Twenty-five Years of Hesitation

The changing world
In financing drugs, there has been dramatic change. I couldn’t find data back to 1982, the year I started underwriting. However, from 1985 through the end of 2006:

• Canada’s spending on prescription drugs increased more than 700%, from $2.6 billion to an estimated $21.1 billion
• For comparison, the Consumer Price Index increased 106%, from 63 to 130(1992=100)
• Prescription drugs were 9.6% of national health expenditures in 1985; they are now 17%

Despite efforts to the contrary, Canadians are spending substantially and proportionately more on drugs.

There are many reasons for this, including more prescriptions written, poor treatment adherence, migration to new and often better drugs, more chronic disease, reduced role for generics, more biologics, and recently, the introduction of new oral cancer drugs. Most drug plans have not kept pace, limited by a singular focus on cost control. As the boomers age, this will become a much less attractive choice for governments that seek re-election and employers that need the best employees.

Same old, same old
But the more things change, the more things stay the same. Back then, I cut my teeth pricing drug plans with $0.35 per drug deductibles, and annual deductibles of $10 single and $20 or $25 family were typical. Prescriptions cost much less, and out-of-pocket maximums were hardly needed. Today, many of these plans still exist, though the trend points elsewhere.

The private sector still funds a little over half(55%)of prescription drug costs. Insurance now shoulders a bit more(34%)of the burden, and the out-of-pocket share is now a little less. But with an average annual cost of $648(vs. $99 in 1985), a lower share certainly does not mean less cost for consumers. Remember these are averages—there are about 10% of Canadian who still pay 100% of their drug costs, and about 50% of Atlantic Canadians with inadequate coverage.

Governments are in no hurry to solve these access issues. Despite great need and certain clinical advances, public plans will expand access to new drugs only as their finances permit. Employer plans will be increasingly targeted.

On the health policy front, there have been four major initiatives in just the last decade—the National Forum on Health, the Romanow Commission, Senator Kirby’s Senate Committee Report, and the National Pharmaceuticals Strategy. All have called for a plan to deal with catastrophic drug costs. In fact, the 2003 First Ministers Accord on Health Care Renewal specifically promised that all Canadians will have “reasonable access to catastrophic drug coverage” by April 2006. Such a plan has yet to arrive, and there is no reason for us to wait for one.

Drawing conclusions
Drugs will take an even larger share of health spending in the future. Neither governments nor employers are effectively planning or innovating, or integrating their coverage. Drug plans remain narrowly focused on cost control, so the health needs of consumers and the performance needs of business will remain distant goals. Our changing future relies on tactics rooted in the past. This will ensure change occurs without progress.

The issue is not higher spending, private medicine, two-tier care, or the values of our health system. It’s about overcoming inertia. Private or public, we are well and truly stuck.

Having identified our troubles, my next column will aim to make the case for change and to advance a solution or two.

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