I'll start with a brief overview of the PBO mandate, which Jean-Denis Fréchette has already spoken about.
Costing a national pharmacare program would fit under the last section of the PBO mandate, “upon request from a committee or parliamentarian”. As for the PBO's role and where we fit in the costing of a national pharmacare program, it would come after the proposal has been written out, once the parameters of the program have been determined. That's when we can certainly provide a cost estimate. We cannot help in designing the program.
Over the next few slides, I would like to go over a brief introduction to how one can cost something such as a national pharmacare program or other projects.
Before you start getting into detailed and rigorous cost estimations, interested parties can turn to existing information to help inform expectations of what a new program would look like. This is something that PBO also does in surveying the literature before it begins its cost estimations. Canada currently has a wealth of information on pharmaceuticals.
The next few slides provide an overview of how we would approach a costing in developing a cost estimate, and they also provide background information using publicly available data from the Canadian Institute for Health Information.
Currently, public spending on prescription drugs accounts for roughly 43% of total prescription drug spending in Canada; this is for 2015. The total spending on prescription drugs is just over $29 billion. This type of estimate can be very helpful in providing a basic cost estimation of what a pharmacare program would look like, assuming that nothing else changes.
Whereas the previous information provides a snapshot, the information on this next slide provides more of a historical look at prescription drug spending in Canada. What we can see is that it has been increasing over time. The growth seems to have slowed since 2010. The gap between public spending on prescription drugs and private spending on prescription drugs did widen in more recent years. Again, this can help inform what the cost of a national pharmacare program might look like if trends continue and, again, nothing else changes.
With this information in mind, the total national spending on pharmacare is a composite of several provincial programs as well as federal direct spending. With that in mind, each provincial plan does vary, so one needs to ask, in the development of a pharmacare program, what it will look like. Will it look like an existing program or will it be something new? This information can assist in getting a slightly more rigorous or informed cost estimate before moving into the in-depth analysis.
As more sophisticated analysis begins, one can dig deeper into the underlying factors that influence drug expenditures. We have here a brief list of examples for looking at the demand side and the supply side factors that you might want to dig into. Some of them—for example, the needs of a growing population over the needs of an aging population—the government may have no control over. Expectations and behaviours can be another factor, as can the health status of the population, and there are several other factors.
The supply side may be some factors that the government can in fact influence, such as prices, potential inflation, eligibility for who would be under the program, utilization of particular pharmaceuticals, the availability of non-drug substitutions—perhaps through research funding—and several other factors.
Related to this, then, is identifying the key cost drivers. Once you have an understanding of which factors can have an influence, you can start to focus on which have the largest influence. Again, this information is publicly available from the Canadian Institute for Health Information, and it shows the average annual growth factors for pharmaceuticals in only the public sector.
According to CIHI, the Canadian Institute for Health Information, population growth and aging have contributed a fairly steady share of this growth in public drug expenditures. General inflation has contributed a little more, although it seems to have fallen slightly.
After becoming informed on all of these issues, one can better anticipate the impacts in determining the effect each of the program criteria will have on the cost of a total pharmacare program.
To create the pharmacare program, several key parameters or objectives would need to be determined, such as who will have coverage, what drugs will be covered, how much of the cost will be covered, and how much each party will be willing to pay. All of these things need to be answered. Once you've looked at all these key cost drivers, you will be better informed on what each of those answers would look like. At the very end of all of this, when the parameters have been identified, is when PBO can step in.
First PBO would identify the data sources and help develop an appropriate methodology using the available data and resources. Using this information, PBO then would draft the terms of reference and provide that to the party requesting the analysis that the health committee would hear. PBO would then work with stakeholders, data holders, and experts to solidify any required assumptions. Lastly, of course, PBO would produce a rigorous cost estimate, along with a report stating all assumptions in a transparent manner. This work could also include sensitivity analysis.
That is the end of the presentation. Thank you.