The better way: Public and private sectors working together to reform pharmacare in Canada

TORONTO, March 26, 2015 /CNW/ - The life and health insurance industry supports significant reform to Canada's pharmacare system. As noted in a number of recent studies, there are billions of dollars to be saved by leveraging the full bargaining power of the Canadian marketplace to negotiate lower drug prices.  "Bulk purchasing of drugs will lead to major savings. These savings can be achieved through greater cooperation between the public and private sectors. A single government monopoly is not needed," states President and CEO of the Canadian Life and Health Insurance Association (CLHIA) Frank Swedlove.

"The Canadian life and health insurance industry stands committed to working with governments to obtain these savings," notes Swedlove. "At the same time, we must preserve the benefits from competition and innovation that the private sector provides to the marketplace."

For more information, please see backgrounder.

About the CLHIA 

Established in 1894, the CLHIA is a voluntary association whose member companies account for 99 per cent of Canada's life and health insurance business. The industry provides a wide range of financial security products such as life insurance, annuities (including RRSPs, RRIFs and pensions) and supplementary health insurance to 28 million Canadians. It also holds close to $647 billion of assets in Canada and employs about 150,100 Canadians.

BACKGROUNDER

WORKING TOGETHER FOR A BETTER PHARMACARE SYSTEM FOR ALL CANADIANS

The responsibility for prescription drug coverage in Canada is shared between the public and private sectors and generally works well. However, like many other stakeholders, Canada's life and health insurance industry believes that reform is required. Canada's current patchwork system of prescription drug coverage is complex, resulting in unduly high costs for Canadians and creating inequities between individuals.

Ensuring lower prices for all Canadians:
Canadians pay some of the highest prices in the world for prescription drugs.  This places an undue financial burden on both employers and governments and undermines the ongoing financial sustainability of drug coverage in Canada. 

As noted by several recently published studies, there are enormous savings available by using the full bargaining power of the Canadian marketplace to negotiate lower prices on prescription drugs.  However, this does not require a government monopoly. As occurs in other OECD countries, the private and public sectors can work together to lower prices. Leveraging both public and private market volumes during pricing negotiations will bring prices down even further. Importantly, this can be done relatively easily within the current system and will not require unpredictable and costly wholesale reform of the entire system. The Canadian life and health insurance industry is prepared to work collaboratively with all levels of government in Canada to lower prescription drug prices for Canadians. 

In addition, Canada needs to review how drug prices are regulated. The Patented Medicines Prices Review Board (PMPRB) regulates the prices for drugs by establishing the maximum price for drugs in Canada. We believe that fundamental reform of the PMPRB's operations and mandate is warranted. Going forward, the PMPRB should adopt a market-based approach and strive to set the maximum price at the lowest possible level for Canadians. 

Ensuring Fair Access:
Canadians have different access to the drugs they need depending on which province they live in and/or who their employer is. These differences may be particularly pronounced for new drugs.  This complexity is costly for all stakeholders including governments, prescribers, patients, employers and individuals. It also results in inequities in access that undermines Canadians' confidence in the system. 

Our industry believes that Canadians would benefit from the establishment of a common national minimum formulary. This minimum list of drugs would be covered across the nation and would ensure a baseline of coverage for all Canadians thereby significantly reducing the existing complexity in the system. This will result in important benefits for both consumers and prescribers across Canada. An important advantage of using this approach is that it would still allow for plan sponsors or individuals to obtain additional coverage -- thereby maintaining a system that preserves competition and choice in the marketplace.

Preserving Innovation and Choice:
Canada's private insurers provide innovation and choice to Canadians at costs that are well in line with public plans. In addition, they put the needs of their clients at the centre of their plan design and client service. Many other OECD countries have pharmacare systems that perform better than Canada's with respect to cost and access, but also leverage the private sector to provide drug coverage to their citizens. Reform to Canada's drug coverage system must be done in such a way that protects the incentives for innovation and choice if Canadians are to be well served by our pharmacare system over the long-term.

Any long-term solution to these challenges will require both provincial governments and private insurers to change the way they provide coverage to Canadians and to work together more collaboratively going forward. The ultimate goal from a policy perspective must be to ensure that all Canadians have access to the drugs they need without suffering undue financial hardship, while ensuring a competitive and patient-centered system.

SOURCE Canadian Life and Health Insurance Association Inc.

Related Links

http://www.clhia.ca