Why managing risk more effectively is key for private drug plan sustainability

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This article originally appeared in the Benefits and Pensions Monitor on September 5, 2023.

‘If the insurance industry doesn’t upgrade drug insurance model, there’s risk the government may do something you don’t like’

This summer, private drug insurance stakeholders from across Canada, including pharmacy benefit managers, benefits consultants, and patient organizations, gathered in Toronto, ON, for Innovative Medicines Canada’s (IMC) third-annual ‘Private Market Policy Summit.’ 

The event provided an opportunity for meaningful discussion and healthy debate between speakers and attendees alike towards a common objective – improving patient access to innovative medicines while mitigating risk for payers in an increasingly complex environment.  

Growing complexity of pharmaceutical products 

Mark Omoto, general manager of marketing and communications at IQVIA, kicked off the event with a high-level overview of the pharmaceutical pipeline, noting that products are becoming increasingly complex. 

“In 2022, there were 64 novel, active substances that were approved throughout the world. Almost 60% of the products that were commercialized are biologics – so think injectables, infusion-type products – not the ones where you walk into your pharmacy and walk out with a bottle of pills,” Omoto said.  

He also highlighted that 30% of research underway is for products that don’t fit the mould we’re used to in terms of pills or solid substances and are, instead, for things like biotherapeutics, biologics, and therapeutic vaccines. He noted the private market will need to adapt to these changes and create a new model that will enable patients to readily access these new therapies

Managing risk more effectively 

While these complex innovations offer significant value, particularly for patients, they pose challenges for a drug insurance model that was largely designed 15 or 20 years ago around managing out-of-country risk – “those were one-off, rare occasion, non-recurring, high costs,” said Tim Clarke, president of tc Health Consulting.  

Clarke and his team released a white paper in May 2022 that looked at effective insurance models for high-cost drugs. Due to the growing utilization of high-cost drugs in Canada, Clarke’s team concluded that private insurers need to establish some form of minimum standards to ensure the broadest possible risk pool to protect insurers against volatility. He said the current private drug insurance model offers “too much optionality” and is “too voluntary in the nature of coverage.” 

While any solution needs to complement, not replace, the current system that’s working well in most cases, Clarke said there are other insurance models the private drug insurance industry can learn from. 

“We do actually have models here in Canada where insurance isn’t voluntary – employment insurance, auto insurance, and worker’s compensation are just a few examples,” he said.  

Quebec’s pooling system as a starting point 

The Quebec Drug Insurance Pooling Corporation (QDIPC) was created in 1997 to manage the risk of high-cost claims for small groups after the province established its universal drug program. Frédéric Leblanc, strategic leader for drug programs at iA Financial Group, said that, while it’s not perfect, the QDIPC model generally works very well. 

“Everybody shares the risk through the pooling mechanism in Quebec – there’s no yearly maximums or lifetime maximums on plans,” he said. “This should be evaluated for the rest of the country. It’s creating better patient access.” 

When asked what it would take to implement a similar pooling model across Canada, the speakers agreed it would take significant collaboration, both across the insurance industry and with governments. 

“When the government was looking at creating a universal drug program in Quebec, the very first iteration of the program was a single-payer, public program. Group benefits and private payers would not have played a role [in that]. So, the insurance industry got together and thought of a solution and negotiated it with government, which resulted in having a private / public system where all Quebec citizens are covered,” said Leblanc. 

Clarke said he could see a similar scenario happening nationally with “collaboration and fear” being the main drivers for change. 

“Ideally, collaboration first, that gets to a point of exhaustion and then fear pushes it over the line. If the insurance industry doesn’t do it themselves, there’s risk the government may do something you don’t like,” he added.  

Value-based agreements 

Dr. Amyn Sayani, director of medical evidence at AstraZeneca, wrapped up the event by talking about the opportunity for both public and private markets to explore more value-based agreements. These innovative agreements ensure faster access to medicines for patients, while managing risk for payers by linking drug pricing to real-world outcomes

“There are a lot of indications where there is significant unmet medical need and there are drugs coming through that have compelling evidence. Putting them into the hands of patients sooner makes sense,” he said. 

While he recognized value-based agreements are not suitable for every situation, Sayani said they offer a way for payers to manage their budgets more effectively. He also noted “measuring outcomes through the right data sources” will be critical for ensuring these agreements have a meaningful impact on patients’ lives.  

With the recent push towards implementing a public, single-payer pharmacare system in Canada, it’s more important than ever for the private drug insurance industry to find sustainable ways to continue to provide faster, broader access to new medicines for Canadians. The solutions presented during IMC’s policy summit offer a promising starting point for future discussion amongst stakeholders. 

Innovative Medicines Canada represents Canada’s innovative pharmaceutical industry. It aims to help its members discover, develop, and deliver innovative medicines and vaccines.


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