Latest Thinking

Drugs in Canada: paying the high price

February 1, 2014

Suzanne Easo, RPh, BScPhm
Laureen Rance, BSc Pharm, PharmD, MSc

Source: Perspective – Spring 2014 by TELUS Health

The recent CLHIA report on prescription drug policy, Ensuring the Accessibility, Affordability and Sustainability of Prescription Drugs in Canada, has numerous recommendations on how to work towards a sustainable healthcare system.1 Given that growth in drug spending in Canada is at its lowest growth rate in 16 years, at 3.3%, with forecast spending of $33 billion in 2012, one may question the timeliness of such a report with pointed recommendations.2

The good news about the low growth rate is tempered by the knowledge that Canada ranks in the top ten of Organisation for Economic Co-operation and Development (OECD) countries in terms of per person spending on health.3 More than half of drug spending in Canada is paid for by the private sector, either by employer health insurance plans or cash-paying customers.4 The opposite is true in most European countries, whereby a much larger share of drug costs are paid for by governments through tax revenues from the public. Canada is one of the few developed countries in the world without a universal pharmacare program and the only country in the world with a universal medicare system that excludes prescription drugs.5 According to a major national Canadian survey, 9.6% of Canadians who had received a prescription reported not taking it as prescribed (i.e. non-adherence) due to the cost of the prescription. The cost had led them to either do something to make their prescription last longer, not fill a new prescription or not renew a prescription.6 Cost-related non-adherence rates were higher among people with lower household incomes and people with poorer health. Cost-related non-adherence was reported by 26.5% of respondents who had no drug coverage versus 6.8% of the people who did have insurance coverage.6

How are prices set for drugs in Canada?

The prices for patented (or brand) medications are set by the manufacturers; however, these prices are regulated by the Patented Medicines Prices Review Board (PMPRB). The role of the PMPRB is to ensure that prices of patented medications sold in Canada are not excessive. The PMPRB uses a blend of therapeutic improvement reviews and international price referencing.1 The PMPRB currently strives to assess prices at the median of seven OECD comparator countries, which include France, Germany, Italy, Sweden, Switzerland, the U.K. and the U.S.1 Of note, the PMPRB does not regulate the price of generics.

For the most part, generic prices are set as a percentage of the equivalent brand name drug by provincial governments. As a result, the generic price may not be the same across the country, as the percentage can vary by province (Table 1).

In addition, generics not funded by the publicly funded provincial program may not be subject to the same provincial pricing rules as generics that are publicly funded. For example, in Ontario, these non-publicly funded generic drugs are referred to as Off-Formulary Interchangeable (OFI) drugs, and there are 846 OFI drugs represented on the Ontario Drug Benefit Formulary at time of press. The OFI drug prices are set at a (relatively) higher percentage of the brand name drug compared with funded generics, and they are considered interchangeable with the brand name product, which is also not considered a benefit on the publicly funded provincial formulary. This is key for private insurers to realize any cost savings, because in order for the generic to be dispensed for a prescription written for a brand product, the provincial plan must consider it as interchangeable by acknowledging it as such on the formulary. There can be a lag between the time it takes the generic to be approved and deemed bio-equivalent by Health Canada and the province to list the generic as interchangeable, during which time the more costly brand product continues to be dispensed.

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