Thank you for inviting me today. I am very pleased to be here.
My name is Katherine Boothe. I am a professor of political science and a member of the Centre for Health Economics and Policy Analysis at McMaster University. My research expertise is in the area of comparative public policy, and I study the development and reform of pharmaceutical policies in Canada, Australia, and the U.K.
I was asked to speak to you about cost containment, drug cost-effectiveness research, and formulary listing decisions. I'd like to start with three key messages on these topics as they relate to my expertise.
First, in Canada we have a history of talking about pharmacare as if it is a program that poses unique challenges for cost containment, but this is not supported by evidence. In fact, it's wrong. Evidence from similar countries demonstrates that pharmacare does not mean uncontrollable costs, and universal systems actually have access to much better tools for cost containment than our present fragmented system does.
My second message is that a key tool for cost containment is a national or nationwide formulary. This is a list of drugs eligible for reimbursement that applies equally across the country, and we already have a good understanding of the institutional requirements for this to work in Canada.
Finally, cost-effectiveness analysis is an important element of building a national formulary. It's an area where Canada has a good deal of capacity. This country has been an international leader in the area of cost-effectiveness research. Other countries, like Australia, provide examples of how Canada might integrate this analysis more fully into formulary decisions and price negotiations.
These are my take-home messages. In the remaining time I'd like to tell you about the reasoning and evidence behind each of these points.
First we have historical perceptions about cost containment in Canada versus the comparative evidence. My research has found that past proposals for broader public pharmaceutical insurance in Canada have tended to falter because of the perception that cost containment is difficult or impossible or that a universal pharmacare program is equivalent to a blank cheque. Although this perception is persistent, it's not based on evidence.
Expanding pharmaceutical coverage in Canada has been proposed at least five times since 1949. None of these proposals has received much serious political consideration because the initial response from national decision-makers in each case was that it was too expensive, too risky, and too difficult to control costs. However, during this time, similar countries, like the U.K. and Australia, were adopting and consolidating their comprehensive pharmaceutical benefits programs. Both the U.K. and Australia have universal single-payer programs for pharmaceuticals and they both do a better job at containing costs than Canadian drug plans do currently. When it comes to combined public and private spending on pharmaceuticals, as I think you've heard, Canada pays more per capita than all OECD countries, aside from the U.S., and we pay more while providing less access.
Australia and the U.K. use different tools to contain costs. They use either a positive formulary, which is a list of drugs eligible for subsidy, or a negative formulary, which is a list of drugs ineligible for subsidy. There's broad use of electronic health records along with financial incentives to prescribers to aid in appropriate prescribing. In both countries, they can leverage the purchasing power of government to get significantly lower drug prices than Canada. This means there's not a single method for achieving an efficient, affordable system, but rather a variety of tools that can be adopted and adapted to fit the Canadian context.
My second message is about the role of a national formulary. A single nationwide formulary ensures that governments only pay for drugs that have undergone a rigorous evaluation process regarding their value to patients and to society. It means that access is the same for Canadians no matter where they live, which is not currently the case, and it means that governments have the bargaining power they need to get fair prices for drugs.
Here I'd like to emphasize the distinction between national and nationwide. It's not necessary for the federal government to have ownership of a formulary in order for it to be effective. In fact, provinces are already quite successful at co-operating on the process of formulary decision-making through mechanisms such as the common drug review and the pan-Canadian Pharmaceutical Alliance, pCPA.
What they need is an incentive to commit to shared outcomes. Currently, the recommendations of the CDR, common drug review, and the joint price negotiations undertaken by the pCPA are not binding on the provincial drug plans, which is understandable given that each province has sole financial responsibility for its own plan.
This means there is an opportunity for the federal government to act as a crucial partner by contributing financially and requiring consistency, similar to the way it sets national standards for public hospital and medical insurance through the provisions of the Canada Health Act.
My final message is about the cost-effectiveness analysis of pharmaceuticals. This is one part of formulary decision-making, along with other factors, such as budget impact, the burden of disease, and consideration of social values.
There's a significant concentration of expertise in these methods in Canada. We already have the capacity necessary to create an evidence-based national or nationwide formulary.
Currently, cost-effectiveness analysis is applied on a pan-Canadian basis through the common drug review, but as I mentioned, the CDR's role is advisory only.
Australia provides one example of a way to integrate cost-effectiveness analysis into formulary decision-making.
Australia has an expert body whose official mandate is to recommend new drugs for listing on the national formulary, taking into account clinical effectiveness, safety, and cost effectiveness compared with other treatments. The committee is also empowered to make recommendations regarding price.
If the Australian committee makes a positive recommendation, the drug goes to a pricing authority to discuss a final listing price. If the committee's recommendation is negative, the manufacturer may choose to resubmit the drug after gathering new clinical evidence, or propose a lower price.
Australian policy experts often refer to this as a system of “no means no, and yes means maybe”. Drugs can only be listed on the national formulary with expert approval, but final listing is dependent on reaching a satisfactory price agreement.
The final point I'd like to make is that cost-effectiveness analysis is a tool for ensuring value for money, not for containing overall costs. A drug that offers significant new therapeutic benefits may be cost effective even if it is relatively expensive.
Cost containment can come from other tools, such as a nationwide formulary with a transparent budget, fair drug prices, and appropriate prescribing.
Understanding what cost-effectiveness analysis does means we can put it to its best use along with other tools to ensure a national pharmacare plan is equitable, evidence based, and affordable.