Thanks to Chris Gory at Canadian Group Insurance Brokers I recently took some time to review the 2024 Greenshield Drug Trends Report. It’s an interesting read that includes a ton of statistics concerning prescription drug use.

A lot of it approaches this from a cost perspective. The report is largely written to help plan administrators and benefits reps understand what’s happening within their plans. It might even be possible to take a bit of a look into the future.

Why does this matter for a financial planner? We’ll set aside the question of business owners predicting cost increases with their benefit plans. Instead, we can focus on the question of retirement planning, which is likely tied directly to the work of more financial planners.

We generally assume that inflation is similar across all domains. Anybody who has worked with retirees knows this is not the case. Statistics Canada maintains a neat interactive tool that allows one to estimate the extent to which inflation applies to their own circumstances.

Inflation is not the only issue at work here. Anybody with experience in group benefits knows there are at least two factors to consider. Inflation is the obvious issue. If inflation on prescription drug expenses is 2.5% and is only 2.1% in other areas, then somebody with a heavy prescription drug spend should be concerned about inflation.

In addition, though, is the concept of utilization. Imagine that an employee group has 20 people in it. In 2024, the average age of that group is 39 years old. If there is no turnover, the average age of the group in 2025 will be 40. We might assume that the expected prescription drug spend increase is 2.5%. That’s not likely the case, though. That whole group has gotten one year older. That will create increased utilization. More of those plan members will be using prescription drugs. A stable group of employees might see increases of 5%-10% in their overall prescription drug cost. Most group benefit reps would not be at all surprised to see such an increase.

This table, from the Greenshield report, shows a 5.42% annualized increase in drug cost per claimant. Over the same 4 years, inflation in Canada as measured by CPI changes was just 3.68%.

What does this translate into for our retirement planning clients? The Greenshield report provides some useful information here. Of course, we must be careful when using data for a purpose other than what was intended.

Some key takeaways:

Diabetes Meds

Diabetes meds are seeing double-digit increases in costs for benefits plans. These meds (think Ozempic, Rybelsus, and Wegovy) are being prescribed for a broad range of conditions. A prescription claimed through Greenshield cost an average of $1,890 for a year in 2023.

Every trend around these prescriptions is an arrow up and to the right, so budgeting $1,890 per year is probably not sufficient. On top of that, for seniors who rely on provincially sponsored prescription drug plans, this category may not be covered. It’s entirely possible that this category of drug spending is covered out of pocket, even if the client is otherwise eligible for provincial drug coverage.

Biosimilars

Some good news here. Biosimilars are roughly the equivalent of brand-name drugs being replaced by generics. The difference is many biosimilars are replacing very expensive biologics, such as Remicade ($27,317 per claimant in 2023) and Humira ($13,530 per claimant in 2023). 2023 saw biosimilar total cost with Greenshield exceed the cost of the biologic originator (the drug being replaced) for the first time.

This might be a welcome source of relief for retirees. Remicade and Humira are both prescribed for rheumatoid arthritis.

Mental Health

Greenshield notes a per-claimant cost increase of ADHD meds from $500 in 2022 to $999 in 2023. It’s good news that more people are getting the treatment they need. The flipside is that a $999 spend may not be accounted for in the retirement budget.

Financial Planner Responsibilities

The financial planner dealing with retirees and near-retirees should have some awareness of how spending on prescription drugs is likely to impact their clients.

It’s also important to understand what tools are available to deal with this. Every province has a different regime dealing with prescription drugs for seniors. Those regimes can be impacted by the income of the claimant. They often feature restrictive formularies, limiting what drugs can be claimed. Private insurance might be an option, but those plans can be expensive and will have their own restrictions built in so the insurer doesn’t lose out on the insurance it’s selling.