Health Committee on May 9th, 2016

[Frank Swedlove]

We represent more than that, but in terms of the ones that are active in this business, there are 24.

[The Chair, Liberal, Bill Casey]

Do they all pay different prices for the same pharmaceutical? Do they all have to negotiate a price, or is there a price for a particular drug? I know you'd like to join the pCPA to get the advantage of more volume, but does everybody pay a different price?

We've also heard talk about rebates and things like that, and confidentiality agreements.

Are the practices of the pharmaceutical business different from those of others?

[Frank Swedlove]

Yes.

[Stephen Frank]

The answer is yes. The prices will vary by payer, and we don't think that's the right way to go. We shouldn't have 24 or 26 prices for the same drug. That's one of the reasons we do advocate for doing more through the pCPA. The pCPA has managed to bring some harmony to the public payers for branded drugs. It's been very successful bringing harmony to payers on the generics and SEBs for everybody.

As I said earlier, it's an evolving mechanism, and we think there is a lot of opportunity to continue to expand it. If insurers were at the table, you'd end up with people paying the same price in Canada. There would be one price for everyone. Presumably it would be a lower price on average than what we pay now, because we'd be pooling all of our resources to do that. We do think it's a direction we should be pushing in, and as quickly as we can.

[The Chair, Liberal, Bill Casey]

You mentioned 24 companies earlier. Are you saying they might all pay a different price for the same pharmaceutical?

[Stephen Frank]

Yes.

[The Chair, Liberal, Bill Casey]

We heard talks about rebates. I don't like to use the word “kickback”, but that word was raised. Is that part of the pharmaceutical business? Are there rebates to some companies if they...?

[Stephen Frank]

Yes.

The way this is done is through rebates. Even the provinces are getting.... When we talk about lower prices, it's probably not technically the right way to think about it. They're paying a list price, and then at quarter end or month end they're getting a rebate from the manufacturer, so the effective price is lowered over time.

One of the reasons for that is the drug manufacturers are protective of that list price, given the way they have to price things globally. The world we're in is one of rebates and reduction after the fact. That's the world of getting lower prices. That's how it works, and that's honestly probably how it's going to continue to work going forward.

[The Chair, Liberal, Bill Casey]

Thanks very much.

Now we'll go on to the second round of five minutes.

Go ahead, Ms. Harder.

[Rachael Thomas, Conservative, Lethbridge, AB]

Thank you.

Mr first question I'm going to direct to you, Mr. Swedlove, if you don't mind.

If a one-buyer national pharmacare program were introduced, I would imagine your industry would be significantly hurt by this movement, or this change in direction.

I'm wondering if you can quickly spell out for us what your expected losses in terms of jobs would be, either directly or indirectly. Do you have some sort of idea?

As well, would you see any health insurance companies closing their doors in Canada, and would this have an impact on the insurance products that are available?

[Frank Swedlove]

I don't think we can give you a number. There are a number of companies that operate exclusively in the supplementary health business. Of course they can continue to offer the non-drug portion, but their business would be affected. That would be the Blue Cross types and the several not-for profit companies in the field. They would be particularly hurt, and their employees would be particularly hurt.

I would note that a lot of these organizations provide the administrative work and all the back office work to governments and essentially run a large part of the operation of the government plans themselves. Those people also serve the governments. The governments turn to our industry to provide that work because we do it more effectively and more efficiently than the governments can do it.

[Rachael Thomas, Conservative, Lethbridge, AB]

Let me pick up on that, because I think you make a good point.

Other presenters, include the other one who is here with us today, Anita, have mentioned that they feel that government could do it more efficiently and with less cost. Can you comment on that for me?

[Frank Swedlove]

I think the basis of that thinking is the fact they can negotiate a lower price because they would be using the entire Canadian market. That is an important factor, and that's why we say if we are able to join with the provinces to negotiate a price that reflected the entire market of Canada, then we would all share in those lower costs. That's where you save the money.

[Rachael Thomas, Conservative, Lethbridge, AB]

What you're saying is that if you were given access to the drug costs at par and you were able to join, coupled with the lower administrative costs that you're able to deliver, you would be able to be more efficient and more effective than a pharmacare program?

[Frank Swedlove]

Yes, we believe that we would be.

Not only would there be innovation that would continue, which would help reduce the cost of drugs over time, but there would also be more choice if an employer wanted to offer more drugs. That would be available to that employer.

I know unions often negotiate to improve their drug plans because they want to see more opportunities for their members than are generally offered either in the public plan or in many private plans.

[Rachael Thomas, Conservative, Lethbridge, AB]

Excellent.

Along those same lines, I have another question.

Any time I watch a government department put in an administrative system, particularly with regard to IT, I watch them put millions if not billions of dollars into their IT program in order to do administration, and then I watch it fail, or come very close to failing, and many dollars are wasted.

Would you guys or private companies be in a position to come up with an effective system to administer drugs and remunerations, based on pharmaceuticals, and could you do that in a cost-effective manner and in a timely fashion?

Does that make sense?

[Frank Swedlove]

I think we already do that, and the fact that the provinces use us for that function, I think, reflects a realization on their part that we can do it cheaper than they can do it.

[Rachael Thomas, Conservative, Lethbridge, AB]

Would you have the technology in order to do it well?

[Frank Swedlove]

We already do, and we continue to work with the various players, with IT providers and with pharmacists, to continue to lower the costs associated with providing the drugs to consumers.

[Rachael Thomas, Conservative, Lethbridge, AB]

Thank you.

[The Chair, Liberal, Bill Casey]

Okay.

Dr. Eyolfson is next.

[Doug Eyolfson, Liberal, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

I'd like to thank all of the witnesses for coming today.

Ms. Huberman, you were talking about the potential benefits in the workforce and in the economy of making sure everyone could have their medications covered.

By profession, I am an emergency physician. Our patient population is a little skewed, and I probably agree with the estimate that at least 10% of the population doesn't get adequate coverage. In my environment, it's estimated that because we have so many low-income people—working poor, uninsured—it's estimated that six in 10 prescriptions in emergency departments aren't filled.

Given that many of these diseases are very expensive if left untreated, would you not agree that this might be a missing piece of the puzzle about how much a pharmacare system would cost versus how much it would save in decreasing hospital costs by making sure everyone had their medication and didn't get sick?

Does that sound like a reasonable part of this puzzle?

[Anita Huberman]

It's a reasonable part of the puzzle for sure. In B.C. we have the highest child poverty rate, and taking that part of the puzzle into account in a universal pharmacare program is integral. Again, this is an opportunity for the committee, in concert with business, to take a look at what the right model might be and what the gaps are.

We heard from the additional two witnesses that they're willing to explore lower costs in providing drugs to consumers. It's taken until this time for them to say that, but I look forward to more dialogue on this issue, especially on the gaps that we should be looking at, sir.

[Doug Eyolfson, Liberal, Charleswood—St. James—Assiniboia—Headingley, MB]

All right. Thank you.

Mr. Swedlove, you had a letter that you wrote to the health minister, Minister Ambrose, in 2015. You referred to the researchers who promoted pharmacare, you said there were a lot of errors in their analysis, and you said that there would be an immediate $14 billion that would have to be covered by the public purse. What was the source and evidence behind that figure?

[Frank Swedlove]

I'll ask Mr. Frank to go through the analysis. It's quite simple, actually.