1. 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
ma_gagnon@carleton.ca
*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.

2. Pharmacare for Canada?
1964: Hall Commission recommended Universal drug
coverage for Canada
1994-1997: 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 they
live or work, not according to medical needs.

3. OUTLINE
Part 1: Overview of Canada’s social
policy for drug coverage.
Part 2: Potential Reforms

4. Part 1:
Overview of Canada’s and
Ontario’s social policy for drug
coverage.

5. 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)

6. 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?

7. 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
Portugal
OECD 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

8. Incapacity to contain costs
Detail 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.

9. Incapacity to contain costs
Real annual growth per capita for prescription drug costs
from 2001 to 2010 (%, international comparison based on PPP)
5
4
3
2
1
0 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

10. 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%
Luxembourg
Czech 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

11. 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)

12. 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 M
TOTAL: $2,143 M
Benefits:
-Private R&D expenditures: $960 M (including 461 M in tax credits
for R&D). Around 80% of this amount is payroll for researchers.
-Total payroll in pharmaceutical R&D and manufacturing (direct and
indirect employment): $1,529 M

13. 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 costs
On-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.

14. Part 2:
Reform is not an option!...
...Which one do we want?

15. Reforms based on conventional
wisdom:
•We continue to all work in silos and use only the current
available 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

16. Reforms supported by Evidence-
Based Policy
We need collaboration and standardization to
overhaul 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.

17. Reforms supported by Evidence-
Based Policy
We 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.

18. Scenario 1: Universal pharmacare with the same
industrial drug cost policies, 2009
Current expenditure on prescription drugs $ 25,141 million
Distribution 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 - $1,454M
Total prescription drug costs with a universal pharmacare plan $23,687M
Additional impacts other than for prescription drugs
Elimination of extra administrative costs of private plans - $560M
Elimination of tax subsidies - $ 933M
Total of additional impacts - $ 1,493M
Total savings $2,947M (11.7%)

19. Scenario 2: Universal pharmacare with industrial policies
linked to drug costs which have been revised to be in line with
those of other OECD countries, 2009
Current expenditure on prescription drugs $ 25,141M
Distribution 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 - $ 2,986M
Total prescription drug costs with a universal pharmacare
$ 22,155M
plan
Additional impacts other than from prescription drugs
Elimination of extra administrative costs for private plans - $ 560M
Elimination of tax subsidies - $ 933M
Total of additional impacts - $ 1,493M
Total savings $ 4,479M (17.8%)

20. Scenario 3: Universal pharmacare with
cancellation of the industrial policies associated
to drug costs, 2009
Current expenditure on prescription drugs $ 25,141M
Distribution 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 - $ 9,251M
Total prescription drug costs with a universal pharmacare plan $ 15,890M
Additional impacts other than for prescription drugs
Elimination of extra administrative costs of private plans - $ 560M
Elimination of tax subsidies - $ 933M
Total of additional impacts - $ 1,493M
Total savings $ 10,744M (42.8%)

21. Conclusion:
A universal Pharmacare program for all Canadians is not only the
best 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 era
of irrational prescribing, not on how we can shovel more money in
an irrational system.
It is time for Canada to enter the 21st Century!

22. “Somebody has to do
something, and it’s just
incredibly pathetic that it has to
be us”
-Jerry Garcia

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