My name is Anita Huberman. I'm CEO of the Surrey Board of Trade, and thank you for listening to the business perspective on universal pharmacare benefits for businesses.
The Surrey Board of Trade is the second largest in B.C., with a membership of over 2,100 small, medium, and large businesses in shipping and transportation industries, manufacturing, high tech, consultants, non-profits, and small commercial enterprises.
The Surrey Board of Trade has prepared motions in favour of a universal public pharmacare system that improves coverage for all Canadians. The reason we have taken this position is that our members have expressed serious concerns in a number of areas.
There are strains on all businesses. Costs are high and uncontrolled for those who do offer drug coverage. Costs are an impediment for some companies to offer any coverage. There are concerns that a catastrophic public drug plan like B.C.'s still places a major burden on sponsors of private plans. Businesses are also very concerned about government passing a law that would make private insurance mandatory, as in Quebec.
When businesses come to us with concerns such as these, we have to respond by investigating and determining a policy direction that would best serve our members, the businesses of Surrey, British Columbia.
What we found is that there are inequities in access to care. Businesses care about the health and well-being of their employees, their families, and their communities, but the uncontrolled cost of private drug coverage in Canada means that our system has many gaps in coverage. We know that the committee has already heard that at least one in 10 Canadians does not take medications as prescribed because of cost.
Studies in the Canadian Medical Association Journal and by the Angus Reid Institute both indicate that access to medicine is particularly bad in B.C. This is because the deductibles under B.C.'s catastrophic public drug plan have been shown to reduce the use of preventative treatments that patients do not necessarily prioritize in ways that the health care system would want them to.
In the end, we all pay more when patients don't get the medications they need, because they end up in hospital, which can cost taxpayers a lot more than appropriate prescription drugs would cost in the first instance.
Inefficiencies of fragmented coverage is the next area. Businesses know better than anyone else how important it is to focus on core competency and to maximize the efficiencies of those processes. Canadian businesses are therefore concerned that the fragmented nature of drug coverage in Canada results in excess administrative costs, reduced purchasing power, and a silo mentality that may limit the overall efficiency of Canada's medicare system.
There is no doubt that the fragmentation of drug price negotiating power in Canada means higher drug costs. You have already heard government officials and academic experts say that our drug prices are higher in Canada than in comparable countries worldwide. I don't need to repeat the statistics that more informed experts can provide, but businesses are increasingly aware that the inefficiencies of the system are a drag on their competitiveness.
In our research we found a report by Express Scripts Canada that says $5 billion is paid out every year by employers and unions in order to cover poor drug choices and unnecessarily expensive pharmacy services, but individual businesses and employee groups are not in the best position to rein in these costs.
One of the problems with our system is that private insurance for drugs and public insurance for medical care creates a silo between the management of those critical parts of our health care system. It would be more efficient for the costs of medically necessary prescription drugs to be managed along with the budgets for other forms of care. In the Canadian context, that means it makes the most sense for those costs to be managed by provincial governments, in co-operation with each other and with the federal government.
Uncontrolled drug costs are a lost opportunity to improve workplace health. Having a universal public pharmacare system would not put an end to workplace benefits. On the contrary, it would provide an opportunity to enhance those benefits. The high price of medications today, many of which now come to market at prices of tens of thousands of dollars per patient per year, require coverage and cost-control policies out of the reach of the private sector in Canada.
It will be for tax experts to decide exactly how to fund a universal pharmacare program. Businesses in Canada must be at the table in negotiating that funding mechanism, but businesses would support the movement towards a public pharmacare program that achieved system-level savings that we would all benefit from. Importantly, the private sector in Canada can use the funding freed up by a more efficient pharmacare system to make other important investments in the health of our employees and in our families.
Governments have cut public coverage for a wide range of services that Canadians need. Vision care, dental care, hearing care, physiotherapy, and mental health are all areas where employers and unions could make new investments with savings stemming from the savings created through a universal public pharmacare program. These other benefits are essential to patients and, from a business perspective, they are more predictable and manageable than the now out-of-control costs of pharmaceuticals in Canada.
In conclusion, the Surrey Board of Trade firmly supports a universal public pharmacare program that would use bulk purchasing and evidence-based coverage policy to improve and assess medicines while lowering costs for all Canadians. We firmly hope that this committee of Parliament will understand that it is important to have the right system in place—and we're pleased to have you considering this today—a system that is equitable, efficient, and aligned with the other core components of health care in Canada.
We would respectfully request that the committee let businesses focus on running their businesses by putting the management of universal drug coverage in Canada in the hands of those managing our universal health care system. Businesses would support a policy that did this fairly and efficiently.
Thank you so much for the opportunity to allow me to speak to the committee this afternoon.
The Canadian Life and Health Insurance Association represents life and health insurance companies accounting for 99% of the life and health insurance in force across Canada, and the industry provides supplemental health benefits to roughly 27 million Canadians.
I would like to congratulate the federal government for re-engaging in the health care system in Canada.
Let me congratulate this committee also for conducting hearings into this critical issue of how Canadians access their needed prescription drugs.
I want to very clear that Canada's insurers do not believe that the current system is working as well as it should, and we strongly support fundamental reform. No Canadian should have to choose between putting food on the table and their needed medication.
The good news is there are a number of simple policy measures that will make a significant positive impact with very little cost to either government or employers.
The best solution will be one that leverages the strengths of both the public and private sectors and brings them together in a coordinated way for the benefit of all.
As the committee is aware, the responsibility for prescription drug coverage is shared between the public and private sectors. In 2014, our industry directly reimbursed over $10 billion in drug costs. When you add in those amounts paid by individuals directly, over half of all the costs for prescription drugs are paid for privately.
Canadians place a high value on their private drug coverage, and for good reason. Private sector plans have been shown to have significant advantages over the public ones. Let me elaborate on this.
First of all, private insurers generally provide Canadians with access to far more drugs than public plans, and we allow access to new drugs much more quickly than public plans. This is a critical point because, contrary to what many advocates for reform suggest, nationalizing prescription drug coverage will result in a material pullback in coverage for the majority of Canadians.
Second, Canada's insurers have also introduced some of the most important patient-centred innovations over the past several years. For example, in 2013 the industry introduced the Canadian Drug Insurance Pooling Corporation. This pooling arrangement covers all fully insured drug plans and helps small and medium-sized employers maintain their drug benefits even in the face of recurring high drug cost claims.
It is also now standard for insurers to offer a full range of innovative solutions to plan sponsors that incorporate clinical evidence into plan formulary designs while also improving patient outcomes and reducing costs. A good example of that is what we refer to as case management.
I'd like to provide a couple of examples. Let's look at Mary. Mary has a prescribed biologic drug that needs to be injected. She was having trouble injecting herself, and as a result was not compliant with the new therapy. The case manager identified that Mary was having issues and worked with her to find resources and training to help her become more comfortable with the injections. As a result, Mary was able to administer her medication and comply with her therapy.
A second example is John, who is on Humira, but the medication was not achieving good results. The physician then increased the dosage by four times the recommended dose, which increased the potential for side effects and significantly increased costs. The case manager worked with the physician to suggest an alternate medication that had the added benefit of being lower in cost. John was prescribed the new medication and started to improve, a good example of improving patient outcomes while reducing cost.
There is no similar case management program support for those on public plans in Canada.
Finally, I would highlight that we take our responsibilities to reduce inequities in access to drugs seriously. For example, just last year, private insurers worked closely with rheumatologists from across Canada and agreed to a common national clinical standard for access to biologic drugs for patients with adult rheumatoid arthritis.
In our view, however, neither governments nor Canada's insurers can independently solve the long-term challenges facing the system. The best solution for Canadians will be the one that leverages the strengths of both the public and private sectors and brings them together in a coordinated way.
I will now provide some specifics.
Broadly, we believe there are two major issues that need to be addressed. The first relates to putting the system on a more sustainable path financially, and the second relates to greater equity around access.
The good news is that there are already solutions to both of these challenges that could be implemented quickly, with minimal changes to the structure of the system and with minimal costs. As the committee is aware, the provinces, and recently the federal government, work together through the pan-Canadian Pharmaceutical Alliance, or pCPA, to jointly negotiate lower drug prices. The pCPA helps reduce drug prices not only for new patented drugs but also for generic drugs and subsequent entry biologics, or SEBs. The difference in pCPA's approach for generics and SEBs versus patented drugs is instructive and, we believe, points us in the right direction going forward.
With respect to generics and SEBs, the pCPA leverages the government's buying and regulatory power to reduce prices for all Canadians equally. Regardless of whether individuals get their generic or SEB drugs reimbursed by the public or the private sector, everyone pays the same lower price. This has been enormously helpful in reducing the costs for all Canadians over the past number of years.
Unfortunately, the pCPA's approach to lowering prices for new patented drugs does not follow this approach. Rather, for patented drugs, the pCPA negotiates confidential lower prices that apply only to the minority of Canadians covered under the government plan. Those with private coverage or paying out of pocket are left to pay the much higher list prices. This is not an equitable or sustainable approach.
There is a very simple solution to this: namely, allow private insurers to join the pCPA. Having Canada's insurers in the pCPA would allow negotiators to leverage the volumes of the entire Canadian market when negotiating lower patented drug prices. Critically, this will ensure that all Canadians are paying the same lower price and improve the financial position of all plans over time. It is important to note that this would not require any incremental cost to governments and could be accommodated within the current system. There is really nothing holding us back from doing this.
Another important issue we would like to see addressed with respect to pricing is reform of the Patented Medicine Prices Review Board, or PMPRB. This is particularly germane to this committee, given that accountability for the PMPRB falls exclusively within federal jurisdiction. The PMPRB has a mandate to act as a consumer protection agency by capping prices of new drugs at levels that are deemed “not excessive”. Unfortunately, the way in which the PMPRB does this has resulted in list prices in Canada that are among those of the top handful of countries globally, and certainly well above the OECD average.
We believe the PMPRB's mandate needs to be reformed. It should be to establish price ceilings that are as low as possible, rather than simply “not excessive”.
Finally, we acknowledge that access to drugs remains unacceptably uneven across Canada. Different drugs can be available to patients depending on their province and/or the plan design chosen by their employer. This may be particularly pronounced for new and expensive drugs. We need to do better. The industry supports the establishment of a common national minimum formulary. Such a national minimum formulary would ensure a baseline of coverage for all Canadians and would reduce some of the existing complexity in the system. This approach would still allow those provinces, plan sponsors, or individuals who want additional coverage to have it.
With respect to very rare drugs, or “orphan drugs”, we equally believe that governments and private insurers need to work together to develop a common approach to providing access to these medications. If there is one area where a common approach is critical, it is for those drugs that have very small patient populations, yet have very significant costs associated with them.
In conclusion, any long-term solution will require both governments and private insurers to make adjustments to their programs and to work better together going forward.
The good news is that there are a number of simple policy measures we can take in the short term that will have a significant positive impact, with little to no cost to either governments or employers.
We look forward to the continued dialogue on this critical issue and would be pleased to answer any questions you may have.
Thank you very much.
Maybe I can spend a quick second explaining how the flow-through of costs works on the private side.
The majority of Canadians would be covered in the type of plan that we would call administrative services only, which means the employer pays the cost of the drug and the insurer provides administrative services. In that scenario, which would apply to the vast majority of people, any reduction in price gets passed immediately through to the consumer on day one, the first time they present at the pharmacy.
For those plans that are insured, insured plans are repriced on an annual basis, and they get a price based on the trend. If the trend has come down in the previous year because of price reductions, that would get reflected in their premium increases. There would be a lag there for those who have insured plans, but you're probably talking maybe 12 months before that would be reflected in their premiums.
The message is that the cost of the drug is sort of an input to the service we provide to employers, and it's a direct pass-through for the majority. For the rest it's not, it's an indirect one, but it's certainly a very quick follow-on.
To the nub of your point, there's no chance that the insurers are going to be absorbing any of those benefits. Those would get passed through to our plan members and plan sponsors.
An insurer would have a myriad of options they would offer an employer. Every insurer in Canada today has a fully managed, closed formulary they can offer to an employer, which means we assess every new drug that comes to market and we decide whether or not it is on the formulary. That could be offered as a solution to an employer.
We offer managed formularies as another option for employers, so you would say to an employer, “We'll give your plan members access to every drug on the market, but we'll tier those drugs”, so drugs that are, in our view, clinically more beneficial will be in tier 1 and you'll pay a lower co-pay for those. It they're in tier 2, you'll pay a higher co-pay, and then in tier 3, you'll pay even higher. We would call that a managed formulary.
A lot of employers like that because it gives their employees choice and the ability to work with their physician for the types of therapies they should have. As well, there is any sort of combination in between, so we can design everything. Generally we would meet with an employer, and for the larger ones in particular there are highly customized solutions. We would work with them or their union and ask what kinds of benefits they would like and we would design those for them.
For smaller and medium-sized employers, we tend to pitch a sort of package deal to them.
Something I'll highlight that is really important is that we don't really sell drug benefits to employers; we sell benefits. Even within the design of a drug plan, you're going to position that within how you are managing your dental coverage and your vision coverage, how you are managing your disability benefits, what you are doing on your pension side, and whether you have a DC—defined contribution—or a defined benefit plan, a DB. That's the discussion you have with an employer. You don't go in and sell them their drug plan.
When employers look at how they want to structure things, they do that in the context of everything they're doing to try to bring in their employees.
That is, at a high level, the kind of discussion you would have when you're pitching a program.