Teresa Negrich Director, Group Product Development

1. Teresa NegrichDirector, Group Product Development

2. The healthcare landscape is changing ….. rapidly Drug plans Hospitals and Private clinics Eligible prescribers Health and Wellness

3. Today’s Topics • Overview of Canadian Healthcare System • Coverage of Cancer Drugs • Provincial Pricing • Provincial Drug Tendering • Sustainability Principle • Generic drug pricing • Other trends

4. Overview of the Healthcare System In Canada

5. Canada Health Insurance System • Federal legislation • Comprised of 13 interlocking provincial and territorial health insurance plans • Designed to ensure • Reasonable access to “medically necessary” hospital and physician services • On a prepaid basis and • Without direct charges at the point of service “to protect, promote and restore the physical and mental well-being of residents of Canada and to facilitate reasonable access to health services without financial or other barriers.”

6. Canada Health Act • Defines the requirements that the provinces must fulfill in order to receive their full transfer payment under the Canada Health Act • Public administration • Comprehensiveness • Universality • Accessibility • Portability • No extra billing and user charges for insured services • Reporting requirements to Minister of Health

7. Canada Health Act – Key Definitions • Insured health services • Medically necessary hospital, physician and surgical-dental services • Insured hospital services • Medically necessary in and outpatient services such as • Accommodation and meals at ward level • Nursing services; laboratory, radio-logical and other diagnostic procedures • Drugs, biologicals and related preparations when administered in the hospital • Use of operating rooms, anesthetic facilities including equipment and supplies • Insured physician services • Medically required services rendered by medical practitioners • These are generally determined by physicians in conjunction with their provincial health insurance plan • “Medically necessary” is not defined in the Canada Health Act

8. Canada Health Act • Many provinces offer programs and services which fall outside of the Canada Health Act’s definition of insured health services i.e. Pharmacare, disease focused programs • Provincial governments have jurisdiction over administration and delivery of health care services in their provinces • Can determine their own priorities • Determine their health care budget • Manage their own resources • The federal government sets out criteria that the provinces must satisfy in order to receive a full transfer payment for healthcare

9. Cancer Drugs

10. “Tell me your postal code, and I will tell you your chances of surviving cancer,” says Dr. William Hryniuk, past chair of the Cancer Advocacy Coalition of Canada.

11. Coverage of Cancer Drugs – Ontario 2006 • Ontario working group - proposed that Ontario hospitals could administer some new IV oncology drugs on an outpatient basis • However, the drug will NOT be an insured service • Hospitals may charge an administrative fee for administering the drug • Why? - To stop people from traveling to the U.S. to purchase these drugs at a much higher price • Not provincial policy yet • Does this violate the Canada Health Act? Is this service medically necessary? • Legal opinion obtained the working group supported this recommendation • It appears as though a province can carve out (not insure) any service they want on an outpatient basis • Public policy decision that the Federal Government must address, but hasn’t

12. How do the provinces compare? Source CACC report Card 2007

13. Source CACC report Card 2007

14. Private Clinics – The New Healthcare Reality • 18 private clinics in Canada make these drugs available to individuals - 11 clinics recently opened across Canada - They are funded by Roche Pharmaceuticals - They administer more than just oncology or Roche drugs

15. Who will pay for these drugs? • Private healthcare plans • If no private coverage - Exhaust individual savings - Cash out RRSPs - Second mortgage your home - Credit cards This is a great opportunity for group Critical Illness

16. Pharmaceutical Focus

17. Pharmaceutical Focus • The focus is on cancer drugs and drugs to treat rare conditions • It is estimated that there are 483 drugs in the pipeline - 25% are for cancer - 18% are for specialty conditions • Private clinics will ensure that the drugs get covered by private payers • Movement to oral medications rather than intravenous ensures that the treatment does not have to be administered in a hospital and will be covered under private plans

18. The Rise of Catastrophic Claims – Drug Card Only Source: Emergis 2007 Data

19. Provincial Pricing

20. Provincial Pricing – Ontario Bill 102 • Bill 102 limited the amount that the ON government will pay for drugs for ODB plan recipients • Pricing applies to the public plan only Changes • Pharmacy markup - reduced from 10% to 8% on all drugs (brand and generic). • Generic drugs - capped at 50% of the equivalent brand • Rebates have been reduced and replaced by professional allowances • This has impacted pharmacy revenue

21. Components of a Rx Markup IngredientCost Rx = Bill 102 reduced from 10% to 8% + Dispensing Fee

22. Components of Pharmacy Revenue PrescriptionDrug Sales Other Merchandise Sales Generic Rebates Other Pharmacy markup reduced Generic rebates reduced

23. Impact of Ontario Bill 102 • The principle of rebating was exposed • Dispense fees in Ontario increased by 20% immediately • Extra billing is occurring in some pharmacies on the drug card • Cash paying customers are funding a portion of the lost pharmacy revenue • Bill 102 created three tiered pricing • One price for ODB recipients • Another price for drug cards • A third price for cash paying customers

24. Provincial Pricing • Quebec - First province to follow Ontario’s lead - Maximum price structure to be implemented over 3 years • Generic drug prices capped • Maximum profit margin capped for the wholesaler - This pricing structure applies to private plans • Newfoundland • Will follow Ontario’s pricing structure - effective Feb. 1, 2009 • Pushed back new pricing structure due in February 2008 due to negative pharmacy reaction • Nova Scotia • Tariffs introduced on “Top 20” drugs

25. Provincial Drug Tendering

26. Provincial Drug Tendering • Province of BC negotiated a drug deal for Zyprexa - Speculated that 10-15 more deals are in the works • Province of Alberta - AB has announced that they will be establishing a bulk buy policy • Province of Ontario - Tendering certain off-patent drugs where multiple generics exist - First Wave: high blood pressure, gastrointestinal, diabetes, epilepsy and pain disorders

27. Impact of Provincial Tendering • Provinces are legislating on behalf of the public sector and ignoring the private sector • A two-tiered pricing system exists • One price for pharmaceuticals purchased by the government • A second higher price for the private sector and uninsured

28. Sustainability Principle

29. Provinces Add Sustainability Principle British Columbia • Province of BC added a sixth principle to Medicare Protection Act (April 2008) • SUSTAINABILITY – The Medical Services Plan will be administered in a manner that is fiscally sustainable and provides for current healthcare needs without compromising the public health care system for future generations. Alberta • Announced an aggressive action plan to improve efficiencies and the sustainability of their healthcare plan

30. Generic Drug Pricing

31. Generic Drug Pricing – is there cause for concern? • Reasons For Competition Bureau Investigation • Concern over the high cost of generic drug prices in Canada • Cost out of sync with other 10 out of 11 comparator countries • Cost 32% higher than other countries • Findings • Rebates are between 40 – 80% • Lots of competition between manufacturers and suppliers BUT rebates are NOT passed along to the private sector • This has created on over-inflated price

32. Mental Health “there can be no health without mental health”

33. Centre for Mental Health in the Workplace Cubic Health Study Found • Employees with depression - Drug claims were 2.5 times greater than employees who do not suffer from depression • Many co-morbidity conditions accompany depression - Neurotic pain, anxiety disorders, sleep disorders, stomach hyperacidity and mild to moderate pain. *Cubic Health study was based on 2004 and 2005 Great-West Life data

34. The impact of depression in the workplace *Cubic Health Study: based on 2005 data from Great-West Life

35. Co-morbidities of depression *Cubic Health Study: based on 2005 data from Great-West Life

36. Other Provincial Trends

37. Privatization • Governments are entertaining the value that the private industry brings to their budget concerns • Private medical clinics and online doctor services are quickly gaining momentum in many provinces • Quebec just introduced a bill that, if passed, could allow doctors to practice in both the public and private sector • Former Quebec Minister of Health, Philippe Couillard, has joined a private sector company only two months after retiring from politics • He is now a partner of PCP Healthcare Opportunities Fund which invests in private healthcare businesses with the overall goal to improve healthcare system efficiencies • U.S. company launches a NAFTA-based lawsuit threatening Medicare

38. Alternative Healthcare Professionals • Pharmacists and nurse practitioners are being granted the right to prescribe and/or provide expanded services in many provinces • This is a positive change which will take some strain off physicians and increase compliance and health outcomes

39. Provinces Focus On Wellness • Manitoba - Workplace In Motion – grants available to promote activity in workplaces • Alberta - looking at disease management • Ontario – The 2008 proposed $190M (over 3 years) to implement a chronic disease prevention and management strategy. Diabetes will be focused on first. • Provinces Ban on Mandatory Retirement • ON, BC, SK, NS and NF have put in place laws for provincially regulated employers - can no longer force employees to retire solely because they have reached age 65 or more. • Provinces set to Create Electronic Medical Record • Each province is looking to capture medical information electronically so that all healthcare providers have up to date relevant information

40. Other Trends

41. Medical Tourism - Sun, Sand and Surgery • Sicko (Michael Moore) depicts the Cuban health care system superior to the U.S. • Entrepreneurial companies are providing a service of arranging trips to other countries for medical treatment and diagnostic tests • It is estimated that as many as 30,000 Canadians travel each year for medical and dental procedures

42. HPV Vaccination • Gardasil protects against high risk HPV types 6, 11, 16 and 18 • Recommended for women ages 9 to 26 • The Federal Government has provided $300M in funding to the provinces • Some provinces began vaccinations in the 2007 school year • Approximate cost $400 - $600 total (for 3 doses)

43. Impact on Private Plans • As of July 2007, 37% of all vaccinations at GWL were for Gardasil* • At July 2008, 22% were for Gardasil vaccinations (* GWL 2007 drug data) • A new HPV vaccination made by Glaxco Smith Klein is due to come into the market soon. This will increase media attention. • Gardasil is being fast tracked for women age 27 to 42 in the U.S. • Only a matter of time before it is expanded in Canada

44. Paramedical Trends • The number of plan members using paramedical services is increasing and the number of services that they claim is also on the rise • “Blackberry thumb” is predicted to be the new upcoming problem • Despite increasing utilization, paramedical services should form part of every benefits plan • Focus on health and wellness • Can improve physical and mental health • May prevent more serious long term illness

45. Paramedical Claims – % of healthcare

46. Thank you