Pharmaceutical Pricing and Reimbursement Policies in Canada

Abstract

This paper describes and assesses pharmaceutical pricing and reimbursement policies in Canada, considering them in the context of the broader policy and market environment in which they operate, and investigating their role in contributing to Canada's achievements in meeting a range of objectives relating to the pharmaceutical policy. The federal government regulates prices of patented pharmaceutical products with the objective of protecting consumers against excessive prices. Regulation has very likely been responsible for bringing Canada's prices for patented medicines roughly in line with European comparators. Prices of generic products, which are not regulated, are relatively high although high penetration of the Canadian market has been achieved. All Canadians have coverage for drugs provided in hospitals through a publicly financed scheme that furnishes hospital and physician services free of charge to patients. Drugs dispensed outside the hospital setting are not included among the insured benefits guaranteed by the Canadian Health Act. Consequently, two-thirds of the Canadian population, including most employees and their families, obtains such coverage through private health insurance, while most senior citizens, together with designated groups of vulnerable populations, are covered by provincial, territorial or federal plans. In most cases, patients share in the costs of reimbursed medicines through copayments or co-insurance, sometimes after meeting a deductible. The lack of protection against the risk of catastrophic out-of-pocket spending for drugs remains an issue for a small part of the Canadian population, concentrated in the Atlantic Provinces. Reflecting these coverage and reimbursement arrangements, 54% of drug expenditures are financed by private insurances and households. Drug expenditures have been increasing very rapidly in recent years. Formulary management, now facilitated by a government initiative to undertake common drug reviews, and the promotion of generic substitution have been the main levers used by public plans to improve the efficiency of drug expenditures. Private plans have historically covered all medicines authorised for sale in Canada, although this is changing in light of cost pressure. Overall, new drugs are available in the Canadian market on a timely basis, but maintaining comprehensive availability and accessibility may be an emerging challenge.

Pricing and Promotional Decisions of a Drug Manufacturer with the Presence of a Price-Volume Agreement

“…Mizik (Mizik & Jacobson, 2004) found that physician detailing and complimentary drug samples both have a positive and statistically significant effect on the prescribing behaviors of physicians. These results are strongly grounded in past research, as several studies found similar findings (Bingle, O'Connor, Evans, & Detamore, 1991, Wazana, 2000, Paris & Docteur, 2006.…”

“…In a price-volume agreement, the manufacturer and the payer may agree upon a threshold based on the manufacturer's estimate of sales (Paris & Docteur, 2006). If the total sales exceed the threshold value, the manufacturer pays a proportion, α, 0≤α≤1, of the excess sales to the payer.…”

The Drivers of Overspending on Prescription Drugs in Quebec

“…To incentivize the pharmaceutical industry to do business in Quebec, this legislation was introduced in 1994 and allows brand name drugs to qualify for reimbursement for 15 years after inclusion on the provincial formulary, even if their patent expires and the generic version becomes available on the market. This in turn provides two to five additional years of patent protection (Gagnon 2011;Paris and Docteur 2006). However, in an attempt to control prescription drug costs, the government recently abolished the 15-year rule as part of the 2013/2014 budget (Marceau 2012).…”

Use of Product Listing Agreements by Canadian Provincial Drug Benefit Plans

“…Known under a variety of names, a common element of these product listing agreements (PLAs) is the negotiation of confidential prices that are typically achieved through rebates that may or may not be tied to drug expenditures, utilization patterns or health outcomes. Though Canadian hospitals have long used confidential purchasing arrangements, provincial drug plans rarely negotiated confidential price rebates before 2006 (Gorecki 1992;Morgan et al 2003;Paris and Docteur 2007). In recent years, however, some provinces have begun to use PLAs routinely, and in 2010, a Pan-Canadian Purchasing Alliance was established to coordinate PLA negotiations for some new medicines on behalf of participating provinces (Lynas 2010).…”