Pharmacare may be the right thing to do, but it won’t save money

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  1. Joel Lexchin

    Let’s look at some of the data that Peter Dyrda used. He does note that savings may be realized in the prices that are paid by private insurance and people who pay out-of-pocket but doesn’t estimate those savings. According to CIHI in 2014 private insurance and out-of-pocket payments equalled $18.4 billion. A 28% savings on that (the 28% is Dyrda’s estimate of savings in the public sector) is $5.2 billion. Dyrda also says that Quebec had 35% greater utilization than the rest of Canada. Actually what the study said was that Quebec spent 35% more per capita than the rest of Canada. The authors cite multiple reasons for the higher per capita spending – higher volumes of drugs prescribed, more expensive treatment options chosen by prescribers, higher unit prices and lower use of available generics. Only the first of these was mentioned by Dyrda. Dyrda also cites another study about the use of biologics for inflammatory bowel disease as showing that public drug programs cut administration. But while the study says that those on private insurance received biologics more rapidly, it didn’t say that public programs cut administration. That’s Dyrda’s interpretation. Also the study noted that since it was completed it is now easier for doctors to prescribe some biologics for IBD. Again, that’s not something that Dyrda pointed out.

    • Chris Bonnett

      I think the bottom line is that we need better data to enable more realistic and inclusive cost estimates, with explicit assumptions and appropriate sensitivity analyses. For example, the PBO report doesn’t assess their savings estimates if their 25% universal price cut assumption takes a few years to negotiate, or applies only to a subset of drugs (i.e., new ones). It doesn’t explain what may happen to patient out-of-pocket costs if $3.9 B in drugs now paid by private drug plans are no longer eligible under the QC formulary. These are big questions. Right now we have to get better answers and work much harder at finding common ground so that the Advisory Council can make a really compelling case to politicians and ensure the continuing support of Canadians.

    • Peter Dyrda

      Thanks for your comment, Joel. I attempted a long response but it hasn’t uploaded onto the page, so let me try again with a more succinct response. I appreciate your thoughtful comments on the assumptions – this is the scrutiny that I felt was missing from the HESA report. To respond to your comments: for the utilization assumption of 35% – aside from 5% being attributed to an older population in Quebec, the authors hypothesize that the remaining difference is due to using more expensive treatment choices and compulsory coverage, which would be a relevant analogue for national pharmacare. The 12.5% assumption used by PBO was taken from another study which stated that naiive OLS estimates could have been 1-4 times higher than that. I would argue that the estimate should be closer to 35% than to 12.5% based on these two studies. As for the IBD administration paper – I never inferred that the study measured the impact of cuts. The paper highlights that private insurance results in faster time to drug which improves outcomes – and the hypothesis is that this is the case due to more investment in administration by private insurance versus public. If we moved to national pharmacare, we would see a reduction in administration, and therefore presumably a longer time to drug, which could lead to worse outcomes.

  2. Fred Ryan

    I understand Mr Dyrda works for, ultimately, Johnson & Johnson, hardly an independent third-party voice in this debate. while we ought to focus on the content of his argument, that argument replies on several studies supporting his more contentious claims — do we really have the time to sort through his supporting studies, given a natural assumption of his lack of impartiality on this subject due to his relation which a major pharma corp? It wouldn’t be possible to get an opinion on this important subject from a clearly-unbiased source, or add comments from such a source, given Mr D’s associations?

    • Peter Dyrda

      Hi Fred. Thanks for your comment. Reimbursement in Canada is very complex and managed by a relatively small group of professionals. I would argue that anyone involved in the pharmacare debate will have some sort of bias. Given that establishing national pharmacare would require a shift of $15bn to government spending, I would argue we should take lots of time to ensure we have the right assumptions going in. I would also argue that it is beneficial to us all to take into account all perspectives. As much respect we have for academics in this field, they too, are not without their own biases.

  3. Durhane Wong-Rieger

    The detailed analysis is so very helpful. As patients, we know intuitively that you can’t provide the “same” coverage for “less” $ especially when the purpose of Pharmacare is to include all those patients who are currently not accessing. But the data and analyses provide some substance to intuition! Also, we don’t have the results (and will likely never have full learning) from the experiment with Ontario’s OHIP+ whereby kids who were added to the public plan, including those who already had private coverage. But we have heard some interesting “stories” about the access to asthma inhalers increasing by “double digits” in the first quarter and use of EPI pens for four months equaling the use for the entire last year, contributing to the shortage in EPI pens in Canada (other factors played into this). So thanks for the deep dive and for making it understandable.

  4. Civi Jacobsen

    Thank you for your article Peter. It is very important to cover multiple aspects of the argument. Here’s something that seems to be missing generally: a move to get patients off medication to improve overall health. There’s huge savings and social benefits to improving diet, smoking cessation and getting regular exercise. We might incent this behaviour by cutting paying fees per script written which I believe is the case in Ontario. Then we will have funds available for young and old to be looked after. I would really love you to do some research and a piece on that. Best.

    • Peter Dyrda

      Hello Civi. Thanks for your comment. You raise a good point. There is a movement towards de-prescribing in the medical community. However, that tactic for cost saving would likely be independent of any pharmacare model. Therefore, we wouldn’t consider it when conducting a calculation of the cost of pharmacare.

  5. Paul Daniel Conte

    History is replete with government initiatives, provincial and country-wide, that were going to save loads of money, but instead yielded no savings or (more often) increased costs…

    Lots of wild promises being thrown out there about national pharmacare…most likely they will not come true…

    • Peter Dyrda

      Thanks for your comment, Paul. I would argue this will be a balance of puts and takes. There would be a reduction of price, but an increase in volume… where it nets out would be a balance of the two. Compared to other government initiatives, I would think that pharmacare may be unique.

  6. David Walker

    On the public wanting extensive choices- I am not persuaded. For most conditions I would argue there is too much choice, with many expensive drugs offering marginal if any additional benefit.
    On negotiating power- how come our prices remain so high compared to other countries? The comparator countries used by our pCPA tend to be those with high prices.
    Tha challenge in moving to a national pharmacare program will be in moving the savings made by employers, insurance companies and individuals to offset increased government costs

    • Peter Dyrda

      Thanks for your comment, David. It is certainly true that some conditions have the luxury of many options, and not all of them may be the best choice for a patient. However, I caution us as Canadians to keep our options open, as we have a very heterogeneous population. With the impact of pharmacogenetics on drug efficacy, we should try to keep our formularies broad but provide clear guidance and criteria for optimal use. Some look to the New Zealand pharmacare model as a good example, but their population is much more homogenous than ours so having access to options isn’t perceived to be as big of an issue.

      In terms of pricing – by law (Patent Act) enforced by the PMPRB, Canada must not exceed the median price of comparator countries. Furthermore, savings from pCPA are not transparent, so the net price paid is significantly lower than we see with the list price. I would argue at a 28% average discount, our prices in Canada should be within the 20-29% range we see in Europe.

      Moving money from private to public to fund pharmacare will indeed be a challenge. Today, a Globe and Mail article showed that there may need to be a tax increase to fund this gap. Considering the Federal government is running $20bn deficits already, adding another $15bn with pharmacare will be a significant task.

  7. Chris Bonnett

    Everyone has biases and it’s important to disclose them. Mr. Dyrda did this. However, to assume he’s wrong simply because of his employer may be convenient, but a much greater error. This is a thoughtful commentary and it deserves careful assessment…which is the point of HealthyDebate.

  8. john bachynsky

    Peter: Pleased to see a broader commentary on national drug benefit program.

    A few years ago the head of the VA in the United States described pharmaceutical benefits for veterans. The VA is the largest drug benefit program and gets 22% discount of list price on drugs. They provide comprehensive coverage at no charge and distribute medications by mail from hospitals. Sounds like a wonderful system.
    This was followed by the statement that this was the largest problem area because they had no idea of what happened to the tons of medication they sent out. Some was used appropriately, some was saved, some discarded, some diverted and some misused. A very high expenditure resulted from patients admitted for drug related problems.
    Why do we want a system like this?
    In 1975 Saskatchewan introduced a universal benefit program with province wide purchasing for all the benefit drugs. Sound familiar? What happened to it? What can we learn from this? Why isn’t this “evidence” part of the discussion?

  9. Hassan

    If this is the case then the whole health care system payment should change which means making the health care system private

    • Peter Dyrda

      Thanks for your comment, Hassan. Can I assume this is Hassan Yussuff, President of the Canadian Labour Congress? Great to see organized labour taking an active role in the advocacy of pharmacare.

      I respectfully disagree with your argument. Health care is a public good, which is subject to market failure. It is most efficient under a single payer system. We can’t equate this specific scenario of converting from status quo to national pharmacare to our overall health system. Pharmacare is a delivery of goods, versus a delivery of services. I am arguing we go forward with pharmacare, but we shouldn’t assume we will save money. The increased efficiencies gained from a single payer will be offset by higher volumes. Moreover, workers will not have the same options they currently enjoy with private coverage.

  10. Marc-André Gagnon

    This is an interesting opinion piece which touches complex cost issues. Unfortunately, none of the elements convinced me that the PBO should change anything to his report.
    First, claiming that universal pharmacare would reduce current drug coverage without reducing costs is paradoxical and would require solid arguments to back this up. However, the arguments offered by the author are mostly problematic and generate misleading conclusions. Here are my comments to some of the claims in this opinion piece:

    -The author implies that covering more products is better. In the latest PMPRB annual report, we learned that 91% of new patented drugs commercialized in Canada in 2016 did not bring any significant therapeutic benefits as compared to what already existed in the market. By restricting access to therapeutically insignificant new drugs, a market provides greater financial incentives for drug companies to produce more therapeutically significant products, which would increase real options and therapeutic benefits for patients.

    -The author claims that PBO neglected to account for the fact that the discounts have been achieved, and cites an agreement of $3 bn in savings over generics that was passed four months after the publication of the PBO report.
    – The agreement over generics was that, under the threat of being imposed tenders, generics manufacturers accepted to reduce their price by 38% on average only if public drug plans restrain from implementing a tendering process for generics in the last 5 years. The author claims that there is no room for additional savings, for example by implementing a tendering process. I disagree.
    -The author misquotes a report by the Auditor General of Ontario by confusing data from 2015/2016 and 2016-2017. Total rebates for the public drug plan in Ontario in 2015/2016 was $900 millions on a total of $3.9 billion on brand-name drug expenditures. This equates to a rebate of 23%, which is at the lower end of rebates obtained by other countries.
    -Based on numbers provided in the 2016 PMPRB annual report, the listed price (before rebates) of patented drugs were 25% higher in Canada as compared to the median of OECD countries. Canada thus pays among the highest listed prices in OECD countries and, in addition, public drug plans in Canada receive among the lowest rates of confidential rebates from brand-name manufacturers. The author claims that there is no room for Canada to obtain additional rebates. I disagree.
    -The estimate of the PBO report that a universal drug plan could save an additional 25% on the cost of drugs (excluding mark-ups and dispensing fees) is absolutely reasonable if we consider that:
    1-Significant savings would be achieved for drugs currently purchased without negotiations by private plans and uninsured patients.
    2-An additional rebate of 25% on the price of patented drugs over the 23% rebate obtained by the Ontario public drug plan would mean that Canada would now pay a net price (after rebate) for patented drugs in line with the OECD median.
    2-Since the publication of the report, savings of 38% has already been achieved for generics (and more could be achieved through tenders).

    -First, Quebec is no illustration of universal pharmacare, it is an illustration of what happens with mandatory private coverage without universal pharmacare.
    -The author measures differential use in Quebec versus Canada based on costs, which is non-sense because the study cited by the author explains a series of reasons behind differential costs in Quebec that has nothing to do with use.
    -The author disagrees with the PBO estimates on differential use because it “seems low”. However, his alternative scenario on drug use seems a bit disconnected for different reasons:
    1-while the author criticized a universal drug plan for reducing drug options, he now calculates costs by assuming that all patients would have access to the same drugs than before.
    2-in his re-analysis, the author considers that people currently covered by private plans would massively increase their drug consumption by 20% if universal pharmacare is implemented. I disagree. In fact, a universal pharmacare program with the active management of a national formulary could allow the promotion of a more rational use of medicines, which would reduce (not increase) inappropriate use of drugs.
    3-the author considers that the differential use should be based on what was observed in Quebec, and applies an increase of 20% for patients on public plans because use in other provinces would mimic what happens in Quebec. I suggest the author looks in particular to what it means for seniors, which represent 69% of beneficiaries for the Ontario Public Drug plan. Seniors in Quebec pay higher co-pays than in Ontario, have a higher cost-related non-adherence rate, but, according to IMS numbers, consume at least 30% more units. This means that higher consumption in Quebec is not linked to better coverage because Quebec has in fact worse coverage and higher cost-related nonadherence when it comes to seniors. The assumptions on which the author is building his logic are thus plainly false.
    4-A better assumption would be to consider that drug use relates more to the role of physicians as gatekeepers and to the promotion of a rational use of medicines, which would explain why countries with low or no co-pays also have lower drug use than in Canada.

    In a nutshell, the PBO analysis remains far superior to the alternative “re-analysis” provided by the author.
    Universal Pharmacare would not only “improve equity”, and “protect the vulnerable” as the author rightly mentions, it could also allow developing our institutional capacity to promote a more rational use of medicines. And, yes, it could also generate very significant savings for all Canadians.

    Marc-André Gagnon, PhD
    School of Public Policy and Administration

    • Peter Dyrda

      Thanks for your comments, Marc-Andre. I appreciate your engagement in the debate on this platform, which demonstrates the value of healthy debates. I also respect your courage to debate the issue in a public forum. Let me respond to your critiques to move the conversation forward. I will do so in a series of comments since this platform has been finicky with longer responses.

      • Peter Dyrda

        Restricted Options:

        Your argument is that 91% of new patented drugs are no better than current options, and therefore 91% of new drugs should not be included on any formulary. Yet, $4bn of the $28bn spent on total drugs in Canada are for drugs that would not be eligible for national pharmacare – that represents almost 15%.

        The fundamental difference between our arguments is “who” we would rather make the choice for treatments. Under a national pharmacare plan, your option would be to opt for bureaucrats or advisors that advise the PMPRB or CADTH to make choices for patients by restricting options. Under the current system, treatment choices are left to physicians and patients.

        This is a philosophical disagreement wrought with many arguments and I don’t think we’ll ever convince each other, but I also don’t think we need to. At the end of the day, it would come down to the electorate to decide. Some may prefer to defer to experts choosing their options, while others will want access to all of them. My point is, let’s not underestimate the population that will want to make their own choices.

        • Peter Dyrda

          Larger Increase in Use Than Expected

          I disagree with your conjecture that Quebec is not an illustration of pharmacare. It is the only province in Canada with compulsory coverage for drugs, and the PBO used its formulary as the standard. It is not a perfect analog, as you rightly bring up issues with cost-related non-adherence, but its relevance stems from the fact that utilization increased significantly after it moved to compulsory coverage.

          You may disagree with the Quebec paper that cites 35% increased utilization vs rest of Canada, but you neglect to respond to the PBO reference of 12% whereby the reference concluded that 12% is likely “magnitudes” lower than what may be expected.

          Your argument is that pharmacare would lead to a rational use of medicines is without merit. National pharmacare may lead to a more selective formulary, however utilization would increase due to the elimination of cost-related non-adherence (coverage of all those uninsured or underinsured) and also wastage. We will get a sense of the impact of utilization of OHIP+ when estimates committees resume after Sept 1. Anecdotally, we have heard from pharmacists that asthma puffers and EpiPens were flying off the shelves because they were “free”. Without any copays, we can imagine a similar scenario with national pharmacare.
          I would be interested in seeing your references for the examples you raise with regards to seniors.

        • Peter Dyrda

          Having difficulty posting so will keep this brief. Savings from pCPA were not incorporated by PBO. That was an error on their part which changes their conclusions. We can debate what the exact value should be, but we are already in line with OECD values. Choosing an additional value of twenty five per cent savings is arbritrary.

    • Peter Dyrda

      In a nutshell, I am not claiming that this re-analysis is superior to anything else. I wanted to address the fact that, under another realistic set of assumptions, we should imagine a scenario where pharmacare does not save money. If we go down this path, it should only be to improve equity, and not for economic reasons.
      We should also admit that the PBO missed the mark in certain respects. They should have costed more models, whereby they looked at a scenario whereby patients would make their own treatment choices. The fact that they did not account for current pCPA discounts was an oversight. Lastly, assuming only 12% increase in utilization is not supported by the very reference they based it from – hoping that physicians will lead us to a more rational use of drugs is not something we should bank on.
      In conclusion – let’s keep the dialogue moving and see if the broader community can come to a consensus on assumptions. As we do so, let’s also be transparent about our conflicts of interest. Mine have been disclosed in the article. I would appreciate if those that comment also disclose theirs. The latest version of Marc-Andre’s conflicts can be found in the following link, which discloses funds accepted from the Canadian Federation of Nurses Unions.

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