Karen Kesteris Telus Health

Karen KesterisDirector, Product Development

and Pharmacy Services

Telus Health

Summary of the Telus Drug Study

Costs continue to rise in 2015.

Specialty Drugs are the major contributor to cost growth.

Drug treatments for Hepatitis C were the major contributor to Specialty Drugs but costs and claimants are on the decline.

Cost savings have been achieved from generic substitution.

Utilization of prior authorization programs represent a cost savings opportunity.

• Specialty drugs has grown to almost a quarter of total costs but remains to be less than 1% of claims.

10%

11%

13%

14%

17%

19%

21%

23%

0.3% 0.3% 0.4% 0.4% 0.4% 0.5% 0.5% 0.55%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

24%

26%

2008 2009 2010 2011 2012 2013 2014 2015

% of Total Cost % of Total Claims

Specialty Drug share of eligible costs and claims

Therapeutic ClassRank (by Adjudicated Amount) Percent of Total Adjudicated

Amount

2015 2014 2015 2014

Immunomodulators (includes RA, etc) 1 1 11.0% 10.6%

Diabetes 2 2 8.3% 8.1%

Depression 3 3 6.0% 6.9%

Asthma 4 4 5.5% 5.6%

Blood Pressure 5 5 4.5% 4.7%

Antibiotics/Anti-infectives 6 6 4.4% 4.3%

Skin Disorders 7 8 4.3% 4.0%

Ulcers 8 7 4.1% 4.3%

Hepatitis 9 18 3.2% 1.9%

Cholesterol Disorders 10 9 3.2% 3.8%

Share Of Total Adjudicated Amount 54.4% 54.1%

Top 10 drug classes by adjudicated amount

$

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

$2,000

$2,250

$2,500

$2,750

$3,000

$3,250

$3,500

$3,750

$4,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

12,000

13,000

14,000

Jan2011

Mar2011

May2011

Jul2011

Sep2011

Nov2011

Jan2012

Mar2012

May2012

Jul2012

Sep2012

Nov2012

Jan2013

Mar2013

May2013

Jul2013

Sep2013

Nov2013

Jan2014

Mar2014

May2014

Jul2014

Sep2014

Nov2014

Jan2015

Mar2015

May2015

Jul2015

Sep2015

Nov2015

Jan2016

Ave Cost per Claimant Distinct Claimants

Monthly immunomodulatorstreatment costs and claimants

$

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$9,000

$10,000

$11,000

$12,000

$13,000

$14,000

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

Jan2011

Mar2011

May2011

Jul2011

Sep2011

Nov2011

Jan2012

Mar2012

May2012

Jul2012

Sep2012

Nov2012

Jan2013

Mar2013

May2013

Jul2013

Sep2013

Nov2013

Jan2014

Mar2014

May2014

Jul2014

Sep2014

Nov2014

Jan2015

Mar2015

May2015

Jul2015

Sep2015

Nov2015

Jan2016

Monthly hepatitis treatment costs and number of claimants

The proportion of cardholders with mandatory generic substitution continued to increase but not by a lot

• Identify cardholders in Ontario with similar plan parameters:• 1 Tiered plans• 20% co-insurance • No plan maximum• No deductibles

• Sample identified over 700K cardholders

Generic Substitution

Rule

2015 Ave Adjudicated per

Cardholder

% Savings

Mandatory$270 25%

Regular$268 26%

None$337

Impact $ Convenience

Sponsor Savings No change

Member Savings if member switches to generic.Increased cost if remain on brand.

No impact to new patients. Disruption to brand loyalty.

Case StudyEligible cost savings per cardholder

• Prior (Special) Authorization for a drug is used to:• Ensure the drug is used for the Health Canada

approved indication• Implement a step therapy approach, whereby patients

will have to try specific drugs before they can be reimbursed for others

• ‘The right drug, for the right patient, at the right time.’

• Prior Authorization is an add on plan feature that can be specific to one drug or a group of drugs used to treat the same disease.

The number of drugs require PA grows every year, as new Specialty Drugs are launched.

Only 58% of claimants that required PA were approved.Not all claimants submit a form when they are informed at the pharmacy that they require PA.

New products in the pipeline: will they provide cost savings or cost increases.

The potential cost savings from more generics and SEBs.

Utilizing plan design changes to manage costs versus impact to plan sponsors and members.

Product Listing Agreements

Redefining “insurance”

0%

5%

10%

15%

20%

25%

30%

2007 2008 2009 2010 2011 2012 2013 2014

Specialty drug spend has more than doubled from 2007 to 2014

Source: ESC

2011 2012 2013 2014 2015Specialty 13 10 16 19 22Traditional 12 8 14 7 15% Specialty 52% 56% 53% 73% 59%

0%

25%

50%

75%

100%

0

5

10

15

20

25

30

35

40

Source: Health Canada NOC Database

Drug Annual Cost

Cancer

Zydelig™ $5,403/month

Iclusig™ $9,949/month

Keytruda™ $6,600/cycle

Cyramza™ $10,152/cycle

Opdivo™ $9,430/month

Zykadia™ $10,700/month

Rare Diseases

Pheburane™ $140,160

Strensiq™ $573,000

Revestive™ $330,000

Ferriprox® $49,183 - $65,548

Drug Annual Cost

Inflammatory Conditions

Cosentyx® $21,000

Entyvio™ $20,800

Lung & Respiratory Disorders

Ofev™ $41,868

Nucala™ $25,200

Arnuity™ Ellipta® $482 - $964

Diabetes

Trulicity™ $2,630

Jardiance™ $1,007

Cardiovascular Disease

Entresto™ $2,643

High Cholesterol

Generic Crestor ®(10 mg once daily)

$89 / year

Brand Lipitor ®(20 mg once daily)

$809 / year

PCSK9 inhibitor drugRepatha

$7,300+ / year

Repatha

Homozygous familial hypercholesterolemia

Heterozygous familial hypercholesterolemia

Clinical atherosclerotic disease

Primary prevention?40% of Canadians between the ages 40-59 have unhealthy levels of cholesterol1

Source: Statistics Canada - Cholesterol levels of Canadians, 2009 to 2011

Insurance carriers

Pooling charges

Pooling thresholds

Greater scrutiny

Product Innovation

Plan sponsors

Reducing/ capping benefits

Greater share of

risk

Wellness programs

Managing pharmacy benefit costs

Traditional98%

Specialty2%

Ensure cost-effective utilization…

…to fund appropriate utilization

Traditional drugsEnsure cost-effective utilization

Generic substitutionTherapeutic substitution / Step TherapyManaged formularies

Prevent illnessWellness programsDisease management

Specialty DrugsEnsure appropriate utilization

Prior AuthorizationCase management

Pooling

Control ingredient costs

Product listing agreements

Optimize distribution channels

Preferred provider networks

Member engagement

Agenda• Past History• Changes in Research and Development• Changing Pricing Methodology • Mitigation of Risk Cost in High Cost Drug

Therapies• Consequences and Solutions

• Research often focused on acute Medical Issues• Antibiotics, pain control, vaccines, emergent

diseases, prevention, etc.• Expanded into more recurrent ailments including:• High blood pressure, cholesterol, diabetes, etc.

• Further change into less recurrent but seriously debilitating diseases such as MS, RA, IBD and rare diseases etc.

Changes in Research and Development

• Research often done at University and in Publicly funded environments. • Manufacturers provide their production and marketing

experience.• Manufacturer’s research focus on rare or debilitating

chronic illnesses to provide higher returns.• Switch from high frequency low cost, to low frequency

high cost and high frequency high cost drugs.

Changing Pricing Methodology

• Original pricing rationale, pricing of drugs related to recovery of R&D, production and marketing costs.• PMPRB responsible for drug pricing using

international benchmarks and other criteria.• Manufacturers New approach to pricing: • Future value of a drug based on perceived

savings in another area, not the cost of production, and, •What the market will bear?


Example 1Sovaldi

• Gilead bought the manufacturer of Sovaldi, Hepatitis C Cure.

• The cost of production is just over $200. Selling $70,000 +


• "Any discussion of the cost of medicines must also focus on the value they provide to patients and the health care system broadly,” said Robert Zirkelbach, a Pharma spokesperson.

• “Gilead provides discounts for Sovaldi in other countries using a formula to determine what health providers abroad can pay.”

Ergo “You pay more because you can afford to!”


• Savings to our healthcare system being used as a justification for pricing a drug, means “The people saving are not the people paying.”

• New focus on high cost, high margin drugs and maximization of return, over properly priced product. • Who are the ultimate losers in the current model;

can we afford to pay?


Challenge

• Abandonment of pricing structure based on reasonable return on capital investment, and

• Rejection of the pricing reflecting the long-term sustainability of the industry.


Example 2

• CEO Martin Shkreli’s 5,000% price hike for the anti-parasitic medication after purchasing company.

• Did it because he could.

Mitigation of Risk in High Cost Drug Therapies

Industry Response to High Cost Drug Exposure

• CIDPC (Industry Drug Pooling for spread of risk to cover evolving prescription drug landscape)• Retained risk of 15% and threshold of $65,000 for

2 years ($32,500 after initial 2 years) • Insurer still operates an internal pool for any costs

under $65,000 or over $500,000.• Fully insured non-refund programs only.

• Is there a problem with this approach?


Insurer Retained Risk• CIDPC only covers 1/3 of the drug programs.

• Hepatitis C drugs are normally single treatment drugs, and will not qualify for the pool.

• Effect of new entrants such as PCSK9 inhibitors for cholesterol control, i.e. Repatha and Praluent, close to $14,000 annually.


Reinsurer Role• Normal Reinsurance for single event, high cost,

quantifiable, priceable events e.g. in US, heart bypass, Premature baby etc.

• How do you reasonably price recurrent high costs as reinsurance. Aggregate Stop Loss?

Consequences and Solutions

What about Government action and Employer Response?

• The Pan Canadian Buying Group. Are there unintended consequences?• Drug Supply? New drug focus?• Employer disengagement because of cost and

fear. • Insurers could lose line of business and

manufactures a market.


Solutions?• CLHIA represents most private payers in Canada. • Redefine CDIPC

• Look at the current funding model, prospective vs. retrospective (Remember Quebec Pool experience).• Include all business covered by the insurers

insured, retention accounting and ASO. • Establish private payer buying group including

insurers, PBM’s, Unions, government health groups and TPA’s, etc..


Solutions?• Involve manufacturers, public and private payers

in solutions, all stakeholders.

• Improve efficiency of how we pay claims, adherence, prescribing changes, other claims management techniques, etc.

The Future

Without “out of the box” thinking and some serious compromise at all levels, the crisis that was predicted in the last decade will change the face of the treatment of diseases and eventually become the defining issue for the future of medical care in Canada and indeed the world.

Karen Kesteris Telus Health

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