options, choosing a managed formulary, and implementing an employee wellness program will help reduce the financial risk to your business. It all starts with getting informed and planning ahead.

Get informed with our free guide: Gaps in Your Drug Coverage: What You Don't  Know May Cost You >> 

Prescription For A Healthy Benefits Plan: Manage Rising Drug Costs

Download our guide to learn how to better manage rising drug costs and find better cost-saving opportunities to mitigate risks in your benefits plan.


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