Health Committee on Feb. 23rd, 2017

[Colin Carrie, Conservative, Oshawa, ON]

I like that idea, but just as a little aside, Santa has been giving me a lump of coal for years for free, so that's actually the best price on that.

You also mentioned the Competition Bureau. I'm interested in that idea. I don't think anybody has brought that up. Could you expand on that?

[Prof. Amir Attaran]

Consider the provincial formularies right now. A formulary is a list of medicines that are reimbursed by the provinces. You'll often find for a given drug two, three, four, five, six—some number of suppliers—for that drug, and the price that the province is willing to pay to those multiple suppliers is always exactly the same. If you have suppliers A, B, C, and D, for example, the price for A, B, C, and D is the same, which suggests there's been no effort made to bargain A against B against D to arrive at the best price.

This is a kind of price fixing in which our provincial governments are ignorantly complicit, and it merits the attention of the Competition Bureau. The Competition Bureau did study this market. I believe it was in 2008. They produced some wonderful research. Since then the Patented Medicine Prices Review Board has also produced stellar research. Everyone agrees that Canadians pay far too much, particularly for generics, but no enforcement action through the Competition Bureau and Competition Tribunal has come about. That's got to be a missed opportunity.

[Colin Carrie, Conservative, Oshawa, ON]

That's actually a great idea.

Maybe I could ask Professor Ryder this question. We had a witness named Madam Flood here to talk about the national formulary, and she was suggesting that it could be created through a voluntary arrangement and that this would be the best way to do it. Would the Canada Health Act or anything along those lines have to be amended if the provinces and territories sat down and came up with these types of arrangements?

[Prof. Bruce Ryder]

I don't think so, because that could be agreed to as part of the negotiations between the federal government and the provincial and territorial governments. However, it might be a good idea to amend the Canada Health Act because if it's amended to provide coverage for drugs administered outside of a hospital, of course the obvious question is, which drugs?

If we're limiting coverage to drugs administered in hospitals, then there's a built-in control mechanism, in a sense, but if we extend it, then the question of the boundaries of which drugs are covered need to be defined, and they can be defined through negotiation and agreement, and not addressed through the act. It might be a good idea to have it specified in the act itself, so that, for example, the amendment could read something like “provinces are required to provide coverage in accordance with the principles in the Canada Health Act of drugs administered outside of hospital” and the drugs that are covered could be defined as those that are on a national formulary.

A national formulary could be established and maintained by the federal government. I'm not sure that there is any problem with that. The argument against it, of course, as I specified earlier, is that at some point you're not just passing legislation that's dealing with federal spending but you're getting a little too detailed. You're going beyond general principles. You're putting some nitty-gritty of the way this operates inside the legislation itself, and maybe that amounts to regulation of matters that fall within provincial jurisdiction.

Given the need to define physician or hospital services inside the Canada Health Act already, I don't think it's all that different from the existing structure of the act to say that we're going to extend coverage to drugs administered outside hospitals, and here are the drugs.

[Colin Carrie, Conservative, Oshawa, ON]

You pointed out something that I think is going to be a challenge regardless. I've seen different conversations over the years, and as I think was mentioned by Professor Attaran, sometimes Quebec has a separate idea about what's going on and what jurisdiction is, and about communicating and co-operating with the rest of the provinces and territories in areas that have been specifically for provincial jurisdiction.

Since we sometimes have these asymmetrical agreements with different provinces and territories, if we did go down this route, are there available options for provinces and territories that may not like what the federal government is proposing if they wanted to challenge it? How would you see that being brought about? Do they have mechanisms right now, or would we have to change them?

[Prof. Amir Attaran]

Professor Ryder is suggesting an option for sure, and it would require the legislative changes he described. I assume touching the Canada Health Act is politically very hard, so people would rather avoid it. This is part of the reason I suggest you could achieve exactly the same thing through a series of contracts. Provinces that wished to could enter into a contract with the federal government to have a formulary based on their relations under this contract and to take steps X, Y, and Z to negotiate prices on behalf of all of them. To make that powerful, they would each agree not to strike separate deals with pharmaceutical companies, so they could not be divided and conquered.

If contractually the provinces band together such that none of them can split and purchase medicines separately, you have just created a system in which the maximum bargaining power exists. Whatever supplier wins a negotiation will supply all the provinces. They get the biggest economy of scale, so they can afford to bring their price down the deepest, and it can be done without legislation.

[The Chair, Liberal, Bill Casey]

Mr. Davies is next.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chair.

Thank you both for being here.

Many of us around this table came to the conclusion quite a while ago that the need to provide some form of universal pharmacare coverage for Canadians is absolutely imperative. We know that Canadians pay about the second-highest drug prices in the world. We know, depending on who you talk to, that between 10% and 20% of Canadians have no pharmaceutical coverage whatsoever, meaning there are millions of Canadians walking the streets today who have zero coverage to get the medicine they need when they get sick. We're really trying to figure out how best to deliver that.

If I understand you correctly, it seems that there are three broad routes. One is by agreement of the provinces and federal government. Nothing would preclude them, I understand, from coming to an arrangement. You call it a contractual model. Number two, there could be an expansion of the Canada Health Act. Number three, the federal government could go it alone on a stand-alone national program under one of the potential constitutional heads of power. Do I have that correct about the three basic routes?

[Prof. Amir Attaran]

You do. I would say number one is the most desirable and number three is the least desirable.

[Don Davies, NDP, Vancouver Kingsway, BC]

Right. I want to explore each one of those.

In terms of agreement, I'm told that in 2004, at the meeting of the Council of the Federation in Niagara-on-the-Lake, the premiers unanimously agreed to transfer responsibility for pharmacare to the federal government. and there was also unanimous agreement that Quebec would be able to opt out of that plan with compensation.

I'm unclear about that. Is that a contractual agreement or is that an agreement by the provinces to upload jurisdiction to the federal government? Is either of you familiar with that?

[Prof. Bruce Ryder]

I'm not.

[Prof. Amir Attaran]

I am, to some extent. I'm not aware of any contractual basis. I think that was a press release agreement that the various premiers got into. It has performed abysmally, because although the goal at the outset was to band together, combine purchasing power, and negotiate with the maximum purchasing power and therefore get the lowest price, what the provinces instead did was what I earlier called fiat pricing, or command pricing. They would pay 18% of the brand name price, never mind whether that's a realistic figure. They did have the intention of working together; they just did so in probably the most fruitless way possible.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Ryder, how many Supreme Court decisions have there been interpreting the POGG power, to the best of your knowledge?

[Prof. Bruce Ryder]

I don't know what the exact count is, but it's remarkable how infrequently the court has had to engage with the POGG power. A few from the modern era that are most relevant to thinking about its scope. There was the anti-inflation reference from 1976, which focused primarily on the emergency branch of the POGG power. The Crown Zellerbach decision from the Supreme Court of Canada in 1988 was of huge significance because the court, by a narrow majority in that case, assigned the subject matter of marine pollution to the “national concern” branch of the POGG power. The test set out in that case is still the guiding one. It was the one that I recounted earlier.

There have been others that have discussed the power, but not upheld federal legislation pursuant to it. Perhaps the most important one to be aware of is the Hydro-Québec decision, which was released around the same time, wherein the Supreme Court of Canada said the toxic substances provisions of the Canadian Environmental Protection Act could be upheld under the criminal law power, but the court was very hesitant to even think about upholding them under the POGG “national concern” power, given the concerns that we have about the depth of the impact on provincial jurisdiction.

[Don Davies, NDP, Vancouver Kingsway, BC]

I want to focus on POGG for a moment. This is my summary of this test. It says:

The courts have interpreted this residual power to be available primarily in times of emergency, or when a matter of “national concern” arises.

Both of you have mentioned the “national concern” branch.

For an issue to qualify as a national concern it must be indivisible, such that it would either be impossible for the provinces individually to deal with it, or it would require the cooperation of all of them, without which the country would suffer.

One of the things this committee has heard loudly and clearly is that one of the key ways that pharmaceutical prices can come down so that we could afford universal coverage is to have national purchasing, bulk buying. I'm going to put it to you that this is impossible without the co-operation of all provinces or that it's impossible for the provinces individually to deal with because you can only have a national bulk buying program with all of them.

Mr. Ryder, you've indicated more optimism. Dr. Attaran, you've been less optimistic. Do you think that would provide an argument to the Supreme Court of Canada as to why POGG may be appropriately applied to get national pharmacare? It seems to me that it fits that test quite well. Can you comment?

[Prof. Bruce Ryder]

I think you'll hear two different stories. I agree; I think it does fit that test very well. We talked earlier about the securities reference, which of course was focused on a different power.

Similar arguments, of course, were made by the federal government in support of the proposed securities act—that is, that it would be more efficient; uniform regulation is desirable in the area, for a number of reasons; and that if we don't have 13 different securities regulators in each province and territory but one national securities regulator, there are real advantages.

The court essentially said that arguments based on efficiency and the value of uniformity aren't sufficient to take a matter that's been within provincial jurisdiction for so long and pull it into federal jurisdiction. The test that the Supreme Court of Canada has articulated for determining whether federal legislation fits under what's known as the general regulation of trade branch of the trade and commerce power is different from the test for the national concern branch of POGG.

The courts have articulated a provincial inability test as something that's beyond the capacity of the provinces to address effectively. It doesn't weigh quite as powerfully in the POGG national concern jurisprudence. In fact, the way it was phrased in the Crown Zellerbach decision from 1988, which is the leading case, was that it is “relevant to consider” provincial inability; it didn't say that the federal government had to demonstrate that it is met.

As a relevant factor about whether this a matter that's truly of national concern, requires national leadership, has transcended provincial capacities, and has sufficient specificity to not upset the balance of the federation, I actually think that's a decent argument, but there are reasons to be cautious because of how careful the courts are about preserving the balance and the division of powers between Parliament and the provincial legislatures.

[Prof. Amir Attaran]

Perhaps I can have just a quick response to that.

You've put your finger on absolutely the best constitutional hope for legislation to survive, and everything you said was correct, but despite that being the high-water mark of constitutionality, it's still pretty low because of how few cases have been decided under POGG and the fact that you do currently have nine out of 10 provinces co-operating to bring down drug prices. The only province that isn't co-operating isn't there because it doesn't want to be. That's Quebec.

While provincial inability isn't a hard test, it's a consideration, as Professor Ryder said. He's exactly right. That consideration is not on your side.

[The Chair, Liberal, Bill Casey]

Mr. Oliver is next.

[John Oliver, Liberal, Oakville, ON]

Thank you very much.

Thank you very much for a very informed presentation from both of you.

I just want to say, Mr. Attaran, that as Mr. Davies said, many of us are seized not just with the fact that we're overpaying for pharmaceuticals. What's more important to me is that many Canadians are uncovered, uninsured, and cannot afford prescription drugs. I think that pool is growing with the changes in the workplace and the changes in jobs.

My questions, then, are not just about pricing strategies; they're about how to include all Canadians in a coverage model. If you could broaden your answers a bit beyond just pricing, that would be helpful.

It seems that we're dancing around a whole lot of things, yet we already have a very well-established mechanism at the federal level to ensure coverage, which is the Canada Health Act.

First, going back to the Medical Care Act and the 1984 CHA, have there been any constitutional challenges? As well, is there any reason to think that this vehicle is insufficient for us to redefine insured services?

[Prof. Bruce Ryder]

I'm not familiar, Mr. Oliver, with any challenges to the Canada Health Act as a valid exercise of the federal spending power. There have been a number of challenges to other federal spending statutes in a variety of contexts. There's a significant body of case law now in which, for example, in the context of the Canada assistance plan, in the context of federal spending, and in the context of housing, where the courts have approved the exercise of the federal spending power in areas of exclusive provincial jurisdiction with conditions attached, the implication of those decisions, even though they're not dealing with the Canada Health Act itself, is the same reasoning that would lead to the conclusion that it's a valid exercise of the federal power.

[John Oliver, Liberal, Oakville, ON]

I understand the intrusion and the problems we have when we intrude into provincial jurisdiction. Do you feel that simply broadening the definition of insured services under the Canada Health Act to include prescription pharmaceuticals would violate provincial jurisdiction?

[Prof. Bruce Ryder]

No, I'm quite confident that would be a valid exercise of the federal spending power. Of course, it would depend on the degree of specificity that's build into the act. Right now we have general principles and general definitions, and much of the detail is left to negotiations. If that kind of structure were to fall out, I think there would be zero doubt, but if you decided to go further and seek to define with some specificity which drugs are covered, through the inclusion of, for example, a national formulary as part of the regime, there may be more doubt. However, I still think that would be consistent with jurisprudence on the federal spending power.

[John Oliver, Liberal, Oakville, ON]

What would the federal government have to add to that to make it a federal spending authority decision or a federal power? If we redefine what's insured, is there a need then to also address a spending allotment with that? Can you or Mr. Attaran broaden that out for me a bit?

[Prof. Amir Attaran]

I want to rewind to something you said at the beginning. You very wisely said there are two issues on the table. One is getting prices down; the other is increasing the number of people who get drugs, increasing the coverage. Those are indeed two issues, but there is a question of sequencing that needs to be thought about.

We would all like the drugs to be cheaper. We would all like more people to be covered. We all agree it's a travesty that those realities evade us now. Instead of trying to attack the coverage problem first and the pricing second, I think you should do it the other way around, because any step you take to increase coverage, whether it is federally mandated or whether it is with a federal carrot in the form of the spending power, will meet with greater resistence when the prices are high. If you instead tackle the price reduction problem first, you effectively create a surplus of health dollars that already exist, because you've just saved money by reducing the prices, and that reduces the political friction about increasing coverage to more people.

In other words, if you bring the prices down first, you create some budget breathing room in which you can ask for more people to be covered.

[John Oliver, Liberal, Oakville, ON]

My concern, though—and I might have the industry wrong here—is that the work that's being done through the provincial, territorial, and now federal efforts to lower prices is for the federally and provincially insured expense. The private drug costs are not necessarily captured in those. The first costing that's done by the PMPRB is national costing, so we miss lowering the cost of drugs for the people who need them the most.

I would argue that for a single mom with three kids, on a partial income, lowering the price of a round of antibiotics from $300 to $250 does not make it any more accessible to her and does not do anything to allow her to treat her children the way we would treat our children with a—