When High Drug Costs Hurt Private Insurers, All Canadians Suffer
Education and Advocacy It’s time for a collaborative conversation about drug costs.
When we talk about our universal health care system in Canada, it can be easy to forget what an important role private drug insurers play.
Without private insurance, the majority of Canadians would have no coverage at all for necessary medications. So, when rising drug costs put an unsustainable strain on private payers, it’s not just a threat to the insurance companies. It’s a threat to our health care system as a whole.
“Well over half of all drug expenses in Canada are paid for privately,” says Stephen Frank, the Senior Vice President of Policy at the Canadian Life and Health Insurance Association. “We directly reimburse about $11 billion in drugs each year, and another $5 or $6 billion enters the system from out-of-pocket expenses. It’s hugely important for the well-being of Canadians that this market continue to function well.”
Expensive specialty drugs driving rising costs
The pressure on the system is coming primarily from new high-cost specialty drugs that can run up to hundreds of thousands of dollars per treatment. Though many of these drugs target relatively uncommon diseases, the sheer number of new treatments is dramatically changing the insurance landscape. “Historically, most of the drugs on the market were mass market inexpensive drugs,” says Gary Walters, the Principal Consultant at Cedar Hill Group. “It’s only in the past 10 years or so that we’ve seen the introduction of these very high-cost drugs. And the numbers keep growing. It’s a new problem that the whole private system wasn’t designed to deal with.”
The issue is exacerbated by the fact that these aren’t, by and large, one-off treatments we are talking about, but rather treatment plans that patients sometimes require for the rest of their lives. “A lot of these new drugs are recurrent, meaning they’re taken on an ongoing basis,” says Walters. “In the past, high-cost drugs were usually ones that you took for a period of time and then stopped. Now, a patient may be on a drug that costs half a million dollars a year, for year after year after year. That really puts a strain on the system.”
When issues of private coverage sustainability are raised, it’s only natural for the question of public pharmacare to come up. In this case, however, the question is one of fundamental economics. “In Europe, the single-payer systems are having a lot of the same problems we are. Public single-payer systems aren’t a panacea for this issue,” says John Moore, the Vice President of Business Development at Johnston Group. “There’s a limited amount of money to pay for all these drugs. The public and private systems are the same in this way.”
A collaborative solution within the existing system
A practical solution is thus more likely to be found within the system we have, rather than by reinventing the wheel. The challenge is getting all the major players talking to one another. “The biggest problem we have is that there has been no meaningful dialogue between the manufacturers, the private and public payers, and the patient groups,” says Moore. “The only solution to this in the long-term is to have all the stakeholders get together and discuss it. If we break down the individual stakeholder silos and have everybody at the same table developing solutions, we can come up with viable made in Canada resolutions.”
With research on new specialty drugs advancing at an unprecedented pace, and with patients rightly clamouring for access to these treatments, this issue isn’t going away anytime soon. The silver lining is that all parties are heavily invested in finding a solution, and are increasingly realizing that it will only be found through collaboration. “The reality is that both the public and private payers have the same problem, and we both have a stake in fixing it. This means we have a solid foundation from which to start working together,” says Frank. “We need to recognize what the public side does well, and also what the private side does well. Then we need to find a way of bringing them together so we can get the best of both worlds.”