Health Committee on Feb. 14th, 2017

[Colin Carrie, Conservative, Oshawa, ON]

It's difficult when you're looking at the whole system to compare apples to apples, so I did want to dig in a little further on that as well.

What's the world of private insurance like in New Zealand? I know that in my community of Oshawa, a lot of union members have really great coverage. One of the criticisms I've heard of New Zealand, for example, is if a brand name drug or an innovative drug were desired by a patient, perhaps it would not be covered. I've heard of people going to Australia, for example, for treatment for certain things.

Can you comment on the role of the private system in New Zealand, please?

[Matthew Brougham]

Private insurance is not as deep. The market is not as deep as here. It's not as significant in the provision of health care in New Zealand, and most people are privately insured to cover, essentially, surgery and surgical procedures. That's largely what's covered.

When it comes to pharmaceuticals, you're right when it comes to being able to pick up a supplementary package of pharmaceuticals. When I left New Zealand, there was one insurer offering that kind of coverage, primarily because all the other insurers would just say, “Look, we'll just use the national coverage, thank you very much.”

Yes, there are situations of drug coverage not being provided for a particular drug. It's considered to offer less health benefit to the country than other options that might be in front of the decision-makers, and as a consequence patients are left with two options: they either pay for it themselves out of pocket or, if they're able to, they take advantage of the Australian system, but few people actually have that opportunity.

[Colin Carrie, Conservative, Oshawa, ON]

I think at the end of the day everybody would appreciate staying in their own country or community for their health care.

Looking at this, we see there are so many complications. With the private sector insurance in Canada, I believe, it's over half of the pharmaceuticals when you're looking at the dollar value, so if we went to this monopoly from, say, a government system, some people said you'd have to come up with $17 billion from day one, or something along those lines. Also there's the option of choice, and again I'd say a lot of Canadians do have that choice.

One of the criticisms I've heard of New Zealand as well is that it takes a significant amount of time to get a drug on a formulary. Is that something you could comment on?

[Matthew Brougham]

Yes, it does take time. It can take a long time here as well. You have products that are sitting inside the pCPA currently that are essentially stonewalled, not moving forward and not moving backwards. You're asking managers to essentially try to drive a hard bargain or get a good deal out of a manufacturer. If they don't have a product that is very high value and they're not prepared to adjust their price, then, yes, that can hold things up.

However, by the same token, as I mentioned in my opening address, when managers are given a fairly clear set of instructions—i.e., get the most health benefit you can from the budget available—it provides them with incentives to work in both directions, so things that don't look like they're a good value tend to languish until prices adjust. Things that look like very good value go through very quickly. In my experience in the past, New Zealand was, in some instances, among the first countries to fund new technologies because it considered them to be very good value.

[The Vice-Chair, Conservative, Len Webber]

Great. I'll have to cut you off there. We have to move on with our questioning.

I'd like to welcome Monsieur Pierre-Luc Dusseault here today. Welcome to our health committee. You are in the room with the best committee in the House of Commons.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

I'm seeing that. Thank you.

[The Vice-Chair, Conservative, Len Webber]

You have seven minutes of questioning, Mr. Dusseault.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

Thank you.

Thanks to our witness.

I will speak in French, so you may want to use your earpiece. Sorry about that.

I hope that will work.

I thank the witnesses for being here with us today.

First of all, I would like to know the main reason why medication prices are much lower in New Zealand than in Canada. What is the main reason that explains that, in your opinion? Is it bulk purchases? Are there other factors at play? As my colleague said earlier, there are four to five million inhabitants in New Zealand, and there are 35, soon to be 36, million in Canada. Is the fact that you buy medication in large quantities and through centralized procurement by the government really the only reason that explains the lower cost of medications there? Are there other factors that explain the lower costs?

[Matthew Brougham]

Yes, there are other factors. Bulk purchasing gets you part of the way, gets some price reductions essentially, but as anyone who is involved in business knows, the way to maintain a high price is to identify your product as unique. The alternative to that—in other words, if you're on the buyer's side—is to understand what products are substitutable for one another. It's understanding the substitutability of products that actually drives the competitive process. This is what introduces strong incentives for price competition in the marketplace.

You can do that in several different ways. In New Zealand, for example, when things go off patent, New Zealand runs tenders for sole supplier of the product. Clearly there are many suppliers of the product, and these products are very substitutable for one another, if not perfectly substitutable for one another.

When it comes to on-patent medicines, you will frequently come across a situation where a competitor...and let's be clear, the competitor has produced a “me too” in order to make it into the market and get a slice of the action. These me toos are frequently substitutable for one another, so suddenly, even in the on-patent market, you'll have the ability to leverage price competition from competing suppliers, and that is one of the key areas where benefits derive.

Therefore it's not just bulk purchasing, and in fact these things tend to combine together in many different ways to enter into what you might call “clever contracting”, essentially.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

If memory serves, medication covered by insurance in New Zealand is listed in a schedule to the law. I would like to hear about the process through which people determine which medications are in that schedule of covered medications, and I'd like to know how much that list can vary over time. You said that there was fierce competition among the companies. Certain medications are interchangeable and have the same effect, but are marketed under different names.

Also, over time, how can you adjust your list of covered medications and provide the best medication that is on the market?

[Matthew Brougham]

New Zealand engages in the same sorts of processes that we engage with here in Canada. You do a form of health technology appraisal of the technology, essentially to try to determine what health benefits this product is likely to give relative to how much you need to spend on it. The “relative to how much you need to spend on it” is really important, only from the point of view of knowing how much you can spend within a given budget. More importantly, once you rank all of these options it tells you which one is the most valuable down to which one is the least valuable within the budget that you have available.

The usefulness of doing these sorts of analyses is in understanding which one provides the most benefit and which one provides the least. That what's we refer to in trying to provide incentives to minimize the opportunity costs of these decisions.

That process is no different from the way it's done here; it's just that the results are used differently. One goes through the same use of technical expertise to try to arrive at an understanding of the product's benefits and the product's costs, and ultimately the budget impact of that. Those options are then compared with other options that are on the table and various recommendations are made, in the case of New Zealand, to a board of directors of the Pharmaceutical Management Agency to list a product or not list a product.

It evolves over time through the addition...and, as I mentioned, you have the substitutability of products. As opportunities come up to substitute from one product to another, those opportunities are taken and patients are asked to switch. Essentially doctors are asked to manage that process of switching the patients from one product to another product.

[Pierre-Luc Dusseault, NDP, Sherbrooke, QC]

So there is a certain flexibility.

I also have a question on access to the medications listed in that schedule.

In Canada, we have sometimes in the past had problems with medication shortages, and access to some medications. Have you experienced similar situations regarding the covered medications that are recommended by the New Zealand government? Have you had problems with access and shortages, and if so, what did you do to resolve them?

[Matthew Brougham]

The shorter answer is, yes, in any system that uses pharmaceuticals.

Ultimately, the pharmaceutical supply chain is quite fragile. It's a very precise engineering process. When it goes wrong, it goes wrong for very large volumes of products. It affects large parts of the world when this happens. I don't think there would be any system in the world that can avoid shortages of pharmaceuticals because of that.

The truth of the matter is that, from what I've seen over the last five or six years in Canada, New Zealand's supply shortages have been less problematic, and there have been fewer of them than I've seen here in Canada. Part of the reason is the different supply chains that the two countries use. There are really two or three blocks of supply chains around the world, and countries tend to be engaged with one or the other, but not both of them.

The other reasons for the difference, despite the fact that New Zealand uses sole-supply purchasing for off-patent pharmaceuticals, are the contracting arrangements. The contracts are very specific about continuity of supply.

For example—

[The Vice-Chair, Conservative, Len Webber]

I will have to cut you off there, Mr. Brougham. We've got to move on to the next round of questioning. Perhaps next time, Mr. Dusseault, you can continue on with the answer there.

We're going to move back to the Liberal members. Dr. Eyolfson, you have seven minutes. Go right ahead.

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

All right. Thank you.

Thank you for coming.

I'm a physician. I practised medicine for almost 20 years here. I'm very interested in this subject. I've seen the costs in the emergency department of non-compliance.

This is a very hard number to track down. It may be very difficult to answer. When people don't adhere to medications, of course this causes illness, and this costs the system. Is there any estimate of what the cost of patient non-compliance and non-adherence would be to the medical system?

[Matthew Brougham]

Occasionally there are estimates that are specific to a particular intervention. In terms of a general estimate, you have just reminded me that there have been one or two studies out of the U.S. that have looked at this and tried to generalize it. Generally, though, they attracted a great deal of criticism from academics for poor methodology.

You're right. It's very difficult to argue that non-compliance of X does not lead to additional costs on the system of Y. I would say that it's next to impossible.

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

All right.

I understand that this Pharmac program started in 1993. Is that correct?

[Matthew Brougham]

Correct.

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

Okay.

What percentage of New Zealanders had limited or no coverage prior to 1993?

[Matthew Brougham]

New Zealand has had universal access to pharmaceuticals since about 1956, I believe. In 1993, it went from being a program run by the Ministry of Health to a separate arm's-length program run by a government agency. There were a few other changes that I remember. This fellow who spoke before was talking about a schedule at the back of the legislation. That no longer exists. The schedule is actually published separately by the management agency.

That's what changed in 1993. As a result of that, some of the management practices changed as well. I referred briefly to the idea of substitutability of products and thus creating price competition in the marketplace. Some of those efforts were being undertaken by the Ministry of Health prior to the establishment of Pharmac.

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

All right.

I think I know the answer to this, but I'd like to get it on the record. Are people ever refused drug coverage because they have a pre-existing condition?

[Matthew Brougham]

No.

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

I thought the answer would be that, but as I said, I wanted it on the record, for obvious reasons. With private insurance plans, particularly in the United States, that does cause a significant problem.

[Matthew Brougham]

That's correct.

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

It's something we'd like to avoid.

In regard to how physicians are prescribing, is there any surveillance of prescribing practices within the national network that might show that physicians in one region or even individual physicians are preferentially prescribing more expensive drugs, when you find that generic, equally effective, cheaper drugs are available? Is there any surveillance of the physician prescribing practices like this?