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Canadian Rx Coalition launched to transform the $14-billion pharmacy benefit industry

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Business consulting firm Towers Watson has just launched the Canadian Rx Coalition, which the firm says is the first-of-its-kind employer group that will give organizations control over their pharmacy benefit plans. As governments scramble to reform the prescription drug market in Canada, Towers Watson believes the Canadian Rx Coalition will become a ground-breaking new way for employers to manage employee drug plans through a cooperative alliance with other Canadian plan sponsors. Membership in the Canadian Rx Coalition will give organizations control over their pharmacy benefit plans, and ensure long-term sustainability in the face of rising costs.

 “The majority of working Canadians and their families depend on corporately-sponsored health benefits to ensure affordability of the prescription drugs they need,” says Wendy Poirier, director of the Canadian Health and Group Benefits Practice at Towers Watson. “But today, the Canadian pharmacy industry is at a crossroads. Prescription drug plan costs have continued to escalate over the last two decades, translating into a drug tab costing billions of dollars each year. The new Canadian Rx Coalition will enable participating organizations to better manage their drug plans, to the benefit of both employers and their employees.”

Members of the Canadian Rx Coalition will have access to better ways of proactively managing pharmacy costs and deliver optimal care, including collaborative purchasing and much improved transparency of the deal terms available to them through their pharmacy benefits manager. In addition, step-by-step approaches for drug utilization management, disease management, formulary development and other efforts will have a sustainable, long-term impact on overall costs, quality and individual health outcomes.

According to Poirier, the idea for a Canadian coalition grew from the success of a similar group developed by Towers Watson south of the border. Launched in the early 2000s, the U.S. collaborative was designed to address employer feelings of lack of ability to control or influence their drug benefit plans. Poirier notes that in Canada, at issue is the transparency of the system and sustainability of drug benefit plans – if the cost is too large, many employers may not be able to continue to offer the option. And, looming on the horizon is the issue of the cost of specialty drugs – such as “biologic drugs” for conditions such as rheumatoid arthritis, Crohn’s Disease, certain cancers, diabetes – which, while likely more effective are very expensive.

“The Coalition is a win-win for both employers and employees,” states Poirier. “The dynamic nature of pharmacy management means plan sponsors must continuously recalibrate design, pricing and utilization levels to achieve their cost and productivity objectives. The Canadian Rx Coalition will provide the tools that plan sponsors and members need to manage their health and drug programs more effectively.” Despite recent reform plans announced in Ontario, and changes now in effect in Alberta, employers are not really at the table negotiating costs with drug companies and pharmacies, says Poirier. “Employers are not in the game,” she notes, “and they should be.”

The coalition will provide significant immediate and long-term value through:

  • Transparency in drug pricing, vendor contracting and reporting.
  • Efficiency and immediate cost savings through improved management, reduced or eliminated administrative error and more effective coordination – without the need to change plan design.
  • Administrative responsiveness and access to flexible, rules-based administrative systems tailored to plan-sponsor needs for specialized design features and effective coordination with government programs including any new regulations that could have a significant impact on drug costs.
  • New delivery models such as preferred providers and carved-out drug plan options.
  • Design support for active pharmacy benefit and clinical management.
  • Improved therapeutic results and value to patients through managed programs and formularies.
  • Collaborative bargaining to gain a stronger position and industry voice.

The target group for the coalition is clearly large, national employers, and a founding group of these employers is on board. Based on the U.S.-experience, Poirier believes that a consultant –led group will be more effective in driving the coalition than a strictly employer-led group.Towers Watson has partnered with insurance company Greenshield, chosen after an extensive selection process. Greehshield will manage the process. Employers joining the coalition be charged a management fee.

Background: The Canadian pharmacy industry at a crossroads*

Prescription drug costs in Canada are continuing to rise, having more than doubled over the past decade. At the same time, drug expenditure per capita has soared, with Canada now ranking second in the world after the United States according to the Canadian Institute for Health Information. Total drug spend in Canada is now over $30 billion, of which approximately $25.4 billion (84 per cent) is for prescription drugs. For employers, this translates into a $14 billion – and growing – drug tab.

Unfortunately, however, many of the drivers of increasing costs have been “invisible” to employers. Pharmacy rebates – the method by which drug pricing agreements are established – and other aspects of drug pricing are not transparent, make it extremely difficult for employers to effectively manage their drug benefit programs. At the same time, Canadian drug plan sponsors often encounter design and administrative challenges, including vague descriptions of what is covered for employees, inconsistent adjudication, lack of incentives and processes to improve generic dispensing rates and inefficient prescription re-supply practices.

According to the Canadian Competition Bureau, the private sector could save up to $600 million each year if changes were made to the way we pay for generic drugs alone. These savings could be used to reduce drug plan costs or expand employee coverage. As Poirier notes, “there is a growing awareness of the need to make the pharmacy benefit system more flexible and accountable, not only to reduce costs but also to improve patient outcomes. By launching the Canadian Rx Coalition, we’re starting this process, so that employers can better manage their programs, obtain fair pricing deals and encourage a healthier, more productive workforce.”

Towers Watson is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management.Further information on the Towers Watson Canadian Rx Coalition can be found at

www.towerswatson.com

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Note: Statistics cite Canadian Institute for Health Information, Drug Expenditure in Canada, 1985-2009 which is freely available online at www.cihi.ca.

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