Cost drivers in private drug plans in Canada
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1 PMPRB presentation in 2016 CAHSPR Conference Cost drivers in private drug plans in Canada Nevzeta Bosnic, Senior Economic Analyst, NPDUIS, PMPRB May 10, 2016
2 Supporting Health-Care Decision Making in Canada Purpose: to provide policy makers and public drug plan managers with critical analyses of price, utilization and cost trends, so that Canada's health care system has more comprehensive and accurate information on how prescription drugs are being used and on sources of cost pressures. Research initiative established in 2001 by F/P/T Ministers of Health A partnership between the PMPRB and the Canadian Institute for Health Information (CIHI) The NPDUIS Advisory Committee advises the PMPRB and provides expert oversight and guidance for the analytical reporting of the initiative Representation: BC, AB, SK, MB, ON, NB, NS, PEI, NL, YK, NIHB & HC, CIHI and CADTH CIHI NPDUIS Database houses pan-canadian prescription claims-level data from publicly financed drug benefit programs in Canada PMPRB NPDUIS uses a board array of data source to respond to the diverse analytical needs of its stakeholders. 2
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4 Cost drivers in private drug plans Background Objective Points towards the most important cost pressures, measures their impact, and delves into the factors determining trends Methods Builds on the cost-driver methodology developed by the PMPRB Focus: 2014 and 2015 Data Source IMS Brogan Private Pay Direct Drug Plan Database (85.7% capture) ~12.8M beneficiaries, 7.5B drug expenditures (2015) Disclaimer: Although based in part on data provided under license by IMS, the statements, findings, conclusions, views and opinions expressed in this report are exclusively those of the PMPRB and are not attributable to IMS. 4
5 Effects of cost drivers on prescription drug plan expenditures Changes in drug plan expenditures are driven by many factors e.g. number of beneficiaries, aging, increased use of drugs, rate of generic substitution, price changes, and shifts in the mix of drugs used Some factors may have a push or positive effect on the prescription drug expenditure growth e.g. aging, increased use of drugs and new drug entry Other factors may have a pull or negative effect e.g. price reductions and generic substitution The net effect of these countervailing pressures constitutes the rate of change in prescription drug expenditures 5
6 Key cost drivers Demographic Effects Population Aging Gender Drug Mix Effects Existing drug Entering drug Exiting drug Volume Effects Prescription volume Prescription size Strength-form Drug Price Effects Price change Generic substitution Level of drug plan expenditures change from one year to another if only one factor changed while holding all the others constant. In real world though, multiple factors change simultaneously, creating a cross effect. 6
7 Cost drivers in private drug plans in Canada Demographic Drug-Mix Volume Price 7 Data Source: IMS Brogan Private Drug Plan Pay-Direct Database
8 Demographic effect: Notable changes in the beneficiary size and its composition DEMOGRAPHIC EFFECT Beneficiaries (2015) Age group Growth rate % % % All groups 3.3% Number of all private plan beneficiaries grew by 3.3% in The growth in the number of those of 55 years of age and older was much higher (7.3%) than for the younger groups resulting in a continued increase in share of beneficiaries for this age group. Data Source: IMS Brogan Private Drug Plan Pay-Direct Database
9 Drug-mix effect: High-cost drugs entering the market and shifts in use from lower- to higher-cost drugs The top five drugs contributing to cost growth had a greater impact in 2015 than in 2014 (3% vs. 2%, respectively). Sovaldi and Harvoni contributed notably to the increase in cost. Data Source: IMS Brogan Private Drug Plan Pay-Direct Database
10 Price effect: (1) low impact of unit price change Overall this factor reduced the cost growth by 0.3% UNIT PR ICE CHANGE Price effect - 2.2% Unit price change - 0.3% Data Source: IMS Brogan Private Drug Plan Pay-Direct Database
11 Price effect: (2) generic substitution had a moderate pull down effect in 2015 Limiting reimbursement of brand-name drugs to generic price levels could result in cost savings in private drug plans, as the non-patented brand-name products are reimbursed at much higher unit cost levels. Price effect -2.2% Generic substitution -1.9% Data Source: IMS Brogan Private Drug Plan Pay-Direct Database
12 Conclusions Drug expenditures grew faster in 2014 (5.8%) and 2015 (6.2%) than in previous years (2011 to 2013 had 2%-3% growth rates) The recent growth rates however are not as high as in 2008 (10.3%) and 2009 (8.3%) The relatively higher recent growth is mainly due to two factors: 1. A more pronounced drug mix-effect 2014 and 2015 had the highest drug-mix effect, (4.2% and 5.6%, respectively) compared to 2008 to 2013 (~3%) Driven largely by newer and more expensive drugs 2. A lower cost saving effect from generic substitution and price reductions No longer able to offset the increasing cost pressures of the drug-mix effects 12
13 National Prescription drug Utilization Information System T H A N K Y O U Patented medicine prices review board Nevzeta Bosnic Nevzeta.Bosnic@pmprb-cepmb.gc.ca
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