Back
Report: New drugs and their impact on employee benefit plans
By: Benefits by Design | Tuesday April 22, 2025
Updated : Monday April 21, 2025
New drugs are constantly being developed to help patients manage and treat various diseases and health issues. While this is great news for patients, some new drugs come with price tags which can be alarming from a plan sponsor point of view. The 2025 TELUS Drug Pipeline Report provides details about what is expected to be approved, and the impact it might have on private drug plans in Canada.
New drugs – Generic substitutions for traditional drugs
The big kid on campus when it comes to new drug development is Diabetes. There are currently more than 30 generic substitutions to replace five different brand name drugs under review. However, only two brand names look like they will have generic substitutions passed by the end of 2025.
Substitutions for the brand name drug Victoza (liraglutide), which is a GLP1 similar to Ozempic, are expected to pass. These drugs “are more utilized and more costly than [the other two second-line therapies], with an annual average eligible cost per claimant of $1,700.”
The other new drugs which are under review are expected to be approved sometime in 2026 or 2027. These are mostly delayed due to litigation issues surrounding the patent expiration.
What employers need to know:
- The new generic substitutions will have a price tag of approximately 25% of the brand name. This translates to a savings of about $1,275 per claimant per year for the GLP1 drugs, and $750 for the other two types.
Biosimilar substitutions
New biological drugs are continually being developed to treat a multitude of autoimmune diseases, eye diseases, blood disorders, and more. While these new drugs provide life-changing effects, they have also been steadily increasing the cost to plan sponsors over the last 15 years.
As more plan members hit the stop-loss threshold in their employee benefits plan, stop-loss charges also rise. Meeting or surpassing the threshold is not entirely due to biological drugs, as it can be cumulative, and there are many costly medications, procedures and equipment. However, they have certainly contributed to the rise in employees going over the stop-loss threshold.
What is Stop Loss and How Does It Keep Benefits Plans Sustainable?
While there are currently 30 biosimilars under review, some of them are being delayed due to litigation. Newly approved in 2024 and 2025 are biosimilars to treat osteoporosis, bone metastasis, multiple sclerosis, Crohn’s disease, arthritis and IBS.
What employers need to know:
- Mandatory biosimilar switching has been proven to help with rising costs, and some provinces have already put this in place. Insurers and plan sponsors in provinces without mandatory biosimilar policies can use drug formularies to mitigate costs.
- Biosimilar substitutions can save plan sponsors 20-40% of the biological originator.
Specialty drugs
Specialty drugs that are not biologics also have an impact on stop-loss fees as they also have a high price tag.
Weight management drugs have been on everyone’s radar of late. Wegovy has been making waves and smaller waists in Canada since it was approved by Health Canada. Patients using the new drug can expect to see a 10-15% reduction in their weight. There are other drugs on the market which offer a 20-24% reduction, but availability is stalled due to manufacturing issues.
Wegovy was also approved to treat heart disease risk in those who are at risk of a cardiovascular event.
What employers need to know:
- The new drugs for weight loss are expected to have a high impact on employer sponsored benefit plans once they do hit the market. This is because the cost is expected to be similar to current brand name weight management drugs.
- Generic substitutions are expected in the coming years, but since they are not regulated by Canada’s Generic Tiered Pricing Framework, the drug manufacturers will set the price. Unfortunately, this means the impact is uncertain.
- The health benefits seen from lowered risk of heart disease, diabetes and other chronic illnesses may not be seen for years to come, and could be difficult to quantify. However, it will be interesting to see if these drugs have a lasting effect on the overall health of the population.
Alzheimer’s disease
There is some exciting news coming in the dementia and Alzheimer’s Disease (AD) department. A new diagnostic test promises much higher accuracy, and requires only a simple blood test. Previous diagnoses were achieved via a brain scan or spinal tap. The new test is sure to increase the number of accurate diagnoses of AD, including early-onset AD.
There are two new drugs expected to launch this year to treat early onset Alzheimer’s for patients in their 40s, 50s, and 60s. Both are biological drugs.
There is some trepidation from Health Canada to approve them for coverage, as the efficacy is between 27% and 22%.
What employers need to know:
- This is the first time drugs for AD treatment have been on the radar for plan sponsors. This is because the disease usually affects people who have already left the workforce.
- They are expected to have a medium impact on employee benefits plans. While the claimant base is relatively small, the cost of the drug and the expected requests for subscriptions from those with a diagnosis is high.
Conclusion
Plan sponsors have faced what seem to be ever-increasing costs as new drugs are released each year. These include specialty drugs as well as new brand name drugs for treating depression, asthma, and other diseases.
However, there is some good news on the horizon as new biosimilars and generic substitutions help to keep costs down. Employers can keep their plans sustainable by staying aware of new therapies, and ensuring that their benefits plan is prepared to handle the new drug. Whether that be through expansion of benefits, or tighter drug formularies.
Looking for more information on keeping your benefits costs in check?
The Cost of Employee Benefits – Sustainable Plans vs. Cheap Ones
