In recent years, medical advances have continued to accelerate. The development of new drugs using existing and new technologies has been at the front of this curve. New drugs have cured serious illnesses, improved the quality of life for patients with less common diseases, and extended the lives of many. However, this has come at a price, as many of these new drugs have come with price tags in the hundreds if not thousands of dollars per dose.

Inflationary pressures coming from new drugs for Canadians are driven by a number of factors including but not limited to;

– Pharmaceutical companies wanting to recoup their significant research investments

– New technologies being required to manufacture the drugs

– Progress made in treating illnesses that occur less frequently in the general population

As a result, many new drugs coming to the market can cost $25,000 per year or more (with some exceeding $1M) per patient. When covered by what are known as fully insured extended health insurance plans, paid largely by employers, these new drug expenses can render the plan unaffordable as insurers need to increase premiums to cover the additional insurance benefit costs associated with the new drugs.

By creating the Canadian Drug Insurance Pooling Corporation, behind the scenes, through and insurance mechanism called “pooling”, Canadian insurance companies share the costs of very expensive drug prescriptions that repeat year after year. While this doesn’t eliminate the impact of high costs the new drugs, the pooling mechanism dramatically reduces the inflationary impact insurance premium rates for specific employers with employees who rely on the drugs.