In a recent opinion piece on this website, Peter Dyrda, an employee of Janssen Canada laid out the reasons he thinks national pharmacare will not save money. As a life-long severe asthmatic, past health researcher who worked with health economists from around the world for 25 years, and now an independent patient activist who runs the website Faces of Pharmacare, I find his arguments restate a well-worn narrative from Big Pharma.
Let’s look at his arguments:
Restricted options for patients
First, the much ballyhooed “options” that industry warns will be restricted with national pharmacare are not nearly as vast nor diverse as they would like you to believe.
Here’s an example I know well. While there are dozens and dozens of different medicines available for asthma, first-line treatment has changed little over the past 50 years. We still rely primarily on drugs to relax the muscles of the airway or to reduce the swelling of the mucous membranes in the lung. That’s it. The myriad options are just variations on a theme.
Don’t get me wrong, these are useful drugs, but they’re no longer extraordinary nor particularly innovative. Even many of the new high-cost monoclonal therapies (drugs made by cloning and concentrating certain beneficial immune cells) for asthma barely outperform placebo or traditional therapy arms in clinical studies.
This is not limited to asthma medications. A 2013 paper on the pharmaceutical industry found that the vast majority of new drugs approved in the U.S. were little or no more effective than existing drugs.
If bona fide options for treatment are exaggerated, a national pharmacare program should restrict access to certain medications. For example, it should restrict access to drugs that simply don’t work, like diclectin, or to patented drugs where an equivalent lower-cost generic is available. It should continue to restrict access to drugs that have not yet gone through proper safety and efficacy trials and it should restrict access to drugs that show no therapeutic benefit. It could, for example, restrict access to the 57 percent of all new cancer medications shown to have no clinical benefit by a recent study in the British Medical Journal.
Negotiating power with pharmaceutical companies would not change
We have no truly national negotiating strategy to speak of. Our drug insurance market is dominated by private and not-for-profit insurers (such as Blue Cross) that have no interest in negotiating lower prices, because most of the plans they administer work on a cost-plus basis. Every year, they increase the premiums based on the actual outlay for insured care (including drugs) in the previous year, and then add about four percent as an administration fee. Clearly, lower prices for drugs mean lower administrative fees for them. Why would private insurers negotiate lower drug costs?
We grant patented drugs monopolies for about 20 years. The only potential policy tool Canada has to counteract the highly inefficient single-seller model is a monopsony, or a single buyer, which would give us maximum negotiating power when paying for medications. That is one of the reasons New Zealand pays such low prices for drugs despite having a population that is almost 10 times smaller than Canada’s.
Yet Dydra dismisses this approach outright, alluding to the “successes” of the pan Canadian Pharmaceutical Alliance (pCPA), a federal-provincial group created in 2010 to attempt to negotiate lower generic and brand-name drug prices for public drug programs. According to their own estimates, they now save us $1.28 billion per year.
That is a big number, but nowhere near the $7 billion annual savings that universal pharmacare would provide, according to well-regarded Canadian researchers in peer-reviewed literature.
Not long ago, I had the opportunity to ask representatives of the pCPA at a conference if they could tell me how they come up with their $1.28 billion number, if they could simply “show me their math.” Their answer was an unequivocal no, due—apparently—to confidentiality.
If I had to guess, I’d think they are using hyper-inflated “sticker” prices as starting points, like the rack-rates you find behind hotel doors. It’s conceivable that they also take credit for price decreases on drugs already at the “patent cliff,” drugs about to see reduced costs due to competition from generic alternatives. Many of their reported price reductions have exactly the same negotiated “discount” of 18 percent. Not sure about you, but that coincidence and the lack of transparency sure makes my spidey-sense get all tingly.
Drug use will likely be much larger than the PBO estimated
There can be no doubt that universal pharmacare will increase utilization of prescription medications in Canada. This is based on the assumption that those who currently have inadequate or no insurance will have no-cost or low-cost access.
While it is certainly more nuanced than that, the crux of the concern is that increased utilization from the newly covered could overwhelm potential savings. Yet even if there were no net savings gained (a highly unlikely effect), the improvement of outcomes in the population would be a significant net benefit. If people in need of care had better access and improved their health outcomes, they would reduce reliance on the rest of the system. We would all be better off.
But what about that estimate of increased utilization?
The PBO estimate of a 12.5 percent increase is based on an econometric paper from 2005. Dyrda suggests that the number is 35 percent, based on a policy paper from 2014 which actually examines what drives higher drug expenditure in Quebec.
While the paper does suggest that increased utilization may be due—in part—to the introduction of compulsory drug insurance in 1997, it is not a primary driver. In Quebec, they routinely provide 30-day-supply prescriptions rather than the 90-day-supply provided elsewhere. This triples the filling fee compared to other jurisdictions. They also have a distinct “15-year rule” that effectively extends patent life and profitability of brand name drugs while reducing the uptake and use of generics. Finally, five percent of the difference is actually due to the make-up of the province’s population. So 35 percent is a rather generous estimate.
The more important lesson would seem to not emulate the drug insurance system from Quebec, which caters more to the insurance and drug industries than the province’s citizenry.
Cutting administration sometimes has its drawbacks
This is not actually one of Dyrda’s arguments, but he does devote time trying to cast doubt on the potential for administrative savings from a universal pharmacare system by simply stating that “cutting administration sometimes has its drawbacks.”
To defend this assertion, he cites a single study on biologics for inflammatory bowel disease (funded by Janssen), and uses it to infer that the superior outcomes for privately insured patients can be “attributed to the higher administrative support provided by private insurance,” a conclusion that requires a little bit of fancy to reach.
The reality of the administration of private drug insurance is that it seems to exist to support the industry and not the patient. Just ask Lilia Zaharieva, a student at the University of Victoria who has cystic fibrosis. About a year ago, her private university plan simply adopted the provincial formulary so it no longer had to cover her high-cost, life-saving drug.
So let’s reframe this: There are 150-200 private insurers managing about 2,000 group plans and about 100,000 individual private plans in Canada. In addition, there are over 100 public plans across the provinces, give or take. Then there are the military, RCMP, First Nations, and various other special access programs and compassionate access systems designed to fill the increasing number of coverage gaps. Each of these has its own bureaucracy, negotiation processes, rules, limitations, paperwork, filing requirements, online systems, paper-based systems, appeal systems, etc. They all do their best to deny claims where they can and they all deal individually with pharmacies, industry, providers and patients. Streamlining these duplicative and largely unnecessary processes would save enough costs to ensure that any isolated “drawbacks” could be easily managed so that all Canadians needing prescription medication would be treated the same way they are when they visit the doctor or the hospital.
Not only will it cover all Canadians, it will also save Canadians money.