Who Pays When Your Employee Needs High-Cost Drug Coverage?
When an employee is prescribed a specialty medication costing over $10,000 a year, that single claim can land squarely on your employee benefits plan. This can spike next year’s premiums.
Formulary Protect takes those high-cost claims off your plan and finds outside funding, so your employee is supported without blowing up your renewal. Here’s how it works…
Worried About High-Cost Drug Claims?
Talk to us about how to support an employee with an expensive drug need, keep your HSA, and avoid a surprise renewal increase.
- Chris Biddeson
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Most business owners never think about drug coverage… until an employee needs an expensive drug.
A renewal notice arrives with a steep, unexplained increase. Or an employee is diagnosed with a condition that requires a drug most people have never heard of, and suddenly your benefits plan is the only thing standing between that person and a bill they cannot pay.
When that happens… who is actually paying for the expensive drug?
Usually the employer pays, through higher premiums at the next renewal. With a formulary protection program, a dedicated team looks for funding from provincial drug plans, the drug maker’s assistance program or a spouse’s plan instead, and finds it about 95% of the time.
What is High-Cost Drug Coverage?
For Canadian employers, managing high-cost drug coverage traditionally meant facing unpredictable premium hikes.
Programs like Formulary Protect take these expensive drugs off your regular plan and find someone else to pay for them. Instead of the employer paying, a Coverage Navigation Service (a team that finds other funding for the employee) secures alternative funding through provincial programs or manufacturer assistance.
How Common Are High-Cost Specialty Drug Claims?
In 2005, drugs costing over $10,000 a year, known as specialty drugs, were rare. There were roughly 125 of them on the market, mostly for serious, uncommon conditions like advanced rheumatoid arthritis and HIV.
By 2025, that number had grown to more than 960, with some treatments now costing up to $2.4 million. The conditions they treat have expanded too. It is no longer just rare diseases. Specialty drugs are now used for psoriasis, asthma, and a growing list of common diagnoses your employees could realistically receive.
This is not a hypothetical risk concentrated in a handful of unlucky companies. Nationally, specialty drugs are used by just 2.1 percent of drug plan claimants, yet they now account for 33.9 percent of total private drug plan spending, according to TELUS Health’s 2026 Drug Data Trends & National Benchmarks Report.¹
A small fraction of employees are driving a third of the cost. That is a structural shift in how drug costs work, not a rare event, and it lines up with a separate Government of Canada finding that more than one-third of total private drug plan costs come from drugs costing over $10,000 a year.²
Who Pays for an Expensive Employee Drug?
When a high-cost drug claim comes in, there are five possible payers. Understanding which one ends up footing the bill is the difference between a manageable situation and a renewal that blindsides you.
If your plan is fully insured, you might assume the carrier absorbs the cost. In practice, that cost gets reflected back to you at renewal. A single catastrophic claim (like a biologic treatment) can become next year’s premium increase.
Many employers default to covering everything because it feels like the right thing to do for their team. That works until a plan absorbs one too many specialty drug claims, at which point renewals become difficult to sustain and you are forced into a reactive decision under pressure.
Some employers respond to rising costs by introducing a drug cap, a maximum amount the plan will pay per medication per year. The problem is that a drug cap does not target the expensive drug specifically. It caps every drug on the plan, including the everyday prescriptions the rest of your team relies on. The fix for one rare, expensive problem ends up reducing coverage for everyone.
Provincial drug programs exist specifically to cover certain high-cost medications, but they are typically designed to be the last payer, not the first. They only step in once private coverage has been ruled out, and the process to access them is not something most employees know how to navigate on their own.
Pharmaceutical companies run patient assistance programs that can cover all or part of a high-cost drug, often to protect their list price internationally rather than reduce it outright. These programs are not advertised, and most employees have no idea they exist.
The reality is that the right answer is usually a combination. But, finding that combination is specialist work that most HR teams and businesses are not equipped to do themselves, especially while also supporting an employee who has just received a serious diagnosis.
What Happens When a Drug Isn't Covered?
This is the gap that Formulary Protect, offered through Quikcard in partnership with ClaimSecure, is built to close.
From day one, drugs costing over $10,000 a year are excluded from the plan’s standard formulary (the list of drugs your plan covers). While that sounds like a loss of protection, it is actually just step one.
A dedicated Coverage Navigation Service immediately steps in to secure funding on the employee’s behalf, whether through provincial programs, manufacturer assistance, or a spouse’s plan.
The team handles the entire process on the employee’s behalf, including the paperwork, coordination with their physician and pharmacy, and ongoing communication so the employee is never left guessing what happens next.
Quikcard case: $120,000 Saved, Employees Supported
In a recent Alberta example, a 205-employee group using the program found alternative funding for 12 high-cost drug claims within the first few months. This is a conservative estimated savings of $120,000 for that one employer alone, calculated at the $10,000 minimum threshold per drug.
The actual figure could be considerably higher depending on what each of those drugs would have cost the plan directly.
That is one company. Across the broader program, alternative funding has been found successfully in 95 percent of cases nationally, based on program experience through September 2025.³
In Alberta specifically, that funding most often comes through a combination of sources, with government programs and manufacturer assistance each playing a significant role on their own.
What If No Funding Is Found?
No program is 100 percent successful. Specialty drugs represent roughly 1% of all prescriptions written. Of those, the funding search comes back unsuccessful in about 5 percent of cases. That means the actual risk of a claim being denied is roughly 5 in 10,000 prescriptions across your entire plan.
That is not zero. But it reframes the question.
Instead of asking “what if we can never afford a high-cost drug claim,” the real question becomes “are we comfortable with a system that resolves this successfully 95 percent of the time, instead of one where every high-cost claim lands fully on our renewal.”
For most employers, once they see the numbers, that is not a difficult call.
What Are Your Options at Renewal?
If your business has never had a high-cost drug claim, this can feel like a problem for someone else’s company. But, the data suggests otherwise.
With nearly 1,000 specialty drugs now on the market, covering everyday conditions as well as rare ones, the question is less about whether your plan will eventually face one of these claims, and more about whether you have a deliberate answer in place before it happens.
The options at renewal generally come down to four:
- negotiate with your current carrier and absorb whatever increase results,
- shop the market knowing that high-cost claims follow you and make quotes harder to secure,
- introduce a drug cap and accept the reduced coverage that comes with it for every employee,
- or put a formulary exclusion and funding navigation program in place before you need it.
Frequently asked questions
What's considered a specialty drug?
Any prescription medication costing more than $10,000 a year.
As of 2025, close to 1,000 distinct drugs fall into this category in Canada, including complex biologic treatments for conditions like rheumatoid arthritis, as well as therapies for cancer, severe asthma, and psoriasis.
Will one employee's drug claim raise our insurance?
It can. On most group insurance plans, one expensive drug claim can push up your price at renewal, sometimes producing a significant, unexplained premium increase.
A formulary exclusion and funding navigation program is built specifically to prevent that single claim from reaching your plan’s costs in the first place.
Can a company refuse to cover a prescription?
In a small number of cases, yes, if no alternative funding can be found and the drug is excluded from the plan’s formulary. This is uncommon: coverage navigation succeeds in finding funding through another source in roughly 95 percent of cases, and the realistic chance of an employer facing an outright “we cannot fund this” answer is approximately 5 in 10,000 prescriptions across the plan. It is a real possibility, not a common one.
Does a drug cap solve this problem?
Only partly. A drug cap limits what the plan pays for all medications, not just the expensive one, so everyday prescriptions for the rest of your team are capped too. Some employers combine a drug cap with Formulary Protect to keep drug coverage affordable over the long term.
Is this available in every province?
Formulary Protect is not currently available in Quebec.
What happens if my employee's drug isn't covered by our plan?
The drug is taken off the plan’s standard list, but the employee isn’t left on their own. A dedicated team works with them to find funding elsewhere, through provincial drug programs, the drug maker’s assistance program, a spouse’s plan, or a combination. This works about 95 percent of the time.
What does this cost an employer?
Formulary Protect costs $250 per drug case. It’s added on to an existing Quikcard plan, such as a Health Spending Account, Wellness Spending Account, Flex Spending Account or ASO plan.
Does Formulary Protect work with a Health Spending Account?
Yes. It isn’t sold on its own, but it can be added to a Quikcard Health Spending Account, as well as WSA, FSA and ASO plans.
¹ Source: TELUS Health, 2026 Drug Data Trends & National Benchmarks Report, released April 28, 2026.
² Source: Government of Canada, “Canadian public drug plan spending grew by $3.4 billion over 5 years, driven by use of higher-cost drugs,” October 21, 2025.
³ Based on ClaimSecure program experience through September 2025.
