Canada Life’s national practice leader highlights what’s next for Canadian plan sustainability
Barbara Martinez has spent 25 years watching Canada’s drug benefits landscape reinvent itself. The national practice leader of drug solutions at Canada Life began her career at a time when a Health Canada approval was often sufficient for a drug to be covered by workplace benefit plans.
“The drug legally required a prescription, it was used to treat an illness or injury, it had a drug identification number. That was often enough for it to be added to plans. And that made sense,” Martinez says. “In those days, there were fewer drugs on the market, options were more limited, costs were far lower than they are today. It’s a whole different landscape nowadays − with new medications arriving faster, prices are higher while therapies are often targeted to specific conditions or patient populations.”
Now, Martinez suggests the industry has moved toward an evidence-based model, drawing on clinical expertise and health economists to evaluate how drugs perform not just in trials but in real-world use, including who benefits the most and what the long-term impact on plan spending looks like. The aim is to ensure that covered medications deliver meaningful health value while keeping plans affordable.
“It’s just not affordable to cover everything approved by Health Canada any longer,” she says.
Cost remains key pressure point
Cost is the most obvious pressure point facing most plan sponsors. Twenty-five years ago, most medications were relatively inexpensive. Today, plans can face therapies priced at $100,000 or $500,000 a year, notes Martinez. She recalls a moment about 20 years ago when a $20 migraine pill rattled the industry.
“It’s almost laughable now to think that a $20 pill was a concern considering that today rare condition drugs can easily cost $100,000 or more,” she says.
Those rising costs have since forced plans to change how they add coverage. Prior authorization, step therapy, and clinical oversight are now standard, all aimed at ensuring that high-cost drugs reach the members who need them most while keeping plans sustainable.
“More than 70 percent of all the prescriptions that we pay for are for generic drugs, as opposed to brand drugs,” Martinez notes, adding that that shift helps free up dollars to allow plan sponsors to cover the expensive therapies certain members need.
“By making sure we’re paying for those lower-cost alternatives once they become available, it frees up money to then pay for those higher-cost drugs that certain members are going to need to be healthy and productive. We also know that people are accepting generics far better today than they may have 20 years ago,” she explains.
Generics pave the way for future drug categories
That shift is about to become even more important following Health Canada’s recent approval of two generic Ozempic drugs, with more on the way. While Martinez acknowledges that the generics should bring meaningful cost relief, she cautions it will take time for plan sponsors to see the impact. Notably, manufacturers still need to distribute the new generics, while provinces need to complete their own assessments before pharmacists can begin substituting them for the higher-cost brand versions.
The price of the generic has landed at 35 percent of the brand cost, bringing the annual expense for a patient down from $5,000 to roughly $2,000.
Martinez also acknowledges that the old habit of sorting drugs into broad lifestyle categories has outlived its usefulness. Historically, plans often took a blunt include-or-exclude approach to areas such as fertility, obesity, and smoking cessation.
Now, those conditions are better understood as issues that can materially affect health outcomes, which means coverage decisions need to be based on clinical value rather than outdated labels, she explains. Additionally, modern drugs treat multiple conditions, which makes these types of labels impractical.
For example, Martinez points to Wegovy because it’s approved for chronic weight management, fatty liver disease, and potentially sleep apnea. Categorizing a drug as “lifestyle” when it also treats serious medical conditions creates a complicated coverage decision.
An optional layer of coverage
Instead, Canada Life is moving toward an optional layer of coverage that can be added to plans, with higher reimbursement for certain drugs and lower reimbursement for treatments that may otherwise be more difficult for plans to sustain from a cost perspective.
She says plans should look beyond defining drugs by category alone and instead consider how to provide access to treatments that make medical sense while keeping costs sustainable.
“The way we can do that in drug plan design today is to put drugs into categories not based on disease but based on plan impact. For example, one of the problems we’ve tried to solve over time are these very, very high-cost drugs that small numbers of patients take. So, we’ve applied pharmacoeconomic analyses, and other methods, to appropriately balance plan costs and members’ need for access to effective treatments.”
Moreover, Martinez highlights a newer pressure on drug plans. While insurers have spent years building tools to manage very high-cost drugs used by small numbers of plan members, a growing challenge now comes from medium-cost drugs used by larger populations.
Those treatments may be far less expensive on an individual basis, Martinez notes, but their widespread use can still put a serious strain on plan budgets. She believes plan sponsors need a different framework − for example, one that balances access with affordability and recognizes that medium-cost, high-volume drugs are becoming a major sustainability issue for plans.
Why evidence-based stewardship is effective in plans
When asked what recent developments have had the greatest impact on plan sustainability, Martinez says that evidence-based stewardship has been the most effective strategy for keeping drug plans both competitive and financially viable.
She explains that the process now involves health economists, pharmacists, doctors − and even lawyers − all working to ensure that coverage decisions are grounded in clinical evidence and compliant with regulation, and that they support long-term benefits for members.
From Canada Life’s perspective, the goal is to deliver plan designs that reflect those priorities while still allowing plan sponsors to meet their individual needs and the needs of their members, rather than applying a single formula across the board.
“Everybody wants to manage spending and deliver access, but the way you do that is going to be different for different clients depending on their philosophy and their objectives for the drug plan,” Martinez says, acknowledging that some employers prioritize competitive benefits to attract talent, while others are focused on cost containment.
Demand for digital tools is increasing
Looking ahead, Martinez says technology will play a growing role in how members interact with their drug plans. Canada Life’s digital tools already allow members to check drug eligibility, coinsurance levels, prior authorization requirements, and generic alternatives in real time. The tools also help by flagging when a drug that’s not covered is under review and providing an expected decision date.
“These are tools that members can use right in the doctor’s office so that they can know what their coverage is right at the time of prescribing,” she says, adding that demand for that level of transparency is only increasing.
