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.