Figuring out pharmacare

The Canadian government has said it is seriously considering the implementation of a national pharmacare program. But how exactly would it work, which model would make the most sense? Who would be covered? What drugs would be included? Who would pay for it? And how would employers be affected?

Looking to answer these questions and more, Canadian HR Reporter hosted a special roundtable sponsored by Sun Life that delved into national pharmacare, including lessons to be learned from similar programs such as Quebec; the potential impact on employer benefit plans; and challenges around costs and administration.

The need for change

Canada’s universal health-care system is really a reflection of how health care was designed in the 1960s, anchored around hospitals and acute care — but that design hasn’t really evolved, said Louis Thériault, vice-president of policy and research at Innovative Medicines Canada.

On the other hand, western European countries include pharma as part of universal health care.

“It’s a reflection of a political reality in Canada, a fragmentation of how health care is provided by province. It’s hard to keep pace with the changes that would be needed to stay up to date in terms of what I call the business model of health-care services.”

While the system is federally funded, and governed by the Canada Health Act, there are different levels of care delivered across the provinces, said Jennifer Schmidt, a principal at Mercer.

“The term ‘universal health care’ is not necessarily universal for all Canadians. There are systems in place for all Canadians — for catastrophic, for seniors, for low income — but they vary by province, and even the drugs that are covered by the province vary. So I think part of the universal discussion needs to be about bringing consistency for Canadians across provinces and across territories.”

There’s a new realization of how varied the models are, both among the provinces and at the federal level, said Jean-Michel Lavoie, assistant vice-president of group benefits at Sun Life.

“(For example) I live in Ontario, this drug is covered; I live next door in another province, and that drug is not covered. So it’s created a realization of the fragmentation, and maybe a political willingness now to intervene to standardize, to a certain extent.”

Part of it also has to do with the patients themselves, said Nadia Alam, president of the Ontario Medical Association.

“The disease patterns that were there in the 1960s have… changed drastically over time. It isn’t necessarily… the senior population that has illnesses, (it’s) chronic illnesses that require medications. We’re now seeing a growing burden of illness among working-age adults between 25 and 65. It’s the largest number of the population that now has chronic diseases like diabetes, like hypertension, like heart disease, that have very predictable pharmaceutical needs.”

Canada’s federalist model is very difficult, said Alam.

“It’s trying to herd 13 cats into moving in the same direction but, at the same time, we kind of need a firm hand from the federal government as well, so that we don’t lose what’s good in the system.”

Lessons from Quebec

Quebec created a semi-public drug prescription plan in 1997, making it mandatory for workers to enrol in private plans when available, or go on a public plan. People still have to pay an out-of-pocket expense when buying prescriptions.

“Quebec has a mixed model, but it’s mandated coverage. And I think if you talk to many of the residents of Quebec, as well as the government, there is a preference for that type of model. There are some challenges with how it’s been established and implemented around some of the cost of the co-pay’s deductibles, which is part of that underinsured component of affordability. It’s not just the uninsured, it’s the underinsured,” said Justin Bates, CEO of the Neighbourhood Pharmacy Association of Canada.

“But, as a general model, one of the benefits of Quebec is that is it does have a very robust formulary. And I think it’s really important that we take a principled approach to equitable access to medicines across the country, and ensure that if you have coverage today on the private side, you do not have a walk-back of coverage if you’re on a public plan. We should be looking at increasing access, not decreasing what’s available to patients.”

The Quebec model is helpful in understanding what a model at the federal level could look like, said Lavoie.

“There’s good and bad, and it requires tons of co-ordination, because it’s a dual regime, and it’s co-administered to a certain extent between private and the RAMQ (Régie de l’assurance maladie du Québec). But there are good things (there),” he said.

“It is a very robust (formulary) list that could become an inspiration for some type of pharmacare in the future, to have this mandatory minimum coverage across a region, a country, that provinces have to provide, and then private insurers’ employers can decide if they want to meet that minimum requirement, or if they want to go over that.”

But the downside is Quebec’s model is fragmented because it involves a multi-payer model, which means higher administration costs, said Alam.

“It’s a bit regressive in the sense that more of the cost burden is borne by patients (and employers),” she said. “That regressive system speaks against the model in Quebec.”

“And it has to be taken into account, because one of the problems with patients bearing the cost, an increased cost for drugs, is that it has been shown again and again that that plays a significant role in how patients use their medications, whether they take them every day as prescribed, or whether they parse them out so that they can make them last longer, or whether they skip them entirely.”

Cost challenges

Really, it comes down to what kind of principle we want, said Alam.

“Do we want everybody to be covered, whatever the cost, or do we want everybody to be covered in a certain way? What are the trade-offs?”

Another flaw in the system is the list price of the drugs is not equal, said Lavoie.

“At point of sale, the prices are different, depending on who’s paying. And it’s kind of a missed opportunity in the principle that this could have been addressed at the principal site. And then your administration model — you can still have a model that’s administered by multiple payers, if you will, if the principle is that the prices are going to be the same.”

“But we should learn from this, and maybe it’s an opportunity in the national debate around pharmacare to say, ‘OK, let’s address that,’ because joint negotiation, joint purchasing, everybody paying the same price maybe is an opportunity in a national pharmacare.”

But when it comes to bulk buying, the provinces have been willing to make changes to their plans while, historically, private plans have not, said Helen Stevenson, founder and CEO of the Reformulary Group, adding they have this notion “You can have whatever you want, no matter how much it costs.”

“I know there’s lots of talk about sort of jumping in… but public plans are set up differently than private plans. Public plans will say, ‘No, that drug doesn’t demonstrate the right kind of cost-effectiveness, or clinical cost-effectiveness,’” she said.

“If there’s one system, then fair enough. But if there’s going to continue to be these, let’s say, two systems that are going to work in parallel, they are going to need to restructure themselves as well, to be able to take advantage of some of those tools, and combined really around sustainability.”

As costs become increasingly unsustainable, employers are more willing to talk about those changes, said Schmidt.

“Plan sponsors aren’t really sure how to manage it without restricting access to employees. And so the public formularies cover a list of drugs (and) the private plans enhance that list,” she said.

“The employers and private plan sponsors need that flexibility. They need to be able to say, ‘You know what, we’re having an issue attracting and retaining employees in this sector. We want to make our benefits plan, our retirement plan, our compensation top of the tier, so that we can get people in.’ So I think it’s important to recognize that the design partly flows out of that compensation model.”

“The benefits program isn’t just about health insurance, it’s partly about compensation.”

If there is an intent to have a private/public mix, then having prices that are negotiated at a level playing field for both public and private will enhance the ability for those private plans to keep offering benefit coverage, said Schmidt.

“And not just drug coverage but other benefits coverage — that’s an integral part of the Canadian health-care system, really.”

The system has to be affordable both for taxpayers and businesses, she said, citing the challenges of rare diseases and high-cost drugs.

“You can’t just suddenly transfer all the costs to the private sector. You can’t suddenly transfer all of it to the public sector,” said Schmidt.

Lavoie agreed.

“If there’s an area of opportunity for a government intervention being first-payer, first-claim, first-dollar type, wherever you define the threshold, then that can be defined in dollar, or maybe in volume of — or prevalence of — disease, or what have you.”

But in designing a national pharmacare program, it has to be forward-looking, said Thériault.

“This is the notion of sustainability, to me, that goes beyond the day-to-day fiscal and accounting side of it… it’s much deeper in terms of how we find a solution for that.”

“How do we redefine a funding model that makes the whole environment around the pharma environment — from industry to delivery, for patients, for employees — sustainable from that perspective? I think that’s a tougher conversation, and it’s a system-design conversation. It’s not only about the drug, or how we pay for it, it’s how we deliver it, it’s how we provide access to it… The value that’s perceived, that will be different for different stakeholders.”

And we’re not just talking about drugs, said Thériault.

“If you give someone that Hep C drug that saw a big spike in costs for employers a few years ago… then you’re preventing possible hospital admission, or possible chronic care later. You can’t just look at the drug piece, you have to look at the whole piece. And private plans play a big part in the Canadian health-care system, and the… government needs to support the ability for those private plans to continue.”

When it comes to the ultra-high cost drugs, there almost needs to be a universal, first-payer system, said Schmidt.

“(That means) everyone has access to the same list of drugs across the country, and that helps employers or private plan sponsors have a robust system with a reduced level of risk, and then a second tier that is that financial protection against hardship for out-of-pocket costs that can be part of a private plan, or a public plan,” she said.

“So... it’s not necessarily one pharmacare system. I think you have to look at different types of pharmacare based on the different types of needs.”

All pharmaceutical plans — whether they’re single-payer, multi-payer, first-dollar coverage or catastrophic coverage — are facing the pressure from these niche drugs being required, said Alam.

“And we’re going to see the way patients are treated change over the next five years, over the next 10 years, so that treatment becomes much more tailored to the individual patient.”

“It again comes back to… what kind of plan we want to create, what are our principles, what are we moving towards? And understanding that that incremental approach — which seems to be favoured by Canada, because all of the provincial plans, disparate as they are, they’re all incremental approaches towards universal pharmacare… has to extend beyond the election cycle.” 

A glimpse into the future of Canada’s national pharmacare

With an increasing number of high-cost drugs coming to market, access and affordability are greater concerns than ever before. These rising costs affect the underinsured and uninsured the most.

About two per cent of Canadians have no coverage, while around 10 per cent cannot afford to pay the co-insurance or deductibles for their coverage. However, when considering the entire picture, we cannot ignore that the current system is working well for most.

The Canadians who have access to public and/or private coverage enjoy affordable access to a broad range of prescription medicines, largely made possible by the private sector, which plays a critical role and covers 25 million Canadians through workplace benefit plans.

In the end, finding a model that works for all is what matters the most. Sun Life recognizes that while the current system is working well, there are opportunities to enhance it, by addressing the following issues:

Ensuring access and equity

National pharmacare is a key federal government priority. For this reason, the Advisory Council on the Implementation of National Pharmacare was established earlier this year to provide independent advice on the best way to implement a national pharmacare program.

With over 100 public drug coverage programs in the country, it’s difficult for most Canadians to navigate and understand if they’re covered by one of them. With the implementation of a standard formulary through a private, workplace plan — or through a public plan for those without workplace coverage — we can help ensure all Canadians have access to the medication they need.

Drug plan sustainability and equitable pricing

Allowing private insurers to join the federal and provincial governments as part of the pan-Canadian Pharmaceutical Alliance would achieve the same negotiating power and savings as a single payer plan, and ensure the lowest prescription costs for all.

 A common evidence-based decision-making process, such as the one undertaken by the Canadian Agency for Drugs and Technologies in Health, would help provide a transparent standard and cost-effective treatment for all Canadians.

High-cost, catastrophic drug coverage

As costs for specialty drugs continue to rise as a proportion of overall drug spending, it is vital for any national pharmacare program to recognize the needs of Canadians who rely on these lifesaving medicines. If costs continue to rise as predicted, coverage for these drugs may simply become unaffordable for employers.

By covering catastrophic drugs, the government can make an important difference in the lives of Canadians, and can help prevent related future costs (for example, government-funded hospital stays).

Sun Life is taking an active role in paving the way towards a system that continues to build upon the strengths and assets of the public and private sectors — a system that is affordable, achievable and protects the workplace benefit plans that are highly valued and relied upon by millions of Canadians.

To find out more on what we’re proposing, read our Bright Paper at www.sunlife.ca/nationalpharmacare.

Videos from the roundtable

Part 1: Lessons from Quebec

Part 2: Private versus public

Part 3: Sustainability and administration