Political Backbone Needed to Control Drug Costs

Blaming Canada’s aging population for healthcare costs spiraling out of control is misplaced. Missing the opportunities to contain public spending is the real culprit. For example, drug costs have been rising by an average 10% a year since 1999.

We spent almost $30 billion on prescription drugs in 2009, and the share of pharmaceuticals in total health expenditures has risen from 9.5% in 1985 to 16.5% nation-wide. This is the second biggest ticket item in healthcare, second only to the amount we pay for hospitals (which accounts for 28% of all healthcare spending).

One in four Canadians had no drug insurance coverage before the recession even began, and hundreds of thousands more have lost coverage since. The attack on retirement benefits has meant that thousands of pensioners are having more difficulty getting the medicines they need. Out-of-pocket expenditures doubled from $2.3 billion in 1999 to $4.6 billion in 2009, and a growing number of Canadians are simply not filling in prescriptions because of their cost.

In fact, Canadians pay more for each pill than almost every other advanced industrial nation except Switzerland, and 30% more than the average cost in the OECD nations.

We can do better.

In fact we can improve access and contain costs.

Sound impossible? In 2010, Professor Marc-André Gagnon published a ground-breaking report through the Canadian Centre for Policy Alternatives showing we can meet these twin goals, by flexing our collective purchasing power and getting smarter about how we spend.

It all comes down to the power of a single, public system. One that manages costs through four levers that decision-makers have been talking about for decades:

1) universal public insurance;
2) a national formulary of essential drugs;
3) independent evidence-based drug evaluation, and
4) bulk-purchasing.

One that identifies which drugs and patterns of use are most effective.

One that can save us more than $10.7 billion in annual costs.

For this to happen we need our governments to work with us, not against us. We need this more than ever. Today, big bucks are at stake.

The government of Canada is negotiating a free trade agreement with Europe, which it hopes to have concluded by the end of 2011.

One of the things the Europeans hope to get from this deal is changes to our drug patent laws and regulations. Specifically, they’d like to extend patent protection for top-selling drugs. Pharmaceuticals account for 15.6 percent of total exports from Europe to Canada, with a value of more than $5 billion annually.

In early February a study by Professors Aidan Hollis and Paul Grootendorst, two of Canada’s top academics on pharmaceutical policy, showed that the changes sought by the European Union would add $2.8 billion to our annual expenditures on drugs. The federal government is calling the shots, but it won’t shoulder the costs. The full impact of the new rules would be largely borne by provinces, private insurers and individuals paying directly.

A recent CARP poll shows that almost two thirds of CARP members (64 per cent) are against extending patent protection to name-brand prescription drugs, even if it means the loss of some research and development. A further 11 percent weren’t sure. Only a quarter of CARP members favoured the direction in which the negotiations are moving.

Provincial and territorial governments are sure to be on the side of the majority of CARP members. When the Premiers come together at their annual Council of the Federation meeting in British Columbia this July, the topic of how to manage the rising costs of healthcare will likely come up.

Potentially huge savings in drug costs are low-hanging fruit for governments if they work together, with the federal government on their side.

These savings could be re-invested to build a system that provides first-dollar coverage for medicines, reduces waste, improves utilization and ensures better access to life-saving and life-enhancing treatments.

When you spend $30 billion a year on something, why pay retail? With our governments on our side, we can better manage costs and save.

The more we save, the more we can do. The sooner we act, the sooner we save. Let’s encourage our leaders to practice the adage of our parents’ generation: waste not, want not.
Armine Yalnizyan is a senior economist at the Canadian Centre for Policy Alternatives