For years, plan sponsors have grappled with double-digit growth in drug spend. Employers face cost pressures associated with an aging workforce and a rapidly changing economy. Will expenditures for new medicines, like specialty and biologic drugs, threaten the sustainability of private drug plans?

Brad Millson, Engagement Manager at IMS Brogan Now, shared new research from IMS Brogan, at our CPBI lunch on September 18, exposing a surprising trend. Canadian pharma market growth has reached an historic low, increasing only 2.6% in 2013, a far cry from over 10% only five years earlier. Looking forward five years, IMS Brogan predicts that private drug plan cost inflation will not exceed 2.8% annually and might actually be as low as 1.6%.

What is causing this stabilization? In public plans, provincial drug purchasing changes have significantly reduced their generic spend. In private plans, the majority of prescriptions are also being filled by generic drugs. Over the next five years, as employers follow the provincial lead and more brand name drugs experience a loss of exclusivity as their patents expire, generic savings could significantly mitigate any increase in costs related to speciality and biologic drugs. Specialty drugs will be expensive, certainly, but they will impact only a small number of employees. Conversely, as top name brand drugs are replaced by generics, they are forecasted to lose almost $1 billion in value.

Overall, IMS Brogan projects that drug costs in the private drug plan market will remain sustainable, experiencing low single digit growth in the near future. Generic entry and pricing reforms will continue to help offset cost pressures to private drug plan costs.

- Cameron Thickett