Cost-Control Mechanisms in Canadian Private Drug Plans

Abstract

Approximately 68% of Canadians receive prescription drug coverage through an employer-sponsored private plan. However, we have very limited data on the structure of these plans. This study aims to identify and describe the use of cost-control mechanisms in private drug plans in Canada and describe what private coverage looks like for the average Canadian. Using 2010 data from over 113,000 different private drug plans, provided by Applied Management Consultants, we determined the overall use of key cost-control measures, and the cost-control tools that appear to be gaining currency compared to a report on benefits coverage in 1998. We found that the use of common cost-control measures is relatively low among Canadian private benefits programs. Co-insurance is much more common in private coverage plans than co-payments. Deductibles are uncommon in Canada and, when in place, are very small. The use of annual and lifetime maximums is increasing. Canadian private benefits programs use few cost-control measures to respond to increasing costs, particularly in comparison to their public counterparts. These results suggest there are ample opportunities for greater efficiency in private sector drug coverage plans.