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June 3, 2013

Can we afford pharmacare?

Reuel S. Amdur

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The average cost of producing a single generic pill is less than ten cents. That is what people attending the "Rethinking Drug Coverage" conference in Ottawa held on May 24 and 25 were told. The conference was sponsored by the Canadian Health Coalition and the Carleton University School of Public Policy and Administration. Available at the conference was a report by Carleton professor Marc-André Gagnon, The Economic Case for Universal Pharmacare, published by the Canadian Centre for Policy Alternatives and the Institut de recherche et d'informations socio-économiques.

Speakers addressed the need to move to a universal pharmacare system in Canada.  At least, as professor and emergency room physician Joel Lexchin suggested, individual provinces might take the first step.  In his own practice, he encounters patients who cannot afford to have needed prescriptions filled.

Among countries with universal medicare, Canada is the only one without national drug coverage.  Drug plans of Britain, France, and New Zealand were described at the conference.  In the United Kingdom, there are co-payments, but some people are exempt, depending on location (Wales, Scotland, England, or Northern Ireland) and status—age, being a recipient of social assistance, etc.  While prices are not regulated, drug company profit margins are.  Britain also has a body which monitors new drugs being brought to market to determine safety and efficacy.  There are some problems with this body, NICE (National Institute for Health and Clinical Excellence), but in spite of any warts it serves as a model for elsewhere.  According to Professor John Abraham of King’s College, London, the administrative costs are low because of the system’s efficiency.

By contrast, the French system is extremely complex.  There are different public bodies for different groups in society and supplementary coverage plans to cover co-payments.  Co-payments for medicines are determined by a system of color-coding, indicating the degree of medical impact.  There are also categories of patients exempt from co-payment.  Differing bodies (a) classify drugs and control advertizing, (b) include them in the formulary for coverage; and (c) establish their value in terms of cost and effectiveness and negotiate with the pharmaceutical industry to establish the cost of drugs and to set reference prices, in order to promote use of generics.  (A side note on advertising: Drug companies in the United States spend $61,000 per doctor annually on drug pitchmen.  Not possible in France.)

In New Zealand, the government sets an annual budget for drug purchases, and PHARMAC (the Pharmaceutical Management Agency) bargains with drug companies to purchase drugs.  There is a small co-payment in most cases.  The consequence of this system is a cost of drugs considerably lower than in other countries. 

The general conclusion is that countries with universal pharmacare spend less per capita, as much as 49% less.  Retail prices are 16% to 40% lower.  The inflation rate for drugs in these countries has been far lower than in Canada. Public finding as opposed to private payment for medicines is much greater in these countries than in Canada.  Canadians individually and through their private plans pay more.  And while the brand-name drug manufacturers have issued a stream of propaganda about the need for Canada to protect the so-called research and development companies in order to attract investment, Canada hardly shows on the map in terms of R & D by these firms.  In short, in spite of the adjustments made to favor the so-called R & D pharmaceutical companies, Canada hardly shows on the map in terms of R&D.  In short, these adjustments , especially in Quebec, have simply not paid off.  Now, in trade talks with Europe, Canada is being asked to give better patent protection to pharmaceutical companies .  Since European countries have made a better deal with the giant pharmaceuticals than we have, we need to ask what Ottawa plans to do to keep prices in check.

In the face of rapidly increasing costs, drug benefit programs are doing various things—raising fees, increasing co-payments, removing items from coverage, and demanding employee participation in payment for the program.  In spite of all these moves, drug plans are doomed, as they now exist.  That is what Barbara Martinez, a drug benefits solutions leader with Great-West Life Assurance said.

She noted that the cost of medicines for maintenance drugs such as those for blood pressure and cholesterol  has risen 58% since 2005, but the drugs that are going to break the bank are the new biologic and specialty drugs, the average annual cost of which is $15,000.  Currently, on such drugs Great-West appoints a case manager to monitor how the drug is stored, handled, and taken, how the physician prescribes it, and at which pharmacy the prescription is filled.  The implication is clear: either the private drug benefits system is gone or significantly slashed, or we need to replace it with something else, especially a universal program.

Quebec has universal pharmacare.  The program is a great illustration of what not to do.  It was undoubtedly conceived with an eye to pandering to the pharmaceutical giants, whom Quebec wants to have do their research and development in the province.  The program is in two parts, one for those covered by workplace insurance policies and the other for everyone else.  The result is that the province is unable to control drug costs, as the drug plans pay the price charged, without negotiation, thus setting the prices for those not covered by a workplace program as well. 

An  effective universal drug plan would have the following characteristics: It would be universal with at most minimal co-payment at the cash register.  It would include a national body to bargain with manufacturers.  Possibly it could engage in some manufacturing directly.  It would have an agency to evaluate safety, effectiveness, and value for money.  This body or another would establish the formulary.  With such a program, the question is not whether Canada could afford such a program.  Rather, the issue is how we could possibly not make significant savings were we to implement one.

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