Thank you, Mr. Chair and members of the committee. Thank you for your attention today.
I'm Angelique Berg, president and CEO at CAPDM, the Canadian Association for Pharmacy Distribution Management.
CAPDM is the nation's trade association for wholesale distributors that channel over 90% of the medicines our country consumes. With their trading partners, distributors form our efficient, accurate and reliable supply chain that ensures physical access to medicines, so naturally we support the aim of Bill C-64. We support both affordability and access in balance and not at the expense of one or the other.
Importantly, we recognize the enormous challenges that government and our citizenry face: slowed economic growth, regulatory overburden, health care system insufficiency and a growing percentage of the population over 65. I mention these to tell you that we're aware of the broader context, and we stand with you in navigating solutions where we can be of value.
To appreciate our comments relative to Bill C-64, I'll provide some basics about the supply chain because we rarely think about how our medicines get to us, just so long as they do.
The supply chain begins with manufacturers, who sell to distributors, who then sell to pharmacies and hospitals. Purchases flow the opposite way: from pharmacies, who buy from distributors, who buy from manufacturers. Rounding out that supply chain are service providers to this core supply chain, like third party logistics firms and transportation companies. The majority of Canada's pharmacy supply chain stakeholders are CAPDM members.
Distributors streamline orders and deliveries for 15,000 product SKUs between hundreds of manufacturers and over 12,000 points of dispensing over nine million square kilometres, creating efficiencies that save the country over $1 billion annually. Their safety stock also provides a short-term shortages buffer against drug shortages. The sector has over 30 distribution centres, all of which comply with at least three overarching acts, up to seven different Health Canada licences and very high technology to meet the conditions of all of those. The sector has roughly 20,000 employees—experts in inventory turnover and the secure and complex handling of all medications—and they are the backbone of our pharmacy supply chain.
Our market is challenging. It's a controlled market where funding is limited, yet operating and regulatory costs are not. Distribution is largely funded as a factor of the listed drug prices: The lower the price, the less funding is available to get medications to Canadians.
Costs have increased at least 2.5 times faster than volumes in the last five to 10 years, with market forces and increasing regulation. The gap is estimated at over $100 million annually, and distributors have so far absorbed that through eliminating expenses to stay in business and with only minimal impact to Canadians.
Assuming that it is striving for lower drug prices, we see that Bill C-64 has the potential to erode physical access and to exacerbate drug shortages. Because they run so efficiently, reduced funding means that distributors have few options left but to reduce services. Some examples are that they could stop carrying money-losing products, which would be those of the lowest cost; reduce safety stock, which eliminates the buffer against shortages; or reduce delivery frequency to high-cost regions or eliminate them altogether.
CAPDM members are understandably concerned about some of Bill C-64, generally about reduced drug pricing and specifically about a restrictive national formulary, which was addressed in last evening's panel, and bulk purchasing. Evidence suggests that these types of policies limit suppliers. When the government awards a contract to a single manufacturer, that firm effectively becomes a monopoly, so competitors have little incentive to stay in the market. Concentrated marked power increases the risk of limited supply, and therein lies our concern.
We recommend that this policy change be approached with caution, that further regulatory burden be avoided and that time be taken for consultation with all supply chain actors to uncover potentially unintended consequences so that Bill C-64's aims can be successful.
We don't have all the answers—we dearly wish that we did—but we're most willing to collaborate with government to find them in order to ensure safe, secure and timely physical access to medicines for all Canadians, and that's why we exist.
Thank you on behalf of the CAPDM board of directors, and I welcome your questions.