Transcript Controlling Drug Costs: Learning from Canada

Controlling Drug Prices: What
Canada Does
Joel Lexchin MD
School of Health Policy &
Management
York University
Outline
Price increases in Canada versus U.S.
Canadian price controls
Other differences between Canada and the
U.S.
What are the consequences for Canada
Percent change from previous year
Escalation in Spending U.S. and
Canada, Adjusted for Inflation
16
14
12
10
8
6
17.5
15
12.5
10
7.5
5
4
2.5
2
0
0
-2
-2.5
-4
-5
1975
1980
1985
1990
Year
1995
Canada
2000
2005
1970
1975
1980
1985 1990
Year
U.S.
1995
2000
2005
What Price Differences Matter:
Generics vs. Brand-name
Percent of unit volume
United States
Originator
Single source
28%
Multisource
14
Brand-name
14
Unbranded
44
Generic
Percent of sales
Originator
Single source
70
Multisource
13
Brand-name
8
Unbranded
10
Generic
Most prescriptions
are filled with
generics.
Most of the money
is spent on brandname single source
products.
Health Affairs 2004;W3:
521.
U.S. Prices Compared With
Other Countries
Patented Medicine Prices Review Board. Annual report 2004
What’s Going On?
Why has the rate of increase in spending in
Canada levelled off?
Why has the rate of increase in spending in
the U.S. continued to escalate?
What are the differences between the two
countries?
Control Over Prices in Canada
Patented Medicine Prices Review Board
(PMPRB)
Provincial controls
Current Canadian PMPRB Rules
- New Drugs
New Medicines
Breakthrough or
Substantial Improvement?
No
Yes
Comparable Dosage Form
No
Yes
Category 2
Category 3
Category 3
Category 1
Median IPC
TCC
TCC
RR Test
TCC
Highest IPC
Highest IPC
TCC
RR = relative relationship
IPC = international price comparison
TCC = therapeutic class comparison
Highest IPC
PMPRB Regulations on Rate of
Rise in Prices
Compares average transaction price of drug
product with CPI adjusted price of drug
product
Based on 3 year cumulative change in CPI
with one year increases capped to 1.5 times
annual inflation
Provincial Monopsony Buying
Power, 2002
Province
Total spending
($ 000,000)
Public expenditure as a percent
of total spending
Newfoundland
292.9
39.8
PEI
77.3
34.7
Nova Scotia
567.2
37.1
New Brunswick
454.5
33.5
Quebec
4575.6
49.5
Ontario
7663.5
44.9
Manitoba
597.0
50.1
Saskatchewan
511.8
46.4
Alberta
1625.8
45.7
British Columbia
2001.9
50.6
Yukon Territory
15.5
66.2
NWT
19.5
75.0
Nunavit
6.1
55.9
Not Just Savings on Ingredient
Costs
Administrative costs in private plans 8%
versus 2% in large public plans
Overall Effect of Canadian
Regulations on Prices
5
Year-over-year
changes in the PMPI
(Patented Medicine
Price Index) =
change in transaction
prices of patented
drug products
4
3
2
1
0
-1
-2
-3
1988
1991
1994
1997
2000
Percent change
2003
PMPRB Annual Report 2003
Other Differences Between
Canada and the United States
No DTCA in Canada
US lacks monopsony buying power
Faster uptake of newer, more expensive
drugs in U.S.
No Large Public Buyer
40
36.1
35
30
25
18.3
20
15
10
5
0
Canada
OECD, 2004
United States
Per cent public, 2000
Faster Uptake of Newer Drugs in
the U.S.
Canadian per capita
consumption of
new medicines(drugs
launched in 2 most
recent years)
relative to the U.S.,
1999
Danzon et al. Health Affairs, 2003
Do Companies Keep Drugs Off
the Market?
 New drugs evaluated by Medical Letter May
2003-June 2004:
 40
 Available in U.S. but not in Canada:
 32 (8 now in Canada as of 24 Oct. 2004)
 Number of unavailable drugs with major
therapeutic advantages:
 1 to 3
Why Are Some Drugs
Unavailable?
Low Canadian prices?
Longer Canadian approval times?
Smaller Canadian market?
Internal company priorities about when to
market drugs in different countries?
Conclusions
Canadian prices are lower
Price controls
No DTCA
Slower uptake of newer, more expensive drugs
Consequences
Canadians healthier than Americans
No significant effect on new drug introduction
Company profits remain healthy