City of Oak Creek

Common Council Report

Meeting Date:  9/7/04

Item No.:         9

Recommendation:  That the Council authorize implementation of the Canusa prescription drug program for Oak Creek employees, over age 65 retirees, and residents.

Background:  On April 5, 2004, Council referred the issue to the Health Insurance Study Committee for further research.  On April 28, 2004 the Insurance Committee met for a general discussion about how a Canadian prescription drug program could work for the City.  The Committee met again on May 25 and August 4 to review the City’s prescription drug program claims for 2003 for comparison purposes to see how much could be saved by implementing a Canadian drug program and specifically considered Canusa as the service provider.  A review of the prescription drug utilization for the active employee population as well as the over 65 insurance group in 2003 showed potential savings to the City of approximately $283,000 in prescription drug costs.  The Insurance Committee was encouraged by the program’s ability to save money for both the City and employees, that Canusa’s safety procedures were sound and that the legal ramifications had been addressed.

The Canusa prescription drug program would run alongside the City’s existing pharmacy benefit management system and would provide case management as well as aggregate reports to the City on utilization (no individual prescription records will be shared).  The plan would be completely voluntary.  Employees and retirees would have the option to continue to fill prescriptions at a pharmacy, to use the existing U. S. mail order program, or to use the Canusa mail order program. 

Canusa has researched all the compliance regulations, health and safety questions, quality and comparability questions (on prescription drugs) and will make certain warrants and representations to their clients.

Participants may only access the Canusa program if they have used and ordered medication for at least 90 days.  The Canusa program expressly excludes “controlled substances,” narcotics, antibiotics, “biologics” (such as vaccines and blood products), any drug therapies (that require frequent/direct observation by the treating physician), “stat” orders, and drugs subject to any current FDA consumer safety alerts.  Canusa has undertaken extensive efforts to assure that, where Canadian pharmaceuticals are used, they are chemically identical or substantially similar to the U. S. medication based on specific technical information filed with the FDA and Health Canada.  The filled prescription is in the strength and dosage prescribed by the plan member’s U. S. physician.  The filled prescription is dispensed with English language labeling, instructions and cautions, and packaged in a manner identical or substantially similar to the packaging of comparable U. S. filled prescriptions.  All patient information is handled in conformance with HIPAA requirements (confidentiality).

The Personnel Committee met on August 17, 2004 and recommended forwarding the Canusa prescription drug program to Council for implementation with options for an incentive program (to be discussed).  The options considered were:

Option 1:   Require employees/retirees to continue with their current copay structure

Option 2:   Waive the current copay fees

Option 3:   In addition to waiving the copay fees, offer employees/retirees 50% of the savings to the City on the first two prescriptions ordered only, then continue only to waive the current copay fees

According to Dan Burkwald, the City’s insurance consultant, his experience has shown that without offering an incentive, people are unlikely to change their behavior concerning medical costs.  The more incentive offered by the City for participation early in the program, the more likely people will be to change their habits and the more likely the program is to be successful in the long term.  If the City were to share a little of the savings up front, the better it will be accepted by employees/retirees.

A comparison report was prepared showing the City’s active employee prescription claims from June 5 through July 30, 2004.  When extrapolated over a 3 month period, it reflects a cost to the City of $66,010.  That same period of time would have cost the City $47,709 for the Canadian equivalent (savings of $18,301) before participant copays and $36,635 if copays by participants were required (savings of $29,375).  Although waiving the copay would reduce the net savings to the City (by $18,334), it would be an added incentive to encourage participation.  Waiving the copay is a much easier task to accomplish administratively and incurs no extra cost to the City whereas offering participants a flat percentage of the savings may require an added fee.  When compared to the extrapolated 3 month cost ($66,010), the cost savings with continuing to require copays would be 44.5% versus 27.7% if the copays are waived.

If Option 3 were chosen, given the extrapolated data provided, over the 3-month period, the City would save $18,301 with the Canadian program versus the U. S. mail order program and could share half of that savings with the participants ($9,150) and still save $9,150 in a 3-month period.  These statistics are based solely on the active employee group. 

Although the active employee group filled almost as many prescriptions as the over age 65 retiree group (1,349 active vs. 1,497 retiree) it is difficult to estimate how much the savings for that group may be, as their copays are not the same, and will also depend on participation levels.

The success of the program will rely heavily on educating people about how the program works and assuring participants of its safety.

Fiscal Impact:  Implementation of the program would only result in a cost savings to the City.

Fiscal Review by: Beverly A. Buretta, CMC City Clerk

Respectfully submitted, Barbara S. Blumenfield, Ph. D. City Administrator