Presentation (CTI)

OBJECTIVES: Private drug plans are key stakeholders in the Canadian healthcare system and reimburse an important share of drug spending, with costs being a major concern for plan sponsors. This study explores the key cost pressures for private drug plans, differentiating between short-term effects and those with longer-lasting impacts, and highlighting the impact of the COVID-19 pandemic since March 2020.
METHODS: Using data from the IQVIA Private Pay Direct Drug Plan Database, an expanded Laspeyres cost driver model isolates the key factors contributing to the growth in drug expenditures: demographic, volume, price, substitution (generic and biosimilar), and drug-mix (i.e., shifts in utilization). The study focuses on 2023, with a retrospective look at recent trends since 2018 and an integration of age and gender considerations.
RESULTS: Prescription drug expenditures for private plans rose by 12.9% in 2023, returning to the pre-pandemic trend, with a compound annual growth rate of 7.1% between 2018 and 2023. Increased use of higher-cost medicines—drug mix effect—was the primary driver, pushing costs up by 5%-9% annually. Medicines costing over $10,000 and $25,000 annually represented one-third and one-sixth, respectively, of total drug costs. Even pronounced savings from generic and biosimilar substitution—enhanced by biosimilar switching initiatives and price reductions—did not fully mitigate the increasing drug-mix effect. The pandemic reshaped drug plan claims, initially causing a downward demographic effect due to fewer reimbursed beneficiaries in 2020, followed by a rebound surpassing pre-pandemic levels after 2021.
CONCLUSIONS: Greater adoption of high-cost drugs is a significant driver of expenditure growth in Canadian private drug plans. Understanding the forces driving expenditures in private drug plans will help benefit plan advisors and sponsors to benchmark their individual claims experience to the rest of the market.