I call the meeting to order.
We welcome our guests from the Office of the Parliamentary Budget Officer.
Today we have with us Jean-Denis Fréchette, parliamentary budget officer; Mostafa Askari, assistant parliamentary budget officer; Peter Weltman, senior director, costing and program analysis, Office of the Parliamentary Budget Officer; and Carleigh Malanik, financial analyst, Office of the Parliamentary Budget Officer.
I understand that Mr. Fréchette is going to have a short introduction and then Ms. Malanik is going to have a slide show for us.
Thank you, Mr. Chair, vice-chairs, and members of the standing committee, for this invitation to discuss your work plan on the national pharmacare program and the support that the office of the PBO could offer.
Every time that a standing committee or a parliamentarian seeks our expertise, we really appreciate the opportunity and always collaborate to the extent allowed by our limited resources and our legislative mandate.
Thank you also for your motion. In 30 years on Parliament Hill, I have seen hundreds and hundreds of motions, and I can tell you that this one is particularly very detailed, well written, exhaustive, crisp, and clear. It is unfortunate that I cannot tap into the expertise of your members, Mr. Chair, who collaborated to put this motion together. They would be an asset for the PBO, which, by the way, has very limited expertise on this issue.
I understand that we will have the opportunity this morning to discuss your motion. There are indeed elements in the motion pertaining to the PBO's mandate that will need further clarification—for instance, the aspect of policy development.
I have to admit that I was little bit apprehensive when I read your notice of meeting entitled “Development of a National Pharmacare Program” and “Briefing Session with the Office of the Parliamentary Budget Officer”, mainly because we are not in the business of policy development. We normally cost private member's bills, legislation, and existing programs, but when there is no program per se, we don't develop a program and cost it, which I am sure you understand.
Also, the last paragraph of your motion relates to the independence of our analysis, which is specifically mentioned in the PBO's legislation.
It may be because I'm francophone, but when I see in the English version the words “will work” as in “the Parliamentary Budget Officer will work with”, the statement seems a bit normative or “prescriptive”, as you say in English. When my spouse tells me “you will do this”, it's in my interest to do it.
In short, this restrictive aspect of the motion may call into question the independence of our analyses in the future. We certainly want to clarify this point with the committee during our discussions.
In that context, we have a short PowerPoint presentation aimed at helping you to better understand our mandate and operating model. Our presentation was sent to your committee before we received the motion, but as you will see, it's a good link and they are quite well related to each other.
With your authorization, Mr. Chair, I would like to ask my colleague Carleigh Malanik to walk you through the presentation, after which we will be happy to answer your questions.
Thank you, Mr. Chair.
I'll start with a brief overview of the PBO mandate, which Jean-Denis Fréchette has already spoken about.
Costing a national pharmacare program would fit under the last section of the PBO mandate, “upon request from a committee or parliamentarian”. As for the PBO's role and where we fit in the costing of a national pharmacare program, it would come after the proposal has been written out, once the parameters of the program have been determined. That's when we can certainly provide a cost estimate. We cannot help in designing the program.
Over the next few slides, I would like to go over a brief introduction to how one can cost something such as a national pharmacare program or other projects.
Before you start getting into detailed and rigorous cost estimations, interested parties can turn to existing information to help inform expectations of what a new program would look like. This is something that PBO also does in surveying the literature before it begins its cost estimations. Canada currently has a wealth of information on pharmaceuticals.
The next few slides provide an overview of how we would approach a costing in developing a cost estimate, and they also provide background information using publicly available data from the Canadian Institute for Health Information.
Currently, public spending on prescription drugs accounts for roughly 43% of total prescription drug spending in Canada; this is for 2015. The total spending on prescription drugs is just over $29 billion. This type of estimate can be very helpful in providing a basic cost estimation of what a pharmacare program would look like, assuming that nothing else changes.
Whereas the previous information provides a snapshot, the information on this next slide provides more of a historical look at prescription drug spending in Canada. What we can see is that it has been increasing over time. The growth seems to have slowed since 2010. The gap between public spending on prescription drugs and private spending on prescription drugs did widen in more recent years. Again, this can help inform what the cost of a national pharmacare program might look like if trends continue and, again, nothing else changes.
With this information in mind, the total national spending on pharmacare is a composite of several provincial programs as well as federal direct spending. With that in mind, each provincial plan does vary, so one needs to ask, in the development of a pharmacare program, what it will look like. Will it look like an existing program or will it be something new? This information can assist in getting a slightly more rigorous or informed cost estimate before moving into the in-depth analysis.
As more sophisticated analysis begins, one can dig deeper into the underlying factors that influence drug expenditures. We have here a brief list of examples for looking at the demand side and the supply side factors that you might want to dig into. Some of them—for example, the needs of a growing population over the needs of an aging population—the government may have no control over. Expectations and behaviours can be another factor, as can the health status of the population, and there are several other factors.
The supply side may be some factors that the government can in fact influence, such as prices, potential inflation, eligibility for who would be under the program, utilization of particular pharmaceuticals, the availability of non-drug substitutions—perhaps through research funding—and several other factors.
Related to this, then, is identifying the key cost drivers. Once you have an understanding of which factors can have an influence, you can start to focus on which have the largest influence. Again, this information is publicly available from the Canadian Institute for Health Information, and it shows the average annual growth factors for pharmaceuticals in only the public sector.
According to CIHI, the Canadian Institute for Health Information, population growth and aging have contributed a fairly steady share of this growth in public drug expenditures. General inflation has contributed a little more, although it seems to have fallen slightly.
After becoming informed on all of these issues, one can better anticipate the impacts in determining the effect each of the program criteria will have on the cost of a total pharmacare program.
To create the pharmacare program, several key parameters or objectives would need to be determined, such as who will have coverage, what drugs will be covered, how much of the cost will be covered, and how much each party will be willing to pay. All of these things need to be answered. Once you've looked at all these key cost drivers, you will be better informed on what each of those answers would look like. At the very end of all of this, when the parameters have been identified, is when PBO can step in.
First PBO would identify the data sources and help develop an appropriate methodology using the available data and resources. Using this information, PBO then would draft the terms of reference and provide that to the party requesting the analysis that the health committee would hear. PBO would then work with stakeholders, data holders, and experts to solidify any required assumptions. Lastly, of course, PBO would produce a rigorous cost estimate, along with a report stating all assumptions in a transparent manner. This work could also include sensitivity analysis.
That is the end of the presentation. Thank you.
The kinds of things you're presenting here are exactly the questions we need answered. It sounds as if you could be a big help to us.
We talked about the different costings. There are costings in supply and demand in terms of how much this is going to cost. That's the big barrier. If it wasn't going to cost much, we wouldn't have to discuss it very much.
We talk about the estimates of how much it would cost to implement this, how much we would spend. One of the discussion items that comes up over time is the potential for cost savings and how much the costs of instituting such a program would be offset through savings in the health care system. We know there are expenses to the health care system when people are non-compliant with medications, get sick, and come into the health care system.
Through your office, would you be able to do any analysis of how much Canadians could save in hospital visits due to non-compliance or how much we would save our health care system if people could afford their medications?
Thank you for the question, which is a great question.
It's part of the model. In Carleigh's presentation, when we say we will develop terms of reference, we will of course develop that with the committee. Depending on what drivers or what factors you want to have in the model, we will include those because the costing is also how much savings you can have.
The difficulty we're having right now is this. What is the model? What is the system? What is the program that you want to have? Is it a national program in scope, only financed by the federal government, and so on? What we proposed to do eventually with this committee—if it's the wish of the committee—is to develop that and include those kinds of factors.
Right now we have your motion, which is, as I said, very detailed. I would prefer to have your vision of the program and then add all the factors and parameters you want to have included in the costing project.
Let me first apologize for being late.
Certainly the savings from the pharmacare program have to be the main reason that you want to have a pharmacare program; otherwise, it would not make any sense economically, so one has to find a way to estimate that. I think the range of estimates that you put in the model, the final estimates from that, would be the main factor that would determine the range of savings that you're going to get from the pharmacare program. That's a very challenging part of this. One way others have done this is by looking at the savings that other countries that have a pharmacare program have seen since the introduction of a program. That may or may not be a good benchmark for Canada, because the system here is certainly different.
Another way of making that saving is by negotiating prices with the pharmaceutical companies. Right now, my understanding is that the provinces are actually already doing that, so there are some savings already being seen. Those all have to be taken into account if you do the costing for a pharmacare program, and I think, as Mr. Fréchette said, it's also important to know exactly the type of program that the committee is considering, because you can have many different structures for these programs, and the cost would certainly be different in each case.
I want to thank the witnesses for being here. I think I'd love to have a little more time with you as well, because I think some of the things you've already said opened my eyes.
I think, Mostafa, you were saying the savings should be the main reason for doing it. We've heard already that people are making all kinds of assumptions. What I'd like to get to is whether can we get a model that we want so that we can give proper direction. Can we define what the problem is?
One of the interesting comments we had was from Neil Palmer, who is the president of PDCI. He was saying there is insufficient data on the numbers of Canadians who either lack prescription drug coverage or have insufficient drug coverage, which undermines the ability to develop policy in this area. I think what we need to do is take a snapshot of what is going on here.
|| Figures of 10% to 20% with no coverage or inadequate coverage are frequently cited. However, the underlying data supporting these figures is weak and generally based on unreliable opinion surveys.
|| That 10% to 20% could be underestimate or an overestimate. Either way, we need to know. We need to know because it's not possible to make informed policy recommendations and decisions when there is such uncertainty.
With us giving you direction, I think what we have to do is take a look at where we are right now. I think you have two slides, Carleigh, that opened my eyes. One was slide number 4, which showed $16.6 billion in private spending on drugs. The other one was slide 9, where you're talking about parameters.
Do you guys have any insight on which Canadians are have coverage now? For those without coverage, what percentage are low-income Canadians who may be having problems affording drug coverage? For those without coverage, which percentage is higher? Is it a problem not to be having some type of private insurance for these people? I'd like to see what we can do to dig down and define the problem today.
Do you guys have any idea about what the problem is we're asking you to help us solve?
To answer your first question about the data sources, that's exactly what we do all the time when we do costing. That's why it's in one of the slides you identified.
Believe me, sometimes we have a request from parliamentarians or committees and we say we don't have the data, so it's just impossible. I don't know about this case, but if we do the costing, then we will do this type of survey.
On your other question, we do have a profile of those who are low-income and not middle class. We don't talk about middle class. We talk about low incomes and so on. That will be part of the parameters that we will use. We did other studies on that, and that will be part of the costing. Those are easier to get in terms of information and data.
The other part of your question about who is covered, and so on. There are some firms—you mentioned Brogan, for example—that we can pay and then see what quality of data they can provide.
We've had some witnesses say that if we went from a mixed system to a monopolistic system run by government, on day one we would have to come up with $16.7 billion.
What I'm challenged with as a Conservative—we're looking at government spending right now—is that the Liberal government had what they called a modest deficit of $10 billion. That's what was promised. I think the deficit is about three times that size. I think your office even said that with the spending going on, these things could be unsustainable and that we have to look at how we're going to fund any new program spending.
We're not seeing a lot of benefit from increased spending. We're getting numbers showing that unemployment is at an all-time high. Businesses are going elsewhere. If we want to implement this monopolistic type of system, then how do we pay for it?
Based on he current fiscal situation, which you are very much aware of, can our country afford a monopolistic government-run system that may be costing us $16.6 billion more per year?
It would be big enough. Okay, you'd suggest we stick with one.
Mr. Askari, I just want to correct one or two things.
You said savings are the objective. That's not necessarily the case, sir. One of the objectives might be universal coverage for all Canadians, and we may recognize that it might cost us more money.
Second, Dr. Carrie was talking about a $17-billion deficit, but once again, not necessarily. Universal pharmacare might cost more money, but it could be funded by any number of increased revenue sources if we wanted to, so it doesn't necessarily add to a deficit. Is that not correct?
Thank you very much, Mr. PBO and panel, for appearing before us. I used to read about you in the papers, but it's nice to see you personally.
I was looking at Mr. Morgan's study from 2015. That model says that it's going to save us $7.3 billion. I think there will be savings on top of that, because people who don't have the coverage now are costing health care a lot of money too. I would like you to look at that number for people who are not covered right now by health care and don't have coverage for prescriptions. How much savings would there be?
Mr. Carrie was saying that it's going to cost us about $17 billion more. Right now, somebody's paying for that. I believe that money will be going into the pharmacare pool, and I don't think that it actually will cost the government $17 billion more. Maybe we could have copayers or taxpayers or something to recoup the money that we're going to lose.
I would like to see the study.... If we were to go with Mr. Morgan's model, we would save $7.3 billion. How much money are the people who don't have that coverage now costing the system? That will be a saving for us too, in other words. I would like your thoughts on that.
One thing I can say with some confidence is that if there is a pharmacare program, demand for prescription drugs will increase, because obviously there will be people who are not covered now, and they will be covered by that program. That cost will increase, and it will put more pressure on the budget or the cost of the program.
As to whether there will be savings, as I said, that's a critical assumption, and there's a critical issue in regard to how much savings you are going to have from a pharmacare program, both from the fact that there is a possibility of negotiating prices that are lower than the current prices and also because there will be more discipline in the way people consume prescription drugs.
Those assumptions are critical, and we cannot really say what we are going to get right now. In Steven Morgan's model, they have made certain assumptions and they came up with those results. We have to do our own kind of work and come to some kind of conclusion at the end as to exactly what that is. If it is significantly different from their estimates, then we'll have to explain exactly why that is the case, and we will do that as part of our report.
Thank you very much. To our witnesses, thanks again.
One of the things Canadians want us to look at is why we are doing this and what the problem is. Mostafa, you were saying there are a lot of assumptions being made. We're doing this so that hopefully we can see some savings. That would be the main reason.
We're looking at the taxation system, the fiscal situation. We've just received your most recent report, and it states that after three months the federal government expenditures in 2016-17 total $62.9 billion, which is 5.7% higher than the $59.5 billion spent over the same interval in 2015-16. That's the largest increase in at least five years, so before we start spending more money, that first assumption has to be clear.
In your answer last time, Mostafa, you did state that you as a group could give us a snapshot or a benchmark of where we're at today. Is that correct?
I want to be clear on what I've heard from you, because it has been helpful to have you come back and give us some feedback.
We've heard three potential models here. There's the comprehensive pharmacare program across Canada from the Morgan group. There is another extreme, which is simply that the government provides coverage to uninsured Canadians and the system stays the same otherwise, with all the inefficiencies and cost issues that are locked into it. The third one is more the government providing insurance, but then there's a managed competition model that's layered in to try to improve the efficiency of the system.
What I've heard from you is that you want us as a committee to give you one direction. You want to cost one, or else you'll be costing for the rest of your days, and I'm sure you have other important things to be doing.
Is that a yes? Would you like us to come forward with one model?
I think I'd just like to back it up, if I have a minute to respond.
What we would be most comfortable providing is, as Mostafa stated earlier, a comparison of examples. We can show different countries that are paying different prices, and we leave it there. I don't think it's within our ability or mandate to suggest areas of savings. We would just leave the opportunity out there in the report, showing what these people are paying, what those people are paying, and what these other people are paying.
I don't think we'd go as far as to say we could save money if we tried this or we tried that. I think that would be better coming back after policy-makers say that they have decided on an approach that they want to take to manage this program and ask us to come back to them with an updated cost estimate.
I have so many questions today, Mr. Chair. Thank you very much.
This is excellent, because I think in the scenario that I'm looking at, it appears we're being asked to perform surgery on a very important program in Canada without first coming up with a diagnosis. There's more than one way to get the solution that we would like. I think, Mostafa, you said there still will be private care because the public health care system won't cover everything.
My impression from some of the witnesses is that they don't want a private system. They do want a monopolistic type of system, one system, in which perhaps bureaucrats or different groups of individuals would decide which drugs would be covered. That's one of my concerns.
The decisions we make, first of all, are going to be expensive one way or another, but we do want to make sure at the end of the day that we're actually solving the problem that's out there, and we don't really have up-to-date statistics on it. Do you agree that it's important to gather sufficient data on the number of Canadians who either lack prescription drug coverage or have insufficient drug coverage, in order to properly estimate the cost implications of a universal public national pharmacare program?
If I may...maybe I'll put myself in trouble and maybe I should switch to French, because I'm less in trouble when I do that.
An hon. member: You go ahead.
Mr. Jean-Denis Fréchette: Mr. Chair, here is what we could do, and I'm not suggesting anything; I'm just saying here's a potential scenario.
We took notes of all the discussion from both sides, and remember that we are non-partisan. We are independent of the government and we're non-partisan as well.
We took notes of what was discussed this morning from both sides, and what we could do is come back with our terms of reference. We have the motion that is there. I think we can manoeuvre around that. We took notes of other good suggestions from both sides for models, and also your last suggestion. We will come back with our terms of reference, whether or not we're going to have two reports, three reports, three models, or one model. Those terms of reference will belong to this committee to decide the direction you want the PBO to take. I think it's going to be easier for this committee to go forward on that basis as well, or to amend the terms of reference. It's going to be easier for the committee to decide which direction you want to take.
We'll be honest with you after that. If we say we cannot do that, then it's for whatever reason. If it's helpful, that's the way we can go.
The first issue is that we did not talk about any timeline.
Here is the way forward. We took note of all the comments from all sides. We will come back with the terms of reference or some kind of a work plan, according to what we heard, with some options.
We would like you to then decide which one you want. It will be your model. It will not be the PBO's model, so let's be clear on that. It's going to your choice. I'm sure people in the department are listening right now in meeting rooms, and maybe they do have a model. Maybe they have something in mind. We will ask them if they have a model. Then we can cost that. That's going to be the model they may have. They probably don't appreciate what I just said, but we will ask the department. There is a policy shop, a policy section in departments, so that's certainly a discussion we will have. That's the first thing.
The second thing is that we will present the terms of reference with some kind of timeline. In two weeks, roughly, we should be able to come back with the terms of reference based on the discussions that we had this morning, with some options for you to decide which one you want.
From there we'll discuss the timeline and what we will do. Then we can report on a regular basis to the committee, as we do with other committees, on the difficulties that we have with accessing data or developing our own analysis of it. I want to be clear that if you provide me with some kind of margin to manoeuvre within the motion that you have there.... As I said, I'm not sure where the motion stands right now. If I have to respect the motion, it's a little difficult, but if we can play a little with the motion, then that would be easier for us to develop the terms of reference. In two weeks we should come back with what I said.