National Pharmaceuticals Strategy and National Pharmacare Program

1. National Pharmaceuticals StrategyandNational Pharmacare Program Ali Suleiman Director, Research & Pharmacy Analysis PMCQ Education Day October 20, 2005

2. PresentationOutline • Prescription Medications in Canada • National Pharmaceuticals Strategy • Discussion Items • National Formulary • National Pharmacare Program • Concluding Remarks

3. Prescription Medications in Canada

4. National Health Expenditures Trends 19% of the $40.4B increase in HCS in Canada were attributed to cost of prescribed drugs 45% 75% Source: National Health Expenditures Trends 1975-2004 (CIHI)

5. Where the Money Goes Source: National Health Expenditures Trends 1975-2004 (CIHI)

6. The Shift in Cost 1999 2004 52.7% 47.3% 55.4% 44.6% Source: National Health Expenditures Trends 1975-2004 (CIHI)

7. Why Prescription Medications is an Issue Now…..? • More elderly with chronic conditions • Previously untreatable diseases now treatable • More drugs • More drug therapy instead of surgery • More patients recover at home not hospital • Change in drug utilization & prescribing habits Result - increase in prescription drug expenditures

8. Background Leading to NPS • 1997, National Forum on Health recommended a national pharmacare program. • Sept 2000, First Ministers working to ensure access to new, appropriate and cost-effective drugs. • Sept 2001, National Prescription Drug Utilization Information System (NPDUIS) established. • Sept 2002, Common Drug Review (CDR) established.

9. Background Leading to NPS • Feb 2003, First Ministers Health Accord to create system with timely access to quality health services. • July 2004, Canada’s premiers and territorial leaders press Ottawa to spend billions on a national pharmacare program. • Sept 2004, as part of 10-year plan, First Ministers agreed to the National Pharmaceuticals Strategy.

10. What is the National Pharmaceuticals Strategy? • A collaborative, integrated & comprehensive approach to pharmaceuticals in Canada • Governments working together with input from providers, researchers, policy makers, industry, patients and the public • First report to First Ministers due June 2006 Source: Presentation by NPS Co-Chair Jurisdictions: Ian Shugart & Penny Ballem

11. Nine Key Elements • Options for catastrophic drug coverage • Common National Drug Formulary • Access to breakthrough drugs accelerated • Evaluation of drug safety and effectiveness • Purchasing strategies for best prices • Influence prescribing behavior • Broaden the practice of E-prescribing • Access to non-patented drugs & prices • Best practices in drug plan policies

12. Expected Benefit from NPS • Better coverage & equal access for Canadians • Safer, more effective drugs • Better evidence for: • Listing decisions & post listing assessment • Best practice prescribing • Patient information needs & self-management • Greater value for patients & health system in return for significant investment Source: Presentation by NPS Co-Chair Jurisdictions: Ian Shugart & Penny Ballem

13. Progress to Date • Ministerial Task Force established • Priority areas identified • Project plans developed & approved by CDM • Background research underway • Policy development work initiated • First consultation opportunities: • Working Conference on Strengthening the Evaluation of Real World Safety and Effectiveness (September 14, 15) Source: Presentation by NPS Co-Chair Jurisdictions: Ian Shugart & Penny Ballem

14. Five Focus Areas • “Real world” drug safety & effectiveness • Expensive drugs for rare diseases • Drug pricing & purchasing • Catastrophic drug coverage • Common drug formulary Source: Presentation by NPS Co-Chair Jurisdictions: Ian Shugart & Penny Ballem

15. Next Steps • Fall 2005/Winter 2006 – Ongoing consultation on specific priority areas • Fall 2005 – Interim Report to Health Ministers • June 2006 – Report to First Ministers Source: Presentation by NPS Co-Chair Jurisdictions: Ian Shugart & Penny Ballem

16. Challenges • Early in process – too soon to judge • Entire policy focus currently on drug cost • Weight given to therapeutic advantage?? • Feds taking policy lead - no legislative mandate or authority • Industry relegated a minor role • Industrial benefits not yet a factor • Private sector plans not fully engaged

17. Discussion Items • National Formulary (NF) • National Pharmacare Program

18. Discussion Items National Formulary (NF) A prerequisite to a sustainable full-fledged national Pharmacare program

19. What is a NF ? • Who are beneficiaries (i.e. seniors, welfare, catastrophic, other???) • Which drugs are benefits • Financing (who pays) • Who decides, controls, administers • Decision making process?? Answers define the “National Formulary”

20. What is a NF ? • Answers depend on perspective • Provincial ministers of health • Financial commitment from feds • Province defines beneficiaries • Province controls benefit list & administers financing (who pays) • Feds • Control/influence over beneficiary definition & benefits • Funding will be ongoing issue

21. What is a NF ? • Either a list of drugs that member plans will reimburse • Example : most provincial drug plans • Or a list of drugs that member plans should reimburse • Example: WHO Essential drug list

22. NF…. is it Needed ? • Protecting current public drug programs • Bring drugs into Medicare ‘basket’ of universally covered health care goods & services • Indispensable to cost-controllable & cost-effective nation-wide Pharmacare • Reduce disparity among beneficiaries to various plans • Prerequisite to full-fledged national Pharmacare program

23. Current Public Drug Program Formularies • All provinces have their own formularies • Most cover bulk of drugs for the poor, the elderly, patients facing catastrophic drug costs and or certain conditions • Formularies revised several times a year • Formularies used to implement cost reduction policies (e.g. Limited Use, generic substitution, Reference-based pricing……)

24. Potential Benefits of a NF • Cost Containment …..? • Depends on: • Provinces respond (e.g. control over eligibility, financing & how to list) • Prescribing physicians respond (e.g. off-label prescribing) • Decision-making criteria to list drugs (cost-containment vs. cost-effectiveness and / or political influence)

25. Potential Benefits of a NF • Improving purchasing power • Larger price reduction in exchange for national listing is not guaranteed; discount prices to one buyer could trigger lower prices elsewhere • Reduced transaction costs by avoiding individual negotiations with suppliers

26. Potential Benefits of a NF • Standardizing drug coverage • Considerable variation between current provincial drug plans (e.g. eligibility, copay, deductibles, drugs covered and financing) • Costly; significant additional funding needed to raise all provincial programs to the same level of coverage

27. Potential Benefits of a NF • Elimination of duplication • Already incorporated through the expansion of the role of CCOHTA; CDR • CDR • Intention: centralize review for all provinces • Reality: one additional step in market access – if recommended, provinces still decide listing

28. Barriers to a NF • Current Variations between provinces • Unequal fiscal resources to commit to drug coverage • Different populations with different coverage needs • Current provincial formularies (significant investment) • Different political outlook

29. Barriers to a NF - Analytical Issues • Who are beneficiaries (i.e. seniors, welfare, catastrophic illness) • Impact of various copayment, deductible amounts on utilization • Which drugs are benefits • How to list • Who decides, controls, administers • Costs and financing (Who pays)

30. Cost of NF • One size fits all? • Loss of experimentation • Mismatch between decision making authority and expense

31. Discussion Items National Pharmacare Program

32. National Pharmacare ProgramChallenges • Inadequate coverage for small part of population • Balancing health care priorities, cost and benefit • Rapid growth in drug expenditures • Evidence for need for improved prescribing and utilization and post listing surveillance

33. National Pharmacare Program Objectives: • Equity of access • Safety & efficiency • Cost containment

34. National Pharmacare Program • National standard for • Beneficiaries • Benefits • Feds major role • Administration - status quo or new • Control - feds via $

35. Cost Impact of the Pharmacare Public Funding Model • A publicly-funded Pharmacare program providing first-dollar, universal coverage • Highest increase in prescription drug expenditures • Private & individual spending would undergo the largest decrease due to a dramatic shift in funding from private sector to public sector

36. Is it Feasible? • Overall increase in expenditures due to removal of existing cost sharing arrangements • Ramifications for private insurance market • Removing the drug plan portion from private insurer may increase cost of offering remaining benefits (dental, vision care, etc) • Reduction in consumer choice • Loss of private control over some health care spending • Erosion of provincial jurisdiction

37. National Pharmacare ProgramPublic/Private Model • Eligibility for public coverage • All currently eligible provincial beneficiaries plus universal plan with high deductible • Administrators • Provinces with compulsory national formulary • Who pays • Provinces & Federal (Feds contribution increases) • Patients & employers pay premiums, deductibles, co-pays, and co-insurance

38. National Pharmacare ProgramImplications • National formulary necessary • Limited list of benefits likely due to cost • Extensive criteria for payment (LU policy) • Lead to pressure for appropriate use • Slow listing time • Many players - different priorities • Feds new player in decision process • Companies will be unable to effectively negotiate listing

39. National Pharmacare ProgramImplications • Price controls through drug life and on generics • Expect attempts to leverage buying power (tendering) • Very expensive • Erosion of provinces’ constitutional power

40. Concluding Remarks • National Pharmacare • Unlikely • National Formulary • Helps high cost drugs • Negative for pharma • Price controls • Limited listings

41. QUESTIONS ???