Health Committee on May 2nd, 2016

[W. Neil Palmer]

We do a range of things, typically for pharmaceutical manufacturers. We prepare the submissions of clinical and cost-effectiveness evidence that are submitted to the common drug review, INESSS, and the pan-Canadian oncology drug review. We provide similar types of information to the PMPRB. We help the manufacturers assemble the evidence they need to get their drugs listed as benefits on formularies.

[The Chair, Liberal, Bill Casey]

Mr. Dempster.

[William Dempster, Chief Executive Officer, 3Sixty Public Affairs]

Good afternoon.

My name is Bill Dempster and I'm CEO of 3Sixty Public Affairs, a health policy and advocacy consultancy.

My colleagues and I have practical experience with pharmacare programs, government policy, and pharma industry stretching back to the mid-1980s. We contribute to peer review publications, policy magazines, and industry journals on a range of issues relevant to this study.

I want to thank the committee for inviting me to share my point of view on a national pharmacare program.

I've been invited here to talk in particular about bulk purchasing and cost containment. I'm here as an individual to share my personal observations, and I want to focus my remarks on a lot of what Neil touched on in regard to the pan-Canadian Pharmaceutical Alliance, by reviewing where the pCPA fits in the process, how it works, and the impacts it has as a cost-control tool and policy. I'll also touch on how other payers, including private insurers and hospitals, control costs using similar mechanisms. I'm going to make some references to some figures and graphs that I've prepared in a PowerPoint deck in both languages.

Hopefully, I'm going to help the committee better understand the evolution of pCPA and how it can fit into the federal government's approach to pharmacare and understand a little more about how other payers also control costs using similar mechanisms.

I would invite you to look at page 2 of my handout which shows where the pCPA fits. You've already heard from Health Canada and the federal price watchdog, the PMPRB, as well as the Canadian Agency for Drugs and Technologies in Health, or CADTH. It is after the review by CADTH or Quebec's health technology assessment agency, INESSS, where pCPA picks up a new drug for potential negotiations with manufacturers.

Operationally, the pCPA secretariat is housed in Ontario's health ministry, with five staff, but the bulk of the work takes place across the country, as every week federal, provincial, and territorial public drug programs hold teleconference calls to discuss current negotiations and review recent evaluations to determine whether or not to enter into talks on a new medicine.

If pCPA decides to negotiate, one representative jurisdiction is chosen to lead the talks and be the primary point of contact with the manufacturer. It's like collective bargaining or multi-level negotiations. That lead jurisdiction actually has to get the consensus of all of the other jurisdictions that are involved in that discussion in order for a deal to be secured. I use the term “deal” loosely because there is no legally binding agreement. They are negotiating a letter of intent that all participating governments are expected to implement.

Most deals are a simple price discount, which operates as a rebate that will be paid back to each jurisdiction. However, it's not always about price. I think there's room to expand what the pCPA can do. In fact, the pCPA has said it is open to and has concluded negotiations on issues like health outcomes and utilization caps for ongoing research.

What are the primary interests of the parties in these negotiations? Well, beyond patient access to new health products and improved health, which both parties are looking for those, the drug plans want greater budget and clinical certainty and, ideally, savings. The manufacturers are looking for a fair price and greater revenue certainty. The time it takes to negotiate varies widely from a few months to over a year in some cases, and now there is a large volume of new products coming through the system, which is already stretched. This is causing a backlog. There are around 20 drugs that have CADTH recommendations, but there's no decision on whether to negotiate.

The pCPA is also looking at multiple products in the same class of drugs, some of them older medicines that have been on the formulary or that have come due for renegotiation. The pCPA is also responsible for administering the reimbursed and transparent prices for generic drugs; and as my fellow panellists said, prices for generics are set at progressively lower percentages of the innovator price. It can be as high as 85%, but it can go down to 18%. Most payers benefit from these transparent generic drug prices.

How do other payers, including private insurers and hospitals, operate? Well, there are just three private health benefit providers that account selectively for two-thirds of the big private market, and there are dozens of smaller private insurance companies. All of them are ramping up negotiation capacity on their own, as are smaller providers.

Private insurers can offer literally hundreds of different types of drug benefit plans based on the needs and capacities of their clients, which, in general, are employers, unions, and affiliated groups, but they can also be individuals. Private payers have also long used the valuation committee to provide reimbursement advice, and manufacturers prepare and submit lots of data to these payers as well.

Not all private plans are open formularies. As you might have heard previously, a growing number are actively managed with a range of cost-control mechanisms.

Private health benefits are highly valued by most Canadians. They cover 24 million of us, including, I would imagine, every person around this table. For employers they're an essential part of a competitive compensation package. How about hospitals? Well, they too have drug evaluation committees and can often negotiate alone or as part of group purchasing organizations, depending on the province.

Let's go back to the pCPA and talk about what it has achieved. As my fellow panellist said, as of last month the pCPA had successfully negotiated a milestone 100 medicines and uses of medications. The half a billion dollars in annual savings announced last year has to be much higher today. There are 40% more negotiated products through the system and there are even more generics listed at the lowest price level.

To get a snapshot of these savings, I'd ask you to turn to page 3 of my handout. As you can see, we compared the provincial reimbursement rates today with those of a decade ago, in 2006 before the introduction of any provincial capacity to negotiate with manufacturers. Ten years ago, 103 new drugs, drug uses, or formulations had come to market in the previous 24 months. For those, only two provinces had reimbursed or listed more than 30% on their public drug programs, and the average was less than 20%.

Fast-forward to the end of last year with the pCPA in full swing. There are at least three things that I think we can pull from this data. First, a lot more products are coming to market, nearly 200 compared to half that a decade ago. Second, Canadian patients can now access many more new drugs, double the number of 10 years ago, and the proportion of new drugs has jumped from less than 20% to over 30% on average. Finally, there is more consistency across the plans. Look at the line graphs on the right and you will see that there is much less variability across plans today. This is looking a lot like a de facto national formulary.

However, these graphs don't tell you the aggregate value or price reductions. Those are really hard to figure out, because a lot of the prices are confidential. These are based on individual negotiations, but for a glimpse of that, I would direct you to page 4 of my handout. Let's look at the total amount spent by provincial governments on prescription drugs in recent years. You'll see that since 2011 when the pCPA really started, spending by governments levelled out and even dropped as a share of total health spending. So governments are spending roughly the same amount, or even less when you consider inflation, population growth, and aging, but Canadians who depend on public drug plans have access to many more medicines. It tells us that prices must be coming in at significant discounts.

We've talked about how the pCPA works and shown how the pCPA adds value, achieves better prices, and increases consistency across government programs, but I want to provide a quick analysis of the pCPA beyond economic issues.

Here are some other positive aspects of pCPA. In addition to taking part in government collaboration, the office is willing to consult and engage with all stakeholders, and it has set out some very patient-centric principles drawing on the cancer review system. However, the pCPA still has some challenges, and I'll just touch on a few. First, in terms of transparency, the public doesn't know which jurisdictions have taken part in any given deal. Second, there are no timelines for the various steps, although the office of the pCPA is developing a negotiations playbook, and they hope that some elements and timelines are clarified in that. Third, provinces don't always reimburse quickly or at all following the conclusion of a negotiation. For them the negotiated deal or letter of intent appears to be an option to reimburse and not a commitment to reimburse, and that probably limits the level of discount the manufacturers can offer. Fourth, the backlog I spoke of earlier is delaying access to important new therapies and there is a cost to patients and the health care system in those delays. These issues need attention.

Now that the federal government is involved in the pCPA and more engaged with the provinces on health care in general, Ottawa could inject funds to increase the capacity of the pCPA to move products through the system, improve transparency, improve timelines for quick reimbursement decisions after negotiation has been completed, and even play a role in closing important national access gaps, such as an approach to funding drugs for rare disorders.

What does this have to do with national pharmacare? National pharmacare as a policy proposal appears to work in other countries in context, but I think there's a lot of analysis to do before we can say that it works in practice in Canada. In the meantime, all public jurisdictions are steadily building and adapting the pCPA to the Canadian federal reality. This relatively young initiative is an important and evolving contribution to national collaboration on pharmacare.

I'd like to thank all of you again for inviting me here today. I look forward to hearing from the next panellist and answering your questions.

Merci.

[The Chair, Liberal, Bill Casey]

Thank you very much.

I'm just wondering. Does this system make sense to you? Is this a good system?

[William Dempster]

As my fellow panellist said, it's an organically evolving system. I've been writing on it since it started in 2011, and at least every two years we publish an article on it. It's getting better year over year.

Is it a good system? Yes. Could it be a lot better? Oh yes.

It's definitely not perfect, as I think I've laid out, and it's not the full nationalized pharmacare program, but it certainly is stepped to national collaboration and general frameworks for it that everyone can draw on and access prices that they otherwise couldn't.

For Atlantic Canada, where I understand you're from, Mr. Chair, I think it's been an amazing success. The listing rates in Atlantic Canada have gone up significantly because they can get access to better prices, which they just couldn't get under the previous system.

[The Chair, Liberal, Bill Casey]

Thank you.

Dr. Sher.

[Dr. Graham Sher, Chief Executive Officer, Canadian Blood Services]

Thank you very much, Mr. Chair, and committee members. Thank you very much for the opportunity to be back in front of this committee, this time to talk on the important topic of pharmacare.

We are here before you today because we view Canadian Blood Services' national formulary of plasma protein drugs as a made-in-Canada model that may be useful to inform the committee's discussion on national pharmacare. We believe our approach shows that bulk purchasing of pharmaceuticals can be done transparently and successfully on a national pan-Canadian scale while maintaining product choice and ensuring security of supply for all Canadians. We've also supplied the committee with a written brief that includes more details about the information I'm going to summarize today.

Let me begin by explaining what plasma is and providing a bit of context on how plasma protein drugs are made. Plasma is the protein-rich liquid in blood that helps other blood components circulate throughout the body. Plasma protein drugs or plasma protein products are a highly specialized class of drugs made from human plasma.

Pharmaceutical companies that manufacture these derivatives are called fractionators and are typically found in the United States and Europe, where these products are made by pooling large volumes of plasma donations from thousands of screened plasma donors. The pooled plasma then goes through a series of rigorous processes and tests to eliminate pathogens and other contaminants, making the finished products extraordinarily safe. A number of these plasma protein products are now synthetically manufactured by genetic recombinant technology and all of the drugs in this class of products are deemed to be expensive biological drugs for lifesaving indications.

Our organization has the sole responsibility for bulk purchasing and managing a pan-Canadian formulary of 45 brands and classes of plasma protein products. We do this on behalf of all the provinces and territories with the exception of Quebec. These drugs are worth over $600 million a year and are essential medicines in Canadian hospitals and clinics, and around the world. They are used to treat patients with bleeding disorders such as hemophilia, as well as patients with inherited and acquired immune conditions, burn, trauma victims, and many other clinical indications.

Advocates for a national drug program have argued that the lack of broad national bulk purchasing capacity creates a serious value gap for Canadians. We would agree.

While governments have indeed been able to lower the cost of some drugs through the pCPA, as we heard from both previous speakers, price is only one part of the equation. Our supply chain management and bulk-purchasing program addresses, in addition to pricing, patient outcomes, health system performance, as well as cost, and delivers layers of added value to Canadians in the process.

We achieve these benefits in several ways. Firstly, wherever possible, we carry multiple brands of a single product class. We buy these brands and classes in smaller, diverse lots. We negotiate essential safety stock agreements with every manufacturer to mitigate against any potential shortfalls or supply disruptions. Most importantly, we do this without resorting to single sourcing. At the same time, because of the national bulk purchasing power, we ensure that the prices we pay are highly competitive internationally.

Another very important factor in our process is that we build into the process input from stakeholders at all steps of the procurement process. Our program engages and involves patient groups, as well as the prescribing medical community, and gives them a voice in the decision-making on product selection and procurement, and aims to offer and ensure a reasonable degree of product choice.

As part of our product selection process, we also collaborate and draw on the expertise of the Canadian Agency for Drugs and Technologies in Health, CADTH, from whom you've heard, to provide the necessary pharmacoeconomic analysis whenever we consider adding a new category of drug to our formulary.

This collaboration is an important part of the procurement program and ensures that we add the right types of drugs to the formulary for Canadian patients. It also ensures shorter and more efficient approval times for review and ultimate decision of listing of drugs onto our formulary making access times for some of the drugs on our formulary amongst the shortest in the country.

One of the greatest successes of our program is the use of open, competitive, public tendering to get the best possible prices through multi-year requests for proposals for a single product or group of products. This public tendering process and the economy of scale we achieve by purchasing for all the provinces and territories have brought significant cost savings for funding governments. For example, in a recent round of tendering for a suite of plasma protein products, we negotiated a $600-million reduction over a five-year period for less than a dozen drugs. More recently, we were able to negotiate an additional $60-million annual reduction for two hemophilia drugs. Today we've been able to negotiate the price of drugs down to below 2009 pricing levels. These examples clearly underscore the value of a national bulk-purchasing program of expensive pharmaceuticals and, more importantly, this value is achieved without sacrificing either product choice or diversity of supply.

Once these products are purchased and available, how they're used also becomes important. We collaborate with experts in transfusion medicine and physicians and provincial-territorial governments across the country to develop clinical practice guidelines and to promote optimal utilization practices for these drugs. Our model also allows the provinces and territories to introduce their own access guidelines for individual products, which they can then manage themselves at the regional health authority or institutional level. Canadian Blood Services and national physician groups affiliated with the blood system can also develop national criteria for use. These options give the treating jurisdictions flexibility in how they manage their use of these essential, yet expensive, biological drugs.

Canadian Blood Services also independently qualifies new suppliers and audits them periodically. This process adds an additional layer of vigilance and product safety for patients. Our contracts with suppliers require them to report early and regularly any issues in bringing product to the marketplace, and to ensure they maintain adequate safety stocks in the country. This information enables us to act on any supplier issue quickly and helps mitigate the risk of product shortage.

Our procurement and legal groups are well versed in the specifics of bulk buying, which we leverage to the advantage of all the provinces and territories. These steps are an important additional layer of value in managing a national bulk-purchasing and distribution program on behalf of all jurisdictions.

Collaboration with the prescribing medical community and the hospital sector in which these drugs are used has clearly been an important part of the success of our program. We have hospital liaison specialists who maintain strong relationships with the treating community and manage any issues related to supply, product choice, or adverse events. Our on-staff medical directors provide expert advice when a physician encounters an issue with a patient who could benefit from the perspective of an additional specialist.

These cornerstones of our bulk-purchasing program are the elements that have enabled it to succeed. Taken as a whole, our model supports a level of health equity that remains out of reach for many other patient groups served by individual provincial health systems, and who may face an all-too-common postal code lottery when it comes to accessing certain medications, particularly expensive ones. In contrast, whether the patients we serve are in Vancouver, Iqaluit, or St. John's, Newfoundland, they have access to the same reliable supply of high-quality drugs at all times.

In summary, Canadian Blood Services has been providing universal and equitable access to plasma protein drugs at no cost to patients for nearly two decades. Our approach to bulk purchasing is not a cookie-cutter solution for many of the substantial challenges that must be resolved should governments enact aspects of the national pharmacare program. Rather, our experience shows that bulk purchasing can be done transparently and successfully, while maintaining product choice and security of supply.

We brought these points to the committee today to demonstrate that pan-Canadian collaboration in the complex area of drug acquisition, distribution, and utilization, can be done in a way that responds to the concerns raised by many stakeholders to the pharmacare issue.

As interested parties continue to study this complex issue, we would be pleased to answer their questions as well as this committee's and to explore any ideas further, if they are of interest.

Thank you very much.

[The Chair, Liberal, Bill Casey]

Thank you very much, all of you, for shedding light on some of these issues, which are a little complicated, if you're not familiar with them.

Mr. Kang, happy birthday. You get to ask the first questions.

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

Thank you, Mr. Chair, for the birthday wishes.

Conflict of interest is my greatest concern. My first question is for Mr. Palmer.

Have you received any financial compensation in the past 12 months from clients in the pharmaceutical industry or special interest groups with the specific purpose of influencing federal pharmacare policies in their favour?

[W. Neil Palmer]

I'm sorry, you're going to have to repeat the question. I couldn't hear it very clearly.

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

Have you received financial compensation in the past 12 months from clients in the pharmaceutical industry or special interest groups with the specific purpose of influencing federal pharmacare policies in their favour?

[W. Neil Palmer]

From the pharmaceutical industry, no, sir, I have not. The only funds we've received are from the Canadian Pharmacists Association for preparing the study that I believe you have a copy of.

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

Have any groups you represent been invited to appear before this committee to talk about national pharmacare, and if so, which ones?

[W. Neil Palmer]

Has anybody...?

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

—any group—

[W. Neil Palmer]

The Canadian Pharmacists Association will be appearing here.

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

Okay, thank you.

Mr. Dempster, I have the same question for you. Have you received financial compensation in the past 12 months from clients in the pharmaceutical industry or special interest groups to lobby the federal government on their behalf for pharmacare policies that would benefit the way they do business?

[William Dempster]

Yes. I am a registered lobbyist in three, possibly four, jurisdictions, including Ottawa; Queen's Park in Toronto; and I think Alberta, depending who we have working out there at any given time; and Quebec.

It's advocacy. Lobbying is, I would say, a third of what 3Sixty Public Affairs actually does. I'm here today, though, to express my personal views.

We also do a lot of analysis and writing. Technically it is for the pharmaceutical industry. We write a 500-page review called PharmaFocus for IMS Health, which is the world's biggest health analytics company, and it looks at all of these issues across the country.

I'm not here to advocate any particular issue, but I'm more than happy to let you know these details, and it's on the public record in several jurisdictions.

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Chairman, I have a point of order.

In fairness to the witness, let me say that I'm unclear about something. Twice now he has said that he's here in his personal capacity, but the witness list and also the document that he passed out says William Dempster, CEO, 3Sixty Public Affairs, and it's on 3Sixty Public Affairs letterhead. I'm just curious or unclear about this. I'm trying to square the testimony that he is here on his own behalf with his having indicated on a number of occasions that he's here on behalf of the organization of which he's the CEO.

It's not that there's anything wrong with either of these cases; I'm just trying to clarify why this would be the case.

[The Chair, Liberal, Bill Casey]

Mr. Dempster.

[William Dempster]

I'm CEO of 3Sixty Public Affairs. We engage in advocacy activities and support interest organizations in understanding and building bridges with governments. We also do a lot of analysis and research on those issues to help prepare them for building such bridges and understanding how to come up with good public policy.

Today—this may have been something to do with some interaction with the clerk—we're not representing any of our clients. Perhaps I should have clicked a box saying that I'm representing 3Sixty Public Affairs, although I have to say, Mr. Chair, that even within my organization, on all of these issues we have excellent debates and discussions. I don't want to say that my personal views are those of everyone I work with or of my colleagues at 3Sixty Public Affairs.

I don't know how I can be more specific. I'd be happy to take this off-line or let you know more about what we do and how we do it.

[The Chair, Liberal, Bill Casey]

Mr. Kang.

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

That was going to be my second question. You said you were here personally and not on behalf of your company, so there could be conflict or a perceived conflict in this.

What should we make of this?

[William Dempster]

I think I understand what you're suggesting. The work that I do with clients, who are only in the health sector, and who range from innovative pharmaceutical manufacturers and biologics to medical device companies to patient organizations to health care professionals and so on, has certainly helped educate me on a lot of these issues and has put me in a position, I think, to provide some figures in front of the committee on how the pan-Canadian Pharmaceutical Alliance works, but I'm certainly not advocating on behalf of any of our clients today.

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

Mr. Sher, very briefly, I have the same question for you.