In a column in the Times Colonist last Sunday, Prof. Colleen Flood from the University of Ottawa proposed that the federal government establish a national pharmacare program.
Flood’s heart is in the right place. Canada’s current approach to drug purchasing is an international embarrassment.
We spend more on prescription medications, per capita, than any other country except the U.S. We spend more, in total, than the U.K., which has a population almost twice as large.
By contrast, New Zealand, with its tiny population (4.5 million), gets a better deal from big pharma than we do. And why? Because that country has a centrally administered drug program, which offers notable advantages.
First, the same agency that licenses drugs negotiates the price. That provides a useful hammer — meet our offer or we won’t approve your drug.
Second, pharmaceutical companies save time and money because they have to deal with only one bureaucracy. That lets them cut a leaner deal.
Third, it’s a lot harder to fool one central purchaser than 10 provinces who sign secrecy deals with suppliers that prevent them sharing information with each other.
This divide-and-conquer policy, widely employed by the industry, is a major reason our costs are too high.
Unfortunately, we’re not going to have a federally run program, because it’s unconstitutional. The Constitution Act gives provinces, not Ottawa, the authority to deliver health-care services.
However, before we talk about solutions, let’s understand the problem. The pharmaceutical sector is run by sharks.
This kind of shark: U.S. insulin prices have increased, in some cases, more than 1,000 per cent over the past two decades. Why? Because growing obesity rates have raised the incidence of diabetes, and more desperate patients equals more opportunity for price-gouging.
Now you might wonder, how can a drug invented by two Canadians almost a century ago keep costing more? Frederick Banting and Charles Best sold their patent to the University of Toronto for $1 each, the idea being that no one would profit from their discovery.
The answer is called “ever-greening.” As patents expire, drug companies often make minor adjustments to their products, then re-patent the “new and improved” format. That prevents generic companies making me-too versions at greatly reduced costs.
How long can this ever-greening go on? Well, in the case of insulin, since 1921.
Fine. We’re dealing with unscrupulous companies. How do we respond?
First, we need one central purchasing agency that each province and health authority agrees to join. And each must also agree to purchase only through that agency.
It can’t be federally run, but the feds should sit on the board of directors so Ottawa can bring its drug-licensing authority to the table. That gives the agency a double-bladed axe to swing — licensing power and a monopoly on purchasing.
Second, the agency must buy generics whenever the opportunity exists. This will cause heartache with some GPs who prefer to prescribe brand names, but exceptions can be granted on a case-by-case basis.
Third, the price offered for each drug should be the cheapest available on the market for medications in that class.
This is called reference pricing, and while B.C. adopted it years ago (one reason we have some of the lowest drug costs in Canada), the country as a whole has been slow to respond.
Some believe these reforms might save enough money to make pharmaceutical coverage a fully insured service (like hospital and physician care). Unfortunately, that seems unlikely.
Many Canadians get drug insurance at work. If the provinces take on the entire burden, they’re letting employers off the hook.
For that reason, a universal, government-funded program is probably beyond our means. But with the necessary reforms, what the provinces can afford is much more generous coverage.
