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Confronting The Future

Chief Factors

The increase in cost and utilization of pharmaceuticals can be attributed to four chief factors (See Chart 1):

• Claim Effect – The quantity of drugs dispensed
• Drug Mix Effect – The introduction and withdrawal of specific drugs
• Price Effect – The fluctuation in the price of drugs
• Demographic Effect – The changes in our aging population ‘Claim Effect’ costs rose more than 16 per cent from 2000 to 2005.* We are stemming some of this by limiting the size of new prescriptions until the effectiveness and degree of patient tolerance has been judged.

The ‘Drug Mix Effect’ costs have increased more than 13 per cent.* New drugs are often more expensive, but do they provide significantly improved results over existing products?

Price changes on existing drugs, the ‘Price Effect,’ have resulted in an increase over the five years from 2000 to 2005 by more than eight per cent.* We can slow this increase by limiting payments to the lowest cost generic when possible.

The ‘Demographic Effect’ – a combination of age, gender, and occupation – has increased costs more than six per cent in the same five-year period. Not surprisingly, the rate of growth of claimants is highest for those over the age of 44.* The aging population means that increases in the utilization of oncology, diabetes, and life-extension drugs will continue to rise (See Chart 2).

Living Longer

While more effective treatments are being developed in pharmacology, there is, of course, a weight that is pulling down the scale on the other side for those of us in the industry. We’re living longer which means that the costs of prescription drugs, extended healthcare benefits, and overall healthcare are only trending in one direction – up. And there are a number of factors that are contributing to it.

The increased prevalence of private medical care, including private clinics, has changed the definition of what is ‘medically necessary.’ This has created an opening for private healthcare providers to offer services that are not traditionally considered necessary. The incidence of home care and elder care is increasing, as are laboratory costs, both of which continue to run up the expense of healthcare for Canadians. These will only become a greater challenge for our industry in the years to come. But what can we do about it?

There is no single line of defence. The frontline stance should be aimed at more cost-effective healthcare, reduced hospital admissions, a healthier workforce, reduced absenteeism, and reduced short-and longterm disability. We must be dedicated to being progressive and that means exploring every alternative.

We have to ensure that expectations are managed and that prevention, not just treatment, is our objective. Benefits should be evaluated for overall effectiveness and the ultimate outcome. We must always differentiate needs from wants when it comes to procedures and we need to ensure that accessibility to healthcare remains a Canadian staple.

Drug manufacturers, governments, physicians, pharmacists, plan sponsors, and, indeed, patients themselves will require us to be more communicative, more transparent, and committed to finding joint solutions.

Shift Our Thinking

We have to shift our thinking to a new direction. Instead of trying to be everything to everybody, we need to look more closely at the individual – the right benefit, at the right time, and at the right price. There is also no definitive, clear guide for what our industry will face in the future, and even though we have a good idea of where it is headed, strategies will need to be adapted as we change and progress. With so much at stake, it is foolhardy to be isolationist and think only of our own companies. The bonds within our industry, among our competitors, and in conjunction with regulators will need to be strengthened and used to full advantage. Collaboration isn’t always easy, but, in the next decade and beyond, it is essential to the health of our industry, and our customers.

And so I challenge all of the organizations in our industry to think collaboratively and to work together, not just to protect our individual company’s well-being, but to also play a key role in the preservation of a quality healthcare system of which we can all be proud. ■

David Garner is president and chief executive officer of Green Shield Canada. * Green Shield Canada 2006 Drug Claims Research

 

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