When it comes to health-care spending in Canada, there isn’t a lot of variance between provinces, according to Joe Farago, executive director of private payers and investment at Innovative Medicines Canada.
In a session at Benefits Canada’s 2019 Halifax Benefits Summit on Sept. 24, he said prescription drugs’ percentage of the total health-care budget has been fairly consistent, at 15 per cent, since 2007. Looking specifically at branded drugs, their percentage share has been sitting at around seven per cent, since 2010 when the patent cliff hit, he added.
So what makes up most of the spend in a government-funded health-care budget? “Hospitals, doctors, nurses, procedures. It’s very difficult for governments to manage those costs. It’s a lot easier to manage drugs and utilization because it’s more of a product you’re buying and see how you address cost, but it hasn’t gone up since 2007 — it’s been pretty consistent.”
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Considering how Canada measures up globally for new drug launches, Farago said it’s in the middle of the pack among the 20 countries in the Organisation for Economic Co-operation and Development. “The only reason we look that good is because of the value of the private drug market in Canada,” he said. “There’s typically faster access on private drug plans, manufacturers will bring products to Canada quicker. If we had to wait for the public plans . . . . It doesn’t make Canada look too favourable.”
There’s a balance in terms of how low to go on prices, said Farago, noting countries with higher drug prices have significantly different access to innovative therapies compared to countries with lower prices. “The U.S. has the highest prices — I’m not suggesting we go there, we couldn’t afford to. They get about 85 per cent of all new drug launches.”
He also said Germany receives 70 per cent of new drug launches, followed by Australia (40 per cent) and South Korea (30 per cent), while New Zealand sits at the other end of the spectrum, at 13 per cent.
However, the pharmaceutical market is global in nature, noted Farago, with Canada representing 1.7 per cent. “When you’re pricing drugs and looking at global supply chain, Canada now is referenced by at least 60 other countries. In terms of the order of when drugs come to Canada — if you have regulations like some of these other countries that have very low prices, it means Canada gets bumped down the scale in terms of its launch sequence. There’s a balance between us getting good and quicker access and getting fair prices.”
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Farago also discussed the difference between public and private drug plans. Public plans typically cover older populations, and focus on whether a drug works, whether it’s safe and whether it fits a budget. “They’re trying to ration limited health dollars — not just on drugs, but on health services.”
On the other hand, private plans are very different, he said, noting they’re focused on a much younger population, are interested in workplace productivity and avoiding long- and short-term disability, which are really expensive.
However, the added value of private drug plans is faster access to broader medicines, said Farago. It could take between 12 and 18 months for a province to agree to cover a drug, and then the patient could be waiting up to two years to actually get access to that new medicine.
“Private plans are much quicker, from a few weeks to a few months. That’s just one of the values. We don’t want to look like public plans, and we’re seeing a trend that private plans are trying to control costs and are looking to systems [on public plans]. It’s attractive because it’s systemized, but it adds a lot of time and there’s a lot of duplication of services.”
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As private drug plans grow nationally, costs are also increasing, driven by utilization, as well as chronic diseases. “Sixty-seven per cent of the share of private drug plan cost is due to chronic disease,” said Farago. “If you’re looking to manage cost, this is one of the key areas you should look at for these reasons.”
The issue of high-cost drugs needs to be addressed, he added, noting drugs that cost between $10,000 and $25,000 accounted for most of the 3.5 per cent of private drug plan growth over the past two years. “However, when we look at that, we’ve broken it down into those parameters — number of claimants, claims per claimant and the cost per claim. Eight-five per cent of it is due to increased utilization of those drugs.
“Why are we using more? This lets us know we should dig deeper. It’s not just the price. We have more Canadians using these drugs more often. Why? Is there proper utilization? While people are saying, ‘Canada pays the highest price or costs for drugs,’ they should be saying, “Canada spends a lot of dollars on medications because we use a lot of them, public and private.'”
Read more stories from the 2019 Halifax Benefits Summit.