Canada’s health care system has come under increasing scrutiny as the debate on health reform intensifies in the U.S. The National Post recently published an interesting article on Canada’s provincial drug plans and recent changes that have allowed some of them to negotiate prices directly with drug companies in exchange for having their products listed. The benefits of this are the significant discounts that the Ministries of Health can reinvest in the health system and access to a greater choice of medicines for patients on provincial drug plans. The downsides are the creation of tiered healthcare (pricing differences between public and private health plans as well as between provinces) and a lack of transparency.
Drug rebates raise questions on cost, transparency
In a controversial shake-up of Canada’s pharmaceutical marketplace, drug companies have been paying provincial drug plans millions of dollars in rebates in exchange for having their products listed.
In the past, the price of a brand-name drug was the same, regardless of who paid. If a new drug came on the market, drug plans either agreed to list it at that price, or not.
Some experts say the unprecedented deal-making is already saving the health-care system money and making a wider array of medications available to patients. Others worry about the lack of transparency and a new, two-tier drug pricing system that leaves private insurers and people without any coverage paying more than public plans for the same medication.
At least five provinces have begun negotiating with manufacturers to win price cuts for the medications they include on their benefit plans. Until about two years ago, provincial governments, private insurers and individuals from east to west all paid the same prices for brand-name prescription drugs.
In Ontario, where the whole trend began about two years ago, the head of the government drug plan says the process has enabled the province to sink hundreds of millions of dollars into covering drugs it otherwise would have had to leave off its formulary. The Ontario Public Drug Programs, which reimburse medication costs for about three million welfare recipients and senior citizens, negotiated $80-million in rebate savings over three years for one drug alone, said executive officer Helen Stevenson, without naming the product.
“We are compromising on transparency: we acknowledge that,” Ms. Stevenson said. “But if it means we’re getting tens of millions of dollars off the prices of drugs, and that money can be put directly back in the drug budget, we think this is a good step for Ontario.”
But some analysts say the process makes it difficult for organizations like the inter-provincial Common Drug Review to judge the cost-effectiveness of new products in a cash-strapped system.
“When you have individual provinces now doing secret, non-transparent pricing negotiations, it really sabotages the whole CDR initiative,” said Neil MacKinnon, a pharmacy professor at Dalhousie University. “Nobody knows what the final price is and it’s hard to keep governments accountable when you don’t know what the final price is.”
Ms. Stevenson said the secrecy around price arrangements is unavoidable, as the industry has said it would not enter into negotiations if the results were to become public.
About 45% of drug costs in Canada are covered by provincial plans, 35% by private insurers and 17% by individuals, according to the Canadian Institute for Health Information.
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