What is Hepatitis C?
Hepatitis C is a slow progressing virus that is transmitted through the blood and attacks the liver. About 25% of individuals who contract the virus are able to clear it. Many experience a brief acute illness with symptoms of fatigue, loss of appetite, and a discoloration of the skin called jaundice. Those who cannot clear the virus are at risk of chronic hepatitis which can cause cirrhosis of the liver, liver failure, or liver cancer. There are approximately 300,000 Canadians who are affected by this virus.
Can Hepatitis C be treated?
Certain forms (genotypes) of the Hepatitis C virus can be treated and cured. Treatments are very expensive, ranging in costs from approximately $50,000 to $150,000 with treatment periods of 8 to 24 weeks. The drugs used for this treatment are Galexos, Sovaldi, Holkira Pak, and most the recently approved Harvoni. Harvoni is a once a day pill that was approved for use in Canada in late 2014 and has over a 90% cure rate.
Impact to Plan Sponsors
In the first quarter of 2015, Harvoni has risen to the 3rd highest cost drug across a major insurance carrier’s (Great West Life) entire client base, next to only Remicade and Humira. We estimate these results to be consistent across numerous Canadian insurance carriers. Harvoni is anticipated to reach #1 by the end of 2015.
The effective treatment outcomes of these drugs will likely generate increased screening and a subsequent increase in the numbers of those diagnosed with the disease. The cost impact of this one disease could potentially exceed the drug spend for all other drugs combined if most affected individuals received treatment.
Although your plan includes catastrophic medical pooling protection to insulate you from the risk of a high cost claim, the amount of the claim up to the pooling level will be included in your annual claims experience and will have an impact on your renewal pricing. In addition, we anticipate that insurance carriers will be reviewing their minimum catastrophic medical pooling levels and adjusting their pooling charges accordingly to offset the additional risk of these new high cost prescription drugs. In some cases, insurance carriers have started to apply some experience rating to the pooled claims charge, meaning that pooling charges may be adjusted according to your group’s specific claims.
Importance of EP3 Industry Pooling
Fully insured programs that are eligible for EP3 are further protected in the event of a large cost drug claim because insurance carriers are not able to experience rate the pooling charges by client. Clients with Administrative Services Only (ASO), Simplified Retention, Profit Participation Plan, or Retention Accounting financial arrangements are not eligible for EP3 protection.
Looking Out on the Horizon
There is upward pressure on Group Insurance plan costs due to many new specialty and biologic drugs used to treat numerous disease states and conditions. Initially, biologic drugs were designed to treat rare and complex medical conditions, however now there are a number of biologic drugs being developed for acute conditions such as high cholesterol and cardiovascular disease. This pressure will only continue as pharmaceutical companies continue to develop these high cost drugs. The sustainability of group benefit plans will become increasingly more costly and reviewing your plan design and financial arrangements is critical to mitigating your potential risks.