Correct diagnosis, incorrect prescription—The Fifth Estate’s segment on pharmaceutical costs

If there are 10 people on a boat, and one falls into the ocean, do you toss that person a lifebuoy—or do you cut the lifebuoy into 10 pieces and distribute it equally?

Last weekend, CBC’s The Fifth Estate cited research that one in 10 Canadians cannot afford their prescription medication. If true, this is certainly a problem that needs to be addressed—and public policy should focus on identifying and supporting this group of individuals.

Unfortunately, the solutions being offered by Prof. Steve Morgan (and others) on the show—i.e. a publically funded national pharmacare plan—instead focus on subsidizing prescription medicines for everyone, including the nine out of 10 who don’t need it. It’s like using a baseball bat to fix something that needs a surgical tool.

The segment by The Fifth Estate certainly raises some important questions and presents compelling data. However, the simplicity of the narrative may mislead some viewers into conflating some very significant, but distinct, issues.

Let’s try and clarify some of these:

1. Do most other universal health-care systems provide coverage for pharmaceuticals?

Yes. For example, countries such as Switzerland, the Netherlands, Germany, France, the United Kingdom, Australia and New Zealand all provide some level of coverage for pharmaceuticals under their universal plan (each requiring varying degrees of copayments from patients). However, it must also be noted that while several countries with universal health-care systems provide coverage for pharmaceuticals through government-run programs (such as the United Kingdom and Australia), many others (such as Switzerland and the Netherlands) provide universal access for all health-care services (including pharmaceuticals) through private insurers. In fact, in stark contrast to Canada, all of these countries (even the U.K. and Australia) allow for a much expanded role for the private sector in the insurance and delivery of medical services—either integrated as partners, or offered as alternatives.

Of course, the simple existence of a national drug plan (whether it be mostly public or private) does not guarantee a reduction in the proportion of individuals who struggle to pay for their prescription medication. For example, a 2013 survey by the Commonwealth Fund indicated that eight per cent of Canadians with below-average incomes  “did not fill prescription or skipped doses because of cost.” Unfortunately, that number was 18 per cent in New Zealand—The Fifth Estate’s poster child for a publically-funded universal pharmacare plan.

2. Are Canadians without private insurance for pharmaceuticals “on their own?”

No. While there isn’t a uniform national drug plan for such groups, every province in Canada has an individually tailored comprehensive prescription drug insurance program for low-income and other vulnerable Canadians. While the levels of coverage vary by province, at a minimum lower-income Canadians have access to catastrophic insurance for prescription drugs (limiting out-of-pocket costs to a small percentage of income), while those on social assistance have coverage at very low or zero cost.

In fact, in British Columbia, where The Fifth Estate interviewed the brave young boy with diabetes, the government runs several drug plans including one called Fair Pharmacare. This plan covers 70 per cent of drug costs after an income-based deductible is met, and 100 per cent of costs after a maximum annual threshold is reached—focusing subsidization on those who actually need it. Further, they specifically offer assistance to individuals with diabetes including insulin pumps and supplies such as blood glucose test strips, insulin, needles and syringes.

Although fewer details regarding the drugs that Ontario-based Jim Poot was taking for his brain-tumour were discussed, the staggering amount he had to pay for his medication is again surprising.  This is particularly striking given the fact the province runs several drugs plans to help individuals who are struggling financially with the cost of their medication. For example, the Ontario Drug Benefit (ODB) covers seniors over 65 and the New Drug Funding Program (NDFP) covers various intravenous cancer drugs administered in hospital. Moreover, the Trillium Drug program is run by the government for individuals “who spend approximately 3 to 4% or more of their after-tax household income on prescription-drug costs.”  

This is not to say that the families in question are not struggling—but either they are unaware of these programs, or the programs provide insufficient coverage. If the latter is true, the answer is to advocate for the government to improve these programs (or provide vouchers for private coverage) rather than introduce a new universal plan that may still leave them uncovered while potentially subsidizing coverage for high-income individuals.

3. Do Canadians pay a higher price for pharmaceuticals than patients in other countries?

Before tackling this question, it’s important to first differentiate between the price of a drug and the amount that a patient pays out-of-pocket. The former relates to how much the drug manufacturer charges for its product (in addition to things like dispensing fees charged by the pharmacy). The latter can vary depending on the type of insurance. For example, in New Zealand, individuals pay $5 for subsidized medicines. However, the actual cost of the medicine may be much more—it’s just paid by the insurer/government.

That being said, there is evidence that New Zealand has successfully negotiated lower prices for the drugs themselves, and more generally, reduced their drug costs. This was done variously through bulk purchasing agreements, sole-tendering, therapeutic reference pricing, and narrowly-defined reimbursement schedules. While provincial governments may consider these tactics in order to reduce costs, they should tread carefully. Direct price controls may lead to fewer new and innovative drugs entering the market, while bulk purchasing and sole-tendering can lead to drug shortages and monopoly power.

Interestingly, some of Canada’s high drug prices may actually be due to government intervention in the pricing of generic substitutes. Research has repeatedly shown that prices for generic drugs in Canada are actually higher than in the U.S. (which has more competition and fewer restrictions on prices placed by government).

The point of all of this is not to say the government shouldn’t seek out better deals with pharmaceutical companies, or that they shouldn’t question why other countries may get lower costs. Rather, that this is a complex issue and thinking the government can simply mandate lower prices without any consequences in terms of access, innovation and quality is overly-simplistic.

4. Should Canadian patients be forced to use cheaper alternatives?

A surprising, and somewhat paradoxical, recommendation in The Fifth Estate episode was that private plans should actually cover fewer options, and that patients should use cheaper alternatives in order to save overall costs. It’s true that patients should be continually aware of the costs of the drugs they purchase and consume, which is why a percentage based co-pay (like in Switzerland) is a better option than a flat-fee (like in New Zealand). Further, it’s not unreasonable to suggest that if patients choose to take a brand name drug instead of the generic option they should either pay the difference or a higher co-pay.

However, to even tacitly suggest that private insurance companies should simply refuse to cover higher cost alternatives is simply ridiculous. Patients value options that may provide direct, or indirect benefits. For example, if a patient wants to take a more costly cancer drug that may not improve their chance of survival, but have fewer side-effects, they should be allowed to do so—and we should admire the insurance company that gives patients the option. Moreover, research establishes that drugs within a single therapeutic class differ in their therapeutic profile, metabolism, adverse effects, dosing schedules, delivery systems and other features.  These differences increase a patient’s probability of finding a treatment that is both effective and tolerated. In addition, some research has shown that forcing patients to make an unnecessary switch to the cheapest option available actually led to greater use of other medical services and greater overall cost.

Research has also indicated that access to newer drugs can also help reduce overall health-care costs by (essentially) keeping patients out of hospital. Finally, multiple therapies ensure an uninterrupted supply and availability of vital medications if the initial drug fails in the development stage, in the market, or suffers from manufacturing interruptions.   

Last weekend’s segment by The Fifth Estate raised some important questions with regards to the price and coverage of pharmaceuticals in Canada. However, the solutions that are tacitly presented, such as a national pharmaceutical insurance program and increased government intervention on price and reimbursement, are overly simplistic and ignore the indirect and unintended consequences of such actions.

The one in 10 Canadians who had difficulty filling a prescription due to the costs certainly need to be helped. However, the answer doesn’t begin with subsidizing the nine in 10 Canadians who don’t need it.