Universal Pharmacare and Rare Diseases

Universal Pharmacare and Rare Diseases

“An important element of the Canadian health system remains outside the sphere of public coverage: outpatient prescription drug coverage.”

Universal health insurance coverage was introduced to Canada in the 1950s and 60s.1 Since then, Canadians have benefitted from open access to hospital and physician services. However, an important element of the Canadian health system remains outside the sphere of public coverage: outpatient prescription drug coverage. This omission has negative consequences and recently inspired the federal government to create an advisory committee on developing a strategy for a national pharmacare plan.2 In Canada, prescriptions filled at local pharmacies are paid for through a combination of public, private, out-of-pocket, and employer-based schemes. All these factors lead to Canadians paying some of the highest prices for prescription drugs. For rare disease patients, drug costs can be very high, which may lead to patients not following their prescriptions.3,4 Therefore, a new system for financing prescription drugs is required to achieve equity in accessing pharmaceuticals within and across provinces. Expanding universal health insurance to include nationwide coverage of pharmaceuticals is a cost-effective method to improve access to drugs and improve system efficiency.

“...Ontarians spend more on prescription drugs and are more likely to report cost-related non-adherence to their prescriptions.”

Currently, each province and territory in Canada set their own standards regarding how to fund prescription drugs. In Ontario, the Ontario Drug Benefit (ODB) program covers most costs for a formulary of about 4,400 drugs for specific groups.5 These groups include seniors, those 24 years old and younger, individuals enrolled in Ontario Works and the Ontario Disability Support Program, and those qualifying for the Trillium Drug Program (households with prescription drug-related expenses that exceed approximately 3-4% of after-tax income).5 Furthermore, some Ontarians benefit from private insurance plans that cover their prescription drug spending; these plans are usually provided by employers.1 Of all Canadian provinces, the drug coverage system in Ontario is often considered the best at limiting out-of-pocket expenditures on prescription drugs.4 Nonetheless, when compared to several other industrialized jurisdictions with universal health insurance coverage (i.e. Germany, New Zealand, the Netherlands, and the United Kingdom), Ontarians spend more on prescription drugs and are more likely to report cost-related non-adherence to their prescriptions.4 The commonality that these comparator jurisdictions share—and the factor that enables lower out-of-pocket spending on pharmaceuticals—is the presence of a single-payer publicly-financed arrangement for prescription drugs.4

Rare diseases are often treated by the prescription of one or more drugs. Quite often, these drugs are very expensive, and costs can accumulate, reaching hundreds of thousands of dollars per year. For example, Gattex, a drug for short bowel syndrome, and Kalydeco, used to treat cystic fibrosis, both cost over $200,000 per year.6 The issue with the current system in Ontario is that several rare disease drugs are not found amongst the 4,400 drugs in the ODB formulary, but they may still be funded if doctors apply to the Exceptional Access Program on behalf of their patients.5 This means that it is possible for rare disease patients to receive assistance in paying for their medications; however, the Exceptional Access Program makes the process complicated and adds to the administrative costs for both patients and the government. This additional cost to patients adds to an already long list of complexities that come with living with a rare disease.

An emerging trend within the pharmaceutical industry is a shift in focus away from developing drugs that are targeted at large populations, the so-called “blockbuster drugs,” and towards specialty drugs and biologics.7 The cost of most “blockbuster drugs” can safely be kept fairly low given that there is a large patient population for these drugs.7 Furthermore, many of these widely used drugs have, or will soon, come off patent protection, and cheaper generics have come to market.8 Therefore, to boost revenue, pharmaceutical companies are expanding their portfolios to include specialty conditions and areas of unmet need—including rare diseases. This development is at once promising and challenging. Given the lack of an effective treatment for over 90% of rare diseases, the increased spending on R&D may be a beacon of hope for patients.9 This trend should be embraced, and policies are needed to incentivize research for under-treated rare diseases and to ensure that new drugs can be brought to market promptly; establishing these supply-side policies is especially important given the lack of an orphan drug policy in Canada. Conversely, a greater availability of specialty drugs will come with significant costs. Drugs and biologics with small patient populations will almost always be costlier than more widely used drugs given that the costs incurred by manufacturers have to be recuperated from a smaller group of buyers.8 In Ontario and the rest of Canada, the high cost of new drugs will place a significant burden on patients, private insurance providers, and the government.7 Most likely, the current patchwork system will be unable to effectively meet the demands of patients as new and more expensive drugs come to market.

When the landscape of pharmaceutical spending in Canada is considered as a whole, it can be seen that drug expenditures accounted for 16.4% of all health spending in 2017, to the tune of $1,086 per capita.10 Given the anticipated wave of high-cost drugs, including those for rare diseases, coming to market in the coming years, it is imperative to find ways to maximize what can be done with these dollars. When the precedent set by existing universal pharmacare programs is considered, a potential solution can be seen. A national universal pharmacare program holds promise in improving access to medications and reducing the current problem of cost-associated non-adherence that is reported by roughly 10% of Canadians.11,12 Jurisdictions with a universal pharmacare program show lower rates of non-adherence (6% for Germany and 2% for the UK) while simultaneously spending less per capita on drugs.4

“By consolidating the nation’s bargaining power, the federal government will be able to negotiate lower prices for drugs than any individual province or insurance provider could on their own.”

From a system-wide perspective, significant savings can be achieved through a universal pharmacare program by consolidating the nation’s bargaining power and reducing administrative costs. Although it may seem counterintuitive, expanding coverage of drugs and consolidating Canada’s bargaining power can lower the overall spending on prescription drugs. A 2015 study estimated that a universal pharmacare program in Canada would lower overall spending on prescription drugs by 32%, saving over $7 billion system-wide.13 This study projected that although public spending on drugs would increase by around $1 billion, the savings for the private sector (i.e. private insurance, employer-provided insurance, and out-of-pocket spending) would decrease by over $8 billion.13 These savings are largely derived by the centralized procurement of drugs under a national pharmacare program. By consolidating the nation’s bargaining power, the federal government will be able to negotiate lower prices for drugs than any individual province or insurance provider could on their own.13

For rare disease patients, a national pharmacare system would be advantageous for two main reasons. Firstly, as demonstrated by the case of drug coverage in Ontario, it would simplify the process of financing prescription drugs by eliminating the administrative burden of applying for funding. A universal pharmacare system that ensures all people receive the drugs they need, regardless of their ability to pay, would significantly simplify the current patchwork system and rectify differences in access both within and between provinces. Secondly, the savings on a national level would provide a buffer that can be used to fund the next wave of high-cost drugs for rare diseases. By improving efficiency on the national scale and increasing Canada’s bargaining power, a national universal pharmacare system would ensure that there are sufficient funds available to absorb the costs of specialty drugs and ensure that rare disease patients can benefit from recent increases in R&D. Although a national pharmacare plan holds significant promise, it will be a challenge to successfully implement a new system. Any implementation strategy must ensure that the variety of available drugs is not limited, and there must be provisions that ensure rare disease patients are not deprived of safe pharmaceuticals and biologics that are available in other jurisdictions. Ultimately, a well-designed universal pharmacare system will allow the country to take another step towards the goal of ensuring that all Canadians, regardless of income or social status, have access to the best possible healthcare and related services needed to achieve good health and wellbeing.

Works Cited:

1. Marchildon GP. Canada: Health System Review. Vol 15.; 2013. http://www.euro.who.int/__data/assets/pdf_file/0011/181955/e96759.pdf.

2. Adhopia V. Ontario Health Minister Eric Hoskins to chair newly created federal pharmacare committee. CBC News. http://www.cbc.ca/news/health/hoskins-pharmacare-1.4552739. Published 2018.

3. Graf von der Schulenburg J-M, Frank M. Rare is frequent and frequent is costly: rare diseases as a challenge for health care systems. Eur J Heal Econ. 2015;16(2):113-118. doi:10.1007/s10198-014-0639-8.

4. Morgan SG, Daw JR, Law MR. Rethinking Pharmacare in Canada The Institute’s Commitment to Quality. 2013. http://acer-cart.org.koallo.ca/wp-content/uploads/2015/07/CD-Howe-Commentary_384.pdf.

5. Government of Ontario. Get coverage for prescription drugs. https://www.ontario.ca/page/get-coverage-prescription-drugs#section-1. Published 2018.

6. Herper M. Inside The Pricing Of A $300,000-A-Year Drug. Forbes. https://www.forbes.com/sites/matthewherper/2013/01/03/inside-the-pricing-of-a-300000-a-year-drug/#46a5212b4917. Published 2013.

7. Morgan SG, Daw JR. Canadian pharmacare: looking back, looking forward. Healthc Policy. 2012;8(1):14-23. http://www.ncbi.nlm.nih.gov/pubmed/23968600.

8. Thomas K. U.S. Drugs Costs Dropped in 2012, but Rises Loom. The New York Times. https://www.nytimes.com/2013/03/19/business/use-of-generics-produces-an-unusual-drop-in-drug-spending.html?pagewanted=all%26_r=0. Published March 18, 2013.

9. Austin CP, Cutillo CM, Lau LPL, et al. Future of Rare Diseases Research 2017–2027: An IRDiRC Perspective. Clin Transl Sci. 2018;11:21-27. doi:10.1111/cts.12500.

10. Canadian Institute for Health Information. National Health Expenditure Trends, 1975 to 2017. Ottawa; 2017. https://www.cihi.ca/sites/default/files/document/nhex2017-trends-report-en.pdf.

11. Law MR, Cheng L, Dhalla IA, Heard D, Morgan SG. The effect of cost on adherence to prescription medications in Canada. CMAJ. 2012;184(3):297-302. doi:10.1503/cmaj.111270.

12. Morgan SG, Gagnon M-A, Mintzes B, Lexchin J. A Better Prescription: Advice for a National Strategy on Pharmaceutical Policy in Canada. Healthc Policy. 2016;12(1):18-36. http://www.ncbi.nlm.nih.gov/pubmed/27585023.

13. Morgan SG, Law M, Daw JR, Abraham L, Martin D. Estimated cost of universal public coverage of prescription drugs in Canada. CMAJ. 2015;187(7):491-497. doi:10.1503/cmaj.141564.

Cite This Article:

Sharma K., Chan G., Palczewski K., Lewis K., Ho J. Universal Pharmacare and Rare Diseases. Illustrated by K. Tang. Rare Disease Review. January 2019. DOI:10.13140/RG.2.2.18506.21445.

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