Silverberg Group - Bringing Your Employee Benefits into Focus

Containing Drug Costs 101

The cost of prescription drugs in Canada is on the rise and will continue to grow over the next five years. These increases could drastically impact the drug portion of your benefits plan and we want to provide you with the information you need to minimize this risk.

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These are the main factors driving prescription drug cost:

1. New Specialty Drugs

New specialty drugs are flooding the market to treat complex chronic conditions such as Cancer, Multiple Sclerosis and Parkinson’s disease. These new drugs are more specialized than their predecessors and tailored to specific types of patients. Unfortunately, this also means that these drugs can be substantially more expensive, with some costing upwards of $10,000 a month for treatment.

In a recent study it was revealed that these drugs account for less than 1% of all prescription drugs, but more than 25% of the total prescription drug cost.

2. Brand Name Drugs

The pharmaceutical industry is a multi-billion dollar business in Canada. Companies spend this money to not only research and develop these drugs, but also to market and sell them. This does not come without a price, however, and for these companies to profit they must factor these additional business expenses into the price of their drug. Once factored in, they rely on doctors to prescribe these drug to their patients and the patient (and their employee benefits plan) to subsequently cover these inflated prices.

As catchy as the names of these drugs may be, there is quite often a generic version of the drug available at a lower cost. Many people believe that the generic drug must be inferior, due to it’s price. In reality, the generic’s active ingredient is identical to it’s brand name counterpart and just as effective.

3. Health Awareness

Just ten years ago people rarely spoke of mental illnesses – there was no real discussion about these issues and people would often suffer quietly, rather than seek out proper medical attention. Today, we have effectively managed to reduce the stigma previously attached to mental illness, as well as other health issues which people may have felt compelled to keep quiet about in the past. This heightened awareness has allowed people to seek out proper treatment, including the prescription drugs that they need.

4. Boomers Retiring

This one is self-explanatory – an aging population requires additional medical care. More doctors, more exams and more prescriptions…


What is being done in Canada?

Rising drug costs have been a prevalent issue in Canada for a number of years and a conversation has recently begun about the implementation of a nation-wide Pharmacare program. This program would ensure that the people who are least able to pay for their prescription drugs, would be granted access to them. By supplying these drugs to those in need, Canada would be taking a huge step towards improving our nation’s preventative health care measures. Unfortunately, it may still be a number of years before this program is fully operational.


In the average employee benefits plan, drugs and disability account for over 50% of claims. This is a huge portion of your overall group benefits plan and could continue to grow in the near future.

What preventative measures can you take to minimize your risk?

Some carriers have created unique solutions to ensure that your drug cost expenditures remain as low as possible. These solutions include:

Central Dispensary / Home Delivery Model – A program which utilizes a Central Dispensing Pharmacy to purchase prescription drugs at a lower bulk price. These drugs are then couriered directly to the homes of your employees suffering from chronic health issues.

Generic Substitutions – A program which ensures that your drug plan will only pay for a brand name drug if there is not a suitable generic alternative. If there is a generic version available, the plan only pays the amount equal to the price of the generic choice.

Patient Assistance Programs – Pharmaceutical company sponsored programs which cover certain prescription drug costs for employees who may not be able to afford them.

Case Management Programs – A program in which your carrier works with your employees and their physicians to understand their illnesses more comprehensively and strategize the most effective treatment plan.

Capping the Pharmacy Dispensing Fee for Prescriptions – By limiting the dispensing fee coverage to the amount charged by the low cost pharmacies you can encourage your employees to seek out the less expensive dispensaries. (typically large grocery store chains)

These are just some of the ways you can contain rising drug costs. For more information about these preventative measures and other ways you can minimize your risk, please contact your employee benefits specialist.