Health Committee on May 2nd, 2016

[Dr. Graham Sher]

The federal government has virtually no role in funding or financing the operations of Canadian Blood Services. We are funded by the collective of the provinces and territories for all the products and services that we provide to Canadian patients. The sole exception to that is that the federal government is in a cost-sharing agreement with the provinces for the national organ donation and transplantation program that we administer for the whole country. There's a fifty-fifty funding agreement between the federal government and the provinces and territories for a total budget of about $7.5 million a year. All the drugs that we acquire through the $600 million a year formulary are provincially and territorially funded, not federally funded.

[Sonia Sidhu, Liberal, Brampton South, ON]

Second, related to that, do you think the Canadian Blood Services model of financing and of governance is a model for pharmacare?

[Dr. Graham Sher]

If I understand your question correctly, as I said to Mr. Davies, I do think the model that we use for procuring, acquiring, distributing, and monitoring the utilization of these expensive biological drugs is a model that could be replicated for other drugs in the country, although not necessarily for every pharmaceutical that is prescribed. I think there are unique aspects to the program that we administer, but I do think it is worthy of exploration for a series or a class of other drugs that are not dissimilar to the 45 on our formulary.

[W. Neil Palmer]

I'd like to add a comment. My understanding is that most of the products that go through CBS are not the kinds of products you'd see at a retail pharmacy. They're more like hospital products, which go through a specialized procurement process already in many cases, not the single one country one, but perhaps group purchasing organizations or hospital-by-hospital contracting. But I don't think—

[Dr. Graham Sher]

I'm not sure that's entirely accurate. None of our products go through retail pharmacies. That is correct, but all our chemotherapy drugs are administered in hospital, so I think there are many other classes of drugs that are quite similar to those we distribute.

[W. Neil Palmer]

I agree, but not in regard to the traditional retail pharmacy type, because there's a whole set of distribution that is completely different.

[The Chair, Liberal, Bill Casey]

The time's up.

Mr. Davies, you have three minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

The one thing that we haven't really mentioned here. We have talked about the problem, and the reason this committee is studying national pharmacare is that the status quo is not acceptable. As I said, at least 20% of Canadians have no coverage. That's not acceptable in a country like ours, at least in my and my party's opinion, but in addition to that, we've heard rock-solid evidence that Canadians are paying the second-highest, sometimes fourth-highest, drug prices in the world. We're actually paying through the nose for a system that can't provide universal coverage. That's the context that underpins this study. We also have understood that Canada is the only country in the world with universal medical care without some form of universal pharmacare.

As a result, we're putting these things together and looking for a way to improve coverage for Canadians and maybe tackle the costs. What we've been hearing so far in testimony from proponents of a national pharmacare system is that we need a combination of things. We need bulk buying and national market access for successful low bidders like they have in New Zealand. In New Zealand, if a low bidder gets the tender, they get access to the whole market for their drug. We also need a streamlined administration instead of having thousands of administrators across this country in private plans. We need an evidence-based formulary, and the cost savings that come with timely universal access to medicine, as Dr. Eyolfson has described.

You put all those things together and we have heard proponents say that if Canada moves to a model like that, taking best practices from around the world, we could actually achieve universal coverage for Canadians and save billions of dollars at the same time. In fact, Dr. Morgan has estimated that if we adopted the German system or the U.K. system, we would save $4 billion or $12 billion and make sure everybody's covered.

Mr. Dempster, I'll give you a chance to respond. What's your comment on that scenario?

[William Dempster]

I think any time you look at what another system accomplishes, you have to take it in its cultural reality and its health system reality. You really can't just drop it into Canada and say it's going to work exactly the same here. We're right beside the United States. It's a different reality from Germany or Austria or France or whichever model they want to actually replicate here.

In terms of the specific elements of the proposed Pharmacare 2020 model—and I was there when it was launched in 2013 in B.C.—with tendering for single source products across a given class, you will only end up with one or two choices of which bidder actually wins that. It really is a challenging system to put into place for all single-source products. I'd say that you can't do it. You can do tendering for generic drugs. Ontario tried to do it in 2008. It does work in some other markets and I think there might be some savings that you could actually get from there, because you're tendering for the same versions but different suppliers and you can control for supply issues, as Dr. Sher said earlier.

We've already talked about administration a little bit. I think that more data could be brought forward to the committee. As for an evidence-based formulary, all of the formularies that are in place in Canada at the public level are presumably evidence-based. They rely on CADTH, they rely on INESSS in Quebec, and then they have their own formularies in each province, and many of the private plans do as well.

Therefore, I think we already have that element in many ways. I would just want to see what that looks like in its entirety if you brought it in and modelled it out, and I encourage shops like Neil's and others' to do that. I would also encourage Professor Morgan to continue to work on and refine his numbers further to see what the impact would be. I would caution against completely bringing holus-bolus an entire system into Canada and saying it can work here.

[The Chair, Liberal, Bill Casey]

Your time is up.

Thanks very much.

Who actually writes cheques to pharmaceutical companies?

[W. Neil Palmer]

That's a great question.

If you look at a traditional pharmaceutical that goes through a retail pharmacy, the manufacturer would sell it to a wholesaler or distributor. The distributor in turn would sell it to the retail pharmacy. The retail pharmacy would sell the drug to the patient, and that patient would be reimbursed by the public or private plan, or would pay cash.

The money to the pharmaceutical company comes from the wholesaler or distributor. In some cases they'll sell directly to the pharmacy. They typically may sell directly to the hospital or a hospital buying group. Usually they sell into the distribution chain and it's usually a distributor or wholesaler or potentially a hospital that cuts the cheque.

[The Chair, Liberal, Bill Casey]

Does any level of government ever write a cheque to a pharmaceutical company?

[W. Neil Palmer]

They would at the hospital level, but I should add that it's only indirectly. There are some products that provinces will pay for that aren't approved in any of the normal systems, and they may cut a cheque for those. There are some rare diseases for which drugs are imported through the special access programme. However, those would be the exception.

[William Dempster]

Vaccines is one example.

[W. Neil Palmer]

Vaccines and public health is a good example.

[William Dempster]

Public Health at the federal level actually can take care of not just vaccines but also antiretrovirals to have a stockpile in case of an emergency.

[The Chair, Liberal, Bill Casey]

The federal government would pay directly to the pharmaceutical manufacturer.

[William Dempster]

In that way, that's an actual bulk purchase.

[W. Neil Palmer]

We tender every three years.

[William Dempster]

The whole term “bulk purchasing” actually doesn't really apply to a lot of what you're going to end up with, no matter what you're looking at. It's about reimbursement and pharmaceutical and health benefits. It's not really bulk purchasing.

[The Chair, Liberal, Bill Casey]

We've heard a couple of different numbers. What is the total cost of pharmaceutical purchases in Canada and what's the breakdown among the provinces, the federal government, the insurance companies, and retail patients?

[William Dempster]

This is a forecast, because we don't have the exact numbers yet, but in 2014, for prescription drugs it was $28.8 billion in total. If you add over-the-counter drugs it's going to get up to more than that. The private sector share is divided between out-of-pocket contributions—and I believe we made reference to $6 billion before—and private insurers with $10.1 billion of that. Provincial drug plans spend $10.4 billion, which is 36% of the total. Then the federal drug benefit plan is 2.1% of the total, and that's $600 million. Then there is some other publicly funded drug expenditure.

Also, we were looking at data about out-of-pocket expenditures. We said $6 billion, and that's the number we saw earlier. I saw that number jump drastically back in 2010 to 2011, I think. I've been talking to the health information people about what happened there. I think a lot of what gets categorized as out-of-pocket expenses is coming from the pharmaceutical industry in another form of rebate that they're giving to individual consumers to be able to offset what they would otherwise pay in terms of copays at the pharmacy. So, it would be interesting to unpack those out-of-pocket contributions a little bit more, too.

Sorry, I went a little bit further.

[W. Neil Palmer]

If you look at table 3 on page 20 of our report, we unpack those numbers using 2015 figures. It includes actual public, provincial, and NIHB expenditures and estimates of private expenditures, by using CIHI numbers. Then we unpack the pharmacist fees and the copays.

[The Chair, Liberal, Bill Casey]

Mr. Dempster said $6 billion private. Is that just in retail sales?

[William Dempster]

That's $6 billion in out-of-pocket contributions. That would be individuals with copays.