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Recent television coverage investigates Canada’s rising drug prices

It is not too often that our world of health benefits get widespread media attention, but if you happened to catch the recent episode of The Fifth Estate called The High Cost of Pharmaceuticals: Canada’s Drug Problem, you know that it touched on some very timely issues for our industry. However, with the show’s one-hour timeframe and target audience of the average Canadian, it’s impossible to include all the ins and outs of some complex issues. To keep the discussion going and provide additional insight for industry insiders—like plan sponsors and advisors—we contacted Stephen Frank, senior vice president, policy, at the Canadian Life and Health Insurance Association, who was interviewed on the show. Stephen shared with us what was left on the cutting-room floor…

Missed the show?

Watch it online here:

Setting the scene

The Fifth Estate explains that although some Canadians have limited or no drug coverage, most Canadians—approximately 80%—do have coverage. And indigenous, elderly, and poor people, as well as those in hospital are usually receiving drug coverage by way of a public plan. The rest of us are covered by private plans, typically through employers. Then getting down to the issue at hand: although traditionally employer plans have been very generous covering almost every drug available, this notion—that we can continue to afford any drug at any price—is at the heart of Canada’s drug problem. Accordingly, this notion needs to change.

Needless to say, we agree with this aspect of the show’s premise—especially when we factor into the equation that many of the new high-cost drugs entering the market cost hundreds of thousands of dollars per year. But what is the solution? How can we bring down Canada’s drug costs? To get to the “How?” first The Fifth Estate investigated the “Why?” Just why is it that Canada has the second-highest drug prices in the world, after only the United States?1

First stop: the doctor’s office

Perhaps a contributing factor to high drug prices is that, although certain drug therapies have the same efficacy, doctors don’t always prescribe the cheapest option. For instance, although Canadian Diabetes Association guidelines recommend doctors prescribe the drug metformin—an effective and low-cost option—research shows that one-third of newly diagnosed diabetics covered by private insurance plans start on a more expensive drug first, before ever trying metformin.2

This prescribing trend triggers another “Why?”—a journalist’s favourite question (and of course, one we are also exceedingly fond of). So assuming there is no medical reason to steer clear of metformin, why do many physicians opt for prescribing higher-cost drug options?

The Fifth Estate’s findings include that doctors who have more contact with, and information from drug companies tend to prescribe more expensive drugs and more brand-name drugs, and they make more inappropriate prescribing decisions.3 Marketing works! In addition, often drug-company sales representatives use hard-sell tactics like undermining prescribing guidelines and suggesting off-label uses to push higher-cost drugs.4 Could misinformed prescribing practices—influenced by drug company marketing—be contributing to unnecessary spending?

Stephen’s take was that while most doctors are now on board regarding generics versus brands because the science is very clear around comparable efficacy, there may be more of a struggle, for example, around first-line versus second-line therapies and biosimilars. Stephen added that to be fair to physicians, their prescribing decisions are based on patient care, not cost. Building physician knowledge regarding the cost-side of drugs would be useful and is arguably very necessary in the years to come.

The role and responsibilities of private carriers 

Further illustrating the magnitude of the higher-cost prescribing issues, research conducted for the show comparing the difference between what insurance companies paid for more expensive drugs versus what could have been paid if doctors prescribed a cheaper vision was $3 billion per year between 2011 and 2015—approximately $15 billion over five years.5

Clearly, addressing drug marketing practices and inappropriate prescribing is important. But what about other aspects of the drug transaction? What about plan design and specifically, whether insurers have a responsibility to help employers make cost-effective choices for their plans? This is one area where Stephen felt that a lot was left on the CBC’s cutting room floor:

“Overall, it’s just not correct to suggest that private plans are standing still, that we’re not addressing these issues. Every year the dollar amount difference between covering more expensive versus less expensive drugs gets smaller and smaller. The real point is that the world is changing very rapidly for private payors. Fifteen years ago, a typical private plan was basically open; whatever the physician prescribed, we reimbursed. This is increasingly not the case as everyone makes an effort to move toward increased plan management.

“For example, every carrier in Canada, including GSC, has solutions for their plan sponsors, like mandatory generic substitution and criteria regarding step therapies. However, there still is a perception among employees that ‘if I don’t get exactly what my physician prescribed, it could be detrimental to my health’ and employers are very reticent to make changes that could be perceived as negative for employees. As a result, it’s not a question of whether or not plan management is happening, it’s a question of how quickly employers will allow it to happen. It’s about how long will it take us to get there, not whether we will get there at all.”

Along these lines regarding the insurer’s responsibility, The Fifth Estate also suggested that insurers have no incentive to help employers decrease their costs with the idea that the bigger the employer claims, the more the insurer makes in administrative fees. Stephen was quick to correct this misconception: “Nothing could be further from the truth. We need to have costs in line with our customers’ ability to pay. Having rapid escalation in price that is going to push it out of reach of our employers is not in our interest.”

From problems to solutions…

Through their investigation, although The Fifth Estate teased out a lot of the critical issues, they also presented hope for the future in that physicians, employers, employees, and private payors can all play a part in helping curb rising drug costs. An example of progress is the work of the Canadian Pharmaceutical Alliance (pCPA) where all 13 provinces and territories—and now also federal drug plans—are working together to achieve greater value for brand name and generic drugs for publicly funded drug problems.

However, the provinces are only one piece of what The Fifth Estate refers to as Canada’s patchwork approach to drug coverage because of the many public and private payors. Is the solution for Canada to try to increase purchasing power by moving to a single drug price negotiating and purchasing agency like New Zealand’s pharmaceutical management agency called PHARMAC? Canada is the only country worldwide that has a publicly funded universal health program that does not include a publicly funded universal drug program—not that Canada hasn’t been studying and discussing it since the 1960s.6

Although the show touches mainly on the potential benefits of this kind of approach, there are just as many drawbacks—maybe more depending on who you talk to. For instance, critics of nationalizing prescription drug coverage caution that it would result in a significant pull-back in coverage for the majority of Canadians. “You can always save money by rationalizing access,” Stephen explains. “But that’s the risk if we focus too much on cost and not enough on access. The right approach will balance cost savings and access.” Slow access to new drug innovations is also a real concern. New Zealand falls behind most developed countries when it comes to speedy access to new drugs.7

What Canada needs is a collaborative approach

Continuing the solutions discussion, Stephen felt that a lot was left on the cutting room floor: “Overall, it really depends on what is meant by pharmacare. If it means a much more integrated mix of our public and private systems—one where we work collaboratively around pricing and access to drugs—then yes, we should move in that direction. For example, countries like the Netherlands, Germany, Japan, and Korea, have knit together a private and public system where they aren’t hung up on ‘public’ versus ‘private’, instead they’ve just built a system that works. By contrast, the New Zealand system, where they have nationalized everything and pared back what they can offer is too restrictive.

“What we should be looking at is bringing private insurers to the table together with governments to negotiate pricing for everybody. What we have now where the pCPA negotiates lower prices that only apply to public plans, just doesn’t make sense. A collaborative public/private approach would achieve even more leverage in pricing negotiations—and everyone would share equally in the lower prices. It’s analogous to what is already the case on the generic side; provinces cap generic drug prices, but the lower price applies to everybody, not just the provinces. We need a similar approach on the branded side.”

Interestingly, also in terms governments becoming part of the solution, The Fifth Estate interviewed Canada’s Minister of Health Jane Philpott. She describes her plans to change Canadian regulations to force patented drug companies to lower their prices, and she plans to continue to push provincial-federal negotiations to lower generic drug pricing. This involves a review of the Patented Medicine Prices Review Board (PMPRB), the federal body mandated with ensuring that the prices of patented medicines sold in Canada are not excessive.

Stephen thinks the government is moving in the right direction. “We’re very encouraged by what Minister Philpott is saying. We need to review the PMPRB because it hasn’t been reviewed since it was created in 1987, and the world has changed enormously since then. The goal should be to turn the PMPRB into a real consumer protection agency with a very clear mandate and instructions so that it is doing everything possible to bring costs down for Canadians. And of course, we need to make sure the PMPRB has all the tools it needs to just that.”

Stephen, any last words for our readers?

“To sum it up, when you look globally regarding how other countries have addressed rising drug prices, you see that there are two approaches. We could make a dramatic, complex, and costly overhaul sweeping everything under the government umbrella—an overhaul that also brings with it a ton of risk and is restrictive. Alternatively, we could implement some very simple and quick measures to create a balanced, mixed public/private drug program. This collaborative public/private option is the best opportunity, and the good news is that it’s right there within our reach. We’ve been asking governments for this kind of collaboration for years now. We ask every opportunity we get, and we’ll continue to have the discussions until we spark the catalyst that will finally bring governments and private payors together. It’s time we all got on it!”


1, .5 The High Cost of Pharmaceuticals: Canada’s Drug Problem, The Fifth Estate, Episode 42, Broadcast date: January 13, 2017, Web page: Episodes, Retrieved February 2017:

2,  3, 4, 6, 7 The High Cost of Pharmaceuticals: Canada’s Drug Problem, The Fifth Estate, Episode 42, Broadcast date: January 13, 2017, Online broadcast, Retrieved February 2017: