ESI Canada 2008 Drug Trend Report -...

Drug spend up 5.0%

• Drug spend up but percentage increase slowing

Record high generic fill rate – 45%

• Influx of generics in recent years mitigating trend

Specialty trend increasing faster than other drugs

• Specialty drugs coupled with an aging population willcontinue to drive future drug trend

Private sector receiving a failing grade

• Traditional and innovative strategies will be needed tomanage drug spend in the future

ESI Canada 2008Drug Trend Report

INSIDE Components of Drug Trend ......................................................................... . 3 High Cost Specialty Drugs Will Drive Future Trend .................................... 7 Benefit Management Solutions ..................................................................... 9 Key Recommendations for Private Payers .................................................. 14 Top 100 Therapeutic Classes of 2008 .......................................................... 15

ESI Canada 2008 Highlights As the largest adjudicator of private drug claims in Canada, ESI Canada’s 2008 Drug Trend Report provides a statistically relevant reflection of Canadian private sector drug trends. This year’s analysis is based on 65 million drug claims totaling $3 billion in drug spend for 7 million Canadians. ESI Canada’s drug trend analysis has been conducted since 2000 and provides the marketplace with key information regarding the drivers of private drug trends and the plan design tools available to target and manage these trends in order to optimize the value of the drug benefit.

A note about trend: One word, two approaches…

ESI Canada’s drug trend analysis is

based on a retrospective

methodology and will therefore differ

from a carrier’s health plan premium

increase which is based on a

prospective methodology and

includes a drug plan’s specific claims

experience, utilization, demographic

changes, changes in drug mix, plan

member co-payments and other

health plan claims experience. As a

result, ESI Canada’s trend factor will

be lower than a carrier’s since it is

based on actual claims experience

from the previous year rather than

the predicted average increase of an

Extended Health Care (EHC) plan, of

which drugs are only one

component.

Terminology used in this report Drug Trend = Historical increase in

cost allowable per claimant over the previous year

Cost Allowable = Amount payable before member contribution

Claimant = Each unique person who submits a prescription claim

including spouses and dependents

Private Drug Spend In Canada The private sector increase in drug spend per claimant for 2008 was 5.0%. While drug spend is up again this year, the percentage increases from year to year have been slowing. However, these increases are still outpacing the annual inflation rate as indicated by the green line below.

$478 $524 $573 $621 $665 $698

1.8%2.2% 2.0% 2.2% 2.3%

0%

2%

4%

6%

8%

10%

$‐

$100

$200

$300

$400

$500

$600

$700

$800

2003 2004 2005 2006 2007 2008

Annual Drug Spend Per Claimant

Avg Spen

d Per C

laim

ant

National CPI %

Increase

+9.6%+9.4%

+8.4%+7.1%

+5.0%% Trend

46% increase between 2003 & 2008

Cost Per Claimant As seen above, the annual drug spend per claimant in Canada continues to increase. In 2008, the annual drug spend per claimant reached $698, an increase of 5.0% over the previous year. However, this spend varies by region with the West and East being the least expensive partly due to their greater use of generic drugs. Ontario had the highest spend per claimant, with Quebec a close second. However, when investigating trend factor by region, Quebec has experienced the greatest increase during 2008 at 6.7%. This is partly due to the removal of formulary drug price freezes in 2007 and the province’s lower generic utilization.

Drug Trend Varies By Region

WESTQC

Annual Cost Per Claimant

$636+4.7%

$720

+4.3%

$702

+6.7%$670

+4.2%

$698

+5.0%

% Trend

ON

East

Canada

2 Optimizing the value of health benefits

Components of Trend The national drug trend of 5.0% is made up of two main components: Utilization and Cost per Prescription. The table below demonstrates how these components have changed from 2007 to 2008, as well as each of their individual sub-components.

Components of Drug TrendCOMPONENT 2007 2008

OVERALL TREND 7.1% 5.0%

UtilizationPrevalence 0.8% 0.6%Intensity 2.8% 2.0%

3.6% 2.6%

Cost per RxInflation 1.2% 0.6% Brand/Generic Mix ‐ 0.7% ‐ 1.0%Therapeutic Mix 3.0% 2.8%

3.5% 2.4%

Utilization Overall, utilization for 2008 is up by 2.6% resulting in 11.7 scripts per claimant. The increase in utilization is due to an increase in the proportion of eligible members with a claim (prevalence) and more scripts filled per individual claimant (intensity); both of which are impacted by an aging population.

10 10.3 10.7 11 11.4 11.7

7

8

9

10

11

12

2003 2004 2005 2006 2007 2008

Rx Volume Continues to Increase

# Scripts Per Claim

ant

Utilization up 0.3 to 11.7 scripts per claimant

Driven partially by an aging population

+3.0%+3.9%

+2.8%+3.6%

+2.6%

% Trend

ESI Canada’s Drug Trend Analysis

As seen below, the average number of scripts per claimant increases by age group, and each group has experienced an increase in the number of claims from 2003 to 2008. Looking at the distribution of claimants (lines below), we have observed a decrease in the percentage of claimants less than 45 yrs of age and an increase in the 45-64 yrs age group signifying an aging population. This trend is expected to continue in the future resulting in an increase in the number of scripts per aging claimant.

0%

10%

20%

30%

40%

50%

0

5

10

15

20

25

30

35

0‐19 yrs 20‐44 yrs 45‐64 yrs 65+ yrs

Avg. # Rxs/Claimant 2003 Avg. # Rxs/Claimant 2008

% of Claimants 2003 % of Claimants 2008

Impact of Age on Utilization# Scripts Per C

laim

ant %

of Claimants

Cost Per Prescription In general, the cost per prescription continued to increase in 2008 totaling $59.69, a 2.4% increase over 2007. This includes an average ingredient cost of $51.24 and an average dispensing fee allowable of $8.45.

$47.61 $50.62 $53.56 $56.34 $58.31 $59.69

$‐

$10

$20

$30

$40

$50

$60

$70

2003 2004 2005 2006 2007 2008

Cost Per Script

Cost per Rx up $1.38 to $59.69

Partially offset by increased use of generics

+6.3% +5.8%+5.2% +3.5%

+2.4%% Trend

Cost Per Script

Optimizing the value of health benefits

Components of Drug Trend

3

Prescription costs are impacted by 3 main factors: inflation (in both dispensing fees and drug prices), brand/generic mix, and therapeutic mix. Inflation Overall, dispensing fee inflation drove drug trend by only 0.1% in 2008. The fee allowable is kept in check by fee caps. If we look at the average fees submitted by region in 2008 (below), we see that they are substantially greater than the average fee allowable ($8.45). In addition, we see that the average fee submitted has increased only marginally in all regions compared to last year. Not only do fees vary between regions (Ontario having the highest fees), we also see that fees vary significantly within each region ($4–$15).

Average Fee Submitted By Region

Avg. Fee

Sub

mitted

Significant opportunities for smart shopping…

$9.49 $9.62 $10.50 $10.54

$8.59 $8.67

$3

$6

$9

$12

$15

2007 2008 2007 2008 2007 2008

Western Canada Ontario Eastern Canada

The second component of inflation is drug price which was responsible for increasing trend by 0.5%. Drug price inflation is the increase in the cost of the same basket of drugs from one year to the next. Overall the inflation factor is low since the price of the majority of drugs remains unchanged year to year once the initial price is established. However, much like drug trend, drug inflation varies by region. One noticeable difference is the percent of DINs that decreased their prices in Quebec during 2008. Overall 26% of DINs decreased their price, which was almost exclusively driven by generic drugs – 93% of these DINs were generics.

In addition, we have seen an increasing trend with multi-source brands decreasing their drug price as they come off patent to compete with generics for market share, although this remains a small percentage overall.

Drug Price Changes By Region

% of DINs

QC – 26% of DINs decreased their prices in 2008

93% of these were generic drugs

25.9%

0%

20%

40%

60%

80%

100%

Western Canada

Ontario Quebec Eastern Canada

Price IncreaseNo ChangePrice Decrease

Brand/Generic Mix This component of cost per script focuses on the change in the use of lower cost equivalents versus their brand name counterparts. In 2008, the generic fill rate in Canada reached a record high of 45% - up almost 4% over 2007. This increased utilization of generic drugs has had a positive effect on the trend factor by reducing total expenditures by 1.0%. This positive impact is due to the number of highly utilized brand name drugs that lost their patent in recent years as well as legislative changes such as Ontario’s Off Formulary Interchangeability (OFI) introduced in April 2007. Below are the notable brand/generic mix changes for 2008.

Top Brand/Generic Mix Changes

Key Generics 2008: Pantoloc, Actos, Diamicron MR & Seroquel

CommonIndication

Therapy ClassKey Generic Introductions

Generic Fill Rate2007 → 2008

Ulcer/Reflux Proton Pump InhibitorsPariet (2007)Pantoloc (2008) 14.8% → 39.5%

High Blood Pressure & Other CV Disease

ACE InhibitorsAltace (2006)Prinivil/Zestril (2007)Coversyl (2007)

38.1% → 62.0%

ContraceptionCombination OralContraceptives

Portia (2008)Aviane (2008) 0.1% → 13.2%

Depression SNRIs Effexor XR (2006) 66.2% → 75.9%

Sleep AidsNon‐BDZ GABA‐Receptor Modulators

Imovane (1997) ‐ OFI 63.0% → 89.0%

Optimizing the value of health benefits 4

Impact of Safety Issues…The surge in biologic drug use over the past few years is due in large part to their superior efficacy over traditional therapies. While these agents have been shown to more effectively treat diseases and in some cases, actually reverse disease progression, these benefits may come at the cost of safety issues. In the case of rheumatoid arthritis and psoriasis, for example, the body’s own immune system attacks the joints and skin, respectively. Biologic drugs target these overactive immune cells to control the disease; however, these same immune cells that are being targeted by the drug are also critical to the body’s natural defense mechanisms. This is why treatment with a biologic drug carries with it a risk (albeit small) of severe infections and in some cases cancer. In fact, Raptiva was withdrawn from the market in early 2009 due to potentially life-threatening infections that can arise while taking the drug. This may have been foreshadowed by the decreasing trend seen in the psoriasis category during 2008. As well, the trend increase observed for Remicade and Humira may be in part due to patients switching from Raptiva, as both of these agents are now indicated for chronic plaque psoriasis. Impact of Generics & Price Decreases…The other notable therapeutic mix change occurred among drugs used for ulcer and reflux disease. The Proton Pump Inhibitors (PPIs) saw the recent introduction of generic versions for Pariet and Pantoloc which decreased the average cost per script in this category. More interestingly, among the H2 Antagonists, the brand drug Zantac (ranitidine) decreased its price by more than 80% making it significantly cheaper than generic versions. This may have come in response to Ontario’s introduction of Competitive Agreements in mid 2008 which targeted 4 different multi-source molecules, one of which was ranitidine. Due to the dramatic price decrease of the brand, the tender was subsequently cancelled for this molecule. Both of these events for two highly utilized drug classes lowered costs overall for the treatment of ulcer and reflux disease resulting in a -1.8% trend for 2008.

We anticipate that increased generic drug use will continue in the coming years. A number of highly utilized brand name drugs accounting for a significant portion of current drug spend are scheduled to come off patent in the next 5 years (below). This will hopefully translate into substantial savings for plan sponsors.

Generic Pipeline – 5 Yr Forecast

Lipitor

Norvasc

AdvairPrevacidActonelOther

OxycontinOther

DiovanFloventSingulairAtacandAvapro

Other

Crestor

PlavixSymbicortOther

Nexium

LyricaOther%

of T

otal Drug Spen

d

Potential savings approx. 5‐7%

Therapeutic Mix The largest component of trend was therapeutic mix which is the mix of medications for a given condition as well as the mix of conditions that are present in the population. As seen below, this increase is partly due to high cost “specialty” medications, such as those for rheumatoid arthritis and cancer, which are growing at a rate of over 20% per year and currently represent 14.7% of drug spend.

‐1.8%

‐15.8%

23.0%

26.3%

‐20% ‐10% 0% 10% 20% 30%

Ulcer/Reflux

Psoriasis

Anticancer

RA/Crohn's

Notable Therapeutic Mix Changes

% Trend

H2 Antagonists

Remicade

Humira

Proton Pump Inhibitors

Amevive

Raptiva

Oral Cancer Meds



When we examine the range of drug spend by claimant for 2008 in the chart below, we see that at the top of the pyramid 25.6% of the costs are incurred by just 1.7% of the claimants and at the bottom of the pyramid the majority of claimants (53.7%) are costing the plan less then $250 a year.

Range of Drug Spend by ClaimantRx Costs Are Concentrated In The Population As Are Potential Savings

$1‐$249

$250‐$999

$1,000‐$2,499

$2,500‐$4,999

≥ $5,000Range of Annual Cost per Claimant

% of Drug Spend

% Claimants

53.7%

28.2%

12.5%

4.0%

1.7%

6.7%

21.1%

27.8%

18.8%

25.6%

The percentage of high cost claimants (≥ $5,000/yr) has increased from 0.2% in 2003 to 1.7% in 2008. These high cost claimants are typically suffering from more serious diseases such as rheumatoid arthritis, multiple sclerosis or cancer and may be taking high cost medications including biologics. An analysis of these claimants also finds that they are older, suffer from multiple chronic conditions, and use more medications per condition. On average, these claimants have 5 chronic conditions compared to less than 1 among those claimants claiming less than $250 per year. What’s interesting is that a large percentage of these high cost claimants not only suffer from specialty conditions but also suffer from chronic conditions which are prevalent in the rest of the population – high blood pressure, high cholesterol, and diabetes.

High Cost Claimants (≥ $5,000/yr)Importance of Spend vs. Prevalence

19.1%

8.7%

6.2%

5.8%

5.6%

5.4%

4.1%

3.7%

3.5%

3.3%

1. RA/Crohn’s

2. Multiple Sclerosis

3. Diabetes

4. HIV/AIDS

5. Narcotics

6. Anticancer

7. High Blood Pressure

8. Blood Disorders

9. High Cholesterol

10. Antibiotics

% of Spend % of Claimants

12.9%

7.2%

31.3%

3.8%

44.9%

13.8%

56.9%

17.1%

45.1%

63.0%

Top 10 Common Indications

As seen above, for high cost claimants 19.1% of spend was for RA/Crohn’s (#1), while only 12.9% of claimants had these conditions. However, while diabetes (#3) accounted for only 6.2% of spend, 31.3% of claimants had this condition. Similar trends are seen with both high blood pressure (#7) and high cholesterol (#9). For all other claimants in the remainder of the pyramid (i.e. claimants spending < $5,000/yr), the top 2 conditions ranked by spend are high blood pressure and high cholesterol, and diabetes is ranked 4th (see p.15). These 3 conditions account for nearly 30% of drug spend and there is significant comorbidity across these 3 conditions but as well as other prevalent conditions (e.g. depression.) Based on this information, efforts to manage drug costs should begin with a focus on chronic conditions. And what’s noteworthy about these 3 conditions is that they can be prevented to an extent using simple lifestyle modifications (e.g. diet and exercise). Plan member disease state management programs that target chronic conditions will contribute to a reduction in overall drug spending as well as improved employee health – not only for high cost claimants but for all plan members.

High Cost Claimants: Not Limited to Specialty Drugs…

There will be more high cost claimants in the future with further development of specialty drugs. As a result, Plan Sponsors could utilize high amount pooling in an effort to cap their exposure.


As seen below, over half of the new drugs introduced in 2008 reveal a continuing focus on the development of high cost specialized drug therapies. These drugs have had a small impact on the therapeutic mix in 2008 but will have greater impact in 2009 and in future years. Many of these new drugs provide advantages over existing therapies and treatment for diseases that were previously untreatable; however, these benefits come with a significant price tag. Although we will continue to see a greater percentage of generic drugs being utilized and having a positive impact on reducing the trend factor, the new drugs that come to market will be highly specialized and extremely expensive. We have seen that the percentage of high cost claimants has increased dramatically in recent years and we expect this trend to continue with these types of new drugs coming to market.

New Drugs to Watch in 2009

Noteworthy New Drugs That Came to Market in 2008

Brand Name

(generic name)

Manufacturer Indication(s) Annual Ingredient

Cost/Patient*

Revlimid (lenalidomide) Celgene Myelodysplastic syndrome (MDS) & Multiple myeloma $95,300 - $131,765

Catena (idebenone) Santhera Pharmaceuticals Friedreich’s Ataxia $42,000-$105,000

Tasigna (nilotinib) Novartis Pharmaceuticals Chronic myeloid leukemia (CML) $33,400 - $70,270

Vectibix (panitumumab) Amgen Metastatic colorectal cancer $16,458 - $49,374Volibris (ambrisentan) GlaxoSmithKline Pulmonary arterial hypertension $48,749

Stelara (ustekinumab) Janssen-Ortho Chronic moderate to severe plaque psoriasis $22,155

Intelence (etravirine) Janssen-Ortho HIV/AIDS $7,957Stalevo (levodopa/carbidopa/entacapone)

Novartis Pharmaceuticals Parkinson’s disease $2,409 - $4,818

Relistor (methylnaltrexone) Wyeth Canada Opioid-induced constipation $4,389Olmetec (olmesartan) & Olmetec Plus (olmesartan/HCTZ) Schering-Plough Mild to moderate hypertension $380 - $760

Zeftera (ceftobiprole) Janssen-Ortho Complicated skin and skin structure infections (cSSSI)

$295 - $590 per 7-14 days of treatment

Xarelto (rivaroxaban) Bayer Prevention of venous thromboembolism

(VTE) in patients undergoing hip/knee replacement surgery

$147 - $366 per 14-35 day course

Pradax (dabigatran) Boehringer Ingelheim

Prevention of venous thromboembolism (VTE) in patients undergoing hip/knee replacement surgery

$80 - $290 per 10-35 day course

Nevanac (nepafenac) Alcon Eye drop for pain & inflammation following cataract surgery $20 per bottle

*Pricing is obtained from ESI Canada’s database (excludes retail markup and dispensing fees) and calculations are based on manufacturer’s recommended dosing.



High Cost Specialty Drugs Will Drive Future Drug Trend

Specialty Drugs Have Large Impact on SpendMore spent on specialty items than any other drug class

% To

tal D

rug Spen

d

Specialty Trend = +17.0%

All Other Drugs = +3.0%

Pipeline & Future Drug Trend There are more than 250 chemical entities in the final stages of development which could enter the Canadian marketplace in the next several years. More than half of these are specialty drugs with a primary focus on cancer, infectious disease, neurologic conditions, and autoimmune disorders. These potentially high cost drugs will put significant pressure on plan sponsors. However, the prospect of generic versions of biologic drugs may help mitigate these potential cost increases. Biogenerics of select drug products are already available in Europe. Considering the upcoming generic pipeline, we anticipate that drug spend will continue to increase at slower rates until approximately 2012-2013. However, with more than 125 specialty drugs anticipated to be introduced in the next several years (compared to only 72 over the last 5 yrs), drug trend will begin to increase at higher rates beyond 2013. Based on preliminary estimates, the average spend per claimant could reach $1,185 by 2018.

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

2003 2008 2013 2018

Forecasted Drug Trend – 10 YrsTrend Cooling Only For a Limited Time…

Annu

al Spe

nd Per Claim

ant

$1,185

Characteristics of Specialty Drugs There is often confusion on what defines a “specialty” drug and in actuality it goes far beyond their high price tag. Specialty drugs are most often used in the treatment of rare or specialized diseases such as rheumatoid arthritis, cancer, multiple sclerosis, HIV/AIDS, and hepatitis. In addition, to the indication for use, we also consider the monitoring required with the drug, the need for frequent dosing adjustments, specialized handling or administration, and finally the cost. Some also question how biologics fit into the specialty drug definition. Biologics are drugs that are derived from living organisms or their byproducts and are clearly defined under Schedule D of Health Canada’s Food & Drugs Act (e.g. drugs such as Remicade, Humira, Rituxan, Avastin, growth hormones, fertility agents, and interferons). In general, most biologics are considered specialty drugs with the exception of insulins, vaccines, and allergy serums, because they do not possess one or more of the specialty drug characteristics below.

Unique Qualities of Specialty MedsIt’s More Than Just Cost…

Types of Conditions Treated:

Specialty Drugs

Frequent Dosing

Adjustments

Cost >$500 per 30 day supply

Specialized Handling &

Administration

Close Patient

Monitoring

Intensive Clinical

Monitoring

Rheumatoid Arthritis

Cancer

Growth Deficiency

Hepatitis

Anemia

Multiple Sclerosis

Pulmonary Hypertension

Many Others…

Impact of Specialty Drugs The impact of high cost specialty drugs is already being felt by plan sponsors. If we were to group all specialty drugs together (approximately 1,100 DINs) plan sponsors are spending more on specialty drugs than they are on any other major condition. Although specialty drugs accounted for 14.7% of spend in 2008, they represented less than 1% of claims. In addition, the rate of growth in specialty drug spend is increasing at 17% per year compared to 3% for all other drugs.



Generic Substitution Plans

Plan TypeGeneric Fill Rate

48.3%

47.1%

43.6%

Ensure greater use of lower cost equivalents

Target: cost per script

Opportunity: upcoming patent expirations

Overall Savings = 1% ‐ 2%% of ESI Plans

52%

41%

7%

0%

20%

40%

60%

80%

100%

Mandatory Generic Substitution

Generic Substitution

Traditional Plan

Current pharmacy practice in most provinces indicates that pharmacists may interchange a brand name drug for a lower cost equivalent but they are not mandated to do so unless the patient asks for the generic. Implementation of a generic substitution plan will ensure that the plan takes advantage of the new generics entering the market. Public sector: With the exception of Quebec, all provincial drug programs enforce generic substitution and preferentially reimburse generic products over their brand equivalents.

Dispensing Fee Cap Fee Caps assist in the reduction of the cost per script. Plans that utilize a dispensing fee cap will experience savings of 5% to 6%. This tool encourages the member to be a smart shopper in order to minimize their out-of-pocket payment. A total of 32% of plans (excluding Quebec) currently utilize a fee cap, however there remains significant opportunity as we saw earlier that dispensing fees submitted range from $4 to upwards of $15. Public sector: Almost all provincial drug programs have a set dispensing fee cap in place.

ESI Canada currently offers a variety of benefit management tools and products that target the various drivers of trend:

Solutions Address Drivers of TrendAn Array of Options Currently Available for Plan Sponsors

Trend Component Solutions

Utilization• Prevalence• Intensity

• Drug Utilization Review (DUR)• Quantity Limits, Days Supply

• Plan Exclusions• Coordination of Benefits (COB)• Member Payment

• Prior Authorization• Copay/Coinsurance Differentials• Generic Substitution• Managed Formularies

• Fee Caps• Preferred Provider Networks

Cost Per Script• Inflation

• Brand/Generic Mix• Therapeutic Mix

When we examine the utilization of these benefit management solutions, the private sector receives a failing grade. Conversely, the public sector has done a much better job at incorporating a variety of strategies into their drug plans. Let’s explore some solutions that may improve private payers’ score cards:

Generic Substitution Plans Generic substitution plans influence the drug mix, namely the brand and generic mix of drugs, by cutting back brands that have lower cost interchangeable generic alternatives and advising the pharmacy to switch the brand name drug to a generic.

Plans utilizing this feature experience lower drug costs since generic drugs are typically 30 to 40% less expensive then their brand equivalents. The additional savings associated with this type of plan design are 1% to 2% due to a higher generic fill rate compared to a traditional plan. Generic substitution plans will become much more important as we continue to see more highly utilized brand name drugs come off patent.

Benefit Management Solutions

9



Dispensing Fee Caps

Target: fee per script

Opportunity: smart shopping

Fee Limit Avg. Fee Allowable

$6.20

$9.70

Overall Savings = 5%‐6%

% of ESI Plans

Encourage use of lower fee pharmacies

68%

32%

0%

20%

40%

60%

80%

100%

Fee Cap

U&C

Managed Formulary Managed formularies are currently underutilized among private payers (17% of plans) but are common place in the public sector as an effective benefit management tool. A managed formulary, such as ESI Canada’s Dynamic Therapeutic Formulary (DTF), encourages the use of cost-effective drugs through a two-tiered formulary where preferred drugs are reimbursed at a higher coinsurance. This type of managed formulary helps to reduce the cost per script by encouraging plan members to be wise consumers through the utilization of more cost-effective drugs.

Managed FormulariesProvide cost effective and clinically appropriate plan management

Plan TypeAvg. Cost Per Script

$57.12

$60.03

% of ESI Plans

Target: cost per script

Opportunity: increased savings & tiering

Overall Savings = 4% ‐ 5%

83%

17%

0%

20%

40%

60%

80%

100%

Managed Plans

Prescription Plans

This plan design targets drugs that have lower cost alternatives which are not interchangeable. As a result, they cannot be switched for a generic equivalent automatically by the pharmacist - the member must request the lower cost item from their physician. A two–tiered coinsurance is utilized to provide an incentive for the plan member to request the lower cost item in order to be reimbursed at a higher rate.

Traditional Prescription Plan vs. DTF Under most traditional drug plans, all drugs are reimbursed at the same coinsurance providing little, if any, incentive for members to select a lower cost therapeutic alternative. On the left hand side of the slide below, we can see how a traditional plan operates for both preferred and non-preferred drugs. Let’s take the Proton Pump Inhibitors (PPIs) as an example, and use the more expensive Nexium as the non-preferred item and use the lower cost generic Pariet (rabeprazole) as the preferred drug. Under a traditional drug plan for a $100 Nexium prescription, the member would be reimbursed at 90% and be responsible for $10. However, if the plan member’s physician had initially prescribed the lower cost therapeutically equivalent drug (generic rabeprazole), the member would still pay 10%, but this time $6. The $4 differential in the out-of-pocket costs for the plan member provides little incentive for the member to work with their physician to request a lower cost alternative drug. The traditional prescription plan does not typically provide any opportunity for members to discuss with their physician treatment options from a cost/ outcome perspective. The plan member is generally not even aware that a lower cost treatment alternative exists. As a result, under the traditional prescription plans, the plan sponsor ends up paying significantly more for the plan member’s treatment (i.e. $90 vs. $54).

$90

$54$70

$54

$10

$6

$30

$6

$0

$20

$40

$60

$80

$100

$120

Non‐preferred item @ 90%

Preferred drug @ 90%

Non‐preferred item @ 70%

Preferred drug @ 90%

Plan Member

Plan Sponsor

Traditional Plan DTF

Managed Formularies Can Encourage Consumerism

10



DTF Case Studies Over the past year, we conducted several case studies on groups who implemented the DTF to document actual plan experience and generated savings from this type of managed plan. We collected data from two different employer groups with different coinsurance structures, both of whom implemented the DTF on January 1, 2006. Claims were captured for 2 years following the plan design change. Savings were calculated via 2 methods: 1. Cost Shift – savings to the plan sponsor generated by

simply changing the coinsurance for non-preferred drugs

2. Switch – savings to the plan sponsor resulting from patients switching from a non-preferred drug to a preferred agent

DTF Case Studies

All Claims 90% coins

Tier 1: Preferred 90% coins

Tier 2: Non‐preferred70% coins

DTF Implementation Date

Pre‐DTF Period Post‐DTF Implementation

Savings generated in 2 ways:

1. Cost Shift = move to Tier 2 without member changing medication

2. Switch = member switches to Tier 1 drug

#1

#2

Results: As seen below, the average annual savings for the 2 employers ranged from 4.3% to 6.9%. The higher savings achieved by Employer B are directly linked to the higher switch rate (39% Employer B vs. 24% Employer A). This is likely due to the coinsurance structure used by each of the employers, as there was more financial incentive for a patient to move to a Tier 1 drug within Employer B because they would be reimbursed at 100% leaving no out-of-pocket expenses vs. 80% reimbursement for Employer A.

Now, if we were to look on the right hand side of the slide and examine how these two drugs would be reimbursed under the DTF we see a different situation. Because Nexium is less cost-effective than other PPIs it would be classified as a non-preferred agent and reimbursed at 70%. If the plan member receives this drug, they are required to pay $30 out-of-pocket. However, if the plan member is able to discuss with their physician the higher reimbursement rate for the preferred drug (generic rabeprazole), they will only have to pay 10%, or $6. This $24 difference in member payment provides greater incentive for plan members to discuss lower cost therapeutic alternatives with their physicians. In addition, the plan sponsor also benefits from members choosing more cost-effective drugs. In the DTF example above, the plan would pay $70 for Nexium compared to $90 under a traditional plan. If the member chooses generic rabeprazole (Pariet), cost savings are neutral to the plan sponsor. Thus, the key advantage of the DTF is that it provides savings to both the plan sponsor and the plan member. Plan sponsor savings come from the greater use of lower cost equivalents as well as the cutback on high cost non-preferred items when a switch to the preferred drug does not take place. The plan member can reduce their out-of-pocket costs by working with their physician to select a preferred lower cost alternative drug. This can be achieved by using information that is given to plan members outlining the non-preferred drugs and a list of corresponding lower cost preferred alternatives. This type of plan design will save the plan sponsor between 4% and 5% and will reduce the plan member’s out-of-pocket costs. Public sector: All provincial drug programs are“managed” in the sense that each drug is only listed onthe formulary after a clinical review is completedevaluating efficacy, safety and cost in comparison toother drugs treating the same condition.


The DTF case studies provide excellent examples of the success of a managed formulary providing cost-effective and clinically appropriate plan management. In addition, this demonstrates that members will modify behavior and switch to the preferred drug if there is sufficient incentive to do so.

12

EMPLOYER B CASE STUDY

0%

20%

40%

60%

80%

100%

2005Q1

2005Q2

2005Q3

2005Q4

2006Q1

2006Q2

2006Q3

2006Q4

2007Q1

2007Q2

2007Q3

2007Q4

PREFERRED

NON‐PREFERRED

DTF Groups – PPI Switch RatesTiering effectively shifts market share and patient behaviour

Percentage of Scripts

Quarter

2/3 of patients switched• Pariet

•Omeprazole

• Nexium

• Pantoloc

• Prevacid

• Losec

For those groups under Employer B who moved to the DTF, there was a significant shift in plan utilization of the preferred drugs from less than 20% pre-DTF to roughly 60% after two years. Approximately two-thirds of patients switched drugs in this category. Although evidence supports that under the majority of cases all drugs in this category are equivalent, there is always the concern of whether the preferred agent which will work in the same manner as the drug the patient is currently on. We found that of those who switched, more than 85% remained on the preferred drug suggesting that this was not a significant issue for most.

EMPLOYER B CASE STUDY

0%

20%

40%

60%

80%

100%

2005Q1

2005Q2

2005Q3

2005Q4

2006Q1

2006Q2

2006Q3

2006Q4

2007Q1

2007Q2

2007Q3

2007Q4

NON‐PREFERRED

PREFERRED

Non‐DTF Groups – PPI Utilization

Percen

tage of Scripts

Quarter

Non‐Preferred Drugs Maintain Majority of Market Share

• Pariet

• Omeprazole

• Nexium• Pantoloc• Prevacid• Losec

For Employer B groups who did not implement the DTF and remained on the previous traditional plan, we see a much different situation. The more expensive non-preferred drugs maintained the majority of the market share at about 75% of scripts. We did observe some increased utilization of the preferred agents but this was attributed to patients switching from brand Losec in Tier 2 to its interchangeable equivalent, generic omeprazole covered on Tier 1. This is simply the result of typical pharmacy interchangeability practice.

These results suggest that if there is sufficient incentive for a patient to switch to a preferred agent, it will happen. An excellent example demonstrating switch rates from the DTF and its ability to increase utilization of preferred drugs comes from the Proton Pump Inhibitors (PPIs) used for stomach ulcers and reflux disease. Note: We will look only at Employer B as not all of Employer B groups moved to the DTF which provides a suitable control group to compare to the DTF claims experience (below).

Public to Private Cost Shifting As public programs introduce a variety of new strategies and the increasing trend for high cost oral agents, more drug costs are being borne by private payers. Conditions traditionally treated with injectable drugs administered in the hospital are now being treated with oral drugs allowing patients to remain at home. One such example is take-home cancer drugs. The 2008 Annual Report Card on Cancer produced by the Cancer Advocacy Coalition of Canada noted that the percentage paid by private plans on oral cancer drugs increased more than public sector pay in all provinces during 2008. Take-home cancer drugs now account for half of all cancer drug expenditures, putting significant pressure on private payers. Delays in adding drugs to provincial formularies, faster discharge from hospital, and drugs administered in private clinics are other factors that will influence future private drug spend.

Factors Impacting Future Drug TrendPublic to Private Cost Shifting Continues…

Trend Component Factor (Impact on Trend)

Utilization• Prevalence• Intensity

• IV administration to oral meds (↑)

• Drug administered in private clinics (↑)

• Delay in coverage or no coverage (↑)

• Income testing for coverage under public programs (↑)

• Pharmacist prescribing (↑↓)

• Faster discharge from hospital (↑)

Cost Per Script• Inflation

• Brand/Generic Mix• Therapeutic Mix

• Two‐tier pricing (↑)

• Blockbuster brands coming off patent (↓)

• Influx of specialty/biotech drugs (↑)

• Other legislative changes… (↑↓)

As noted earlier, a number of strategies have recently been introduced by public programs to help manage drug costs. However, these strategies seem to be neglecting the interests of private payers. Much of the discussion revolves around Negotiated Agreements – a concept whereby a manufacturer will provide its drug at a discounted price (typically via a rebate) for placement on the formulary subsequent to being initially denied coverage or improved/preferred coverage (e.g. moving from prior authorization required to a full benefit).

Ontario Competitive Agreements This type of pricing arrangement was announced in mid-2008 and initially targeted 4 molecules (ranitidine, gabapentin, metformin, and enalapril) that had multiple suppliers, and the winning manufacturer of the tender would supply the lowest price via rebates attached to market share agreements. Interestingly, two of the bids were subsequently cancelled – one because the brand Zantac (ranitidine) lowered its price significantly in advance; and one for metformin, as it was suspected that there was resistance from generic manufacturers to compete. The only agreement in place today is for enalapril (Vasotec), which was won by the brand manufacturer Merck. Ontario Drug Benefits (ODB) now reimburses brand Vasotec at a lower price than it did previously while the private sector continues to pay the higher original brand price.

Other provinces are also following suit. British Columbia has introduced tendering and a multi-source generic pricing policy. Both achieve lower prices for the public sector; however, unlike Ontario, the BC model has craftily avoided 2-tier pricing by using a retrospective process. Nevertheless, the private sector still ends up paying more for the same set of drugs than does the public program. A Starting Point for Private Payers? A couple of years ago the Competition Bureau of Canada undertook a project to investigate why generic prices were higher in Canada than other comparator countries. They found that although significant competition exists, end payers are not benefiting. In their follow-up report released in late 2008 (Benefiting from Generic Drug Competition in Canada: The Way Forward) the Bureau provided some recommendations for private payers to obtain better drug pricing: i) preferred pharmacy networks, ii) patient incentives, iii) negotiated price discounts, and iv) mail-order pharmacies. Some of these proposed solutions may or may not work in all provinces or under all circumstances, but it provides a starting point for discussion.

The Changing Landscape



The way forward for the private sector will likely involve the old and the new – plan sponsors will need to optimize current plan tools that are available but also search out innovative solutions for managing drug spend. It will be important to maximize the potential savings from new generics entering the market in the next few years as this will help to offset the impact of increased utilization of high cost specialty medications. Pharmaceutical manufacturers will continue to focus on targeted, high cost specialty drugs, thus strategies to manage utilization and costs for these drugs will be more critical than ever. Lastly, plan members will be at the centre of these changes and the success of any intervention will be directly correlated to the amount of communication provided to members and their subsequent involvement. Plan sponsors need to utilize the strategies below to ensure their drug plan is optimized and positioned for the future.

1. Optimize Traditional Plan Tools Promote low cost items (e.g. generic substitution) and smart shopping (e.g. fee caps)

2. Control Specialty Drug Spend Assess criteria for coverage, manage appropriate utilization (e.g. prior authorization), and consider various funding options (e.g. high amount pooling)

3. Manage Chronic Diseases Institute disease management programs focusing on prevalent conditions

4. Initiate Active Plan Management Consider implementing a managed formulary such as ESI Canada’s DTF

5. Engage Plan Members Empower members by providing appropriate communication and knowledge on their drug benefits and use incentives where necessary to drive member behavior

6. Investigate Innovative Solutions Evaluate strategies proposed by the Competition Bureau and various provincial programs

7. Assess Current Drug Plan Experience

Analyze current drug plan experience using a tool such as ESI Canada’s Drug Plan ROI A starting point for any private payer should be to first examine their current drug plan experience to determine where drug spend is concentrated, on what diseases, and for what types of claimants. In the following pages we present ESI Canada’s Top 100 Therapy Classes of 2008 which can act as a useful benchmark for plan sponsors.


Key Recommendations for Private Payers


We begin our Top 100 report by presenting the Top 10 Treated Conditions of 2008. The Top 100 report (page 22-23) isgrouped by therapeutic classes, a term that represents a category of similar acting drugs used to treat a specific condition.The Top 10 Treated Health Conditions below are grouped by disease state or most common indication. Each condition maybe comprised of several therapeutic classes. For example, the common indication “High Cholesterol” consists of six therapeutic classes:

• HMG-CoA Reductase Inhibitors (e.g. Lipitor, Zocor, Crestor) • HMG-CoA Reductase Inhibitor Combinations (e.g. Advicor) • Fibric Acid Derivatives (e.g. Lipidil) • Intestinal Cholesterol Absorption Inhibitors (e.g. Ezetrol) • Bile Acid Sequestrants (e.g. Questran) • Nicotinic Acid Derivatives (e.g. Niaspan)

Top 10 Treated Health Conditions for 2008

The Top 10 Treated Health Conditions remain relatively unchanged from 2007 and account for almost exactly the same percentage of cost and claims as they did last year. The only notable change is that Birth Control has moved out of the Top 10 in 2008 and has been replaced by NSAIDs for pain and inflammation.

On the following page, we highlight the following groups of drugs from 2008:

• Top 10 Drugs for 2008 ranked by total spend • Significant new generic entries in 2008

Top 100 Therapeutic Classes of 2008

15

Top 10 Treated Conditions for 2008

Ranked by Claims Volume

Claims Ranking

Health Condition % of Total Claims

1 High Blood Pressure 13.5 2 Antibiotics/Anti-Infectives 9.1 3 Depression 7.1 4 Diabetes 5.8 5 High Cholesterol 5.7 6 Pain, Narcotic Analgesics 5.1 7 Asthma/COPD 4.5 8 Ulcer/Reflux 4.4 9 NSAIDs – Pain &

Inflammation 3.8

10 Birth Control 3.8 Total 62.9

Ranked by Total Cost

Cost Ranking

Health Condition % of Total Spend

1 High Blood Pressure 11.22 High Cholesterol 10.03 Ulcer/Reflux 6.84 Diabetes 6.45 Depression 6.46 Antibiotics/Anti-Infectives 5.67 Rheumatoid Arthritis/Crohn’s 5.38 Asthma/COPD 5.09 Pain, Narcotic Analgesics 2.910 NSAIDs – Pain &

Inflammation 2.5

Total

62.1


2008 Top 10 Drugs

The table below presents the Top 10 Drugs ranked by total cost for 2008.

Rank Brand Name (Generic Name) Common Use(s) Annual Cost/Patient*

1 Lipitor (atorvastatin) High cholesterol $640 to $860 2 Crestor (rosuvastatin) High cholesterol $525 to $725 3 Remicade (infliximab) Rheumatoid arthritis, psoriatic arthritis,

Crohn’s disease, ulcerative colitis, ankylosing spondylitis

$27,800 to $35,000

4 Enbrel (etanercept) Rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis

$20,000

5 Nexium (esomeprazole) GI reflux, stomach ulcers $810

6 Effexor XR (venlafaxine) + generics Depression, anxiety, panic disorders $220 to $880

7 Norvasc (amlodipine) High blood pressure $515 to $760 8 Altace (ramipril) + generics High blood pressure $190 to $245 9 Pantoloc (pantoprazole) + generics GI reflux, stomach ulcers $500

10 Advair (salmeterol/fluticasone) Asthma, chronic obstructive pulmonary disease

$960 to $1635

*Pricing is obtained from ESI Canada’s database, generic pricing is used where applicable, and calculations are based on manufacturer’s recommended dosing.

Significant First Time Generics in 2008

Generic Name Brand Product Common Use(s) Therapeutic Class 2008 Therapeutic

Class Rank By Cost By Claims

Pantoprazole Pantoloc Ulcer/Reflux Proton Pump Inhibitors 2 2 Apri 21/28 Marvelon Birth Control Combo Contraceptives - Oral 17 8

Previfem 21/28 Cyclen Birth Control Combo Contraceptives - Oral 17 8

Modafinil Alertec Narcolepsy, sleep apnea, shift work disorder Stimulants – Misc. 26 45

Valacyclovir Valtrex Herpes infections Herpes Agents – Purine Analogues 36 55

Quetiapine Seroquel Schizophrenia, Bipolar Disorder, Others Dibenzothiazepines 47 54

Risperidone-ODT Risperdal M-Tab Schizophrenia, Bipolar Disorder, Others Benzisoxazoles 90 79

Alfuzosin Xatral Benign Prostatic Hypertrophy (BPH)

Alpha-1 Adrenoreceptor Antagonists 93 78

Ciclopirox Penlac Fungal nail infections Antifungals Topical 94 74

Galantamine Reminyl Alzheimer’s disease Cholinomimetics – ACHE Inhibitors 114 136

Brimonidine Alphagan P Glaucoma Ophthalmic Selective Alpha-Adrenergic Agonists 274 201



Therapeutic Class Highlights

Smoking Deterrents – GPI 62100 Drugs: Zyban, Champix and Nicotine Replacement (gums, patches, inhalers) Notes: This therapeutic class had one of the largest increases in the average cost per prescription in 2008 (13%) due primarily to Champix (varenicline) acquiring more market share since its introduction in 2007. Champix’s market share has essentially doubled (40.1% to 79.6%) in 2008. Like Zyban, Champix is available as an oral agent but in clinical trials was found to be superior at achieving and maintaining smoking cessation when compared to Zyban (bupropion). Human Insulin – GPI 271040 Drugs: Novolin insulins, Humulin insulins, NovoRapid, Humalog, Lantus, Levemir Notes: This category continued to experience growth in 2008 with an increase to rank 23 by claim volume demonstrating an increased prevalence of diabetes and greater use of insulins than in 2007. The average cost per script increased by 8%, largely driven by newer insulin analogues which are priced at a premium to older agents due to longer durations of action and improved side effect profiles (e.g. less incidence of low blood sugars). NovoRapid and the long-acting agents, Lantus and Levemir, all increased their share of scripts in this category. All other products observed a decrease in their market share compared to last year.

Trends – Smoking Deterrents 2007 2008

Claims Rank 109 66

% of Total Claims 0.19% 0.37%

Cost Rank 104 55

% of Total Cost 0.19% 0.41%

Avg. Cost Per Rx $61 $69

Market Share – Smoking Deterrents (by % claims)

2007 2008 Zyban 17.0% 4.7% Champix 40.1% 79.6% Nicotine Replacement (NRT) 42.9% 15.7%

Trends - Human Insulin

2007 2008

Claims Rank 25 23


Cost Rank 13 13



Market Share – Human Insulin (by % claims)

2007 2008 Novolin Products 23.8% 21.6% Humalog 21.1% 20.4% NovoRapid 16.3% 18.4% Humulin Products 18.1% 15.3% Lantus 12.3% 14.9% Levemir 8.4% 9.4%

2. DIABETES

THERAPY CLASSES INCREASING TREND

1. SMOKING CESSATION

3. CANCER

4. MULTIPLE SCLEROSIS


2007 2008 Gleevec 88.5% 77.6% Tarceva 7.8% 16.0% Sprycel 3.8% 6.3% Tasigna 0% 0.1%

2007 2008 Rebif 30.8% 27.5% Copaxone 27.7% 29.4% Avonex 22.3% 23.1% Betaseron 17.5% 15.2% Tysabri 1.7% 4.9%

Classes to Watch: • Multikinase Inhibitors (GPI 215330) - includes the oral agents Sutent and Nexavar which are both indicated for

metastatic renal cell carcinoma. Sutent is also indicated for gastrointestinal stromal tumors and Nexavar is also used for hepatocellular carcinoma. This class jumped from cost rank 172 in 2007 to rank 120 in 2008.

• Vascular-Endothelial Growth Factor (VEGF) Inhibitors (GPI 213350) - only the injectable drug Avastin belongs to

this class which has become an important agent for metastatic colorectal cancer and recently received a new indication for advanced HER2-negative breast cancer. It now ranks 177 in terms of overall percentage spend, up from spot 232 in 2007.

Antineoplastic – Protein-Tyrosine Kinase (PTK) Inhibitors – GPI 215340 Drugs: Gleevec, Tarceva, Sprycel, Tasigna Notes: Tasigna joined this class in 2008 which is indicated for the treatment of chronic myeloid leukemia (CML) and costs over $70,000 per patient for a full year of treatment. While this class of medications has experienced increases in both claims and cost ranks, the average cost per script has decreased in 2008 by 6%. As seen below, this is the result of increased market share for Tarceva and Sprycel which are priced lower than the market leader Gleevec.

Trends – PTK Inhibitors Market Share - PTK-Inhibitors (by % claims)

2007 2008

Claims Rank 303 287


Cost Rank 54 49


Avg. Cost Per Rx $3,538 $3,312

Multiple Sclerosis Agents – Monoclonal Antibodies – GPI 624050

Drug: Tysabri Notes: Tysabri, an injectable biologic for the treatment of relapsing-remitting multiple sclerosis, is recommended as a second-line agent to interferons (Rebif, Avonex, and Betaseron) and Copaxone. Tysabri’s cost (avg.$35,000/patient/yr) is higher than that for first line agents (avg. $20,000/patient/yr). This will increase costs for MS patients, however safety concerns have limited its uptake. Trends - MS Monoclonal Antibody Market Share – All MS Drugs (by % claims) 2007 2008

Claims Rank 407 345

% of Total Claims 0% 0%

Cost Rank 174 97



Tumor Necrosis Factor Alpha Blockers – GPI 525050 Drug: Remicade Notes: Remicade, the only drug given by intravenous infusion in this category, has continued to increase in both claims and cost rank. Its rankings demonstrate the concept of a high cost drug (cost rank #6) for a small number of patients (claims rank #206). The claims rank is also impacted by the less frequent dosing of biologics compared to oral medications. The increases seen with Remicade have been driven primarily by its ever expanding list of indications which includes RA, Crohn’s disease, ulcerative colitis, and psoriatic arthritis, to name a few. Also, the number of private infusion clinics has improved patient access to this biologic.

Soluble Tumor Necrosis Factor Receptor Agents – GPI 662900 Drug: Enbrel Notes: Enbrel has only experienced modest growth since 2007 with a 4% increase in the average cost per script. It remains the market leader in this category and has also benefited from an expanded indication list which now includes chronic plaque psoriasis. This indication is now covered as a general benefit by ODB which may further drive use among dermatologists especially following the market withdrawal of Raptiva. Anti-TNF-Alpha Monoclonal Antibodies – GPI 662700 Drug: Humira Notes: Humira continues to show remarkable growth in 2008 now occupying nearly a quarter of claims in this category of biologics and has jumped 20 spots in cost ranking. New indications in 2006 and 2007 (e.g. psoriatic arthritis and Crohn’s disease) have driven the utilization of this product in 2008. More recently, Humira added another new indication in 2008 for chronic plaque psoriasis which will drive future spend for this product.



Trends - Remicade 2007 2008

Claims Rank 215 206


Cost Rank 10 6



Trends - Enbrel 2007 2008

Claims Rank 176 174


Cost Rank 11 11



Trends - Humira 2007 2008

Claims Rank 252 215


Cost Rank 44 24



Market Share - Biologics for RA (by % claims) 2007 2008 Enbrel 55.5% 46.8% Remicade 26.3% 27.0% Humira 15.4% 23.0% Orencia 1.8% 2.6% Kineret 0.9% 0.6%

5. BIOLOGICS FOR RHEUMATOID ARTHRITIS


Proton Pump Inhibitors (PPIs) – GPI 492700 Drugs: Losec & generics (omeprazole), Pariet & generics (rabeprazole), Pantoloc & generics (pantoprazole), Prevacid, Nexium Notes: This class of medications saw the introduction of generic Pariet (rabeprazole) in late 2007 and generic Pantoloc (pantoprazole) in early 2008. This resulted in a 7% decrease in the average cost per script in 2008 as generics took up market share. Interestingly, the remaining brand products, Prevacid and Nexium, maintained their market share and actually saw slight increases. Thiazolidinediones (TZDs) – GPI 276070 Drugs: Avandia, Actos & generics (pioglitazone) Notes: Generic Actos (pioglitazone) entered the market in late 2007 and quickly picked up market share from the brand product. In addition, negative results from recent clinical trials on Avandia showing an increased rate of cardiovascular mortality resulted in many patients switching to other antidiabetic agents – we have seen some Avandia users move to Actos but also other classes of drugs such as metformin. Thienbenzodiazepines – GPI 591570 Drugs: Zyprexa & generics (olanzapine) Notes: Zyprexa which is used for a variety of psychiatric disorders, lost its patent in 2007 and has been losing market share ever since. The generic accounted for over 60% of all scripts in 2008 lowering the average cost per script to $139. Other highly utilized atypical antipsychotics also recently went generic (e.g. Seroquel and Risperdal) which will help lower overall costs for psychiatric conditions such as schizophrenia and bipolar disorder. We still have not seen significant uptake for new brand drugs such as Invega.

Trends - PPIs 2007 2008

Claims Rank 2 2


Cost Rank 2 2



Market Share - PPIs (by % claims)

2007 2008 Generic omeprazole 14.8% 15.3% Generic rabeprazole 0% 14.2% Generic pantoprazole 0% 10.0% Prevacid 14.7% 15.9% Nexium 22.7% 23.0%

Trends - TZDs 2007 2008

Claims Rank 49 64


Cost Rank 17 23



Market Share - TZDs (by % claims)

2007 2008 Actos 41.7% 17.6% Generic pioglitazone 0.01% 40.7% Avandia 58.3% 41.7%

Trends - Thienbenzodiazepines 2007 2008

Claims Rank 106 110


Cost Rank 48 51



Market Share - Thienbenzodiazepines (by % claims)

2007 2008 Zyprexa 78.7% 39.1% Generic olanzapine 21.3% 60.9%

1. ULCER/REFLUX

2. DIABETES

3. ANTIPSYCHOTICS

THERAPY CLASSES DECREASING TREND



Non-Benzodiazepine-GABA-Receptor Modulators – GPI 602040 Drugs: Imovane & generics (zopiclone), Starnoc Notes: Almost a 12% decrease in the average cost per prescription was observed in this class in 2008 which resulted from generic zopiclone acquiring an additional 34% market share. The generic product has been interchangeable in many other provinces for some time now, however the introduction of Off-Formulary Interchangeability (OFI) in Ontario for this product sparked this increase in the use of the generic versus the brand. Trends - Non-BDZ-GABA-Receptor Modulators Market Share - Non-BDZ-GABA Receptor Modulators (by % claims)

2007 2008

Claims Rank 27 26


Cost Rank 42 46



H-2 Antagonists – GPI 492000 Drugs: Zantac & generics (ranitidine), Pepcid & generics (famotidine), Tagamet & generics (cimetidine), Axid & generics (nizatadine) Notes: As noted earlier, brand Zantac dropped its unit price by more than 80% to undercut the generic price. The brand market share subsequently increased by 14% which lowered the average cost per script in this class by ~15%. Trends - H2 Antagonists Market Share - H2 Antagonists (by % claims)

2007 2008

Claims Rank 41 43


Cost Rank 45 59



2007 2008 Imovane 40.0% 9.8% Generic zopiclone 56.7% 90.2% Starnoc 0.33% 0.01%

2007 2008 Zantac 1.8% 15.5% Generic ranitidine 87.6% 74.3% Famotidine 5.1% 5.1% Cimetidine 2.9% 2.9% Nizatadine 2.6% 2.3%

4. SEDATIVE/HYPNOTIC

5. ULCER/REFLUX

CONCLUSIONS 1. Increases in expenditures on diabetic drugs demonstrate a shift to newer, more costly insulin products (e.g. Lantus,

Levemir, NovoMix). The number of new drugs which could enter the market along with increased disease prevalence, could further increase costs for this condition.

2. Top grossing biologics Remicade, Enbrel and Humira have continued to increase in use due to their ever expanding portfolio of indications. More high cost specialty drugs with multiple indications are anticipated.

3. Oral cancer drugs occupy an increasing percentage of drug expenditures and magnify the public to private shift that is occurring. Also, the number of available treatment options increases the duration a patient can be treated and likewise, the costs.

4. Recent generic drug entries helped lower drug costs and the upcoming generic pipeline shows significant promise. We are also entering the new era of brands competing with generics, which can also help decrease costs in most cases.

ESI Canada 2008Drug Trend Report

ESI Canada is a leading health benefits management company. Serving 7 million members, we help insurance carriers, third party administrators, and the public sector optimize the value of health benefits by linking the talent and professional expertise of our people with leading-edge information management systems and technology. ESI Canada is a wholly-owned subsidiary of Express Scripts Inc., one of the largest pharmacy benefit management (PBM) companies in North America (Nasdaq: ESRX)


This report was developed by ESI Canada and is based on 65 million drug claims across Canada for 7 million Canadians. The data and the results of this analysis are proprietary to ESI Canada.

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