Protecting Pharmacy Benefits: What Your Organization Can Do to Mitigate Higher Prescription Drug Costs

Pharmacy benefits spending is taking up a large percentage of Canadian employers' overall benefits costs. With the proper strategies and approach, companies can reduce their pharmacy benefit spending while increasing compliance, improving health and increasing employee engagement.

The soaring price of prescriptions

Healthcare spending reached $373 billion in 2024, with drug spending accounting for 13.7% of that amount.¹ Canadians, their pharmacy benefit or the government are expected to spend an estimated $43.7 billion on prescribed (i.e., not over-the-counter) drugs this year, up nearly 4% from 2024.

The cost to individuals or private payers is expected to increase 5.6%, while the costs of private drug insurance, which is largely covered by employer-sponsored plans, will total $16.6 billion, a 22% increase since 2021.²

Several factors have led to increased drug spending, but the most significant cause is skyrocketing cost of specialty drugs, oncology treatments and gene therapies. The increased use of expensive GLP-1 drugs like Ozempic and Wegovy for weight loss also have a tangible effect on drug benefits.

Given that drug coverage is the most-used health benefit, with organizations spending as much as 70% of their health benefit on drugs, these costs are taking a significant toll on employers.³ And these costs could further increase with changes to trade agreements.

Many employers are already taking steps to try to rein in costs. According to a HUB client survey:

• The number of clients pursuing preferred pharmacy strategies has risen 14% between 2022 and 2023
• Approximately 10% more organizations are using formularies
• The number of managed formularies has increased 4.8%
• Drug plan maximums are up 5%

The HUB EDGE

To get the most out of their pharmacy benefit, organizations should consider other strategies, including:

• Understand the impact on employees. There are many solutions in the marketplace that offer instant savings but can create stress, friction and long-term impacts on coverage eligibility for employees. Before they can attack costs, plan sponsors should know how much their employees rely upon pharmacy benefits, and how valuable the benefit is to them. For instance, employees may prefer drug insurance over other benefits, so companies should focus on ensuring they have a quality employee experience (QEX) in that area.

• Embrace data analytics. Data analytics can help illustrate drug benefit utilization, what conditions are prevalent among employees and the problematic medical conditions affecting workers. Organizations should work with an experienced broker, who can help provide an entirely new perspective of your workforce’s pharma benefits usage and costs. Proper data analytics involves broader and deeper data sets than what employers have previously relied on. The implications of a drug strategy change require a deeper dive into the data to predict and plan against potential disruption to employees and to maximize long term cost sustainability.

• Formulary management. More Canadian organizations are embracing some form of formulary management. There are numerous managed formulary options available in the marketplace that address evidence-based approaches to drug design that support long term sustainability while minimizing disruption to employees. Organizations should speak to an experienced broker who can guide them through their options and help find the right strategy.

• Benchmark against competitors. Comparing your benefits offerings against the competition can help determine if the pharmacy benefit is inadequate or too expensive. One drawback of benchmarking is that it assumes that strategies and demographics are the same across organizations and that competitors are taking a proactive approach, which isn’t always the case.

Managing pharmacy benefit costs may seem overwhelming, but organizations that take an active role can achieve a more affordable, effective and sustainable plan for the long term. As the largest benefits advisor in Canada, HUB’s team of experts can leverage employee data to develop a personalized approach that meets your goals and provide employees with the pharmacy access they require.

¹ Canadian Institute for Health Information, Health Expenditure Data in Brief, November 2024.
² Canadian Institute for Health Information, “National health expenditure trends, 2024,” accessed February 14, 2025.
³ Benefits Canada, Healthcare Survey 2024, accessed February 14, 2024.