That’s right; your benefits plan has a drug problem. Specifically, there’s a storm brewing with expensive prescription drugs – and most employee benefits plans won’t be able to weather it without the right precautions in place.
There’s no question about it, the cost impact of prescription drug plans is increasing and putting pressure on benefits plans. We are seeing it happen across Canada and the trend is only going to get worse.
Three major factors are contributing to the storm of rising drug costs:
1. Increase in New Drugs
New expensive drugs are entering the market as new treatments are discovered, both to combat what have historically been routine illnesses and to combat new illnesses.
We are seeing more advanced, expensive drugs and treatments prescribed for cancer, heart problems, rare diseases, and even common conditions like cholesterol. For example, a new drug to treat certain cholesterol conditions is now falling into the over $10,000 per year bracket – and about 39% of Canadians have an unhealthy level of total cholesterol, with the percentage increasing for those over 40 years old!
2. Increase in Frequency Drugs Are Prescribed
The frequency at which people are prescribed drugs, particularly expensive drugs, is growing. This is a result of the increase in new drugs on the market to treat both specific and common conditions as well as increased marketing of these products to doctors and patients.
3. Increase in Drug Cost
Drugs are simply getting more expensive overall. Historically, perhaps 1 in 3,000 people would require a drug costing $10,000 or more. Now we are seeing about 1 in 300 people prescribed a drug that costs more than $10,000.
Industry data suggests that by the year 2020, 50% of total drug plan spending will be for “specialty” drugs, whose average cost-per-claim is 25 times more than traditional drugs.
What Does This Do to My Benefits Plan?
This perfect storm of skyrocketing drug costs is having an adverse effect on benefits plans. With higher drug expenses for plan members at greater frequencies, benefits plans can implode – leaving employees without a benefits plan at all. If employers are forced to discontinue their benefits plan due to high costs, they will disrupt the compensation agreement they made with their employees at the outset, causing problems for employer and employee alike.
Unfortunately, most benefits plans in the current landscape are not equipped to handle an influx of these expensive drug claims.
Take Action Now
Employers must take action now to protect their benefits plans from high drug costs, mitigate their risk, and be fair to their employees.
There are options to storm-proof your benefits plan – talk to your benefits provider about how you can take advantage of the government programs and formularies to absorb some of the costs of expensive drugs, or consider putting a cap on available drug coverage (e.g. the plan will cover some expenses but not $50,000/year expenses).
Deal with your benefit plan’s drug problem now, before the storm – because it’s going to hit soon. Don’t put your raincoat on after it starts pouring!
Contact us today to discuss how we can build a custom benefits plan that suits your organization’s specific needs – and mitigates the risks of expensive drug costs!
More from The Benefits Trust:
- New Video: How to Read Your Monthly Financial Statement from The Benefits Trust
- How Employers Can Change Their Benefits Plan without Re-Enrollment
- How Do You Transition from a Conventional Benefits Plan to a Healthcare Spending Account?
- CLHIA’s Withdrawal of Guideline G19 and Transparency - July 10, 2019
- The Benefits Trust Is Celebrating its 25th Anniversary - January 21, 2019
- Season’s Greetings! See Our Holiday Hours - December 17, 2018
- Selling Benefits Plans to Religious Groups & Charities - February 23, 2018
- OHIP+: New Benefits for Children & Youth Coming Jan 1, 2018 - December 19, 2017
- Happy Holidays! See Our Seasonal Hours - December 11, 2017
- Battling Benefits Fraud: How Advisors Can Help - October 26, 2017
- Common Benefits Advisor Problems: Pricing Pandemonium - October 4, 2017
- Choosing a Third Party Administrator for Benefits Plans - September 21, 2017
- The Benefits Trust App: Features Update - June 13, 2017