Health Committee on April 13th, 2016

[Rachael Thomas, Conservative, Lethbridge, AB]

So that's the cost the federal government would be looking to assume if we were to move forward with a national strategy?

[Michael Gaucher]

It depends on how that is structured and what the approach is. Right now a portion of that $29 billion is already covered by public drug programs that are in place in the jurisdictions and with the federal government, but there is that private sector piece. It really depends what type of model and approach was used for a pharmacare program.

[Rachael Thomas, Conservative, Lethbridge, AB]

Maybe you can talk to me a little about when drugs are assessed for their effectiveness. We have generic ones and then we have non-generic ones, of course. When that assessment takes place, if provinces had to take the money that we allocate to them to pay for those pharmaceuticals, is it possible that those provinces could choose to pay for, let's say, the less effective one if it happens to be cheaper and still approved rather than paying for the more effective one, which happens to be more expensive? Could we find ourselves in a situation where people are simply prescribed a drug that isn't really effective but that's just the way it is because provinces are looking to save money?

[Dr. Brian O'Rourke]

I'll take a crack at that one.

We assess the pharmaceutical comparatively. We're looking at product A versus product B. And it's not just on their clinical effectiveness. It also looks at the cost effectiveness. We take into consideration the adverse effects profile, how much more effective one is over the other. We would never recommend a physician or a drug plan to cover a drug that is not effective. It does need to have some effectiveness and it has to demonstrate a greater therapeutic benefit over the existing drugs.

[Rachael Thomas, Conservative, Lethbridge, AB]

Okay.

I see that pharmacare could be a solution in increasing accessibility to pharmaceuticals for some. However I'll relay to you a recent situation in my constituency.

I have an individual whose daughter has seizures, and the drug she was on is totally off the market in Canada. It's gone, not to be found. Her doctors have prescribed another one, a generic one, which does not work. It's not effective. This little girl is having seizures and as a result, had to be pulled from school. Unfortunately within a month, that generic drug was gone, off the market, so now she has to be switched to a new drug. That drug is not at all effective, which means this girl is not just having minor seizures but now she's having grand mal, which means her entire day is ruined.

In that case a pharmacare program is not going to fix that problem. What's going to fix that problem?

[Dr. Brian O'Rourke]

I don't have the specifics of that case, but there were some drug shortages in some epileptic drugs, and that's probably what the situation was there, which is a significant problem for a number of drug classes, particularly some generic drug classes where there might only be one manufacturer and that manufacturer has had problems with its supply of the chemicals that might come from other countries around the world. It's a delicate situation for that patient in that we now have to find a therapeutic alternative. That's where to provide the best care the physicians need to look at all the potential products available for that child. Hopefully there is an alternate that will provide some benefit to her.

[The Chair, Liberal, Bill Casey]

Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

I've seen various statements in this regard, but most of the time I see a statement that says that Canadians pay the second-highest prescription costs in the world. At best, it's third or fourth. Is that correct? Yes.

I guess we don't have a very pretty picture in front of us. We pay close to the highest prices for prescriptions in the world. You've testified that we have very low spending on R and D in this country. If 10% to 20% of Canadians have either no coverage or not enough coverage, that's 7 million Canadians. That's the picture that I see painted in front of us.

Canada has just signed two trade deals, CETA and the TPP, which have new intellectual property provisions. All the literature and opinions I've read indicate that this will delay the introduction of generics to market for some time. I'm seeing estimates of two years as about what it's going to take.

Ms. Hoffman, has the department done some analysis on the likely impact of TPP and CETA, and is it true that those trade deals will likely increase the prices that Canadians pay for pharmaceuticals and add a little bit of mud to that already dirty picture?

[Abby Hoffman]

Yes, some analysis has been done. There's a large number of people, not the least of whom are in the generics industry, who are attempting to estimate what incremental costs will be. The maximum amount of extended protection that brand drugs could get in the Canadian marketplace would be two years. In reality, given the intersection of data protection, patent remaining, patent life, and so on, it's likely to be considerably less, on average, for most products. But every day that a patent product remains in the marketplace beyond what is currently the case is a day when the generic equivalent is not in the marketplace. One can calculate the incremental cost.

This is why measures such as the work being done through the pCPA , and some changes that may be in the offing for PMPRB, are so important.

It is difficult to estimate the global cost. We can do modelling based on drugs that are in the marketplace today and try to imagine what would happen with the same mix of data protection and patent life remaining, but we're actually talking about drugs that will be in the marketplace five, six, seven, eight, ten years and beyond. The profiled drugs and their costs and whether or not there even are generics that could replace them will depend on what's going on in that drug marketplace.

[Don Davies, NDP, Vancouver Kingsway, BC]

Is it fair to say, Ms. Hoffman, that it's the department's position that those two trade deals will likely increase the costs of drugs in Canada and we just don't know how much?

[Abby Hoffman]

That's correct.

[Don Davies, NDP, Vancouver Kingsway, BC]

I'm told that Canada is the only country in the world with universal health care and without some form of universal pharmaceutical coverage. On the assumption that this is true, has the department studied any of the many other countries that have universal health care systems and that have some form of universal coverage? Have we done any modelling on how adopting one of those programs might provide a better system for Canada?

[Abby Hoffman]

Yes, that was what I was alluding to when I said there are two broad paths based in a way on the same principle: that resources are pooled to share risk across the entire population.

The question is: what is the source of that funding? Is it all public sector dollars, in which case federal, provincial, and territorial governments assume all the costs that are currently contributed by employers, employees, and individuals? Or could there be a financing model that would be progressive in its aspiration to achieve equity while accomplishing universal coverage?

The costs of those who are under-covered or not covered at all represent an incremental cost. But if all drug plans in Canada worked on the basis of the same formulary, and if they were all participants in an aggressive drug price negotiation regime, and if PMPRB were able to land where the strategic plan suggested it could, you could get considerably more value from each dollar spent.

[Don Davies, NDP, Vancouver Kingsway, BC]

It's true, because some experts have actually estimated that if we adopted, for instance, the German system, we would save about $4 billion a year of what we're paying now. If we adopted the U.K. system, we would actually save $11 billion a year. I'm reading from the “Pharmacare 2020” plan. Because of the administrative cost savings of a single-payer pharmacare system, it's estimated to be $1 billion to $2 billion less than now.

Independent studies have confirmed this. You add up all those I think they were referred to as efficiencies. If you don't have someone covered for their medicine and they end up in emergency, it is far more expensive. If you add those kinds of savings in, preventative systems, the power of bulk, all of the aspects of it.... It seems to me that the experts who we're going to hear from in this committee will tell us that adopting national universal coverage in this country could save us money over what we're spending now. There's no free lunch, but if we had all those efficiencies we could actually get universal coverage cheaper than what we're spending now.

Is that a possibility?

[Abby Hoffman]

I actually think that's a bit of an improbable scenario because we have to take into account the current unmet need. There's certainly a cost. What we would see is that in all likelihood the expenditure per capita might go down. As you've already heard, our spending per capita is pretty high, as well as drug prices being high. You would also expect to see, even with efficiencies, some increase in demand and consumption.

It's appealing to think that somehow or another there would be equilibrium at the end of the day, that all these people who have inadequate coverage could somehow or another find their way into a common plan or at least a common approach for all Canadians at the current cost. I think our sense would be that it would not be cost-neutral. The question is, how do you pay for it, and does it make sense? This is what I was saying in my initial remarks: to continue this system that we have now where individuals and employers also contribute, but to do that on some kind of progressive model where income is taken into account. Today, the co-pays, the deductibles, the eligibility, and all of that does not reflect any kind of progressive financing model.

[The Chair, Liberal, Bill Casey]

Mr. Kang.

[Darshan Singh Kang, Liberal, Calgary Skyview, AB]

Thank you, Mr. Chair.

I think I will stick with the cost of drugs as well.

From the 2015 study, it was reported that Canada will soon be spending close to $38 billion, or 13.4% overall health care dollars on pharmaceuticals.

Where are the highest drug costs to our system currently located and what barriers have prevented us from adapting our system to lower these costs?

[Michael Gaucher]

In our drug spending report we regularly compare provinces, and most recent data shows that there is quite a variability in per capita. It ranges from just under $600 per person in British Columbia, and at the high end, it's Quebec, at almost $1,000 per person. Again, there are several different factors that can influence really why those costs differ. It could be the health of the population. It could be the demographics, the age. It could be the prescribing of the physicians, the patterns of prescribing, and it could be the design of their programs. There are a lot of factors to consider.

In considering those, getting back to your point, certainly there are several different types of strategies that can be used to address utilization and to try to really promote appropriate and optimal utilization of drugs. A lot of provinces are undertaking these different types of strategies. Some of them are policy-related, some of them are more education-related, but different types of strategies have had some success in addressing inappropriate use and high costs.

[Tanya Potashnik]

If I could just add, a lot of the high-cost drugs are actually being realized in areas like biologics, oncology drugs, specialty drugs, expensive drugs for rare diseases. We are seeing an unprecedented amount of new drugs that are coming onto international markets at price tags that have never been seen in history. We have drugs that cost $700,000 a year, $500,000 a year—numbers that are hard to understand, if I could be frank with you.

One of the things we do is we compare Canadian prices to international levels. To be honest with you, when we look at international prices, at various models, it doesn't matter whether you have a national pharmacare program or a more public-private mix, every country is struggling with understanding these prices and understanding what's driving those prices. Even in a national program, you're still dealing with monopoly situations where manufacturers are pricing their products at levels that are difficult to understand and difficult to justify, really, and difficult to negotiate because there are no therapeutic alternatives.

The cost pressures are not necessarily coming from the older drugs where there has been genericization and greater therapeutic alternatives. I think the pressures are coming for drugs where there are no therapeutic alternatives, where you have unmet needs, where you have smaller populations. Those are some of the key areas that I think will need focus in the future.

[Darshan Singh Kang, Liberal, Calgary Skyview, AB]

Do the demographics of the population in B.C. and Quebec have something to do with this? It boggles my mind. Why are we paying the second-highest drug prices in the world? Is it our small population base, our buying power?

[Tanya Potashnik]

One of the things I want to caution you on in doing these international price comparisons is that every country has gone to an approach that makes it difficult to compare prices, if you will, directly. Every country is engaging in contracting in non-transparent negotiations. When you look at a price, it's no longer feasible in a reliable way to know what any country is paying for a particular drug, because manufacturers have adopted a model of negotiating non-transparent hidden discounts that they provide directly to governments.

The ability to use international prices as a way to assess the fairness of a price within an international context has diminished, if you will, so there are increasing questions about whether this continues to be an effective policy lever.

[Darshan Singh Kang, Liberal, Calgary Skyview, AB]

Is there no legal recourse?

[Tanya Potashnik]

Some countries have mandated their manufacturers to provide this data to them. When they look at a price of a particular product in Germany, for example, they have regulations in place that compel the manufacturer to disclose those rebates. That's one of the areas that is of great interest and concern for us.

[Dr. Brian O'Rourke]

On that, if I may, in Germany they did institute a law on negotiations about four or five years ago. In the German culture, they need to have access. If a physician prescribes a drug, they are entitled to get that drug. For one year after the launch of that drug, it's whatever price the manufacturer has. Then the assessment by their agency—similar to us—takes place, and then they set a price. When the company doesn't like that price because of international reference pricing, there have been a number of cases where the company has decided not to sell their drug in Germany because of that.

In Canada, I think the public plans...because of the pan-Canadian Pharmaceutical Alliance, we've taken good steps to try and manage the pricing. Where the situation is difficult is with the private payers. They don't have a negotiation strength with the manufacturers. They simply take whatever price is offered to them by the manufacturer.

For the public drug plans, they have the information we present to them, so they go into the negotiations from a position of strength. They know what a cost-effective price is and they have a sensitivity analysis of where that price point would demonstrate cost effectiveness. The private payers have access to our information publicly, but they're not able to do those good negotiations with the manufacturers at this point.

[Darshan Singh Kang, Liberal, Calgary Skyview, AB]

In other words, the private payers are subsidizing the public system in some way?