Health Committee on Sept. 29th, 2016

[The Chair, Liberal, Bill Casey]

I call the meeting to order.

We welcome our guests from the Office of the Parliamentary Budget Officer.

Today we have with us Jean-Denis Fréchette, parliamentary budget officer; Mostafa Askari, assistant parliamentary budget officer; Peter Weltman, senior director, costing and program analysis, Office of the Parliamentary Budget Officer; and Carleigh Malanik, financial analyst, Office of the Parliamentary Budget Officer.

I understand that Mr. Fréchette is going to have a short introduction and then Ms. Malanik is going to have a slide show for us.

[Jean-Denis Fréchette, Parliamentary Budget Officer, Library of Parliament]

Thank you, Mr. Chair, vice-chairs, and members of the standing committee, for this invitation to discuss your work plan on the national pharmacare program and the support that the office of the PBO could offer.

Every time that a standing committee or a parliamentarian seeks our expertise, we really appreciate the opportunity and always collaborate to the extent allowed by our limited resources and our legislative mandate.

Thank you also for your motion. In 30 years on Parliament Hill, I have seen hundreds and hundreds of motions, and I can tell you that this one is particularly very detailed, well written, exhaustive, crisp, and clear. It is unfortunate that I cannot tap into the expertise of your members, Mr. Chair, who collaborated to put this motion together. They would be an asset for the PBO, which, by the way, has very limited expertise on this issue.

I understand that we will have the opportunity this morning to discuss your motion. There are indeed elements in the motion pertaining to the PBO's mandate that will need further clarification—for instance, the aspect of policy development.

I have to admit that I was little bit apprehensive when I read your notice of meeting entitled “Development of a National Pharmacare Program” and “Briefing Session with the Office of the Parliamentary Budget Officer”, mainly because we are not in the business of policy development. We normally cost private member's bills, legislation, and existing programs, but when there is no program per se, we don't develop a program and cost it, which I am sure you understand.

Also, the last paragraph of your motion relates to the independence of our analysis, which is specifically mentioned in the PBO's legislation.

It may be because I'm francophone, but when I see in the English version the words “will work” as in “the Parliamentary Budget Officer will work with”, the statement seems a bit normative or “prescriptive”, as you say in English. When my spouse tells me “you will do this”, it's in my interest to do it.

In short, this restrictive aspect of the motion may call into question the independence of our analyses in the future. We certainly want to clarify this point with the committee during our discussions.

In that context, we have a short PowerPoint presentation aimed at helping you to better understand our mandate and operating model. Our presentation was sent to your committee before we received the motion, but as you will see, it's a good link and they are quite well related to each other.

With your authorization, Mr. Chair, I would like to ask my colleague Carleigh Malanik to walk you through the presentation, after which we will be happy to answer your questions.

Thank you, Mr. Chair.

[Carleigh Malanik, Financial Analyst, Office of the Parliamentary Budget Officer, Library of Parliament]

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.

[The Chair, Liberal, Bill Casey]

You have two seconds left. You must be the parliamentary budget office.

We're going to start with seven-minute questions from Dr. Eyolfson.

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

Thank you very much.

The kinds of things you're presenting here are exactly the questions we need answered. It sounds as if you could be a big help to us.

We talked about the different costings. There are costings in supply and demand in terms of how much this is going to cost. That's the big barrier. If it wasn't going to cost much, we wouldn't have to discuss it very much.

We talk about the estimates of how much it would cost to implement this, how much we would spend. One of the discussion items that comes up over time is the potential for cost savings and how much the costs of instituting such a program would be offset through savings in the health care system. We know there are expenses to the health care system when people are non-compliant with medications, get sick, and come into the health care system.

Through your office, would you be able to do any analysis of how much Canadians could save in hospital visits due to non-compliance or how much we would save our health care system if people could afford their medications?

[Jean-Denis Fréchette]

Thank you for the question, which is a great question.

It's part of the model. In Carleigh's presentation, when we say we will develop terms of reference, we will of course develop that with the committee. Depending on what drivers or what factors you want to have in the model, we will include those because the costing is also how much savings you can have.

The difficulty we're having right now is this. What is the model? What is the system? What is the program that you want to have? Is it a national program in scope, only financed by the federal government, and so on? What we proposed to do eventually with this committee—if it's the wish of the committee—is to develop that and include those kinds of factors.

Right now we have your motion, which is, as I said, very detailed. I would prefer to have your vision of the program and then add all the factors and parameters you want to have included in the costing project.

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

I think you've answered this question already, then. I guess it would depend on the model we put forward.

Will you be able to provide an estimate as to how much it would cost if we made sure every single Canadian was able to afford his or her medications?

[Jean-Denis Fréchette]

Mostafa, I'm sure you want to answer something to that.

[Mostafa Askari, Assistant Parliamentary Budget Officer, Office of the Parliamentary Budget Officer, Library of Parliament]

Let me first apologize for being late.

Certainly the savings from the pharmacare program have to be the main reason that you want to have a pharmacare program; otherwise, it would not make any sense economically, so one has to find a way to estimate that. I think the range of estimates that you put in the model, the final estimates from that, would be the main factor that would determine the range of savings that you're going to get from the pharmacare program. That's a very challenging part of this. One way others have done this is by looking at the savings that other countries that have a pharmacare program have seen since the introduction of a program. That may or may not be a good benchmark for Canada, because the system here is certainly different.

Another way of making that saving is by negotiating prices with the pharmaceutical companies. Right now, my understanding is that the provinces are actually already doing that, so there are some savings already being seen. Those all have to be taken into account if you do the costing for a pharmacare program, and I think, as Mr. Fréchette said, it's also important to know exactly the type of program that the committee is considering, because you can have many different structures for these programs, and the cost would certainly be different in each case.

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

Okay, thank you.

There's a paper that we have looked at. It was published in 2015 by Steven Morgan. It was called “Pharmacare 2020”. Are you familiar with the document?

[Mostafa Askari]

Yes.

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

In that paper there was an estimate that we could reduce total spending by $7.3 billion in a best-case scenario under a national program due to larger bulk buying, as opposed to a number of provincial bulk buys.

Would you be able to perform a costing analysis that would be able to confirm or deny whether that was the case, whether those kinds of savings might be achieved?

[Mostafa Askari]

Certainly our costing would be an independent costing. Whether the results we get would be close to or different from those results I cannot speculate right now, before we start doing the work.

[Jean-Denis Fréchette]

If I may, Mr. Chair, I said in my opening remarks that I was apprehensive about the motion. For example, at the end of the motion, it says that “the PBO will work with Canadian Institutes”, which is fine, but “and other sources to obtain”, and the PBO's report “will not rely on analysis prepared by or for a third party”.

We need some discretion here, and that's exactly why you're touching on that point. What do you mean by that statement in the motion? I would like to clarify that because, as Mostafa said, we need to review the literature. If eventually we do a costing for this committee, we will have to review the literature, including those studies, and seek to assess whether or not we can evaluate the value of those studies.

[The Chair, Liberal, Bill Casey]

Okay, thank you.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

I want to thank the witnesses for being here. I think I'd love to have a little more time with you as well, because I think some of the things you've already said opened my eyes.

I think, Mostafa, you were saying the savings should be the main reason for doing it. We've heard already that people are making all kinds of assumptions. What I'd like to get to is whether can we get a model that we want so that we can give proper direction. Can we define what the problem is?

One of the interesting comments we had was from Neil Palmer, who is the president of PDCI. He was saying there is insufficient data on the numbers of Canadians who either lack prescription drug coverage or have insufficient drug coverage, which undermines the ability to develop policy in this area. I think what we need to do is take a snapshot of what is going on here.

He said:

Figures of 10% to 20% with no coverage or inadequate coverage are frequently cited. However, the underlying data supporting these figures is weak and generally based on unreliable opinion surveys.

That's true.

He continued:

That 10% to 20% could be underestimate or an overestimate. Either way, we need to know. We need to know because it's not possible to make informed policy recommendations and decisions when there is such uncertainty.

With us giving you direction, I think what we have to do is take a look at where we are right now. I think you have two slides, Carleigh, that opened my eyes. One was slide number 4, which showed $16.6 billion in private spending on drugs. The other one was slide 9, where you're talking about parameters.

Do you guys have any insight on which Canadians are have coverage now? For those without coverage, what percentage are low-income Canadians who may be having problems affording drug coverage? For those without coverage, which percentage is higher? Is it a problem not to be having some type of private insurance for these people? I'd like to see what we can do to dig down and define the problem today.

Do you guys have any idea about what the problem is we're asking you to help us solve?

[Jean-Denis Fréchette]

To answer your first question about the data sources, that's exactly what we do all the time when we do costing. That's why it's in one of the slides you identified.

Believe me, sometimes we have a request from parliamentarians or committees and we say we don't have the data, so it's just impossible. I don't know about this case, but if we do the costing, then we will do this type of survey.

On your other question, we do have a profile of those who are low-income and not middle class. We don't talk about middle class. We talk about low incomes and so on. That will be part of the parameters that we will use. We did other studies on that, and that will be part of the costing. Those are easier to get in terms of information and data.

The other part of your question about who is covered, and so on. There are some firms—you mentioned Brogan, for example—that we can pay and then see what quality of data they can provide.

[Colin Carrie, Conservative, Oshawa, ON]

We've had some witnesses say that if we went from a mixed system to a monopolistic system run by government, on day one we would have to come up with $16.7 billion.

What I'm challenged with as a Conservative—we're looking at government spending right now—is that the Liberal government had what they called a modest deficit of $10 billion. That's what was promised. I think the deficit is about three times that size. I think your office even said that with the spending going on, these things could be unsustainable and that we have to look at how we're going to fund any new program spending.

We're not seeing a lot of benefit from increased spending. We're getting numbers showing that unemployment is at an all-time high. Businesses are going elsewhere. If we want to implement this monopolistic type of system, then how do we pay for it?

Based on he current fiscal situation, which you are very much aware of, can our country afford a monopolistic government-run system that may be costing us $16.6 billion more per year?

[Mostafa Askari]

It depends on what the political choices are. That is not the kind of thing we provide comments on. That's a political decision. It is the parliamentarians' and the government's decision in looking at the trade-off between different policies and different issues, and then looking at the cost of that and whether the system can accept that cost. That decision is really up to you.

[Colin Carrie, Conservative, Oshawa, ON]

Given today's numbers, to add almost $17 billion.... If it is already unsustainable, how much more would that be pointing us in that direction?

[Mostafa Askari]

In what sense is it unsustainable? Actually, the federal government's overall fiscal situation is sustainable, based on the reports we have done on its overall sustainability. In fact, there is fiscal room.

This is a long-term assessment, not a medium-term assessment. We are talking about the long run, given the population aging in Canada. With all that taken into account, our assessment is that the fiscal situation at the federal level is sustainable. As for the provinces, that's a different issue. They do have some problems.

Certainly, if you have a program that costs a lot of money, it's going to increase the deficit. That's fair. That's a given. That's just the math of it.

[Colin Carrie, Conservative, Oshawa, ON]

Yes, $17 billion—

[Mostafa Askari]

Whether the system—the government and Parliament—is willing to accept that or not is something that has to be decided by you.

[Colin Carrie, Conservative, Oshawa, ON]

What I am looking for is advice on how to pay for it. Just doing my own math, it's $17 billion, and there are 35 million Canadians. That's $500 more per Canadian per year that would have to be put into the system from taxation. We would have to find the money somewhere. That's the kind of advice I would be looking for from you, to see where we would go on that.

Would it be more efficient to have one government system doing it, or just to tweak the system we have here? How are we going to solve this problem? It's huge. If we get a snapshot of the statistics we have now, it allows us to get a better idea of where we are going for policy so that we give you guys good direction, because we are relying on what you say.

Do I have more time?

[The Chair, Liberal, Bill Casey]

No, you don't. Was that a question?