Ottawa, January 13, 2021 – Growth in chronic disease and increased drug claims are two of the key factors driving up the cost of private health benefit plans, according to Innovative Medicines Canada’s 2016-2019 Analysis of Private Drug Claim Cost Drivers report, released today. The report also finds that drug claim costs are rising at approximately 5% annually, less than half of the 11% that insurers have projected.
The report demonstrates that the major cost increases to private health benefit plans in Canada are a result of increased drug utilization due to the growth in chronic diseases, like diabetes, requiring access to more medications. Given the significant impact of chronic disease on private drug plan claims costs and growth, to say nothing of their social and economic costs, there is an opportunity for employers, plan providers, and other stakeholders to work together to enhance the opportunities for plan members to reduce their risk of developing chronic diseases.
There is also a strong need for increased collaboration among drug manufacturers, insurers, advisors and plan sponsors to work together to develop deeper insights into what is needed to address the specific challenges related to the increase in chronic disease, its impact on Canadians’ health, and to ensure that plan members have access to the critical health benefits they need.
- More employees are making more claims. The report shows that private drug plan claims costs grew at a 5.3% compound annual growth rate (CAGR) between 2016 to 2019. More than half of this growth was driven by increased utilization, rather than increased costs per claim, suggesting that the price of drugs is not a major factor in overall cost growth.
- Chronic diseases are a major cost driver for private drug plans, accounting for 68% of drug plan claims costs and 79% of growth.
- The cost growth of drug claims in private drug plans in Canada can be attributed to three primary drivers: increases in the number of claimants, increases in the number of claims that claimants make, and increases in costs per claim due to the adoption of new innovative medicines or to factors such as distribution fees and the frequency of dispensing.
Our hope is this report will provide plan advisors and plan sponsors both large and small with a better understanding of the drivers of drug plan costs. Armed with this knowledge they will be able to more effectively manage their plans and negotiate realistic premiums and pool charges, that will allow them to continue offering these important benefits to their employees.
Joe Farago, Executive Director, Private Payers and Investment, Innovative Medicines Canada
About Innovative Medicines Canada
Innovative Medicines Canada is the national voice of Canada’s innovative pharmaceutical industry. We advocate for policies that enable the discovery, development and commercialization of innovative medicines and vaccines that improve the lives of all Canadians. We support our members’ commitment to being valued partners in the Canadian healthcare system.
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