Solutions to rising drug costs and unequal drug coverage are never easy. But that shouldn’t stop stakeholders from examining these issues to determine what can be done to improve the current system.
The Canadian Life and Health Insurance Association (CLHIA) has done just that, with a report that provides the most important framework for pharmacare reform in a generation.
The report sets out clear, concrete recommendations for improving drug pricing and coverage in Canada.
With the bulk of baby boomers heading into their senior years, the demand for drugs will rise accordingly. Under the public drug program in Ontario, the average per person drug cost for boomers ages 55 to 64 was more than 30% higher than for the middle-aged generation X group (35 to 44). An aging population means higher drug costs for both private and public payers—and the time for action has never been greater.
Recent initiatives to help manage rising costs—such as reductions to generic drug pricing—are important ones that can directly benefit Canadians. But they don’t address the systemic Canada-wide issues that are contributing to cost increases and gaps in drug benefits coverage.
The CLHIA is examining these issues because of the key role that private insurance plays in our current system. In 2011, life and health insurers made benefit payments for prescription drugs of $10.1 billion, with private payers accounting for roughly 55% of all prescription drug purchases. Millions of Canadians depend on the coverage that employers provide—and we are very mindful of this as we continue to advocate for reforms.
Read: Drug coverage system needs reform: CLHIA
The CLHIA recommends continuing the mixed private/public system that Canada has now—but with greater integration, a stronger focus on cost controls and universality to ensure that all Canadians have the coverage they need.
The report contains numerous specific recommendations to accomplish this, with three in particular that are designed to address systemic long-term issues in the current framework.
The first is to reform the patchwork of drug coverage that exists in Canada today. The life insurance industry wants to start the conversation on the creation of a common, national, minimum standard list of drugs to which all Canadians will have access. Such a formulary would do the following:
- ensure a baseline of coverage for all Canadians;
- reduce complexity in the system—and the costs associated with it; and
- offer consistency across jurisdictions and coverage, which would benefit both consumers and prescribers.
Private benefits plans would continue to be able to structure their own drug plan designs provided they meet a minimum national standard, but with the flexibility to include drugs not on the minimum formulary.
The second is to reform the Patented Medicine Prices Review Board’s mandate and practices. The board is an independent, quasi-judicial body that, among other things, is responsible for ensuring that prices charged for patented medicines in Canada are “not excessive.” The CLHIA believes that the mandate on pricing should change to better serve the board’s consumer protection goal. Rather than ensure prices are “not excessive,” the board should strive to achieve the lowest possible prices for Canadians, based on prevailing market forces.
The third recommendation relates to orphan drugs—the high-cost medications used to treat rare diseases. Governments and private insurers must enter into discussions to develop a national, comprehensive strategy that would include creating a new end-to-end approval process for orphan drugs—and work toward an equitable and sustainable funding arrangement for them.
We support these recommendations because they address the two most fundamental issues facing the pharmacare system today: rising costs and unequal coverage. (The report also contains several other suggestions for change, and I encourage you to read the .)
Fundamental change is needed—one that addresses the root causes of rapidly increasing costs and unequal coverage. For this reason, we support the CLHIA’s position—and urge the federal and provincial governments to begin the reform process as soon as possible.
Stuart Monteith is senior vice-president of group benefits at Sun Life Financial. He can be reached at Stuart.Monteith@sunlife.com. These are the views of the author and not necessarily that of Benefits Canada.