marc-andre gagnon - pharmacare in canada today
TRANSCRIPT
By Marc-André Gagnon*, PhDAssistant Professor, School of Public Policy and Administration (Carleton University)
Researcher with the Pharmaceutical Policy Research Collaboration
*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
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.
OUTLINE
Part 1: Overview of Canada’s social policy for drug coverage.
Part 2: Potential Reforms
Part 1:
Overview of Canada’s and Ontario’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 $27.2 bn in prescription drugs in 2011. (CIHI 2012)
• Prescription drug costs increased on average by 10% each year since 1985. (CIHI 2012)
• Public spending on prescription drugs is only 44% of the total (38% from private insurance and 18% out-of-pocket) (CIHI 2012)
• In spite of massive reductions on the price of generics, and of loss of patent on blockbuster drugs in 2010-2011 (Lipitor, Altace, Concerta, Diovan, Singulair), costs of prescription drugs increased by 4.7% each year. Patent cliff is ending soon, are we ready?
United
Stat
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Irelan
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German
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Spain
Austra
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Austri
aIta
ly
Portu
gal
Netherl
ands
Slove
nia
Korea
Norway
United
Kin
gdom
Polan
d
Estoni
aChi
le0
100
200
300
400
500
600
700
800
900
1000
Total expenditures per capita on prescription drugs, 2010 (or nearest year)
US$ PPP. Source: OECD Health data 2012
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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and
Canad
a
United
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es
German
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Italy
New-Z
ealan
d
Finlan
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Netherl
ands
Austri
a
OECD avera
ge
Sweden
United
Kin
gdom
France
Austra
liaSpa
in0
20406080
100120140160180200
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
United
Stat
esSpa
in
New Z
ealan
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Netherl
ands
Portu
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Denmark
Austri
a
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Belgiu
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Icelan
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-2
-1
0
1
2
3
4
5
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
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 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
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.
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 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
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.
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.
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
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%)
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%)
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!
“Somebody has to do something, and it’s just incredibly pathetic
that it has to be us”-Jerry Garcia
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