marc-andre gagnon - pharmacare in canada today

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By Marc-André Gagnon*, PhD Assistant Professor, School of Public Policy and Administration (Carleton University) Researcher with the Pharmaceutical Policy Research Collaboration [email protected] *Research funded for this project by Faculty of Public Affairs (Carleton University), Health Canada, Canadian Health Coalition, Canadian Federation of Access and Costs for prescription drugs; Is it time for Canada to enter the 21 st Century? Pharmacare 2020; Envisioning Canada’s Future Conference organized by CHSPR and PPRC Sheraton Wall Centre, Vancouver BC February 26-27, 2012

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Page 1: Marc-Andre Gagnon - Pharmacare in Canada Today

By Marc-André Gagnon*, PhDAssistant Professor, School of Public Policy and Administration (Carleton University)

Researcher with the Pharmaceutical Policy Research Collaboration

[email protected]

*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.

Access and Costs for prescription drugs;Is it time for Canada to enter the 21st Century?

Pharmacare 2020; Envisioning Canada’s FutureConference organized by CHSPR and PPRC

Sheraton Wall Centre, Vancouver BCFebruary 26-27, 2012

Page 2: Marc-Andre Gagnon - Pharmacare in Canada Today

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.

Page 3: Marc-Andre Gagnon - Pharmacare in Canada Today

OUTLINE

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

Part 2: Potential Reforms

Page 4: Marc-Andre Gagnon - Pharmacare in Canada Today

Part 1:

Overview of Canada’s and Ontario’s social policy for drug

coverage.

Page 5: Marc-Andre Gagnon - Pharmacare in Canada Today

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)

Page 6: Marc-Andre Gagnon - Pharmacare in Canada Today

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?

Page 7: Marc-Andre Gagnon - Pharmacare in Canada Today

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Total expenditures per capita on prescription drugs, 2010 (or nearest year)

US$ PPP. Source: OECD Health data 2012

Page 8: Marc-Andre Gagnon - Pharmacare in Canada Today

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

Source : OCDE 2008 - Eurostat OECD PPP Programme, 2007.

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Page 9: Marc-Andre Gagnon - Pharmacare in Canada Today

Incapacity to contain costsReal annual growth per capita for prescription drug costs

from 2001 to 2010 (%, international comparison based on PPP)

Sources : OECD Health Data 2012

CANADA

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Page 10: Marc-Andre Gagnon - Pharmacare in Canada Today

Predominance of Private Drug Plans in Canada; Spending on Rx drugs by source of funds, 2005

Source : OCDE 2008; PPRI 2007.

LuxembourgCzech Republic

GermanySlovakia

SpainSweden

JapanFrance

SwitzerlandNorway

AustraliaPortugal

DenmarkNetherlands

South KoreaCanadaPoland

United States

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Public SpendingOut-of-pocket expendituresPrivate insurers

Page 11: Marc-Andre Gagnon - Pharmacare in Canada Today

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)

Page 12: Marc-Andre Gagnon - Pharmacare in Canada Today

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 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

Page 13: Marc-Andre Gagnon - Pharmacare in Canada Today

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.

Page 14: Marc-Andre Gagnon - Pharmacare in Canada Today

Part 2:

Reform is not an option!......Which one do we want?

Page 15: Marc-Andre Gagnon - Pharmacare in Canada Today

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

Page 16: Marc-Andre Gagnon - Pharmacare in Canada Today

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.

Page 17: Marc-Andre Gagnon - Pharmacare in Canada Today

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.

Page 18: Marc-Andre Gagnon - Pharmacare in Canada Today

Current 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 - $1,454M

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%)

Scenario 1: Universal pharmacare with the same industrial drug cost policies, 2009

Page 19: Marc-Andre Gagnon - Pharmacare in Canada Today

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 $ 25,141MDistribution 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 plan

$ 22,155M

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%)

Page 20: Marc-Andre Gagnon - Pharmacare in Canada Today

Scenario 3: Universal pharmacare with cancellation of the industrial policies associated

to drug costs, 2009 Current 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 - $ 9,251M

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%)

Page 21: Marc-Andre Gagnon - Pharmacare in Canada Today

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!

Page 22: Marc-Andre Gagnon - Pharmacare in Canada Today

“Somebody has to do something, and it’s just incredibly pathetic

that it has to be us”-Jerry Garcia

Page 23: Marc-Andre Gagnon - Pharmacare in Canada Today

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