Prescription drug coverage: how does Canada compare?

When Jennifer* was laid off, it wasn’t paying the mortgage she was worried about – it was paying her drug bill. The $24,000-a-year cost of Enbrel, used to treat her rheumatoid arthritis, had been covered by her employer. She remembers sitting in the boardroom being told she had been let go, thinking, “I’m going to be crippled because I can’t afford this drug,” she says. “I started freaking out. All I could process was, I’m not going to have a job – how am I going to pay $24,000 a year for a drug?”

She’s among the 10% of Canadians who have difficulty affording their drugs. It’s an issue that’s been discussed frequently in the past, and thrust back into the spotlight by Eric Hoskins, Ontario’s Minister of Health and Long-Term Care, who recently announced his support for a national pharmacare program.

Study by @CMAJ_News: National pharmacare could save $7.3 billion. Join me in calling for a national program! http://t.co/FilOGbLDFz — Dr. Eric Hoskins (@DrEricHoskins) March 17, 2015

Right now, each of Canada’s provinces has its own pharmacare system. But across the country, there are similarities: people on social assistance receive coverage either for free or for a minimal co-payment, and low-income seniors tend to be covered. Many provinces also provide catastrophic coverage for drug costs above a set amount, such as 4% of household income. Private plans, often employer-sponsored, also cover some costs.

Canada’s lack of a national pharmacare plan has been subject to rising scrutiny. Our patchwork system means many people aren’t covered, and we also have higher costs: Canada pays more for prescription drugs than other OECD countries, something the Pan-Canadian Pharmaceutical Alliance is trying to lower by negotiating as a nation. An article published in this week’s Canadian Medical Association Journal reported that the total cost of a national pharmacare program would actually be less than what is currently spent by the combination of public and private drug plans and patients’ payments.

A number of factors affect how much national drug programs cost taxpayers: the price paid for each drug (influenced by negotiations between the government and the manufacturer); which drugs are covered (decided by the government, usually based on cost-effectiveness); the number of people taking the drug (influenced by physician prescribing practices); and the percentage of the cost borne by the government (a policy decision).

But deciding to provide drug coverage to all Canadians is only a first step. Canadians would then need to decide exactly how the coverage would work. How much could we afford? What drugs will be covered? Here are three countries with three very different approaches that Canada could learn from if we decide to establish a national pharmacare program.

The UK: “one of the best”

As part of their health care, all citizens in the U.K. have their prescription drugs paid for. In England, most people pay a co-payment of $14.50 per prescription, although there are exceptions for vulnerable populations, including children, the elderly and those with certain conditions, such as cancer.

Prepayment certificates can help lower costs for those in England, offering a flat rate for co-payments for three months ($53) or a year ($188). Wales, Scotland and Northern Ireland have gone further by eliminating co-payments on drugs, which increases the chances patients will take required medications. And while some people in the U.K. have private insurance, it’s used for faster access to non-urgent procedures or a broader choice of specialists, not for drugs.

“The British National Health Service has one of the best systems,” says Steve Morgan, a professor at UBC who specializes in pharmacare.

The National Institute for Health and Care Excellence (NICE) makes recommendations on whether many new brand-name drugs should be paid by the publicly funded National Health Service (NHS). “[NICE] looks at clinical effectiveness and cost effectiveness at the same time,” says Mark Sculpher, professor of health economics at the U.K.’s University of York. “The strength of the NICE process is its use of evidence and analysis, its inclusive stakeholder arrangement, and that it’s very open and transparent about how it reaches a decision.”

Since pharmaceuticals come out of the overall healthcare budget, however, paying for drugs can have unexpected results. “When NICE makes a recommendation for a new drug, which costs the NHS more money, the NHS has to find the money,” says Sculpher. “So it has to do less of other things – what economists call opportunity costs. And NICE has not formally considered those opportunity costs very carefully.” A new drug being funded, for example, might increase wait lists for surgery.

Through both better pricing and reducing over-prescribing, the U.K. has managed to lower costs. The country spends the same percentage of the world market share for prescription drugs as Canada does – despite having twice our population, says Marc-André Gagnon, assistant professor at Carleton University.

“Evidence-based formularies [like the U.K.’s] can shape prescribing behaviour considerably – it’s probably the easiest way to shape behaviour at a mass level,” says Danielle Martin, vice-president of Medical Affairs and Health System Solutions at Women’s College Hospital in Toronto.

France: the country of co-payments

In France, 99% of the population has their prescription drugs partially covered by the government. But the co-payments are much larger than the nominal amounts in many other countries.

The government coverage is divided into categories, from 100% for expensive drugs that treat serious illnesses, to 15% for drugs that have little medical benefit and treat non-life-threatening illnesses, and 0% for those that don’t have enough research behind them. Most drugs get 65% coverage. The rest of the cost is covered by patients, as co-payments.

Some groups are exempt from co-payments, including children, those who are low-income, and those who have one of a list of chronic illnesses, such as stroke, diabetes or Parkinson’s disease. And most people – 93% – have their co-payments covered by private insurance, which is often furnished by their employers.

The co-payment ladder is intended to help shape the market towards drugs that are more effective or necessary, and away from me-too drugs and non-essential medicines. But because private insurance covers the co-payment costs, the effect is basically negated, says Gagnon.

That, combined with a culture of high medicine use in France, has led to higher costs. Despite a successful campaign to encourage the use of generic drugs, France spends more per capita on drugs than many other countries in Europe. France spends about 71% more than the U.K., and more than Germany, Denmark, the Netherlands and Sweden. As a result, it also has an unusually high number of pharmacies, and it is number three in overall drug expenditures worldwide.

Part of the reason is that France has a strong pharmaceutical industry – one of the largest in Europe. “France’s pharmacare system is interesting, but the country is plagued with a culture of over-prescribing,” says Gagnon.

New Zealand: the anti-pharmaceutical mavericks

In 1993, New Zealand created the Pharmaceutical Management Agency (PHARMAC), which looks at effectiveness, suitability and cost to decide what’s covered by the government and negotiates prices on behalf of the entire country. By tightly controlling the country’s formulary, it has been able to keep costs flat while drug use has risen. One study found that New Zealand paid 51% less than British Columbia for four large, established classes of prescription drugs.

Created in response to rising pharmaceutical costs, PHARMAC’s tough approach to negotiating has made the agency heroes in the eyes of those who advocate for strict price control and villains to those in favour of access to a greater variety of drugs.

“They have achieved the lowest per-capita spending on universal drugs in the world” while providing substantial coverage, says Morgan.

Durhane Wong-Rieger, president of the Canadian Organization for Rare Disorders, sees it differently. “New Zealand has taken a very draconian view towards this. Unfortunately it means that most of the patients don’t get any access to even what we would consider standard medicines, and they are blocked out of any of the innovative medicines.”

Morgan disagrees. “The New Zealand formulary is extraordinarily comprehensive,” he says. “They reign in on drugs that are specialty drugs that don’t have proven value for money and even in that regard New Zealanders still have access to quite a few therapies.”

Still, the New Zealand approach is probably too extreme to be replicated in Canada, says Gagnon. “I don’t think it could work here. It’s based on the idea that you have one reference drug per category,” he says, referring to the fact that the system only reimburses the lowest-priced drug in each therapeutic category. “For Canadian doctors, I think they would think this is absolutely unacceptable.”

Morgan adds, however, that while only the lowest-priced drug is funded when it comes to patented drugs, New Zealand funds several drugs in “therapeutic categories with lots of generics.”

Moving beyond costs

Some argue that focusing on countries that are good at controlling costs isn’t enough. “We’re beyond the day of just looking at what the cost per drug is; we’re beyond the day of just looking at what the impact on the budget is,” says Wong-Rieger, who argues that good access to drugs helps lower costs in the system overall. “The real challenge is to make sure that we’re getting the right medicine to the right patients.”

But Martin argues cost to patients is part of that formula. “We know that we have very high rates of cost-related non-adherence – people not taking their medication at all, or as prescribed, specifically because of concerns about cost,” she says. “We are among the highest spenders in the OECD … and that hasn’t led to any longer life expectancy or any other improved health outcomes.”

While momentum seems to be building toward the idea of a national pharmacare system, the details remain unclear. These three countries provide models to learn from – and lessons in what to avoid.

*Name has been changed

Which pharmacare system is the most promising model? The U.K.

France

New Zealand

Other