Current and future roles of private insurance for prescription drugs in Canada – Employer’s Perspective

Arthur A. Fabbro, Jr.

February 26, 2013

March 2011 2Disclosure or duplication without consent is prohibited

Table of Contents• Magna International Corporate Overview• Current Employer Rx Challenges• Current Rx Benefit Structure• U.S. & Canadian Rx Plans Compared• Differences between U.S. and Canada

PBM Practices• Future Canadian Rx Benefit

Considerations

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Global Presence

~ 117,000 People | 27 Countries | 305 88 | $28.7 Billion (2011 Sales)

(As of Q3 2012)

Canada18,500

46

10

USA19,700

59

16

Mexico20,400

30

1

South America5,425

14

2

Africa100

37

22Asia9,375

35

3Eastern Europe

10,900

Western Europe32,650

82

34

Manufacturing/Assembly

Engineering/Product Development/Sales

Number of Employees

2

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Magna Overview: Global Capability

vehicle assembly

engineering + services

product systems

Roof Systems

Exteriors

Interiors

Vision Systems

Seating

Electronics

Powertrain Systems

Body & ChassisSystems

Closures

Hybrid & Electric Vehicles/Systems

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Current Employer Rx Challenges

• Increasing Rx Benefit Cost vs. Competitive Rx Benefit• Rx Adherence for Chronic Conditions• Limited Rx Distribution (Retail, some Mail)• Lack of Employer negotiating power• Limited PBM Rx Program Management• Formulary Management• Lack of Incentives and Value Based Rx Designs• Lack of full price transparency

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Canada Rx Plan Design

Drug Plan Design CurrentReimbursement Two Tiers:

90% ODB Formulary*, 80%

Prescription Formulary

Deductible Nil

Dispensing fee cap $8 per prescription

Generic substitution Mandatory

Out-of-pocket maximum Nil

Smoking cessation $250 per lifetime

Weight loss drugs $500 per lifetime

Fertility drugs $3,000 per lifetime

Erectile dysfunction Not covered

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U.S. & Canadian Rx Practices

Key Rx Practice   Magna U.S. Magna Canada

     

Pricing Discounts Mark-ups

Generic Pricing (vs. U.S.) N/A 117%

Brand Pricing (vs. U.S.) N/A -47%

Rx Rebates (professional allowances) Magna Shares Retained

Average Dispensing Fees $1.25 $9.70

Generic Dispensing Rates (% of scripts) 86% 36%

Generic Spend (as % of Total Rx $) 15% 28%

Mail Order Pharmacy Utilization Rate (% of total Rx scripts)   61% < 1%

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U.S. & Canada PBM Services

• US PBM– Adjudicate Claims– Safety Checks and Drug

Utilization Review– Negotiate price and

rebates with Pharma– Negotiate preferred

pricing with retail Rx– Manage multiple

distribution channels – Retail, Mail, Specialty

– Clinical Programs– Price Transparency

• Employ pharmacists to dispense, consult with Magna, analyze plan changes, develop clinical rules, etc.

• Canada PBM– Contracted with Insurer– Adjudicate Claims– Some Price Negotiation– Limited $ Transparency– Limited Distribution

(Retail and minimal Mail)– Limited Clinical Programs– Limited DUR

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Future Canada Rx Plan Considerations

• Annual Out-of-pocket maximums• Annual Deductibles• Special Tier for Biologic Rx / Specialty Rx• Pre-authorization for certain Rx• Automatic substitution for Generic Rx• Expand Electronic Claim Submission• Work with Insurance Provider to create new clinical

programs (i.e., Step Therapy)

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Alternatives for Rx Challenges• PBMs must become more than claims adjudicators

– Contracting with Private Payers and Insurers (carve-in vs. carve out strategy)

– Develop and offer Clinical Programs for effective chronic condition management (Diabetes, Coronary Artery Disease, Asthma, Oncology, HIV/Immunology, etc.)

– Robust Formulary Management– Robust Retail Pharmacy Contracting (Preferred Network)– Mail Order Distribution– Specialty Rx / Biologic Rx Distribution– Better Data & Analysis for adequate understanding of Rx spend, cost

drivers, utilization, adherence, etc.

• Regulatory Reform– Full Price Transparency & Disclosure would drive more competitive

practices (Payers, Insurers, Pharma, Pharmacy)

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