Ontario's Drug Costs becoming unsustainable

Health minister wants to remedy spiraling costs
Drug companies, pharmacists warn plan may backfire
May 27, 2006 The Toronto Star
ROB FERGUSON, QUEEN'S PARK BUREAU

One of the great things about turning 65 in Ontario is getting many prescription drugs at a fraction of their true cost, courtesy of your fellow taxpayers. One of the scary things about being a taxpayer in Ontario is that the bill for those 3,400 medicines is $3 billion a year.

Another $400 million is used to cover drugs for people on welfare and provincial disability assistance. In all, there were 83.9 million prescriptions subsidized by the taxpayer last year.

The cost is up sharply from $1 billion a decade ago and rising more than 10 per cent annually, a rate Health Minister George Smitherman calls "unsustainable" as he pushes controversial reforms to the way prescription drugs are sold.

Smitherman's reforms are intended to make drugs cheaper through bulk discounts, price controls and more substitution of generic medications for costlier brand names. He also intends to make "breakthrough" medicines available more quickly and have a streamlined drug-review process involving more public input.

The money-saving proposals are complex at best — lame fodder for water-cooler conversations amid the Stanley Cup playoffs and the latest American Idol winner. "If you can understand it, you actually have to get out more," Smitherman joked last week in a speech outlining his ambitious fixes to the drug system.

The plan has, however, earned headlines for opponents with some pharmacists and drug companies warning of job losses and longer wait times for prescriptions.

The battle moves into the public eye Monday as four days of legislative committee hearings begin. Smitherman hopes to have the changes in effect by fall.

While Smitherman claims the support of patient groups, at least one is edgy about the "unchecked new power" a government-appointed drug czar would have over which medicines are covered.

"We want to make sure quality-of-life issues are taken into account," says Frank Viti, an asthma activist speaking for the Best Medicines Coalition.

For Smitherman, who recently admitted an addiction to illegal "party drugs" in the mid-1990s, drug reform is turning into a bit of a bad trip.

"This is actually a multi-front battle," says Joseph D'Cruz, a professor at the University of Toronto 's Rotman School of Management who follows health-care issues.

Smitherman warns that unless changes are made, the Ontario Drug Benefit program serving 2.2 million citizens will collapse under its own weight.

The problem has been brewing for years. In 2001, then-health minister Tony Clement mused about getting seniors with comfortable incomes to pay more for their own drugs, but backed down amid an outcry.

Not surprisingly, Smitherman maintains seniors and others who get drugs through the program will see no changes in co-payments or deductibles.

Ontario's drug program accounts for 10 per cent of the province's health budget, an increase of 20 per cent from 1996.

It's a period that has seen drug prices skyrocket. Ten years ago, the average prescription in Canada cost $29. Now, it's risen to $55 in Ontario , $10 higher than the national average, according to tracking firm IMS Health Canada. Smitherman is banking on a new drug review system to save taxpayers hundreds of millions of dollars.

As the system now stands, it can take months or years to get new drugs on the province's coverage list, called the formulary, through a process carried out behind closed doors. And pharmacists can substitute generic drugs for brand names only if the medication is on the province's 3,400-drug formulary listing, but not for the thousands of drugs off the formulary unless they contact the prescribing physician for approval. In busy pharmacies and doctors' offices, that's not always possible, which is why Smitherman wants to make substitutions automatic if the patient agrees.

"Our drug system has been failing us," says Smitherman, who hopes to save taxpayers $222 million a year and cut $30 million in costs for employer-sponsored drug plans and people who pay for their own prescriptions. Employers spend $2.6 billion on drug benefits.

But even observers who generally support Smitherman's cure — better known as Bill 102 or the Transparent Drug System for Patients Act — say it could have some worrisome side effects:

? The Best Medicines Coalition, an amalgam of patient groups, wants to make sure there is flexibility in how prescriptions are filled. Viti is concerned there could be subtle differences between the generic and brand-name drugs that may cause discomfort to some patients. "The primary-care physician should be making the decision," he said.

? Generic drug companies say controls limiting their prices to 50 per cent of the brand-name drugs they copy, down 20 per cent from current levels, will make production of some newer medicines unfeasible. "If that's what you're going to demand, I won't bring it out, I won't sell it," says Jim Keon, president of the Canadian Generic Pharmaceuticals Association. The group wants a chance to justify higher prices for select drugs and notes many Ontario plants produce drugs for sale around the world — production that could easily move to lower-cost jurisdictions like India or China.

Other critics say Smitherman's cure is worse than the disease. A coalition of pharmacists worries an end to millions of dollars in promotional rebates paid to them by generic-drug companies — in exchange for shelf space for their products in the highly competitive generic business — and a $25 cap on dispensing special medications worth hundreds of dollars, could force some drugstores out of business or cause layoffs.

The $25 cap could make it impossible to stock expensive drugs because the profit margin would be too low, many pharmacists say. Currently, HIV medications costing $600 a month have dispensing fees of about $60, or 10 per cent.

The government values the rebates given to pharmacies from generic-drug companies at $210 million, but pharmacists say the total is closer to $500 million.

"I can give Smitherman the annual statement from my accountant and ask him how I am going to pay my employees and my rent," says pharmacist Roshdy Boshara, who runs an IDA store near Queen's Park. He says his annual profit is $40,000 after expenses, but he will lose $80,000 from the outlawed rebates alone, forcing him to cut staff.

Smitherman blames the rebates for making generic drugs 40 per cent more expensive than they should be, and plans to mitigate the lost revenue to pharmacies with a 7 per cent increase in the dispensing fee paid for basic drugs under the Ontario plan, to $7.

There's also $50 million in payments annually for pharmacists who do detailed consultations with patients, especially those who need help keeping on top of chronic diseases like diabetes — a development druggists have been advocating for years. It's long past time the government stopped treating pharmacists as "pill pushers" to take advantage of their expertise as front-line health providers who can help keep patients out of hospitals and doctors' offices, Smitherman says. Concerned about lower sales and revenues because of an intensified switch to generic drugs and a government push for better volume discounts, brand-name pharmaceutical companies are threatening to pull millions in research dollars out of the province.

They've hired former top advisers from the offices of Smitherman and Premier Dalton McGuinty to lobby the government, arguing doctors prescribe brand-name medications because they're better for patients in many cases. "Think of it this way," says Jacques Lefebvre, vice-president of strategic affairs for Rx&D, the association of Canada's research-based drug industry, including companies such as GlaxoSmithKline Inc. "Why would Daimler Chrysler continue to produce cars in a jurisdiction if the government says, `We're not going to make those cars available?'"

Brand-name drug firms say the government shouldn't be so focused on drug costs because new medications cut down or eliminate hospital stays. They also say only three in 10 new drugs earn back the millions of dollars spent to develop them, justifying existing prices. Brands now account for 56 per cent of prescriptions in Ontario and generics 44 per cent — a ratio the government hopes to even out, saying there's no reason to pay higher prices for brand-name drugs if generic equivalents are available.

Lobbying from all sides has been intense, sources say, with brand-name drug officials pressing for changes not just with Smitherman but also Economic Development Minister Joe Cordiano and McGuinty. At next week's hearings, interest groups will detail their concerns about the bill to MPPs from all parties in hopes of prompting amendments favourable to their causes.

Smitherman hopes to pass the bill before the Legislature begins its summer break June 22 — a schedule that has critics charging the government is "ramming" reforms through with little public scrutiny — so changes can take effect in October. That's exactly a year before the next provincial election, by which time the government hopes to have balanced its budget.

There are other pressures on the horizon, too. With the first wave of baby boomers turning 65 in just four years, the government's costs for the Ontario drug plan are poised to climb at an even faster clip.
"They're all going to flop on to the drug program and how is the government going to afford that?" says Keon. "The government has to take measures. To argue against that is folly."

It wouldn't be so bad if these were the old days and drug costs were centred on the occasional antibiotic or painkiller.
But Ontario 's population is growing and aging. Advances in medicines have provided long-term maintenance drugs for chronic problems like cholesterol and depression, or medicines that can cure ulcers, which used to require surgery. New cancer and AIDS medications are out-of-this-world expensive.

Just one example: the cholesterol-busting drug Lipitor costs $67 monthly and is the most-prescribed pill covered under the Ontario plan. Lipitor costs Ontario taxpayers more than $170 million a year. Across Canada , prescriptions for Lipitor were up 15 per cent last year, according to IMS Health.

The president of the Ontario Medical Association says higher drug costs are unavoidable. "Drugs have become a more important part of therapy," says Dr. David Bach, a London radiologist. "That may cost money, but if you end up living longer and healthier, that's worth it."

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