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.
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Sure it might save money but at what cost? I’m currently a patient who is affected by the Valsartan fiasco – yes, that’s right – I’ve been given a “cheap generic brand” sourced from China, who happened to be using a known carcinogen while manufacturing this drug. Now, after 12 years of taking this medication, my drug plan forcing my pharmacy to give me the cheapest alternative, I’ve been subjected to and exposed to this dangerous chemical and have the added worry of being tested for many forms of cancer. So on the money that you save on these drugs, please put that money back into health care to treat me and reduce wait times if I should happen to be one of the unlucky ones that develops cancer from this idiocy. I’m already being treated for a precancerous condition that likely stemmed from this BS. I’m furious. My specialist, while trying to quell my fears about the exposure that I’ve underwent, told me how Pharmacare will actually compound this issue and we’ll see so much more of this because to get the cheapest drugs – Pharmacare will seek out these very manufacturers using dangerous compounds. This is NOT a good idea and I implore people to look beyond the mere cost savings that they THINK this is going to bring them. There is no amount of money that can give you your health back in circumstances like this let alone the mental anguish in the worry involved.
Lyn, I’m very sorry to hear about your predicament and I can appreciate your concern. You should note that the issue is not limited just to your generic from China. Novartis, who makes the brand-name you were switched from was implicated as it also used the very same sourcing for it’s own generic version. This is not limited to your drug. Many drugs and/or their precursor constituents are sourced from places like China and India where the prices are lower, but do not maintain the same standards. This is done by brand name and generic products alike in order to reduce production costs. I am not sure if you are on a private plan or not, but many private plans also try to get people to switch to the generic brand to reduce costs. A national pharmacare program which, properly designed-would have a better chance of ensuring quality standards that the haphazard patchwork that is currently in place.
There’s a recurring theme in this article (and many others) that a fully public drug plan will certainly and immediately save us big money and spare us from the profit-oriented missteps of the pharmaceutical, insurance and pharmacy industries. That belief may be the root of concern with Peter Dyrda’s original article (and apparently his employment) regardless of the merits of his arguments and the generally constructive debate it started and to which Mr. Swan and others have now contributed.
However, before we conclude a fully public drug plan is the best way to spend over $30 billion, we should have a thoughtful, well-informed debate on the role of private insurance and have the data and research to compare it to public drug plan performance.
My doctoral research indicates drug insurance opinion leaders across sectors and provinces value the role already played by private insurance. Apart from crucial funding support, private insurance offers useful choice in plan design and pricing. It provides easy access to technology to help improve consumer behaviour in the purchase and use of drugs, as well as the upstream management of chronic disease. Private insurers can help link employer drug plans and income replacement plans with patient health and workplace productivity and innovation. All these are good and valuable and in the interests of patients and the nation. These advantages are not provided by government drug plans. Rather than dismiss private insurance, how can private insurance be organized and regulated to operate in the public interest? European countries with social health insurance systems show this can be done.
One respondent to Mr. Swan’s article wants insurers to prove their value. Agreed – they should make their case and there is lots of room to improve. But the case for a fully public drug plan is no slam-dunk. Canada’s health system fares poorly in international comparisons. Public drug plans have not yet ensured appropriate prescribing and use, and they don’t seriously consider patient preferences or track health outcomes. They do offer lower cost administration, drugs and pharmacy services, and they certainly provide better health technology assessment compared to any private insurer. However, these factors are not sufficient for a free pass to a single payer national pharmacare plan.
If we want a single payer, fully public system – too early to conclude, I think – then we need to demand more of governments and their agencies. If there is a complementary role for private insurance, then hopefully the Advisory Council will investigate that fully because HESA did not. Private insurance is not inherently bad and government programs are not superior in all important metrics. Both payer groups have important contributions to make and could yield more together. Our entire system needs review.
It is not surprising that private insurers would have a positive view of private insurance; nor is it surprising that (at least some) government officials would share this view because regardless of whether or not it is fair or efficient, the private option relieves government of fiscal responsibilities. And ironically, many public servants benefit from extended drug plans whose very existence stems from the fact that governments don’t offer universal drug plans.
You mention that private insurance offers, among other things, useful models of pricing, which if I understand correctly suggests that private insurers can and do get better deals than are or would be available to governments. This strikes me as extraordinary; do we have data to prove it?
The European social insurance systems operate much more like regulated public utilities than private insurers, so I don’t think the analogy is apt in Canada. It is conceivable that starting with a blank slate, we might organize health care overall on a Bismarck (social insurance, largely employer-financed) vs. Beveridge (government financed) model, but we didn’t, and we won’t.
The claim that “Private insurers can help link employer drug plans and income replacement plans with patient health and workplace productivity and innovation,” implying that a public plan couldn’t, is likewise unsubstantiated. Why not? Integrated care linked to non-health-care supports should be the system’s goal. Nothing prevents employers from offering and promoting all sorts of wellness programs, tailored to individuals’ needs and health and health care profiles (including pharmacotherapy). I can’t see why relieving employers of the financial and administrative burden of a private drug plan would compromise such efforts; indeed I think getting out of the drug business would free up time and resources to enhance these other benefits and practices.
You do pose an important question: “Rather than dismiss private insurance, how can private insurance be organized and regulated to operate in the public interest?” If it’s truly organized and regulated to operate in the public interest, it wouldn’t look like private insurance – it would be non-profit, it would not be highly subsidized by tax expenditures, it would be a regulated oligopoly that exerts its purchasing power, it would be free of the moral hazards that plague it now, it would rely on objective health technology assessment, etc. It doesn’t strike me that finding a useful role for private drug insurance ought to be a public policy imperative just because it exists; it is a hammer for which there are no longer any nails. We rightly castigate governments for bloated bureaucracies and endemic inefficiencies, so why should we think any differently about the built-in dysfunctions of private drug insurance, and why should we give tax breaks to those who sponsor it and those who benefit from it in a desperate effort to keep it afloat?
On one issue we agree: it’s not a slam dunk to spent $30 billion on universal pharmacare. We could eliminate poverty (by some definitions) in Canada for not much more than that, and I’d do it before I’d opt for universal pharmacare (although I would shore up coverage for those who simply cannot afford their drugs as a high priority). That’s neither a defense of nor endorsement of private drug insurance; it simply means that there are greater injustices to address than the folly of Canada’s drug sector.
Thank you for this article and also for the patient advocate work you do on behalf all Canadians. Big pharmaceutical companies know full well Pharmacarem will save Canadians money but they are motivated by greed, certainly not the well being of Canadians. Blue Cross is my insurer and I can say I have first hand experience of their treatment- Blue Cross is certainly not interested in the well being of of their clients’ health.
I am a pharmacist. I support Pharmacare. I work in a Family Health Team. I worry that the government equates pharmacists with pharmacies. This is problematic as the business of pharmacy and the corporate interests of pharmacy chain conglomerates often overshadow the professional role of pharmacists. It is troubling to me that the Pharmacare Advisory Council does not include a pharmacist, and it appears there is limited opportunity for consultation with pharmacists. I am also concerned that the Pharmacare discussions are heavily focused on drug cost, acquisition and access, and less so on ensuring Canadians receive medications that are necessary, safe and effective. Pharmacists are critical to the “care” component of Pharmacare. It is long overdue that government invest in pharmacists and harmonize our scope of practice across Canada. There also needs to be investment in integrating pharmacists in collaborative practice models in primary care teams. I hope to hear more patient voices supporting the role of pharmacists beyond medication dispensing in a National Pharmacare Strategy.
Suzanne, I am personally a fan of moving more of the actual “prescribing” to the pharmacist who has far more training. But you have also very articulately pointed out one of the problems with the system … the corporatization of the prescription filling system.
This is an excellent rebuttal and the comment by Steven Lewis (who I assume is the health care policy professor/consultant, not Stephen Lewis the former NDP leader and now HIV/AIDS activist) is also excellent.
A publicly funded pharmacare program has the same advantages of publicly funded medical system (indeed perhaps even more so): maximum coverage of effective drugs to the most people at the lowest cost. Our current system is patchy and fragmented with high administrative costs and higher drug costs than necessary.
Yes, a publicly funded funded drug program requires some trade-offs. Pharmaceutical manufacturers will be under pressure to reduce prices through volume discounts, and marginally better drugs may not be funded. Pharmacists will be under pressure to dispense lower cost generics and receive lower fees. Physicians, nurse practitioners and other prescribers will face restrictions on what they can prescribe. But more patients will receive better drug coverage at lower cost.
IF (and it’s a BIG IF) this is done well, a public drug program can result in significant benefits for patients and taxpayers (who are also patients!).
The idea that more drugs on a formulary means better therapy (and therefore better outcomes) is simply not true. There are too many “new”, expensive drugs that have only marginal improvements on older, cheaper drugs. Plus there are thousands of drugs that have DINS issued by Health Canada (and thereby in theory covered by private drug plans) which are: (a) not marketed in Canada because the drug manufacturer has decided Canada is too small to bother with; (b) banned as private label drugs (i.e. drugs that are the same as a generic drug but whose profit goes straight to Shoppers Drug Mart and Rexall); (c) patented in Canada by a drug manufacturer but not sold in order to prohibit competitors from selling the drug in Canada (so not available to customers); and (d) simply not effective yet are part of a strategy to drag out patent coverage.
Drug companies never have the best interests of patients in their mind. Private insurers too don’t care about drug costs as they simply pass the cost along to employers or employees. All of them are solely focused on profits.
I am usually very opposed to government intervention in the market place, but in this case of drug coverage, i believe that only a public pharmacare program makes sense. Perhaps it is the lesser evil.
excellent rebuttal -having worked in a OB/GYN clinic for almost 20 years I can attest to fact that patients too often cannot afford Rx & later end in hospital much more ill than when med was Rx’d, now to hope & pray that Government will move on legislation to enact PHARMACARE for all Canada
The National Pharmacare discussion MUST include pharmacists. We deal with insurers every minute of every day, and have to explain insurance coverage or lack thereof to angry patients every day. We are on the phone to public and private insurers constantly advocating for patients. We fill out special authorization forms. All of this for no compensation beyond our fee we get when there are no billing problems. Why is there no pharmacist on the National Pharmacare Advisory Committee!?! We help control costs but we’re the ones subjected to massive cuts to our services (over $1.5 billion and counting in Ontario alone). Yet for every $1 spent on pharmacist services, $2.50 is saved by the system. Why are we routinely left out of the discussions? It’s incredibly frustrating and could easily be remedied.
Wende, yes I agree that the value of pharmacists are often overlooked. A national public plan would free you from the Gordian Knot of dealing with multiple administrative systems so that you could focus on helping patients better manage their drug utilization.
This is a classic case of an unattainable notion of perfection being held up to vanquish the good. Yes it is possible – even inevitable – that a universal, state-run pharmacare plan would not cover some expensive but useful drugs that are now covered by some private insurers. It is also possible, as Bill Swan notes, that overall utilization will rise, although the vast literature on overuse (antibiotics, polypharmacy in the elderly, etc.) suggests there is plausibly more over-utilization than under-utilization, and a public plan supported by good analytics has a better chance of curbing the overuse. What pharma fears, of course, is a disciplined approach to purchasing and deploying drugs that rewards impact instead of just being price-takers. Private insurers naturally worry about being put out of business and do their best to assert their value proposition. But it’s a house of cards built on public subsidy of private goods (in the form of tax-free benefits for employees and tax-deductible premiums for employers). And as noted, there is little incentive to negotiate hard or manage use effectively; it’s a subsidized cruise where those on board happily along because no one is paying full freight, even while supporting a large administrative apparatus.
So it is both a question of doing the accounting properly, and more fundamentally a conceptual matter. If you think drugs are essentially market goods where “consumers” know what’s good for them, drugs ought to be heavily advertised and marketed to prescribers and the public, resulting in perfect competition that yields the best of all possible worlds. It would be just like laptop computers, in which case the whole enterprise should be privatized. If you think drugs are, like doctors, nurses, and hospitals, public goods that should be run like public utilities, and that none of the conditions that make laptops ideal market goods (transparent and easily comparable performance data, multiple suppliers, ease of entry into the marketplace, no intermediary between the buyer and the seller, etc.) are present in the area of drugs, then universal, publicly administered pharmacare is the wiser choice. Moreover many drugs are inherently dangerous and almost all are harmful if misused. That we have such a peculiarly fragmented pharma sector in Canada is an accident of history – drugs were left out of the Medicare Act and Canada Health Act outside hospitals. No other sane OECD country (US excepted of course) bases its pharma sector on an interlocking series of indefensible policies, practices, incentives, and accommodations.
And a word about what constitutes a “healthy debate.” A condition of engaging in it should be to declare under what conditions, or on the basis of which facts, one would change positions. I would favour a privatized pharma sector if you can show me examples of where the combination of appropriateness of use, pricing, and health impact under a private scheme is superior to that offered in a public system, with the important additional condition that there are no barriers to access to required medicines based on one’s ability to pay. I would ask representatives of pharma and the private insurance to articulate what would convince them that a public plan was on balance superior, and what criteria they would use to decide. If they can’t or won’t, they are certainly entitled to advocate for their positions, but since these are obvious and predictable, it is difficult to identify the pedagogical value of restating the obvious. The debate should have no a priori assumptions about whether public or private is better in principle. Fortunately, there is a huge natural experiment underway all over the world, and anyone entering the debate should be required to engage with the visible facts. Show me that overall, the people of New Zealand are worse off than Canadians in terms of access and health outcomes because of their drug plan. It’s not a persuasive argument to show me that 20 people in New Zealand didn’t get a two hundred thousand a year drug that 20 Ontarians or Texans got under private insurance and lived 2 months longer as a result; you also have to show me how the general distribution of and access to drugs plays out in the population at what cost, and with what effect on health status.
If the criterion for moving to a universal public plan is that no one will be denied anything now covered by some plan somewhere at any price, it’s a non-starter. Let’s be adults and adopt the standard that a public plan just has to meet 3 basic conditions: a) it is significantly cheaper per added unit of health; b) it is significantly fairer, i.e., resources are distributed from the well-off to the less well-off, not vice-versa; and c) many more people will be helped than harmed.
John Bachynsky’s comment about restricted formularies that Health Maintenance Organizations in the United States uses a study that has serious methodological problems. The study he refers to came to the conclusion that the HMOs with restricted formularies generated higher costs because the formularies didn’t meet the needs of the people that the HMOs served. However, that study was post-test only meaning that it didn’t account for pre-existing existing differences among the HMOs in patterns of care, populations and administrative policies. The HMOs were very geographically variable with consequent variations in medical care cost and utilization, member demographics and compensation methods for physicians and other providers all of which can significantly influence total medical care costs and utilization. Finally, the study has some results which are difficult to believe, such as a finding that increased use of generic drugs leads to increased prescription costs.
Commentary on restrictions on drugs available is a complex issue as there are thousands of drugs, millions of patients and constantly changing drug benefit decisions.
Generally the more drugs available to provide appropriate therapy the better the therapy. This was the conclusion of the HMOs in the United States that started with restrictive formularies and found that the patients who did not get appropriate therapy generated greater costs in the HMO hospitals. Now they use open formularies guided by clinical guidelines that are contained in best integrated.practices.
Drug products that do not produce the required effective result are classed as adverse events and should be reported to the regulatory agency. It is inappropriate to initiate a new evaluation process with different criteria.
Although some products are marginally better than placebo, it should be kept in mind that placebos have a powerful effect and it is difficult to distinguish between a drug and a placebo without a sophisticated methodology.
It is important to consider the perspective when we talk of selecting drugs as benefits. Govt programs see their role as providing appropriate therapy for most patients most of the time. Patients and health care workers look for appropriate therapy for all the patients all the time. Industry tries to provide as many products as possible to provide adequate therapy and increase revenue. Government tries to limit the use of medication to maximize savings. For a consumer advocate the perspective of recommending ways for patients to be involved in the drug benefit selection process should be foremost.
Recently the use of real world experience for decision making is gaining credibility and should be encouraged as a replacement for the clinical trials that use a select population not representative of the drug users.
Very intelligent article, but the current system in BC is brutal. I am about to retire, and will be living on a poverty level income. I will qualify for free medical and pretty decent Pharmacare, but not until I can provide two years of tax Notices of Assessment showing the reduced income. That means that I have to “hang in” until “sometime in 2021 so that I can show reduced income for 2019 and 2020. By the time I qualify, I’ll likely be dead because I won’t be able to continue to afford to take my six medications.
I understand your concerns. I echoes many of the those by one of the patient stories of my web site: https://www.facesofpharmacare.ca/penny-g
Hi Bill – good to see a reasoned response to critiques of proposed pharmacare. I regularly hear concerns that: Pharmacare would reduce coverage and benefits for those who have existing drug coverage, that drugs for chronic diseases like RA ( e.g., Humira, osteoporosis and pain medications might not be covered. Could you expand a bit on these thoughts?
Linda, I think this is a bit of a red herring. I hear it often from the drug and insurance industries as a scare tactic. Remember, that many private plans will drop coverage for expensive drugs if their subscribers elect to do so in order to reduce premiums. Many people taking orphan drugs voice this concern due to the outrageous prices charged for them (another debate for another time). If a drug is truly helpful, it should be covered in the public realm. The issue seems to be that much of the debate currently is focused on “essential medicines” right now, which creates this fear that many monoclonals will be excluded. I do not believe that will be the case and will likely be dealt with separately from mainstream drugs. But we stand a better chance of controlling these costs in a single-buyer situation.