Health Committee on Oct. 19th, 2017

[The Chair, Liberal, Bill Casey]

I call our meeting to order.

This is meeting number 74 of the Standing Committee on Health.

I want to welcome everybody. Today we're going to have an open general round table discussion to see where we are after all of the meetings we've had and to get the opinions of our guests.

We will proceed with a regular questioning series and then we'll have a second round, by the looks of things, until we have to go to vote.

Just before we start, I want to acknowledge that Mr. Davies brought up an issue about the parliamentary budget officer last week, and you were right. I hate to say this, but you were right. We did ask the PBO to do a study based on the WHO. He acknowledged that, but it didn't get done.

However, we did ask, and he did acknowledge it. I just wanted to let you know that. Thank you for bringing it to our attention.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

[The Chair, Liberal, Bill Casey]

Okay, with that little piece of business, I'd like to welcome our witnesses today.

We have Dr. Marc-André Gagnon, associate professor, school of public policy and administration, from Carleton University. Welcome. We have Professor Steven Morgan back. He is a professor in the school of population and public health at the University of British Columbia.

We also have, from Canadian Doctors for Medicare, Dr. Danyaal Raza, chair. Thanks for coming. From Canadian Life and Health Insurance Association, we have Stephen Frank, president and chief executive officer, and Karen Voin, vice-president, group benefits and anti-fraud.

We are going to ask you to make a 10-minute opening statement. I would ask you to limit it to 10 minutes. Then we'll go to a question period.

We'll start with Dr. Marc-André Gagnon.

[Dr. Marc-André Gagnon, Associate Professor, School of Public Policy and Administration, Carleton University, As an Individual]

Thank you very much, Mr. Chair.

My thanks to the committee for the opportunity to share my expertise on the issue.

I would like to discuss two issues with you today. I will start with a few comments on the report of the parliamentary budget officer (PBO). I will then proceed with an analysis of Quebec's prescription drug insurance program.

In terms of the PBO's report, I very much appreciated the quality of the work done by the analysts. The issue of pharmacare is extremely complex; it is very difficult to navigate the data, and it seems to me that the team has managed to get around the main pitfalls. I am fairly satisfied with the PBO's report.

However, I have some questions about certain aspects of the report.

I would first like to discuss the mandate of this report with respect to the concept of copayments. The report asks that $5 copayments be applied for brand name drugs, and it includes a list of exemptions for those who would not have to make the copayments.

First, why doesn't the list of exemptions include low-income people? I think that's a problem.

Second, I do not understand why a $5 copayment is imposed only on brand name drugs. If it is to encourage the use of generics, let me remind you that all public plans include a mandatory generic substitution as it is called. A financial incentive for the use of generic drugs is therefore not appropriate.

Furthermore, copayments are a very poor funding tool for a drug insurance plan, because they can prevent patients from getting the optimal treatment. This can result in higher costs for the rest of the health care system.

I published an article in the Canadian Medical Association Journal on the role of copayments. I would be pleased to submit the article to the committee if it wishes. In the article, I propose that copayments be used in the most effective way, following the Dutch model.

Copayments can be used to optimally guide the choice of prescription drugs. The Netherlands uses copayments as part of a reference price system. A reference price is a cap imposed on the reimbursement of drugs, in certain therapeutic categories, in order to cover the costs of optimal treatments. For all therapeutic categories, drugs are therefore fully covered up to the first dollar spent. However, to provide patients with more choice, patients have the opportunity to choose drugs that cost more without providing additional therapeutic value, even if there is no medical justification. At that point, it's up to the patient to pay the difference. The copayment is therefore used to pay for that difference.

Not only does this type of copayment based on reference prices provide better access to the necessary treatments, but it also makes it possible to use a reference price system that considerably reduces the costs of a pharmacare program, while providing patients with a greater choice of treatments.

A second aspect is problematic in the PBO report. It is the notion of the purchasing power of a single plan that will allow discounts of 25% on all drugs. In addition, this figure has sometimes been criticized because it is considered too optimistic.

I would like to remind you that Quebec is the only province that can have a bidding system for generic drugs for its entire market, both public plans and private plans. In July, Quebec threatened to use a bidding system. I have long argued for a competitive bidding system, as it reduces costs and could reduce drug shortages. As soon as Quebec threatened to resort to tenders for generics, manufacturers offered a 38% discount on average for all generic drugs. The 38% discount was not considered by the PBO because the report was already written when the agreement was made.

All that to say that a 25% discount on drugs is an extremely modest figure, given the purchasing power we could develop. We could go for a lot more.

Finally, a number of savings were excluded from the calculation. It is important to remember that the administrative costs of private plans are on average 10 times higher than those of public plans.

The report does not take into account the fact that 30% of the costs of private plans represent the private coverage of public sector employees. The government is spending that money. We are talking about $3 billion spent by the government on private drug coverage for public sector employees.

In addition, tax subsidies for private plans as well as tax credits for medical care amount to a $1.4-billion tax expenditure for the federal government. I would have liked to see those items in the report, but I understand that the decision was to focus on another, smaller model. If we take the model a step further, if we have a more macroeconomic vision, we strengthen the conclusions of the parliamentary budget officer's report.

This week, together with Professor Morgan, we published an analysis of Quebec's prescription drug insurance program. I would be happy to provide you with a copy of the analysis, in which we try to see the outcome of that model.

It is important to understand that, initially, when we looked at the issue of pharmacare reform in Quebec, all the recommendations were along the lines of creating a universal public plan. However, in the context of fiscal restraint, there has been a lot of pressure from private insurers, a lot of pressure from pharmacy chains and pharmaceutical companies, and we ended up compromising on a plan that follows the private sector logic. So we set up a system based on mandatory private insurance, and we also included private sector logic. Actually, instead of using institutional tools to better control costs, for example through active management of a drug formulary or a reference price system as recommended by the Gagnon report, we preferred to try to control costs by increasing the copayments and deductibles.

If we measure the results in terms of access to drugs in Quebec, we can in fact say that the Quebec plan has made it possible to extend coverage, since more people have access to drugs, but at the same time we still have significant financial barriers.

If we measure access to drugs using as an indicator the percentage of the adult population that has not had at least one prescription filled for financial reasons in the last 12 months in Quebec, this affects 8.8% of Quebeckers. It's a lot better than in the rest of Canada, where it's 10.7%. However, the average for countries with a universal public system is 3.7%. Compared to countries that have a universal public system, Quebec is therefore at the back of the pack in terms of access to drugs.

We also measured the issue of equity. We showed that the Quebec system is quite unfair in many ways. First of all, it's not a universal system, so not everyone has the same access to drugs in the same way. Second, the premiums for members of the public plan, calculated according to income, are relatively regressive. A household earning $40,000 per year must pay the maximum annual premium of $1,334, which is 3% of their income. A household earning $180,000 a year pays the same premium, but that's 0.8% of their income. In the case of private premiums, there is no relation to the income, so we end up with very big inequities.

The premium is mandatory, and the premium of a full-time worker is often equivalent to that of a part-time worker. For a part-time worker or a worker whose status is precarious, premiums can reach 10% to 15% of their income. In some cases, the pharmacare premium even reached 35% of the income.

In addition, following the private sector logic where people pool risks among workplaces, some workplaces will pay higher premiums if the people use more drugs. For example, a taxi drivers' association will end up paying higher premiums than those paid by a university professors' association.

For me, the analysis is very important when it comes to costs. In 2014, our high spending on drugs per capita placed Canada second among all OECD countries, after the United States, despite the fact that Canada has a very poor record in terms of access to drugs.

In Canada, $952 per capita is spent on drugs every year. Quebec is the province that, by far, spends the most on drugs per capita. Quebec spends $1,087 per capita, while the rest of Canada spends $912 per capita. The median of OECD countries with a universal public drug plan is $603 per capita, and these countries offer much better access to drugs. An amount of $603 per capita is 45% less than in Quebec.

Quebec's hybrid plan, which includes mandatory private insurance, was set up with the intention of reducing public spending on drugs. Compared to the rest of Canada, there has been no decline in public spending on drugs.

However, our analysis also shows that, in terms of household and employer spending, Quebec spends $205 more per capita on drugs.

[The Chair, Liberal, Bill Casey]

I have to ask you to conclude.

[Dr. Marc-André Gagnon]

Okay.

In short, there is a problem with controlling private plan spending.

In conclusion, the issue of costs aside, universal public insurance for drugs is a matter of principle. For too long, access to drugs has been thought of as a privilege provided by employers to employees. It now seems clear that all Canadians must be able to have access to this essential part of health care, regardless of their postal code or where they work.

Thank you very much.

[The Chair, Liberal, Bill Casey]

Thank you very much.

Now we'll go to Professor Morgan. Welcome back.

[Professor Steven Morgan, Professor, School of Population and Public Health, University of British Columbia, As an Individual]

Thank you very much for the invitation to speak before this committee again.

Rather than provide a full introduction, I'll simply mention that since I last spoke before this committee in April 2016, I've published a further 22 peer-reviewed research papers on issues concerning the accessibility, affordability, and appropriateness of prescription drugs used in Canada and comparable countries.

I'm very pleased to report that my economic analyses of universal pharmacare in Canada have won two article-of-the-year awards, one from the Canadian Institutes of Health Research and one from the Canadian Medical Association Journal.

I'll frame my remarks based on important research published since the last time I testified at this committee. The first publication I want to speak about is not mine, but rather that of the parliamentary budget officer.

I believe the estimate of the PBO provides this committee with a reasonably solid analysis of what I would call a worst-case scenario of a universal pharmacare program that nevertheless remains an attractive option from an ethical and economic point of view.

The PBO estimated that Canadians are currently forgoing approximately 50 million prescriptions for medicines that might be covered under a universal public pharmacare program because of the out-of-pocket costs they face, either because they're uninsured or because they face cost-sharing rules under the insurance plans they have. The PBO estimated that universal pharmacare could help Canadians to afford those prescriptions and the health benefits that would be associated with their use. Although Canadians would be filling 50 million more prescriptions under a universal pharmacare system, the PBO estimated that a universal public drug plan would save Canadians $4 billion per year.

To be perfectly clear, the PBO used a number of assumptions that likely overstated the public cost of a universal pharmacare plan for Canada. It may be good strategy from a government budgeting point of view to assume the worst-case scenario and then work to bring in the program well under budget, but it is a conservative estimate because of the assumptions embedded in the modelling they did.

Some of the assumptions, such as the idea that the program would underwrite the costs of all medicines on the Quebec formulary, were at the request of this committee. Other assumptions, such as the decision not to look abroad to find out what single-payer systems pay for medicines, were likely the result of time constraints by the analytic team. Overall, however, the PBO estimates are about the same as the worst-case scenario in my economic models published in 2015.

Given the alignment of the PBO modelling with independent academic modelling on this topic, the question can now be put to rest. Canada can afford a universal public pharmacare system because it will improve access to medicines while simultaneously saving us billions of dollars per year. Anyone who says otherwise is either misinformed or trying to misinform others.

Next I would like to share some findings from comparative policy research I have been doing with my colleagues at Harvard University. This work concerns how the structures of drug coverage and pricing policies affect access to medicines and overall costs to society.

The first thing we have shown in that work is that coverage matters. Countries that provide universal coverage of medicines at little or no direct cost to patients achieve better outcomes in terms of access to needed treatments. Using international survey data from 2015 and 2016, we have found that Canadians are between two times and five times more likely to report skipping prescriptions because of cost than citizens in nine comparable countries with universal drug coverage. This is because millions of Canadians are either uninsured or have insurance that causes them to face rather blunt cost-sharing terms, such as deductibles and co-insurance, which have been proven to reduce access to necessary medicines.

Despite the rhetoric of drug manufacturers and the think tanks they might hire, this committee should not be fooled by claims that there is a lack of access to innovative medicines in countries with universal pharmacare models. All comparable high-income countries with universal pharmacare provide access to medicines of proven safety, effectiveness, and value for money within their health care systems. What these countries do not do is provide drug manufacturers with access to markets at prices that cannot be justified by quality scientific data concerning comparative cost-effectiveness. That is why industry stakeholders do not like universal pharmacare systems that are well integrated into the broader system of health care financing.

Related to this, the second finding from our comparative policy research that I'd like to share is that the way medicines are financed profoundly affects cost controls. In a recent paper, we showed that single-payer systems for prescription drug financing achieve better outcomes in terms of cost control than multi-payer systems do. On average, the single-payer systems in Australia, New Zealand, Norway, Sweden, and the United Kingdom cost 20% less per capita than the multi-payer systems in Switzerland, Germany, France, and the Netherlands.

Unfortunately for Canadians, we found that Canada's fragmented system of financing results in the highest prices and the lowest incentive for cost-conscious coverage and prescribing decisions amongst all of these comparable countries.

If Canada were to integrate medicines into our single-payer medicare system in ways that are comparable to Australia, New Zealand, Norway, Sweden, or the United Kingdom, we could save at least $7 billion per year while dramatically improving access to medicines.

This brings me to the final relevant finding from our work on the structure of financing of medicines, which is that none of the comparable countries with single-payer systems for health care use a separate private system for financing prescription drugs. All comparable countries integrate their medicines within their broader insurance systems, and in doing so, they provide system managers both with the incentives and the moral authority to carefully consider the costs and benefits of medicines versus other forms of care for the populations they serve. This is one reason that other countries are able to effectively manage pharmaceutical costs while retaining public support for the tough but necessary decisions they must make concerning which medicines will be covered and which will not.

The last area of research I wish to highlight concerns our obligation to provide universal pharmacare and the importance of the federal role in doing so. Canada has ratified United Nations declarations that establish the right to health care, including the right to access essential medicines without financial barriers as a fundamental human right. Member states of the UN have an obligation to uphold fundamental rights for all of their citizens, which means the federal government has specific responsibility to do so in Canada.

Despite the complexities of our federation, Canada has successfully achieved national standards for universal public insurance for medical care and hospital services, doing so in the 1950s and 1960s. It did so through a system of cost-sharing that ensured that all provinces both could and would provide for their residents. Frankly, Canada must do the same for prescription drugs, or at the very least for essential medicines.

Just as in previous chapters of Canadian medicare, the federal government will need to help make this happen. Some provinces cannot go it alone on pharmacare because of resource constraints. Other provinces cannot go it alone because of the intense regional pressures that stakeholders place on governments that wish to bring pharmaceuticals into medicare and thereby rein in the excessive cost of medicines in our current system. Governments are stronger when they act together, and I think in the Canadian context this requires a federal partnership with the provinces and territories.

The question may then turn to where to start. Earlier this year, with Dr. Nav Persaud and other colleagues at the University of Toronto, I published a paper showing that the establishment of universal public coverage of a limited basket of essential medicines is one place to start as governments work towards more comprehensive universal pharmacare. In that analysis, we showed how covering a list of just over 100 medicines could fulfill about three-quarters of Canadians' pharmaceutical needs.

Though more comprehensive public coverage would remain the goal for a national pharmacare program, starting with the essential medicines means that we would not need to replace existing private and public drug plans at the outset. While the other plans are being phased out, the essential medicines program could establish the Canadian process for publicly covering however many drugs made sense, given its initial budget.

Rather than the historical approach of defining which Canadians would be covered for virtually every medicine, this approach would determine which medicines would be covered for every Canadian. This would help fulfill Canadians' right to health, since the obligation of a nation is not to provide any medicine for any purpose at any price; the obligation of a nation is to ensure universal access to medicines that safely and effectively meet legitimate health needs and to do so at a cost that can be justified and sustained, given the competing health needs of our population and the competing means of addressing those needs with available budgets.

If the federal government provided, for instance, $3 billion per year, it could fund as much as 50% of the cost of a reasonably comprehensive essential medicine list that could be provided to all Canadians within a year. Within that time frame, the list of medicines could be determined by an expert advisory committee, a tendering process could be established and implemented for the roughly 100 medicines that would make the cut, and provinces would certainly be brought along by the savings to their budgets and the benefits to their residents.

Despite being limited to a small number of drugs, such a program would likely save Canadian households and Canadian businesses approximately $6 billion, generating a net savings to Canada of $3 billion.

As the program grows, it could be expanded to one as comprehensive as the pharmacare model for which the PBO estimated the cost. If based on best procurement practices in the pharmaceutical sector, that program would certainly result in net savings that would exceed the PBO's estimate of $4 billion per year.

I'll conclude by noting that there are clear and compelling options for an equitable and sustainable system of universal pharmacare in Canada. I'm very grateful to be invited back again to provide evidence you require as you decide which of these options is best for Canadians.

Thank you.

[The Chair, Liberal, Bill Casey]

Thank you very much. We're glad you came.

Next we have Dr. Raza.

[Dr. Danyaal Raza, Chair, Canadian Doctors for Medicare]

Thank you, Mr. Chair.

Thank you to the members of the health committee for the invitation to speak today.

I'm here today not just in my role as chair of Canadian Doctors for Medicare, but also as a family doctor in Toronto, with an inner city downtown practice that runs the spectrum from those struggling to make ends meet on social assistance, to the working poor, to those solidly in the middle class, and yes, even a few bankers and consultants from Bay Street. My waiting room is always a lively space.

Founded in 2006, Canadian Doctors for Medicare provides a voice for doctors from coast to coast to coast, advocating for evidence-based and values-driven reforms to our public health care system.

As a background to my remarks today, I will submit copies of a brief report that was published by us, Canadian Doctors for Medicare, in partnership with the Canadian Centre for Policy Alternatives, in advance of the recent PBO report on the cost of pharmacare. In that document we provide an overview of current public and private spending on prescription medications and some of the potential savings that Canadians could expect to see with the introduction of a universal pharmacare program.

We have the benefit today of hearing from some well-known economic experts who have deep expertise on this issue, and while I'm happy to talk dollars and cents, I also want to focus my remarks on the positive health impacts that such a program would bring.

I've been very lucky to have been born, raised, and trained all through university in Canada. Now I'm very fortunate to practice as a family doctor in our universal public single-payer system. As Canadians, it's something that we are sincerely proud of, and rightly so. Unfortunately, as a family doctor who works within a very diverse practice and set of patients, I also see first-hand how that same public system doesn't go far enough. Every day that I'm in the clinic I see how gaps in coverage and gaps in medicare mean many Canadians are falling through the cracks in our incomplete system.

At Canadian Doctors for Medicare, we're of course proud of our system; it's why we work tirelessly, not only to defend the principles on which it was based and on which it was founded, but also to find ways to improve it. That of course means seeking innovations that will make it more efficient and more accessible, and ensure it achieves the best outcomes for Canadians. When we talk about pharmacare, we talk about it as one such program. We talk about it as the unfinished business of medicare.

When I'm with a patient, in my role as a physician there is nothing worse than being able to make a diagnosis, have a conversation with my patient, develop a treatment plan that makes sense for them and for me as their family doctor—which often includes prescription medications—only to realize that they're ineligible for a means- or age-tested public plan, they have no job-linked insurance, and that their ability to fill those prescriptions means having to dip into their savings account for medically necessary care.

In fact, this happens so often that I include questions about insurance status whenever I meet a new patient in my meet-and-greets. I ask these questions because I need to be cognizant of this situation, of how it serves as a barrier to treatment and how it influences the care I either can or can't deliver. When a patient's only option is to pay out of pocket, the cost of drugs also begins to influence other budget decisions, including rent, healthy food, hydro, and, of course, medically necessary prescriptions.

This is particularly true for the working poor and people who are precariously employed. It means that patients experience a phenomenon known as “cost-related non-adherence”, resulting in unnecessary hospitalization and a downstreaming of disease. It means that chronic medical conditions like hypertension or high cholesterol go untreated until acute complications develop, creating an unnecessary burden on patients themselves, their families, their loved ones, and our health care system as a whole.

It's estimated that between 5% and 6% of hospitalizations in Canada are a result of non-adherence to prescriptions, costing us approximately $1.6 billion per year. While we don't know the percentage of these cases that are due to the financial burden of filling prescriptions, we know it is frequently reported as a problem, not just by doctors, but by patients. For example, cost-related non-adherence was reported by 9.6% of respondents to the 2007 Canada community health survey who received a prescription. Financial barriers to accessing medically necessary prescriptions are felt especially acutely by low-income Canadians, with 20% of these respondents reporting issues with cost-related non-adherence.

Here in Ontario, where I practice, if you're old enough or poor enough, you're entitled to a comprehensive public drug plan. However, for Ontarians working in contract or precarious jobs who might have the very same diseases as their means-tested or age-tested peers, access to drug treatment depends entirely on their private insurance plans or the balance in their bank accounts.

For example, in 2015 the Wellesley Institute reported that if you were an Ontarian earning $100,000 or more a year in income, there was a greater than 90% chance that you'd have access to a job-linked drug program. However, if you were earning less than $10,000 a year, that fell to less than 20%. We know from the medical literature as well that health is tied to wealth and income, and of course the folks who are least likely to have a drug plan are also the folks who are most likely to need a drug plan.

If we instead look at disease not by employment income but by disease itself, another recent study estimated that the disparity in access to treatment among working-age Ontarians with diabetes resulted in 700 premature deaths a year. That's 700 premature deaths each year in one province for one disease due to a lack of access to treatment. That doesn't begin to capture the cost or social impact from complications of diabetes, such as chronic kidney disease, issues with vision, impaired wound healing, peripheral neuropathy, and an increased risk of heart attacks and strokes.

When I speak with my colleagues in other countries about why I am proud to be a doctor working in Canada, I cite the relief of knowing that cost is not a factor when patients access medically needed hospital or physician services. Medical bankruptcies such as those we hear of in the U.S. are thankfully rare here, but we cannot ignore the significant financial burden that comes with a diagnosis when we do not have access to medically necessary prescription drugs.

I was happy to see in the recent PBO report an acknowledgement of the potential savings that a national pharmacare program could bring to Canada, especially as I saw the $4 billion in estimated savings that were determined despite prudent, conservative estimates of administrative and drug price reduction savings.

You've heard from economists and experts in the PBO about the number of factors that go into determining potential costs of implementing a single-payer universal prescription drug program here in Canada. As well, of course, you have heard of the potential financial savings that would result from expanding access to everyone.

What I and my colleagues at Canadian Doctors for Medicare, as well as doctors across the country, can convey to you with a high degree of confidence is how such a program will have a tremendous and positive impact on the health of everyday Canadians, the patients we see in our offices every day. It will ensure that when any Canadian goes to the doctor, the care doesn't end when they go out the door, and that the medically necessary prescriptions they leave the clinic with are the most appropriate and best available medications based on need and not on ability to pay.

It's time to close this glaring gap in medicare.

Thank you.

[The Chair, Liberal, Bill Casey]

Thank you for your contribution. I appreciate it very much.

Mr. Frank, welcome back. I see you were here in May 2016 on this issue.

[Stephen Frank, President and Chief Executive Officer, Canadian Life and Health Insurance Association]

Thank you for inviting me again.

My name is Stephen Frank and I am the president and CEO of the Canadian Life and Health Insurance Association (CLHIA). Joining me today is Karen Voin, vice-president, Group Insurance and Anti-Fraud, also from CLHIA.

On behalf of the life and health insurance industry, thank you for giving us the opportunity to speak to you again as you finish your consultations on this very important matter of pharmacare.

Our association accounts for 99% of Canada's life and health insurance business. Across the country, 24 companies offer extended health coverage to more than 28 million people. Our industry includes not-for-profit organizations such as Blue Cross, benevolent associations and larger companies. We work with employers to provide Canadian workers with extended health coverage for a wide range of prescription drugs, paramedical services, such as psychologists, physiotherapists and chiropractors, as well as eye exams, lenses and glasses, and dental care, just to name a few of our coverages.

Canada's life and health insurers believe that all Canadians should be able to access affordable prescription drugs. Today, prescription drug costs are too high, and we know there are gaps in coverage. However, meaningful reductions in prices and improving access for all Canadians can be achieved today within our current system.

Canada's insurers are keen to help and believe we have much to offer. Several initiatives set out by both the federal and provincial governments will make a difference.

The proposed amendments to the regulations of the Patented Medicine Prices Review Board (PMPRB), are important because they will provide the PMPRB with the necessary tools to reduce costs. We fully support the direction the PMPRB has taken and will continue to work with the authorities to better assist them.

As well, through the pan-Canadian Pharmaceutical Alliance, or pCPA, this will also help bring down the costs for public plans. We believe the federal and provincial governments are on the right track, but they need to go further. The current approach only leverages half the buying power of the Canadian market in any negotiation, and it leaves those Canadians with private insurance or who are paying out of pocket to fend for themselves. This situation results in prices that are higher than they need to be, and it also entrenches unequal prices for the same drugs across Canada.

The good news is that there is an easy way to address both these shortcomings. Private plans need to be included in the pCPA. This would allow governments to negotiate the best prices possible, using the entire Canadian market volume, while ensuring that all Canadians are treated fairly and pay the same price for the same drug.

Ultimately, Canada's life and health insurers believe the best solution to ensuring sustainable prescription drug coverage is one that blends together the strengths of both the public and private systems. We work together with employers to offer access to a wide variety of prescription drugs through employer-sponsored benefit plans. Canadians value their benefit plans, which provide them with rapid access to over 12,000 prescription drugs. The Sanofi survey in 2016 points to the importance that employees place on their drug coverage: 94% of them indicate that drug plans are very important or somewhat important. One of the reasons employees value their drug plans so highly is that new drugs are approved more quickly than they are in private plans, providing Canadians with faster access to new and innovative medicines, generally with fewer restrictions.

However, there are gaps in the Canadian system, and understanding the gaps is crucial if we're to develop appropriate and targeted solutions. There are Canadians who do not have access to a public or private plan or perhaps do not have adequate coverage. We need to focus and coordinate our efforts to understand where these gaps are and to work on achievable and targetable solutions.

The report that the parliamentary budget office tabled with this committee a few weeks ago highlighted the costs of moving to a universal single-payer system, as well as the savings that could be garnered from bulk purchasing. Even with optimistic assumptions, the costs would be nearly $20 billion for the federal government. As for any estimated savings, the bulk of these are estimated to arise from negotiating better drug prices by using the full buying power of the Canadian market. As I outlined above and want to stress, there's nothing stopping us from moving in that direction now by including insurers in the scope of the pCPA.

The bottom line is that the projected savings to the overall drug spend can be achieved today with minimal disruption and without taking away access to the wide variety of prescription drug plans that are so highly valued by Canadian employees.

In closing, I would say that our industry is committed to working closely with governments to help improve Canada's health care system.

Thank you for your time today. I would be happy to answer any questions you may have.

[The Chair, Liberal, Bill Casey]

Thank you very much. You still have some time left. Madam Voin, do you want to make some comments, or are you good?

[Karen Voin, Vice-President, Group Benefits and Anti-Fraud, Canadian Life and Health Insurance Association]

No.

[The Chair, Liberal, Bill Casey]

We'll go right to questions, then, starting with Mr. Oliver for seven minutes.

[John Oliver, Liberal, Oakville, ON]

Thank you very much.

Thank you again, some of you, for coming back to the committee.

Dr. Gagnon, Dr. Raza, and Professor Morgan, thank you for your leadership on this case. You've been at this for years and years, I think, some of you. Mr. Morgan, you said you've been at it for close to 20, so it's great leadership in bringing this to the point where we as a committee are able to draw on the work that you've done.

We're wrapping up. I think this is our last meeting with witnesses before we begin to give direction to the analysts to draft the committee's report. My questions are going to be focused on some areas I don't think we have addressed yet and had testimony on, so they won't be too general in nature. They primarily focus around the federal, provincial, and national aspects of how things get done.

With the challenges of developing a science-based and evidence-based formulary and achieving the best negotiating strategies that we can in terms of buying processes, it seems to me that a national formulary—done in collaboration, obviously, between the provinces, territories, and feds—would be the ideal place for the formulary to sit. Do you agree with that?

[Dr. Marc-André Gagnon]

The answer is yes. However, at the same time, you can have a different list of exemptions for the different provinces based on specific needs, but—

[John Oliver, Liberal, Oakville, ON]

—but, in general, the place it begins is at a national—

[Dr. Marc-André Gagnon]

—a national formulary, yes.

[John Oliver, Liberal, Oakville, ON]

Would you comment, Mr. Morgan?

[Prof. Steven Morgan]

It is fair to say that all the countries with effective systems for managing cost and access so that there's equity of access with cost control use some form of a national formulary.

[John Oliver, Liberal, Oakville, ON]

Thank you.

[Dr. Danyaal Raza]

It's not only good for cost effectiveness. It will also ensure that we pay only for medications that actually work, and not just medications that are approved.

[John Oliver, Liberal, Oakville, ON]

The next question, then, is who is to administer it. If we think about a single-payer model, is it federally administered, or is it provincially and territorially administered like the rest of our health plan?

The conclusion I have come to is that the provinces spent $13.1 billion on public plans in the last year to insure their insured populations, so they already have robust payment mechanisms to pharmacists and others to support that public system.

This is something I don't like in this report. It says the cost to the federal government would be $20.4 billion, but in reality $13.1 billion is already being spent at the provincial level. If we think about who pays and how we afford it, there are other levels of payment. Private insurance was around $9 billion, but of that almost one-quarter went to municipalities, universities, schools, hospitals, and governments, which again are under provincial control, and they're able to extract payment.

By my math, if I look at what's already in public plans and look at that one-quarter of the insured workplace, $15.8 billion is covered, and we're really left looking for about $3.5 billion or $3.7 billion at the federal level. That's assuming we let all the employers off, so that all their employees are now insured and they don't have to cover benefits for them.

Does that make sense to you? Is that how you would see those numbers rolling out?

[Dr. Marc-André Gagnon]

That makes sense to me, but, as I mentioned in my presentation, you're not counting the federal tax subsidy spent right now for private regimes. This is more or less $1.4 billion a year, so in fact the number would be lower for the federal government.