Access and Costs for prescription drugs; Is it time for Canada to enter the 21st Century? Pharmacare 2020; Envisioning Canada’s Future Conference organized by CHSPR and PPRC Sheraton Wall Centre, Vancouver BC February 26-27, 2012 By Marc-André Gagnon*, PhD Assistant Professor, School of Public Policy and Administration (Carleton University) Researcher with the Pharmaceutical Policy Research Collaboration email@example.com *Research funded for this project by Faculty of Public Affairs (Carleton University), Health Canada, Canadian Health Coalition, Canadian Federation of Nurses’ Union, Assemblée Nationale du Québec.
Pharmacare for Canada?1964: Hall Commission recommended Universal drug coverage for Canada1994-1997: National Health Forum, under Jean Chrétien, recommended full first-dollar coverage for all Canadians.2002: Romanow Commission recommended universal catastrophic drug coverage as a first step towards universal pharmacare.2004-201???: The National Pharmaceuticals Strategy fails to achieve even catastrophic drug coverage for all Canadians. (Health Council of Canada 2009)Diversity of drug plans: People covered according to where theylive or work, not according to medical needs.
OUTLINEPart 1: Overview of Canada’s social policy for drug coverage.Part 2: Potential Reforms
Part 1: Overview of Canada’s andOntario’s social policy for drug coverage.
Inequitable Access and Unefficient treatments• The main reason for inadequate treatments and bad compliance is lack of coverage (9.6% CRNA) (Hanley 2009; Ungar et al. 2003; Law et al. 2012)• After myocardial infarction, medications for free would increase patients life by one year on average. (Dhalla and al. 2009)• Mostly, inadequate drug coverage applies to unemployed or workers with unsecure jobs. (Applied Management 2000; Akyeampong 2002; Akyeampong et Sussman 2003; Statistique Canada 2010)
Incapacity to contain costs (CIHI 2011)• Canada spent $27.2 bn in prescription drugs in 2011. (CIHI 2012)• Prescription drug costs increased on average by 10% each year since 1985. (CIHI 2012)• Public spending on prescription drugs is only 44% of the total (38% from private insurance and 18% out-of-pocket) (CIHI 2012)• In spite of massive reductions on the price of generics, and of loss of patent on blockbuster drugs in 2010-2011 (Lipitor, Altace, Concerta, Diovan, Singulair), costs of prescription drugs increased by 4.7% each year. Patent cliff is ending soon, are we ready?
0 100 200 300 400 500 600 800 900 700 1000 United States CANADA Ireland Greece Germany France Japan Belgium Spain Slovak Republic Australia Hungary Austria Iceland Italy Switzerland PortugalOECD AVERAGE Netherlands Sweden Slovenia US$ PPP. Source: OECD Health data 2012 Finland drugs, 2010 (or nearest year) Korea Luxembourg Norway Czech Republic United Kingdom Denmark Poland Total expenditures per capita on prescription New Zealand Estonia Mexico Chile
Incapacity to contain costsDetail prices for the same volume of medicines in OECD countries, 2005. (US $, Market exchange rate, including branded and generics)Detail Prices = Ex-manufacturer price + wholesaler markup + pharmacy markup + Prescription fees + tax 200 180 160 140 120 100 80 60 40 20 0 Source : OCDE 2008 - Eurostat OECD PPP Programme, 2007.
Incapacity to contain costs Real annual growth per capita for prescription drug costs from 2001 to 2010 (%, international comparison based on PPP)543210 United Kingdom Belgium Norway Portugal Austria Luxembourg Japan Spain Australia Italy Finland France Sweden Netherlands Iceland OECD AVERAGE Switzerland CANADA Germany United States New Zealand Denmark-1-2 Sources : OECD Health Data 2012
Predominance of Private Drug Plans in Canada; Spending on Rx drugs by source of funds, 2005 Source : OCDE 2008; PPRI 2007. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% LuxembourgCzech Republic Germany Slovakia Public Spending Spain Out-of-pocket expenditures Sweden Private insurers Japan France Switzerland Norway Australia Portugal Denmark Netherlands South Korea Canada Poland United States
Private drug plans bluntly inefficient• Administration mark-ups of 13.2% for private plans in Canada as compared to 2% for public plans (OECD 2004)• Most private plans are administered externally by drug insurance companies, which are paid as % of spending, so no incentive to reduce costs (Silversides 2009)• Employers get at least 13% federal tax subsidy ($1.2 bn) on drug plan costs (+provincial tax credit, except in Quebec). (Gagnon 2012)• By eliminating the subsidy, private drug plans would be clearly less appealing for employers. (Smythe 2001; Evans 2009)
Costs and Benefits of Innovation Policies, 2011: Using the health budgets to develop an industrial sector is a bad policy (Update from Report by Gagnon and Gold for Health Canada, 2011)Costs:-PMPRB Pricing policy: $1,950 M (as compared to France or UK)-15 years rule in Quebec: $193 MTOTAL: $2,143 MBenefits:-Private R&D expenditures: $960 M (including 461 M in tax creditsfor R&D). Around 80% of this amount is payroll for researchers.-Total payroll in pharmaceutical R&D and manufacturing (direct andindirect employment): $1,529 M
The Situation Now: Failures in terms of Social Policy goals• Inadequate access to drug coverage for many Canadians• Inefficient treatment due to lack of coverage• Incapacity to contain costsOn-going political discourse is that universal first dollar drug coverage would be irresponsible in terms of public finance, it would cost too much. However, it is the multiplicity of drug plans and the inefficiency of private plans that contribute most to increase costs.
Part 2:Reform is not an option!......Which one do we want?
Reforms based on conventional wisdom:•We continue to all work in silos and use only the currentavailable levers to deal with growing costs: • Increase co-payments • Reduce amount of drugs covered • Reduce proportion of population that have access to public drug coverage • Increase means-testing (catastrophic coverage with increasing deductibles) In the end, we continue importing US style policy with US style results: Massive waste, massive undertreatment and unsustainable growing costs.While balanced public budgets, no improvement in sustainability
Reforms supported by Evidence- Based PolicyWe need collaboration and standardization tooverhaul a broken system: • National Formulary (PLAs are not a long term solution). • Bulk-Purchasing Agency for Generics and Brand-name drugs • According to PMPRB, more than 2/3 of new patented drugs on the Canadian market do not bring any therapeutic advance as compared to existing drugs. We need strong institutional capacities to purchase drugs based on health technology assessment in order to get value for our bucks. •We also need to tackle the irrational prescribing habits caused by marketing-based medicines.
Reforms supported by Evidence- Based PolicyWe need a national drug plan: • Universal Coverage for all Canadians to make sure everybody can access the medicines they need. • Universal Pharmacare should not be understood as “open bar for everybody”. It is a means to develop the institutional capacities to contain drug costs, achieve sustainability, and improve health outcomes (just like in every other countries that rationally implemented universal Pharmacare). •Private insurance in the health sector is not showing any capacity to efficiently control costs. In the current context, it is not a partner, it is an obstacle to create a sustainable system. Take back the tax subsidies.
Scenario 1: Universal pharmacare with the same industrial drug cost policies, 2009Current expenditure on prescription drugs $ 25,141 millionDistribution of prescription drug costs/benefits Growth in expenditures from increase in use +10% of current expenditure Reduction in expenditures from decrease in dispensing fees -2% of current expenditure Reduction in expenditures from drug assessment -8% of current expenditure Elimination of the monthly deductible in Quebec - $ 144M Elimination of rebate system for generics - $1,310M Total savings on prescription drugs - $1,454MTotal prescription drug costs with a universal pharmacare plan $23,687MAdditional impacts other than for prescription drugs Elimination of extra administrative costs of private plans - $560M Elimination of tax subsidies - $ 933M Total of additional impacts - $ 1,493MTotal savings $2,947M (11.7%)
Scenario 2: Universal pharmacare with industrial policieslinked to drug costs which have been revised to be in line with those of other OECD countries, 2009Current expenditure on prescription drugs $ 25,141MDistribution of prescription drug costs/benefits Growth in expenditures from increased use +10% of current expenditure Reduction in expenditures from decrease in dispensing fees -2% of current expenditure Reduction in expenditures from drug assessment -8% of current expenditure Elimination of the monthly deductible in Quebec - $ 144M Elimination of rebate system for generics - $ 1,310M Elimination of the 15-year rule in Quebec - $ 102M Review of the price-setting process by the PMPRB - $ 1,430M Total savings on prescription drugs - $ 2,986MTotal prescription drug costs with a universal pharmacare $ 22,155MplanAdditional impacts other than from prescription drugs Elimination of extra administrative costs for private plans - $ 560M Elimination of tax subsidies - $ 933M Total of additional impacts - $ 1,493MTotal savings $ 4,479M (17.8%)
Scenario 3: Universal pharmacare with cancellation of the industrial policies associated to drug costs, 2009Current expenditure on prescription drugs $ 25,141MDistribution of prescription drug costs/benefits Savings from competitive purchasing - $ 10,200M Growth in expenditures from increase in use +10% of expenditure Reduction in expenditures from decrease in dispensing fees -2% of expenditure Elimination of the monthly deductible in Quebec - $ 144M Elimination of the 15-year rule in Quebec - $ 102M Total savings on prescription drugs - $ 9,251MTotal prescription drug costs with a universal pharmacare plan $ 15,890MAdditional impacts other than for prescription drugs Elimination of extra administrative costs of private plans - $ 560M Elimination of tax subsidies - $ 933M Total of additional impacts - $ 1,493MTotal savings $ 10,744M (42.8%)
Conclusion: A universal Pharmacare program for all Canadians is not only thebest solution in terms of equity and innocuousness of treatment, it is also the most efficient solution to contain costs (even with first dollar coverage). The question before us is how to use public power to improve pharmaceutical policy, strengthen evidence-based medicine and reorganize financial incentives to improve public health.Sustainability depends on what we will do to contain costs in an eraof irrational prescribing, not on how we can shovel more money in an irrational system. It is time for Canada to enter the 21st Century!
“Somebody has to do something, and it’s justincredibly pathetic that it has to be us” -Jerry Garcia
BibliographyAkyeampong, Ernest B. et Deborah Sussman. “Health-related insurance for the self-employed”. Perspectives on Labour and Income. Vol. 4, no.5, mai 2003.Akyeampong, Ernest B. “Unionization and fringe benefits”. Perspectives on Labour and Income. Vol.3, no.8, août 2002.Applied Management. Canadians’ Access to Insurance for Prescription Medicines. March 2000.Buck Consultants. Canadian Health Care Trend Survey. 2010.Canadian Generic Pharmaceutical Association (CGPA). The Real Story behind Big Pharma’s R&D spending in Canada. Montréal: CGPA, 2008.Canadian Health Coalition. L’accès aux médicaments sur ordonnance : État de la situation. Ottawa : CCPA, 2008.Canadian Health Coalition. En obtenir plus à meilleur compte : Stratégie nationale sur l’assurance-médicaments. Coalition canadienne de la santé, 2007.Canadian Institute for Health Information. Dépenses en médicaments au Canada, de 1985 à 2010. Ottawa : ICIS, 2011.Canadian Institute for Health Information. Drug Expenditure in Canada, 1985-2011. Ottawa: CIHI, 2012.Competition Bureau. Pour une concurrence avantageuse des médicaments génériques au Canada : Préparons lavenir. Ottawa : Bureau de la concurrence, 2008.CSN : Politique du Médicament : La CSN craint une hausse des primes des régimes collectifs d’assurance, communiqué de presse, 1er février 2007. Disponible en ligne : http://18.104.22.168/en/releases/archive/February2007/01/c3834.html (page consulté le 29 novembre 2009).Dhalla, Irfan A., Monique A. Smith, Niteesh K. Choudry et Avram E. Denburg. « Costs and Benefits of Free Medications after Myocardial Infarction ». Healthcare Policy. 5(2), 2009: 68-86.EFPIA. The Pharmaceutical Industry in Figures; 2009 Update. Bruxelles: EFPIA, 2009.Evans, Robert. « Old Bones, New Data: Emmet Hall, Private Insurance and the Defeat of Pharmacare ». Healthcare Policy. 4 (3), 2009: 16-24.Department of Finance Canada. 2011. Tax Expenditures and Evaluations 2010. Ottawa: Department of Finance. Available online: http://www.fin.gc.ca/taxexp-depfisc/2010/taxexp1001-eng.asp#tocpart1-06Gagnon, Marc-André. The Nature of Capital in the Knowledge-Based Economy; The Case of the Global Pharmaceutical Industry. Doctoral Dissertation in Political Science: York University. May 2009.Gagnon, Marc-André. The Economic Case for Universal Pharmacare. CCPA and IRIS, 2010.Gagnon, Marc-André and Richard Gold. Public Financial Support to the Canadian Brand-name Pharmaceutical Sector: A Cost-Benefit Analysis. Report prepared for Health Canada, March 2011.
BibliographyGagnon, Marc-André. “Pharmacare ad Prescription Drug Expenditures; A Prescription for Change”, in How Ottawa Spends 2012-2013. Ottawa, 2012.Hanley, Gillian. « Prescription Drug Insurance and unmet needs for healthcare: A cross-sectional analysis ». Open Medicine. 3 (3), 2009: 178-183.Health Council of Canada. La Stratégie nationale relative aux produits pharmaceutiques : Une ordonnance non-remplie. Toronto : Conseil canadien de la santé. Janvier 2009.Jacob, Robert. Le National Institute for Health and Clinical Excellence (NICE) – Une analyse en lien avec les mandats prévus pour l’Institut national d’excellence en santé et services sociaux.. Rapport de l’institut National de Santé Public. Québec: Gouvernement du Québec, 2009.Kapur, V. et K. Basu. “Drug Coverage in Canada: Who Is at Risk?” Health Policy. 71(2), 2005 : 181–93.Law, M. et al.. “The effect of cost on adherence to prescription medications in Canada”. CMAJ 84(3) Feb 21: 297-302.Morgan S.G., Barer ML, Agnew JD. “Whither seniors pharmacare: lessons from (and for) Canada”. Health Affairs. 22 (3), 2003 : 49–59.Morgan, Steve, Ken Bassett et Barbara Mintzes. “Outcomes-Based Drug Coverage in British Columbia”. Health Affairs. 23(3), mai-juin 2004.Morgan, Steve, Gillian Hanley, Meghan McMahon et Morris Barer. “Influencing Drug Prices through Formulary-Based Policies: Lessons from New Zealand”. Healthcare Policy. 3 (1), 2007.Morgan, Steve, Colette Raymond, Dawn Mooney et Daniel Martin. The Canadian Rx Atlas (2nd edition). Vancouver: Centre for Health Services and Policy Research, 2008.NHS Information Centre. Prescriptions Dispensed in the Community; Statistics for 1998 to 2008: England. NHS Information Centre, 2009.OECD (Francesca Colombo and Nicole Tapay). Private Health Insurance in OECD Countries: The Benefits and Costs for Individuals and Health Systems. Paris: OECD, 2004.OCDE. Pharmaceutical Pricing Policies in a Global Market. Paris: OCDE, 2008.Palmer D’Angelo Consulting Inc. National Pharmacare Cost Impact Study . Ottawa : Palmer D’Angelo Consulting Inc., 1997.Palmer D’Angelo Consulting Inc. Étude sur le coût de financement d’un régime national d’assurance médicaments pour le Canada ; Mise à jour du rapport de 1997. Ottawa: Palmer D’Angelo Consulting Inc., 2002.
BibliographyParis, Valérie et Élizabeth Docteur. Pharmaceutical Pricing and Reimbursement Policies in Canada. OCDE Working Paper.Paris: OCDE, 2006.PMPRB. Rapport du CEPMB sur les prix des médicaments non brevetés distribués sous ordonnance : Tendances des prixpratiqués au Canada et dans les pays de comparaison. Ottawa : CEPMB, 2006.PMPRB. Rapport annuel 2008. Ottawa : CEPMB, 2009.PMPRB. Rapport annuel 2009. Ottawa : CEPMB, 2010.PMPRB, Annual Report 2011. Ottawa: Patented Medicines Price Review Board, 2012.PPRI. Sweden. PPRI, 2007.Silversides, Ann. « Ontario’s law curbing the cost of generic drugs spark changes ». CMAJ. 181 (3-4), August 4 2009a: E43-E45.Smith, D.G. “The effect of co-payments and generic substitution on the use and costs of prescription drugs”, Inquiry, Summer 1993.Smythe, J.G. Tax subsidization of Employer-Provided Health Care Insurance in Canada: Incidence Analysis. Unpublished working paper. Department of Economics, University of Alberta, 2001.Stabile, Mark. “Impacts of Private Insurance on Utilization.” Paper prepared for the IRPP conference “Toward A National Strategy on Drug Insurance,” September 23, 2002.Statistique Canada. Dernier communiqué de l’Enquête sur la population active. 5 février 2010.Tamblyn, Robyn, et al. “Adverse events associated with Prescription drug cost-sharing among poor and elderly persons.” Journal of the American Medical Association. 285 (2001): 421-429.Times Colonist. “Pharma initiative saved money, lives”. Victoria Times Colonist. 6 décembre 2009.Ungar, W. J. et al. « Children in need of Pharmacare: medication funding requests at the Toronto Hospital for Sick Children ». Canadian Journal of Public Health. 94 (2), mars-avril 2003: 121-126.