What are biologics?

Dec 21, 2011

From the team of Queenie & Brent

Biological drugs (biologics) are drugs created from a living organism or its products, and can be composed of sugars, proteins or nucleic acid,  complex combinations of these substances or  living entities such as cells and tissues(1). Biologics are extremely costly because they are difficult  to create and once developed, they cannot be massed produced. Biologics are one of those medical creations that have changed the lives of many  and are a great example of what can be accomplished with advances in technology and increased scientific knowledge. 

They are both amazing and frightening at the same time. Amazing because they are a new class of drugs that offer medical solutions to conditions that never existed before such as cancer, Crohn’s disease and rheumatoid arthritis. They help people manage their illnesses and allow them to live a longer and healthier lifestyle that was once unimaginable. Frightening because of the price tags. A single drug can cost more than $500,000.

The idea of an injectable or oral drug as a cure for anyone living with a debilitating disease is phenomenal but the highly unaffordable price tags are of great concern for both employees suffering from these illnesses and employers who offer a drug plan through their employee benefits.

Sun Life reports that Canadian companies are spending $200 million per week or an estimated $10.2 billion on drugs in the year 2010. Great West Life reports that biologics make up 13.3% of private drug plan costs in 2009 and with the number of drugs in the pipeline in the latter stages of development, this cost is expected to increase by 2.5-3 fold by 2019 and possibly within the next 3 to 4 years.

The emergence of this new class of drug has brought drug management to the forefront of the group benefits industry.  Biologics are not only a problem for insurance companies, they should also be a concern for employers as they need to ensure that they have adequate protection (i.e. stop loss) to limit their financial exposure.  And when you consider that insurance companies all have different contractual provisions for stop loss, drug management becomes very complicated…  However, that is a topic for another day.

(1)    FDA US Food and Drug Administration – What are “biologics” – questions and answers

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