HEAL Committee Meeting

37th PARLIAMENT, 2nd SESSION

Standing Committee on Health

EVIDENCE

CONTENTS

Wednesday, October 22, 2003

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1535

The Chair (Ms. Bonnie Brown (Oakville, Lib.))

Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ)

The Chair

Ms. Louise Ogilvie (Director, Health Resources Information, Canadian Institute for Health Information)

The Chair

Ms. Louise Ogilvie

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1545

Ms. Louise Ogilvie

The Chair

Mr. Réal Ménard

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1550

Mr. Grant Hill (Macleod, Canadian Alliance)

Mr. Réal Ménard

Mr. Grant Hill

The Chair

Mrs. Brenda Chamberlain (Guelph—Wellington, Lib.)

The Chair

Ms. Carolyn Bennett (St. Paul's, Lib.)

Mrs. Brenda Chamberlain

Mr. Réal Ménard

Ms. Carolyn Bennett

The Chair

The Chair

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1635

Mr. Tom Brogan (President, Brogan Inc.)

The Chair

Mr. Tom Brogan

Ms. Joan Fearnley (Senior Economist, Brogan Inc.)

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1640

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1645

The Chair

Mr. W. Neil Palmer (Principal Consultant, Palmer D'Angelo Consulting Inc.)

The Chair

Mr. W. Neil Palmer

The Chair

Mr. W. Neil Palmer

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1650

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1655

»

1700

»

1705

The Chair

Mr. Rob Merrifield (Yellowhead, Canadian Alliance)

Mr. W. Neil Palmer

The Chair

Mr. W. Neil Palmer

The Chair

Mr. W. Neil Palmer

»

1710

The Chair

Mr. Rob Merrifield

The Chair

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

The Chair

Mr. W. Neil Palmer

The Chair

Mr. W. Neil Palmer

The Chair

Mr. Rob Merrifield

The Chair

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

Mr. W. Neil Palmer

Mr. Rob Merrifield

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1715

Mr. W. Neil Palmer

The Chair

Mr. Réal Ménard

Mr. W. Neil Palmer

Mr. Réal Ménard

»

1720

Mr. W. Neil Palmer

Mr. Réal Ménard

Mr. W. Neil Palmer

Mr. Réal Ménard

Mr. W. Neil Palmer

Mr. Tom Brogan

Mr. Réal Ménard

Mr. W. Neil Palmer

Mr. Réal Ménard

»

1725

Mr. W. Neil Palmer

The Chair

Ms. Carolyn Bennett

Ms. Louise Ogilvie

Ms. Carolyn Bennett

Ms. Joan Fearnley

Ms. Carolyn Bennett

»

1730

Mr. Tom Brogan

Ms. Carolyn Bennett

Mr. Tom Brogan

Ms. Carolyn Bennett

Mr. W. Neil Palmer

Ms. Carolyn Bennett

Mr. W. Neil Palmer

Ms. Louise Ogilvie

Ms. Carolyn Bennett

Mr. W. Neil Palmer

Ms. Carolyn Bennett

Mr. W. Neil Palmer

The Chair

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CANADA

Standing Committee on Health

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NUMBER 060

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, October 22, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Ms. Bonnie Brown (Oakville, Lib.)): Good afternoon, ladies and gentlemen.

    I'm happy to welcome the witnesses today, but before we move on to that portion, I will suggest to you that there is a motion that has been circulated from Mr. Merrifield, and we will be voting on it at tomorrow morning's meeting.

    Mr. Réal Ménard (Hochelaga—Maisonneuve, BQ): Are we to do it now or tomorrow morning?

    The Chair: It's tomorrow, on his motion.

    Today we have representatives from three groups. The first is the Canadian Institute for Health Information. We have the director, Ms. Louise Ogilvie.

    Ms. Ogilvie, you have the floor.

    Ms. Louise Ogilvie (Director, Health Resources Information, Canadian Institute for Health Information): Thank you very much for inviting us to come here to present to you today. I have circulated a PowerPoint slide, which I will be walking members through today in my presentation.

    For those of you who aren't familiar with CIHI, I thought I'd take a moment to explain a little about who we are. We are a national not-for-profit organization. We were created by the Conference of Deputy Ministers of Health, and our role is to provide information on a number of subject areas that help to inform the debate on developing sound health policy in Canada, around establishing information to better manage the health system. We also work very closely with Statistics Canada to put out information on how to improve the health status of Canadians. That's a little bit about who we are.

    As part of the mandate we provide information around national health expenditures, and as part of national health expenditures one of the components we publish information on is drug expenditure. We have a drug expenditure report that I sent electronically to the clerk, so I believe it is available electronically, although I don't think you have a copy in front of you. I'm sure it is available for you.

    What I thought I would do today is provide you highlights from our drug expenditure report—that's really going to be the focus of my presentation today—and also talk to you about some national initiatives that are going on or will be happening soon that will also have an impact on prescription drugs.

    I'm going to turn to the first slide, which has the pie chart. What I wanted to highlight here is that if you break down total health expenditures in Canada, drugs are the second largest component of spending. On hospitals we spend about $35 billion. In the area of drugs, which would include both prescribed and non-prescribed, we spend about $18 billion, or roughly 16% of our health expenditures.

    The next slide shows total drug expenditures per capita. This is looking at how much we spend on average across the provinces and the territories in drug spending. It's total drug expenditures....

    Yes?

    The Chair: Excuse me, if other copies are like mine, after the cover you flip it over, because the English version is backwards. So the back page is the mandate of the institute; then you flip over and get total drug expenditures and total health expenditures.

    Ms. Louise Ogilvie: I'm glad you mentioned that. No wonder everybody was flipping their papers. So I'll flip one way and you guys flip the other way.

    In terms of total drug expenditures on a per capita or individual basis, you can see that there is variation across the provinces. We've shown the figures for public spending and also for private spending, but if you combine the two and look at both public and private spending, you can see that there is a range from $407 in B.C. to $534 in Ontario, with the average being about $490.

    What the next slide is showing is the drug spending on a per capita basis and how Canada compares with some of the other OECD countries. Here you can see that over the last five years all of the G-7 countries have shown increases in drug expenditure per capita, with the exception of Japan. If you look at the countries, the United States shows the highest total drug expenditure per capita, whereas Canada ranks fourth.

    The fourth line from the top is Canada, and the top one is the U.S. This helps show where we're situated with respect to the G-7 countries of the OECD.

    An hon. member: Is the second one down the U.K.?

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    Ms. Louise Ogilvie: That's a good question. Mine's not in colour either. It looks as if it's either France or Germany.

    These slides are available in colour in the electronic version, so we can provide the details if people need them.

    The next slide is showing total drug expenditures by source of finance. There's always lots of interest in knowing who's paying, whether it's the public sector or the private sector. This is again looking at total drugs. The top line, the one with the circles, is showing the private sector. You can see there that private sector spending is about $11.6 billion. That is representing just over a 7.5% increase from the previous year. You can see that it has continued to increase over the years. If you contrast it with the public sector, the public sector spending on drugs is about $6.6 billion, and the increase from the previous year was just a little bit higher than for the private sector, at about 8.3%. You can see that both the public and the private sector costs of drugs are increasing.

    The next slide is showing public drug expenditure as a percentage of total drug expenditure, so it is showing how much the public spends and what share it has. The graph demonstrates that the four European G-7 countries tend to be more publicly funded, so they would be represented by the four top lines. The U.S.A. health care system has the smallest percentage because of the high reliance on the private sector, so the U.S.A. is down at the bottom.

    Canada has a mix of public and private sector spending, as we've just seen. Among the six of the seven G-7 industrialized countries reporting in 1999, Canada ranked fifth for the share of public expenditure, whereas the U.S.A. ranked sixth.

    So far I've been talking about total drug expenditures, for both prescribed and non-prescribed drugs. Now I'm going to drill down into the prescribed figures.

    The next slide is showing total drug expenditures by type, showing the distinction between prescribed and non-prescribed. The top line is showing the expenditures for prescribed drugs versus non-prescribed. You can see that for the prescribed drugs the line is increasing; it's showing that over time these are the categories of drugs that have been increasing much more rapidly than the non-prescribed drugs, which would be things like over-the-counter drugs. That's really what that slide is showing.

    The next slide focuses only on prescribed drugs and makes the distinction between public versus private spending. The top line shows private spending on prescribed drugs. That represents about $8 billion in spending for 2002, whereas the public share is about $6.6 billion. You can see, though, that both lines have been increasing, over time, in terms of prescribed drugs.

    Those first slides are really to show you in concrete terms what has been happening in terms of drug spending overall, the private-public split, prescribed and non-prescribed, but there is always the interesting question: why is the spending what it is?

    So next I want to turn to the factors affecting drug utilization. There are three major categories of factors there, the first being the prices of the drugs themselves; the second one being the entry of new drugs onto the market; and then the third, the volume of drug use.

    The slide I'm showing you now, on factors affecting drug expenditure, shows different price indices. They're all developed a little bit differently, but the major message there is that drug prices, over time, since about the mid-1990s, have been relatively stable. I'm sure during your hearings with PMPRB you have probably heard about this as well.

    The next slide shows again the factors affecting drug expenditure, but here it talks about the entry of new drugs onto the market. There are a whole bunch of factors that are interesting to take a look at. We know there are new drugs coming onto the market, and there will be more and more. People's access to these drugs is another factor, as well as being able to integrate these drugs into the health system in a safe and cost-effective manner. And then, where we need better information is around the outcomes and the affect these drugs have in terms of the health care system and the health of Canadians.

    The next set of factors looks at the volume of drug use. Here there are a number of factors that affect the utilization or volume of drug use.

    In terms of the population, the aging of the population, we know the elderly use more drugs than the younger age groups. As well, there's the growing prevalence of diseases and conditions. There has been a lot of talk about obesity and the impact that will have on certain disease conditions that will require medication.

    Another factor is the health system itself, looking at how the system is organized and the different drug subsidy programs, whether they be from the private sector or the public sector.

    Then there's research and technology--for example, new treatment strategies that come onto the market in terms of new medications, and our ability to diagnose conditions much earlier, which means an earlier start of certain treatments.

    The next slide shows some of the factors related to the volume of drug use. There are a number of things that affect us there in terms of the industry and physician and patient practices. I won't go into those in detail. I think they're pretty self-explanatory.

    In terms of information on prescribed drugs, we have pretty good information on the cost, but our information is not as good at a detailed level around the use of medications and how this affects patient outcomes. We need to get a better link in terms of looking at the cost of drugs and the utilization of drugs, but also the impact of drugs and the outcomes on individuals.

    In summary, on the last slide, we need better information in order to be able to make sure we provide the right drug to the right person at the right time and to be able to look at how that impacts the health status of Canadians and how we can improve our management of the health system by ensuring that people have appropriate access to the appropriate drugs they need at that time.

    There are a number of initiatives going on nationally. One that the CIHI and PMPRB are working collaboratively on is the development of a national prescription drug utilization information system. We're starting off with the public drug plans, which will have detailed claims level data to allow us and researchers to be able to do good analytic research around drug utilization.

    In order to have good information, we need to have comparable data. So there are a number of initiatives to improve the standards we have around drug data.

    The third series involves a number of different initiatives. The two first ones, the common drug review and the Canadian optimal medication prescribing and utilizationservice, are initiatives that CCOHTA is leading. I understand you'll be hearing from them tomorrow, so you'll get lots more information on that one.

    The last one, Canadian medication incident reporting and prevention system, is a new initiative that CIHI will be undertaking over the next year in partnership with Health Canada and the Institute for Safe Medication Practices as part of a patient safety initiative, looking at how we can improve the safety of prescription drugs in Canada.

    That's it.

    The Chair: Thank you very much.

    Apparently there is a vote in about 15 minutes. It is a procedural motion to go to orders of the day. The question is whether you want to go over and vote or whether you want to just make sure we have even numbers of people here and continue hearing the evidence. What do you think?

    Mr. Réal Ménard: We have to check with the whip's office to see if they expect the members in the House. We cannot say at this time.

[Translation]

    We need to check and see what the whips want us to do.

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[English]

    Mr. Grant Hill (Macleod, Canadian Alliance): Because we balance, I would suggest that we stay, and to heck with the whips.

    Mr. Réal Ménard: You don't believe we have to check with the whips?

    Mr. Grant Hill: I wouldn't. I'd stay.

    The Chair: Mrs. Chamberlain.

    Mrs. Brenda Chamberlain (Guelph—Wellington, Lib.): I think we should vote. I think that's what we're expected to do.

    The Chair: The government wants to vote.

    Ms. Carolyn Bennett (St. Paul's, Lib.): Brenda can go, and then we'd be even.

    Mrs. Brenda Chamberlain: Yes, I'll go.

    Mr. Réal Ménard: If we don't check with our whip, we will not run again. I cannot do that. I will run again. I have to check with him.

    Ms. Carolyn Bennett: Brenda, you call the whip and see if they want just you or all five of us.

    The Chair: How many people want to go to vote? Let me see your hands.

    I will suspend the meeting until after the vote, because the majority of government members want to vote.

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    The Chair: We'll come back to order, ladies and gentlemen. We'll hear from Brogan Incorporated. I think Mr. Tom Brogan is here to present.

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    Mr. Tom Brogan (President, Brogan Inc.): Yes, with my colleague, Joan Fearnley.

    The Chair: Fine. You have the floor, Mr. Brogan.

    Mr. Tom Brogan: Thank you.

    We appreciate this opportunity to contribute to Canadian public policy development. Our company, by way of background, was created about 14 years ago--after I left the government. It was designed to link government and industry using empirical, unbiased analysis.

    We have created a very large prescription database and have pioneered the use of these data to measure utilization among very large patient populations. We've done a number of large studies, including one that analysed cost drivers among private drug plans, the plans insurers operate for companies. We've conducted a detailed examination of the Ontario Ministry of Health drug plan. And most recently, we completed an analysis of pediatric drug use. This is the largest study of its type done anywhere in the world, as far as we know. We've provided copies of all three of these reports to the committee.

    I might add that the last, the pediatric study, was supported by Health Canada as well as a number of drug companies and the Canadian Paediatric Society.

    Today we're going to provide a very brief overview of some of our key findings. While we'd like to comment on a number of the issues you've raised, we're going to limit ourselves to rising drug costs and the source of those rising costs. Our analysis will focus particularly on the prescription drug level at the retail level as opposed to the hospital.

    As Louise mentioned earlier, as a researcher I have to caution the committee that we have a pretty good handle on drug costs--and I mean researchers throughout Canada. What we don't have a good handle on are outcomes. So measuring the health aspects of the various issues raised will be difficult, which you probably have already begun to see, because the data are very weak or non-existent.

    What we have prepared relates to rising drug costs and the populations who are affected, and we will propose a few ideas for further study or solutions.

    I'm going to turn the floor over to my colleague, Joan Fearnley, who has been responsible for a great deal of the analysis I've already mentioned.

    Ms. Joan Fearnley (Senior Economist, Brogan Inc.): Good afternoon.

[Translation]

    We'll be making our presentation in English. However, I will be happy to answer your questions in either official language.

[English]

    What is the cause of rising costs? Drug price inflation is not an issue in Canada, as has already been pointed out. Thanks to provincial drug plan price freezes, price competition, mandatory generic substitution, and the PMPRB, inflation has been virtually absent from this industry for over a decade. Our analyses have shown that shifts in drug utilization have been the major contributor of rising drug expenditures.

    For the purposes of this presentation, we have grouped this shift in utilization into two broad categories. First is drug development. The last 15 years have seen a tremendous development in drug discovery with entirely new drug classes entering the market, and some of these play an important role in disease prevention.

    I'll give a few examples. Drugs that have been shown to dramatically reduce death rates from AIDS account now for 2% of the Ontario drug benefit program budget. New drugs to treat rheumatoid arthritis and multiple sclerosis have had dramatic success for some patients.

    The new generation of drugs used to treat depression now account for 8% of private drug plan expenditures, and this is still growing. Lipid-lowering drugs used for cholesterol account for 9% of private drug plan expenditures and 13% of ODB expenditures--that's the Ontario drug benefit program. This is backed by sound medical research, and the use of these cholesterol drugs has increased over the last decade. As an example, in 1994, only 2% of private drug plan beneficiaries and 4% of ODB beneficiaries used these drugs. Today these rates are 8% and 24% in each of these programs respectively.

    Other areas have also seen increases in utilization. Today, 3% of private drug plan beneficiaries and 10% of ODB beneficiaries use oral anti-glycemics in the treatment of diabetes, compared to 1% and 5% respectively in 1994. And finally, osteoporosis medications were absent in 1994 and now are used by 3% of ODB beneficiaries.

    The second part of this discussion is that we've observed a recent trend in the use of multiple drugs to treat a single condition. In a study of patients using calcium channel blockers, a class of drugs we use for hypertension, the proportion of patients using three or more drugs increased from 18% to 29% over the course of about two years. Among the private drug plans, 10% of the type 2 diabetics, the late-onset diabetics, who are using oral anti-glycemics are using a combination of at least three of these drugs.

    While these examples constitute good medicine, they inevitably result in substantial increases in cost. Furthermore, the rapidly aging Canadian population will compound the effects of these new and better medicines and dramatically increase the demands on the health care system.

    So who uses drugs? The issue of increases in drug expenditures does not affect all Canadians evenly. For individuals under age 65, the most expensive 20% of beneficiaries use over $1,500 drugs per year. The most costly 5%, which can easily be equated to the most ill, generated on average $3,000 per beneficiary per year. In contrast, the vast majority of people who are prescribed drugs use very small amounts, and this has been proven to be true regardless of the patient population we've examined.

    These beneficiaries in the top 5% often suffer from a number of serious conditions. In the private sector they account for 90% of anti-neoplastic drug use--that includes cancer and multiple sclerosis. Two-thirds of diabetes medications and again two-thirds of anti-viral medication, which includes AIDS drugs, are used by that top 5% group. Furthermore, that top 5% group accounts for 100% of very expensive therapies for rheumatoid arthritis and multiple sclerosis. The cost for these therapies is in excess of $15,000 per patient per year, but they are clearly life altering.

    What this means for the policy-maker is that efforts to reduce costs, such as increased patient contribution or limited access to new drugs, tend to result in a greater burden on the most ill in our society. The people who account for 80% of costs are, if we judge by their drug use, very ill. This is not overuse, fraud, or waste.

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    I'd also like to discuss now what has been done thus far to manage some of this cost increase. There can be no argument that health care resources must be used in the most cost-effective way possible. That means, among other things, there is no room for inappropriate use. However, the challenge is to contain costs while ensuring there is not an undue and unexpected negative impact on health outcomes.

    One means of containing cost has been to increase patient cost-sharing in the hope that this would encourage patients to request lower-cost therapies and eliminate unnecessary utilization. However, as Tamblyn and colleagues demonstrated in their landmark study of elderly and welfare recipients in Quebec, increasing cost-sharing can result in a decrease of both essential and non-essential drug use, as well as an increase in adverse events and emergency department visits--in other words, higher costs in the overall health care system and a lower quality of life for patients.

    Additional cost-containment measures include limiting the use of more expensive drugs by imposing specific criteria. In many cases the patient is required to have tried and failed on a sequence of drugs or have a number of risk factors that preclude him or her from taking certain drugs. This cost-containment measure, generally known as limited use, is effective in reducing costs without having undue negative health consequences, since the most advanced treatment is available to every patient if it is required.

    In a study we conducted for the Ontario Ministry of Health, we found that this policy saved $231 million per year--in other words, a 9% decrease in program costs with little likelihood of negative health effects.

    It seems fair to say that pharmaceuticals have become an integral part of the health care system, and efforts to limit use can be counter-productive.

    In the U.K. it appears that a different approach has been adopted. Based on some preliminary information, it appears that the U.K. government is encouraging the use of pharmaceuticals where they have been found to be cost-effective, with the expectation of lowering long-term costs in the rest of the health care system. There have also been initiatives to have closer relations with the pharmaceutical industry.

    It is clear from the data we presented just a few minutes ago that those Canadians suffering with very serious health conditions account for the largest share of costs. From this we can conclude two policy implications. Policies could focus on a case-management approach for these individuals in the higher end to ensure they have the best and most cost-effective treatment. For the largest part of the population, who are generally healthy, the emphasis should be on prevention--in other words, attempt to delay or avoid the onset of serious illness.

    Another approach is to provide targeted information to physicians. The U.K. appears to be taking this approach by using clinical information to encourage appropriate prescribing. This requires providing feedback to physicians on their own practice and targeting information that is relevant to their practice.

    For example, our data show a decline in hormone replacement therapy following the release of the much-publicized studies expressing concern regarding the health effects of this therapy.

    In another case, the use of diuretics for the treatment of hypertension increased sharply after the publication of a clinical trial that demonstrated the clinical advantages of this particular drug therapy.

    We want to emphasize that this feedback system would deal with under-prescribing as well as over-prescribing.

    We would like to close by saying that in our experience there are no easy answers to these issues that have been astutely raised by this committee. The focus on health aspects is, however, a substantial improvement in considering these issues, rather than one that examines costs alone.

    Thank you.

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    The Chair: Thank you very much, Ms. Fearnley.

    Our next group comes from Palmer D'Angelo Consulting. We have Mr. Palmer, Ms. D'Angelo, and Ms. Neale.

    Whichever one of you is leading off, please go ahead.

    Mr. W. Neil Palmer (Principal Consultant, Palmer D'Angelo Consulting Inc.): Thank you, Madam Chair.

    My name is Neil Palmer, and as you mentioned, joining me are Janice D'Angelo and Susan Neale. We're a pricing and reimbursement research group and consultancy. Our clients include research-based pharmaceutical companies, associations, and governments, and our focus is on, as I indicated, pricing and reimbursement of pharmaceuticals.

    Today I'd like to talk a little bit about some of the issues that you've been raising as part of your study and that have emerged recently in the news. I'd also like to say that although our client base includes the research-based pharmaceutical industry, the opinions expressed here are our own, and we're not here advocating any position on behalf of any particular company or group.

    There are some slides available, and hopefully you have those in front of you. As I indicated in the outline, we're going to go very quickly through some things on price trends. Some of this has already been covered by Ms. Ogilvie.

    The Chair: We don't have them. Are they in French as well as in English?

    Mr. W. Neil Palmer: Yes, they are.

    The Chair: Then where are they? The DELTA report was in English only, wasn't it, Mr. Brogan? So we can't give those out.

    Mr. Palmer, would you like to go back to your reference to your graphs?

    Mr. W. Neil Palmer: Yes, and just before I start, you'll notice that in the upper right-hand corner of the slides it says “June 2003”. That should quite clearly read “October 2003”.

    In the bottom left-hand corner you'll notice a copyright symbol. You can cross that out. Please feel free to copy and distribute. Do what you like with these. It was not our intention to limit distribution of these slides.

    If I go to the graph on the second page, the third slide, the information in fact replicates some of the data that was presented by Ms. Ogilvie. It is presented slightly differently in terms of year-over-year increases as opposed to the trend in the index number.

    In these, there are three figures. The first one, the green bar, is the increases in the prices of all medicines in Canada as represented by the industrial product price index collected by Statistics Canada. That includes patented, non-patented, and generic medicines. The second bar is price increases of patented medicines as reported by PMPRB. The third bar is the U.S. producer price index, which is collected by the U.S. Bureau of Labor Statistics.

    I'm not going to spend a lot of time on this, except to point out a few facts.

    First, between 1993 and 2001, patented medicine prices were either flat or declined. So over a period of about a decade, there were no increases in the prices of patented medicines, on average, or in fact they may have declined. This was similar for the IPPI, which measures all medicines in Canada, again from 1993 to 2001.

    What's remarkable in 2002 is that you see a 4% increase in the prices of all medicines--patented, non-patented, and generics. We know from PMPRB that the prices of patented medicines declined, which suggests that the prices of non-patented medicines must have increased by somewhat more than 4%. It's hard to estimate what that would be, because the methodologies for collecting these figures are quite different, but I think it's fair to say that those prices went up.

    I'd also predict or project that in 2003 and 2004 we're going to see price increases, not only for non-patented medicines, but also for patented medicines, by something comparable to CPI. While there are several factors probably contributing to these increases in prices, the number one reason, in my view, is that the impact of U.S. reimportation legislation that's being proposed, as well as the Internet pharmacy issue, is putting incredible pressure on pricing in Canada, and we're beginning to see higher prices. The evidence is already here, and I believe we'll continue to see it in 2003 and 2004.

    Next I'd like to speak very briefly on two slides on the Patented Medicine Prices Review Board.

    I believe PMPRB appeared before you a few weeks ago. I can say from experience, as someone who used to work at the PMPRB--and my colleague Janice D'Angelo also used to work there--that their job is a difficult and challenging one. At the same time, we believe the mandate they've been given is somewhat inconsistent with some of the other federal initiatives.

    In particular, the Health Canada patent register, which provides the most patent protection or the greatest market exclusivity for patented drugs in Canada, is fairly limited, whereas the PMPRB is given the jurisdiction over medicines that have any patent at all, many that have no commercial value. We believe it would be appropriate to have some consistency in the federal government's approach to patented medicines.

    Also, the PMPRB faces many challenges in trying to get their price reviews completed. They're also involved in many other activities, including working with CIHI, as Ms. Ogilvie indicated, as well as federal-provincial-territorial task forces and CCOHTA. Perhaps they should be looking at, and perhaps this committee should examine, whether it's appropriate that they continue to examine the prices of over-the-counter and veterinary drugs.

    Although they regulate the prices of some patented over-the-counter and non-prescription drugs, they have no impact on the retail prices, because that's not part of their mandate. They only look at the ex-factory prices.

    Veterinary drugs are in a whole different world, a whole different marketplace, and although they scaled way back on the degree of regulation, it's still on the books.

    Other products, like vaccines and blood products, are purchased primarily through tenders, through government agencies. So there's a duplication of regulation, where we have other government bodies already negotiating with the providers or manufacturers, and PMPRB in some cases perhaps even getting in the way of that tendering process.

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    On the next slide, I'd like to discuss a little bit about how PMPRB can be perceived as a barrier for market entry of new drugs into Canada.

    We do work with large pharmaceutical companies and small biotech firms, and I can tell you that the large pharmaceutical companies have become well acquainted with PMPRB—their guidelines, how things work—and are willing to wait it out, go through the processes. It often takes many months and sometimes years to work the process through to get their prices approved. They'll take the risk and market their products while that process is going on.

    That's much tougher for small biotech firms that may only have one product. It's very difficult for these companies to bring their product to market and risk the price rollbacks, price reductions, repayment of excess revenues, when they only have one product. That's further complicated by the fact that we have greater international price referencing. A price rollback in Canada may result in pressure for lower prices in other countries. So they can be risking a lot by coming to market their product in Canada. The net effect is that some of these products are delayed coming to market or they're not marketed at all.

    The second point is that when the PMPRB guidelines were developed, and that's some time ago now—it was back in 1989 when they were first put in place—it was a challenging job putting those in place, given the factors that were in the Patent Act and the set-up as being part of a quasi-judicial agency.

    I think there were some expectations at the time that prices of products would increase by a certain amount each year, by perhaps the consumer price index or some portion of that, and that the whole notion of incremental improvement wasn't really considered to be that big an issue. After a decade of no price increases—the whole notion of incremental improvement, which is the hallmark of advances in the pharmaceutical industry—we now have a situation where products that are modestly or moderately better than other drugs are faced with prices that are ten years old. It's very difficult to bring in innovative new products that are modestly or moderately better than the ones that are on the market when the prices you're faced with are ten years old. That's increasingly a challenge for the pharmaceutical industry.

    In the next slide, international price controls, one of the questions that was asked in the terms of reference of this study was understanding some of the international aspects of prescription drugs.

    Most European countries have some method of influencing the prices of the drugs they reimburse. In the U.K. it's through profit controls and influencing through NICE or trying to determine whether products are cost-effective. In other countries it's a negotiation process for drugs that are reimbursed. In almost all the European countries, prices are negotiated only for drugs that are reimbursed by the government. There's free pricing for products that are not reimbursed. Canada is unique in the sense that it controls the prices of all patented medicines.

    I mentioned earlier international price referencing. This is becoming a greater issue in that because of transparency, because of the Internet, because of the way prices are reported, most countries in the world know what every other country is being charged for medicines. If any country comes in with a low price, all the other countries want a low price.

    We now have a situation where there are whole algorithms and formulae that are being developed in terms of what they call launch sequences, so that companies can launch or introduce their products in high-price countries first, working down to low-price countries. If Canada is a low-price country, the implication is that Canada will get its drugs later on than those with higher prices.

    Also, the other aspect of price referencing is companies are not going to tolerate prices that are much lower than a very narrow band of a price range.

    Parallel trade in Europe, which is similar to some of the Internet pharmacy cross-border trade or reimportation, etc., which is an emerging issue here, has been in Europe for some time. It's an artifact of the European Union. It's legal in Europe, and it's something that's been going on for quite some time. It's developed as a profit opportunity, for the most part, for the parallel traders who move product from low-price countries into high-price countries. Those countries that are trying to reap some of the benefits of it have actually had to put in legislation or regulation to actually grab some of the savings that are there. In many cases, consumers don't benefit from this parallel trade.

º  (1655)  

As a result, we've seen quotas and supply limits established in low-price countries to try to limit exports and higher prices in some of those lower countries than in the past to try to stem the flow.

    This brings us to cross-border trade in Canada. There's legislation pending in the United States that would permit FDA-approved drugs that are sold in Canada at lower prices to be reimported into the U.S. I just heard recently that the congressional budget office estimated that this legislation could save the U.S. government $40 billion over ten years. That's $4 billion per year. If you do the math, we only have $11 billion or $12 billion in prescription drugs in this country. You're going to have to move them all south of the border to save $4 billion a year in the United States once you take into account exchange rates, etc. That's clearly not feasible. Not only that, even if some of that goes, it will have a huge impact on the Canadian health care system if large quantities of Canadian drugs start moving south of the border. I think there's some thought that perhaps the supply was unlimited in Canada and for some reason U.S. manufacturers and others would keep supplying to Canadian markets so it would go back south of the border. Clearly, that's not on.

    Internet pharmacies are another issue. We have Canadian-based Internet pharmacies that supply U.S. consumers with cheaper prescription drugs. The size is very difficult to estimate. IMS and others have come up with figures that range in Canadian dollars from $500 million to $900 million in 2003, and it's continuing to grow. We're already seeing—this has happened in Europe and elsewhere—that the major manufacturers are taking steps to limit the supply to wholesalers and Internet pharmacies that are involved in this kind of trade.

    The reason for this is that cross-border trade is bad for Canada. It benefits no one other than those that are involved in the trade itself. It's going to result in higher prices for drugs in Canada, and it already has. There's a potential for shortages of drugs and pharmacists. We've already seen shortages of pharmacists in provinces like Manitoba, and we're going to presumably start seeing some shortages of drugs if the flow continues in large measure. Safety has been raised as an issue, not that the Canadian drugs are unsafe, but rather that this is an opportunity for people who want to either counterfeit drugs or take drugs from other countries and relabel them as Canadian and try to get them into the supply chain.

    I'd like to conclude on the point that this problem originates in the U.S., because there are no prescription drug benefits for seniors. They have a price structure that discriminates against cash-paying customers. I also suggest the solution to that problem rests in the United States. However, by taking the approach they are, they're impacting Canada, and we're going to continue to see higher prices and potentially see some of those drug shortages and shortages of health professionals, perhaps, such as pharmacists.

    The other issue that has come up recently is HIV/AIDS drugs for Africa. The idea that's being proposed is that Canada should amend the Patent Act to permit compulsory licensing of HIV/AIDS drugs by, presumably, Canadian generics firms that would supply the African continent. I agree that the Canadian government should play a constructive role in helping to address the AIDS epidemic in Africa, but clearly drugs are only one part of the solution. You can't just give drugs to patients. They need to have testing; they need to have a physician and coordinated care; there need to be surveillance systems in place. Throwing drugs at the problem isn't just the answer. But I'd also suggest that the innovative firms already have, in many cases, programs in place to provide these drugs. I wonder how the Canadian generics industry is going to provide some of the drugs that are already being supplied at a lower cost.

    Available on the Internet, actually, is a document put out by Médecins Sans Frontières, Doctors Without Borders, who have a publication called “Untangling the web of price reductions,” which is a comprehensive guide of the prices already being provided by innovative or branded companies around the world, as well as some of the generics in countries like India and Thailand. These products are already being provided, so I don't understand, and I haven't seen any information that would suggest, why compulsory licensing is going to assist the problem or assist provision of drugs in Africa beyond what's already being provided through the companies that are already providing drugs as it is.

»  (1700)  

    We also ask the question whether compulsory licences are the best approach. As I mentioned, many firms already have programs in place, and I would think you should ask those firms to continue to provide the drugs before compulsory licensing is granted.

    Also on this topic, if the Canadian Patent Act is to be amended to allow compulsory licensing, it's imperative that safeguards be put in place so Canadians understand where the drugs that are being produced pursuant to those compulsory licences are going, how much is being produced, and at what price. If Canada is to amend its Patent Act for this initiative, I think it's important that we know that the benefit is going to those it's intended for.

    Finally, on generic drugs, Canada has one of the most generous environments for generic drugs in the industrialized world. We have weak patent protection, relative to the rest of the industrialized world, and short market exclusivity. We've just recently completed a study that shows that market exclusivity in Canada is about two years less than in the U.S. and about four to five years less than in the U.K. and France.

    In part, we also have government health policies that favour generics over branded drugs, like mandatory substitution and policies that allow for high prices for generic drugs due to a patchwork of provincial drug plan policies that stifle competition and result in some of the highest generic prices in the world.

    Those high generic prices come.... We've done a study that suggested they're high. The PMPRB has also reached the same conclusion in its study. Some people have suggested that maybe price controls are the answer, and I would disagree with that. The reason prices are high is in part because there are provincial policies that fix the prices and take competition out of the equation. So we need to encourage competition to get lower generic prices.

    Retail-level barriers to entry should be removed. As it stands now, most retail pharmacies buy their generics from one firm or another, so the larger manufacturers have a big advantage in the marketplace. And I think provincial drug plans should consider tenders for multiple-sourced drugs, because generic drugs are, in essence, commodities. One manufacturer's product is just as good as the next, and the drug plans should consider a tendering process to get the best possible price for their drugs.

    The “best available price” policy should be ended. For example, in Quebec they insist on the lowest price in Canada. When you start a policy like that, you get one price in Canada, and it's a high price.

    That concludes my comments for now, Madam Chair. I'd be pleased to answer any questions.

    Thank you.

»  (1705)  

    The Chair: Thank you.

    Mr. Merrifield.

    Mr. Rob Merrifield (Yellowhead, Canadian Alliance): Thank you for coming in and sharing what you have with us today.

    I'm a little confused, to be fairly honest--and my colleagues know that already. The PMPRB started us out at the beginning of the hearings on this and they were saying something completely different from what you've just told us with regard to the pricing of drugs in Canada affecting availability--if it held off any drugs. You say it did. They sat here and said it didn't.

    Do you have any explanation, since you used to work for them, as to why you have a different slant on this? Can you explain why you feel the way you do?

    Mr. W. Neil Palmer: I think their answer was along the lines that they weren't aware of that kind of issue, as opposed to the explicit answer that no, it wasn't a problem.

    I've worked with firms that are either trying to license products or proposing to market new drugs in Canada, and they come to us and say, “What price could we get in Canada? What will the PMPRB limit us to?” And it's not uncommon, when we give them what we think would be the range of prices that would get through PMPRB, when they understand what that range of possible prices is, that they decide they're not going to market the drug in Canada. It's just not a viable venture, from their perspective, to market the drug.

    The Chair: So is it the PMPRB or is it you and your advice that is stopping them?

    Mr. W. Neil Palmer: In some cases, they go to the PMPRB and they're told this is the price they can get.

    The Chair: But before they get there, you've already told them they can get only a certain amount, so they might decide not to go. Is that correct? That's what you're saying.

    Mr. W. Neil Palmer: I'm saying we would give them the range of prices and the probabilities of getting the price through the PMPRB. What we generally do is encourage them to go see the PMPRB, make their case, and try to find what avenues are available to get their price approved through the PMPRB.

    This is typically the smaller firms. The larger firms have a lot of experience, and they will typically market the drug and then deal with the PMPRB over time, although they recognize they're taking a risk that their price might be rolled back. It's much more difficult for the smaller firms.

»  (1710)  

    The Chair: I'm sorry, Mr. Merrifield. I interrupted.

    Mr. Rob Merrifield: You can just add that on to my time.

    The Chair: I will.

    Mr. Rob Merrifield: That really is interesting, because you actually said you're not sure they'd be aware of it, and that's what they told us.

    Mr. W. Neil Palmer: They're certainly aware of some cases.

    Mr. Rob Merrifield: Then they are aware.

    How long does it take? The other question we asked them was about the time it takes to determine a price through the board. They said months. In reality, how long can it be?

    Mr. W. Neil Palmer: The minimum is months, and there are some that take many years.

    Mr. Rob Merrifield: Many years. That would hold off drugs from even being priced in Canada.

    Mr. W. Neil Palmer: As I said, the larger pharma companies will just tolerate this for many years and in some cases actually put a reserve aside on their books in case they get a price rollback. In other cases, some companies will not market their drugs. The top-selling hypnotic drug in the United States is not on the market in Canada today, but it has a notice of compliance. It has been approved for sale by Health Canada.

    Mr. Rob Merrifield: Madam Chair, this is completely different testimony from what we heard from the PMPRB. That's my point, that we're hearing a completely different side of what the testimony was here just three weeks ago. As a committee, we're going to have to try to discern what is really the truth.

    You're telling us that from your experience you have some actual drugs. Can you name some drugs that aren't available in Canada, specific ones?

    Mr. W. Neil Palmer: The one I was just mentioning, Ambien, is the top-selling hypnotic in the United States, and it has had a notice of compliance with Health Canada for several years.

    The Chair: They are not prevented from selling it here. What you're saying is they've decided not to because they can't get the price they want.

    Mr. W. Neil Palmer: They are concerned that the PMPRB would not approve or would roll back the price they charge.

    The Chair: They are not stopped from marketing it. They don't want to take the risk of maybe having to pay back.

    Mr. W. Neil Palmer: Absolutely.

    The Chair: So the drug is not available not because of the PMPRB, but because the company doesn't want to go ahead and put it on the market.

    Mr. Rob Merrifield: There is as well the timing for them to come up with a price.

    The Chair: No, the pricing comes once it's being sold.

    Mr. W. Neil Palmer: No, the smaller ones will try to get the price of their product approved before they actually put it on the market because they don't want to take the risk. The larger pharmaceutical firms, which know the process, are willing to take the risk.

    Mr. Rob Merrifield: What you're saying is it could take beyond a year for some of these products.

    Mr. W. Neil Palmer: Absolutely.

    Mr. Rob Merrifield: They sat here and said it took a couple of months, maybe, at the outside.

    Mr. W. Neil Palmer: They have investigations that have been ongoing for several years.

    Mr. Rob Merrifield: It sounds to me as if I've heard two complete opposites from witnesses. That's interesting.

    Something else that really conflicts in a lot of the witness testimony we've heard since we've been in this concerns the pricing for generic drugs and brand-name drugs in this country. Can you tell me where we actually are with generic drugs in comparison with the United States, as an example?

    Mr. W. Neil Palmer: Canadian prices are on average higher than they are in the U.S. There are exceptions both ways.

    Mr. Rob Merrifield: That's on average, but can you give us something a little more precise than that?

    Mr. W. Neil Palmer: Our study suggested they were about 37% to 40% higher on average. We did a study using the federal supply schedule prices in the U.S. as compared to the ex-factory prices paid by the Quebec drug benefit plan. Quebec is supposed to have the lowest prices in the country, and the FSS prices are meant to be the lowest in the U.S. We found that those were the best price comparisons, and our study suggested that generic prices were significantly higher in Canada.

    Mr. Rob Merrifield: You said they were up to 40% higher.

    Mr. W. Neil Palmer: Yes. There was a wide range. There were some products where the difference was huge while with others it was quite a bit smaller.

    Mr. Rob Merrifield: Now you're saying the Internet pharmacy is going to compromise our price for brand names in this country, and you're saying it's already happening.

    Mr. W. Neil Palmer: Prices are going up for the first time--

    Mr. Rob Merrifield: Is it directly related to that?

    Mr. W. Neil Palmer: To the Internet pharmacy issue? Absolutely.

    Mr. Rob Merrifield: Whose responsibility is it to fix that problem? Is it the United States' or is it ours?

    Mr. W. Neil Palmer: The problem originates as an American problem. What can Canadians do? Health Canada could take steps to limit exports of approved drugs from Canada to the United States; that would be one step.

    Mr. Rob Merrifield: It could limit the export of drugs.

    Mr. W. Neil Palmer: Yes, it could require an export certificate.

    Mr. Rob Merrifield: We already have a law saying they can't come in, right?

    Mr. W. Neil Palmer: And the law is silent on what's going out. It's not clear.

    Mr. Rob Merrifield: That's kind of interesting, when you consider that problem. We've seen some phenomenal growth. According to some of the numbers I've had on the Internet side, it went from about $400 million two years ago to $1.2 billion last year, and it's probably continuing to go higher. It really is interesting when you start seeing how that's going to impact pricing here.

    To solve the problem with the generics here, you're saying it takes competition. I'd like you to elaborate a little on that, how you feel, in practical terms, we are going to solve the problem of the escalating prices of generics, especially when it's been told to us that somehow it's linked to generics, which can't be priced any higher than 70% of brand-name prices when those come off patent law. How does that affect the price?

»  (1715)  

    Mr. W. Neil Palmer: You're quite right. Ontario has a policy that the first generic can be at no more than 70% of the branded price and the second generic 90% of that or 63% of the branded price.

    What that policy in fact does, when you combine it with Quebec's lowest-price policy, is establish the prices for the generics. They don't have to compete because the rules are already set by government.

    What you see in the United States when generics come on is rapid competition. After the first six months, when the first has exclusivity, there's incredible competition and prices drop dramatically. In Canada prices don't seem to drop dramatically. In part that's because of the distribution or supply chain and the way products are distributed, but it's also because of the way provinces pay for generic drugs.

    Saskatchewan has experimented with a tender process, but the reality is that few generics firms showed up. They didn't want to jeopardize the market in Quebec, because if they gave a low price to Saskatchewan, they'd have to give the same low price to Quebec. If there were a tendering process that didn't affect one province or the other and you could get the major generics firms to compete, you'd see much lower prices.

    The Chair: Thank you, Mr. Merrifield.

    Mr. Ménard.

    Mr. Réal Ménard: I'm going to speak in French.

[Translation]

    There is a considerable amount of confusion that you need to clear up. I'm directing my comments here primarily to Mr. Palmer.

    I understand why you are obviously siding with the patented medicine industry—as you are fully within your right to do—but we have an obligation to ensure that the same mechanisms apply to everyone.

    To begin with, the Patented Medicine Prices Review Board, or PMPRB, is a quasi-judicial agency that has the authority to request royalties and that can seek court orders or challenge decisions in court. At least, that's what I understood from your second slide. However, your presentation leads one to believe that the PMPRB sets drug prices. That, of course, is not the case. It may decide that a price is excessive, based on the guidelines in place, but it cannot under any circumstances, set the retail price of a patented medicine. This has been the case since the PMPRB's inception. It's important to recognize this subtlety. Acting in an advisory capacity, the PMPRB may determine that the price of a drug is excessive, but never at any time can it set the retail price of that drug.

    Do you agree with that statement?

[English]

    Mr. W. Neil Palmer: Thank you for the question.

    You're quite right; they don't set prices. But I think we should clarify. There's an important distinction here between prescription drugs and non-prescription drugs. With prescription drugs their guidelines establish the maximum non-excessive price for the ex-factory price. Provincial governments have regulations in place that limit the amount of markup that can go onto prescription drugs. In Ontario, for example, it's 10%. Wholesale plus retail can't exceed--

[Translation]

    Mr. Réal Ménard: That information has already been supplied to the committee. Therefore, we agree on the true role played by the PMPRB. Your presentation led to some confusion, but you have set the record straight.

    Is there anyone here who could provide us with information about the following matters? You claim that drug prices have not increased, and in some respects, you are correct. Drug prices, that is ex-factory prices, as controlled by the PMPRB, are well below the Consumer Price Index. The increase has been at the retail price level. At meetings in our ridings, such as the one with seniors last Saturday evening, we were told that drug prices have increased. The committee wants to know what is behind this price increase.

    You've quoted data that are widely available, specifically from the Federal-Provincial-Territorial Task Force. You mention some grand ideas and new drugs and talk about consumption and demographic growth. Conversely, the intermediaries remain the unknown quantity. Pharmacists maintain that they are not the ones claiming the biggest share of the pot. The manufacturers say that they are not getting rich, while the doctors maintain that they are philanthropists who make no profit whatsoever on drugs. The fact remains, however, that retail drug prices go up 20 per cent every year.

    Can anyone here give us an original, unbiased explanation of the profits made by system intermediaries?

»  (1720)  

[English]

    Mr. W. Neil Palmer: Perhaps I could start with the first part of your question. On the nice graph that Ms. Ogilvie has here, there is a line that shows the consumer price index component for prescribed medicine and non-prescribed medicine. Those do in fact reflect retail prices. This is entitled “Factors Affecting Drug Expenditure”.

    There are some hard numbers on what's happened from Statistics Canada--I used to work there too.

    Mr. Réal Ménard: The only job you haven't had is member of Parliament.

    Mr. W. Neil Palmer: I'll work on that.

    Mr. Réal Ménard: You are very welcome. You have to learn a little French.

[Translation]

    Mr. W. Neil Palmer: I'm a former Montrealer. Therefore, I do speak a little French.

[English]

    That's the answer to the first part. So there are some numbers there that are objective.

    Your next question was on the profits made by the intermediaries. That's going to be a whole lot tougher to get a handle on, and I don't know if any other panellists want to touch that one.

    Mr. Tom Brogan: If I understand correctly, there's a question about a very large increase at the retail level, that is, in the hands of the consumer.

    We collect data from about 150 million prescriptions a year and we have not witnessed a massive increase in individual drug item prices. I must say, I'm a little surprised at the Statistics Canada figures. We have been seeing somewhat of an increase in the last year and a half but not nearly of an order of magnitude of 20%. It's more like 2% or 3%.

    I have to agree with Mr. Palmer. The Internet pharmacies have some bearing on that, plus there's been a price freeze in place for 10 years.

[Translation]

    Mr. Réal Ménard: Mr. Palmer, your second slide on page 2 contains a reference to the patent register. That's not the first time I've heard about this register. I'd like to know why you believe we should limit ourselves to the drugs listed in this Health Canada patent register.

    What can you tell us about this register and its connection with the PMPRB? Why do you think the committee should turn its attention to this register?

[English]

    Mr. W. Neil Palmer: I think I understand. Health Canada maintains a register. This has to do with Health Canada notice of compliance regulations. The purpose of that register is to list products with eligible patents that would prevent a generic from receiving a NOC during the lifetime of the patents that are listed on this patent register.

    Those regulations in that patent register and the patents are distinct from the mandate of the PMPRB, which looks at all patents, no matter how important that patent is. You can have cases where a company has what PMPRB considers to be a patented medicine and there's already a generic on the market; there's already a generic competition.

    Many of the patents have absolutely no commercial value or very limited commercial value. There's a disconnect in federal policy on patented medicines.

[Translation]

    Mr. Réal Ménard: The Council of Canadians, for example, could suggest that we revert to the old compulsory licensing regime which afforded drugs some protection. That protection was not necessarily in the form of a patent, but in the event the drug was copied, the company was paid royalties.

    Has anyone, and that includes the Canadian Institute for Health Information, given any thought to how much we as a society would save in terms of drug costs if we reverted to a compulsory licensing scheme?

»  (1725)  

[English]

    Mr. W. Neil Palmer: I can only comment on this.

    When we looked at our market exclusivity study and looked back at Dr. Harry Eastman's study before PMPRB was created, the market exclusivities were in fact longer during a term of compulsory licensing than after. And I have no explanation for that, but those were the numbers.

    The Chair: Thank you, Mr. Ménard.

    Ms. Bennett.

    Ms. Carolyn Bennett: Thank you very much.

    I thought Ms. Fearnley's presentation was hugely refreshing.

    I think those of us who hoped we as practitioners were doing optimal prescribing have a gut feeling about it, and I thank you for that work.

    These sky-high data are so important. But I want to know from either witness, when you look at where the total drug expenditures...when you start to see what's going up here in terms of Canada, can you tell me in the OECD data...? One of my concerns is we weren't capturing the drugs that were being spent on people in hospital because those were in global hospital budgets.

    In Canada in the early nineties we started doing a shortened length of stay and we started booting people out of hospital. And those drugs ended up looking like they were drugs costs instead of hospital costs for things like pneumonia, PID, and even for heart attacks. We sent them out on all kinds of things.

    Can you tell me whether the OECD data are all comparable? Where are they in shortened length of stay, or is it just that we in Canada started booting people out of hospital faster than everybody else?

    Ms. Louise Ogilvie: I can take a stab at that question, and then if anybody else wants to answer....

    The OECD works with all the different countries. In Canada, we provide data to OECD, and there is a set of standards for sending the data to try to make the data as comparable as possible. But when you look at the fine detail, there are always little differences because of the way health services are delivered in countries.

    You're right that over the past 10 years there has been a shift to move people from in-patient to ambulatory care, and that does have an effect on the total drug numbers we're listing, because as those expenditures start shifting out into the community, it begins to be picked up in the drug category as opposed to in the hospitals.

    But in terms of shifting from in-patient to ambulatory care services, I don't think Canada is really unique. We've seen that same thing happen in other countries as well.

    Ms. Carolyn Bennett: What we felt is that within the silos in provincial health budgets, as soon as you take a drug off a list and then a patient has to be admitted to hospital to get it, the net to the health department is higher.

    I think that's what Joan was saying, from England, right? That's what they figured out, that you should pay for the drugs in order to keep people out of hospital?

    Ms. Joan Fearnley: That's the general drift.

    Ms. Carolyn Bennett: But they've also decided to pay for smoking cessation patches and all those things on their drug formularies, knowing that even if it takes somebody eight times to stop smoking, it will actually ultimately save in terms of health care costs. You pay for the drugs that look very expensive, but ultimately you save huge health care costs by paying for that, particularly in welfare patients, I think. That was just my experience with the different approach the U.K. takes.

    On the value-for-money piece, I guess we're looking at the overall health status of people and how long they live, and all of those things. I think we've asked a couple of witnesses, in terms of this going up, how much are we saving in hospitalization by the increased drug costs and the fact that if you're on three different hypertensives or three different diabetic things, you end up with less time in hospital because it's more optimal coverage of that condition? Are we looking at the economic benefit to actually having people on more drugs?

»  (1730)  

    Mr. Tom Brogan: The fundamental flaw in trying to do that measurement is availability of data. First of all, some of it is not captured. Secondly, some that is captured isn't usable in any research. Thirdly, and the most fundamental problem, what is captured is not released outside a very, very small clique of bureaucrats and researchers. So it is extremely difficult to get a handle on that economic component.

    Ms. Carolyn Bennett: We have to do this if we're going to show people that we're....

    Mr. Tom Brogan: Absolutely.

    Ms. Carolyn Bennett: Otherwise, we keep saying, “Oh, you know, we're spending more on drugs and doctors,” and I've never seen a study that shows that's a bad thing.

    Mr. W. Neil Palmer: The big concern is that drugs are the fastest-growing component of health care. Well, what should be the fast-growing component?

    Ms. Carolyn Bennett: I don't know, probably not doctors.

    Mr. W. Neil Palmer: But as a quick answer to your question, it's very hard to do in the aggregate, but we need to do more and more on individual products to show that they're cost effective, to show that they offer value. If we do that on all the new drugs, eventually overall we'll have a good sense that we're getting value for money, I would think.

    Ms. Louise Ogilvie: I think the other key is that you can't just look at the drug data in isolation; it has to be linked to the in-patient hospital data and linked to the physician claims data. So we have to get into doing studies where we're linking data and doing personal longitudinal-type databases to be able to answer that exact type of question you're talking about.

    Ms. Carolyn Bennett: On some of these drugs that aren't coming to Canada, I really worry about this as somebody who used to fill out all those forms for emergency release of things that our patients are sort of getting free because they can't get them on the market here. It's a big mess.

    Also, in terms of what we're all saying, it may be fine what you're saying, but doctors don't like having to fill out all those forms in order to get either emergency release or the “Yes, I tried that, and then I tried this, and then I tried that.”

    In substantial improvement, in all these other things, are there not grey areas where it actually should matter? The PMPRB does substantial improvement. Aren't there grey areas where if the efficacy was the same but the safety was better and the dosage compliance was way better, such as the example I used a couple of weeks ago, between tetracycline and Vibramycin...? Shouldn't we have a different category than just the whole level 2, level 3 thing?

    Mr. W. Neil Palmer: I think you're absolutely right. The problem is this sort of black and white. It's substantially better or it's “me too”.

    PMPRB, to its credit, does take safety and reduction of adverse events as one of the criteria for substantial improvement. The problem is that the bar is so high to demonstrate that that few drugs ever do, because it has to be so dramatic.

    I think the other problem is often you don't see those dramatic benefits until the product has been on the market for several years. You know in principle that the benefits are there, but it's going to take several years before the clinical trials support that.

    Ms. Carolyn Bennett: Okay.

    Mr. W. Neil Palmer: So to answer your question, yes, there need to be some....

    Again, to its credit, PMPRB eventually says, “Yes, that price is okay,” but it takes a long time.

    The Chair: Thank you, Ms. Bennett.

    Mr. Barrette, I don't think we have time. We have eleven minutes to get to the vote. I'm very sorry.

    I will thank the witnesses on behalf of the members of committee, and I will reserve the right to call you again for additional information if we think you might be able to help us out on our study.

    Thank you very much. The meeting is adjourned.