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Swallowing the costs

Health care system feeling the rising cost of prescription drugs

In Canada, health care just ain’t what it used to be. What was once a source of national pride, held up for all the world to admire as a shining example of socialized government, has become a regular source of pounding headaches. Facilities are closing, shrinking, or cutting back services. Hospital beds are disappearing. Frustrated health care professionals are heading south for greener pastures – and by greener pastures I mean greener money.

There are unprecedented waits for routine tests and surgical procedures. There is a shortage of doctors, nurses, and health care providers in both urban and rural areas, although the situation in cities and towns is not as critical as it is for our country cousins. In many cases, hospitals are making do with dated equipment that has been repaired several times because they don’t have access to modern technologies that are considered indispensable in other countries.

What happened? Why is our health care system, so important to us all, on the endangered list?

Most people blame government cutbacks and the fact that the baby boomer population is entering its sunset years with the usual ailments of ageing – the perception is that there just isn’t enough money in the system to provide previous standards of care to a needier pool of patients. That’s only part of the story, however.

While Medicare budgets were cut drastically in the mid-1990s, both the federal and provincial governments are starting to compensate for the shortfall. Last September, the provincial first ministers hammered out a deal whereby the federal government would invest a total of $23.4 billion in provincial health care systems for medical equipment, health information and communication technology and primary health care.

The B.C. government has increased its budget to $9.3 billion, a 13 per cent increase over previous years, although they were still forced to disallow some medical services that were previously covered by the Medical Services Plan, such as routine eye examinations.

According to the Council of Canadians, the Medicare crisis was exaggerated in the media in the first place by health care professionals who were overwhelmed and wanted more help/money, and by the pundits and politicians who believe that Medicare is an outdated, unprofitable concept that should be shelved in favour of a two-tiered system.

"The phony crisis – the hysterical reports about waiting lists, the tabloid-style horror stories, the denigration of the public system as inefficient and unreliable – is a deliberately created crisis," wrote CC stalwart Murray Dobbin.

"The real crisis in Medicare, however, is a corporate threat. For over 15 years, corporations – from insurance companies to private hospital firms to giant U.S. health conglomerates – have been steadily chipping away at the public armour of Medicare, trying to find profitable ways into the system."

According to a Canadian Medical Association report card, respondents to a poll gave the overall quality of health care in Canada a "B."

"The reality is that once you get into the system the service is good and the satisfaction rate is high," said CMA President Barrett of the results. However, "There is still a sense that the system is in decline and that this decline is a major problem."

While the rhetoric from all sides of the issue is almost too strong to figure out exactly where Medicare stands compared to the past, and to other health care systems around the world, one thing is irrefutable – per capita health care costs are going up, both for the government and for the people who require services.

Part of that is attributable to fallout from the baby boom, part is attributable to lost funding, but there’s another part of the equation that federal and provincial governments are only beginning to get a handle on – the price of health care has simply gone up.

The costs of diagnosing and treating patients has soared in recent years, for example, with the use of expensive technologies like orthoscopics, ultrasound, and magnetic resonance imaging.

While the costs of operating a hospital and maintaining a staff have also increased, the costs are at least tied to inflation and market values.

One health care cost that is growing in leaps and bounds, however, is the cost of pharmaceuticals.

According to Health Canada, drug expenditures are increasing by about 12 per cent annually. Drug expenditures as a proportion of total health expenditures have increased from 9.9 per cent in 1982 to 15.6 per cent in 1998… from $1.1 billion in 1975 to $9.2 billion in 1994. Prescription medicines account for about three-quarters of all drug spending.

We currently spend more money on drugs (14.5 per cent of total health expenditures) than we do on physicians (14.2 per cent). It’s second on the list to hospitals, which account for 32.5 per cent of all expenditures.

In 2000, the year of the last study available, we spent $14.7 billion on drugs, which is up from $11.3 billion in 1987.

About 40 per cent of this total is paid for by taxpayers, while 60 per cent is paid for by patients or non-government health insurance. Seniors are particularly hard-hit, with monthly drug bills that can run into the hundreds of dollars.

More drugs are being prescribed than ever before, treating ailments that were previously untreatable, or that might even have required more drastic measures like surgery. We have drugs for pain for everything, from tennis elbow to a flaccid libido. We have drugs to curb psychotic tendencies, depression and stress. We have drugs to treat Alzheimer’s, arthritis, AIDS, acne, allergies, angina – the ‘A’ list alone contains hundreds of entries.

Because they are effective, doctor’s are prescribing them. However, because there is as much marketing in the medical profession as there is anywhere else, the concern is that they tend to prescribe more expensive brand name medications rather than cheaper alternatives.

To combat the rising prices, the provinces are working together to get better deals, changing their formulary (list of approved drugs) and using generic brands whenever possible.

Recognizing that this couldn’t go on, Canada’s 13 provincial and territorial health ministers met with federal health minister Allan Rock in Newfoundland this past September in order to work together to bring the cost of drugs down.

"We have 13 different systems, yet we have one Canadian health-care system," said New Brunswick Health Minister Dennis Furlong. "It really doesn’t make much sense. We should be welding those systems together so that we have one approach across Canada."

For years, the Atlantic provinces have grouped their resources together to buy drugs out of economic necessity – like everything, the price goes down with quantity.

It’s still not enough – in the past decade New Brunswick has seen its yearly drug costs rise from $65 million to $90 million. The government was recently forced to raise premiums for Pharmacare recipients, and took two popular arthritis drugs off the formulary.

In British Columbia, which has just settled job actions by doctors and nurses, and increased health care spending by more than 13 per cent, the health care system is also taking a harder look at drug costs.

While some are calling on the pharmaceutical industry to lower its prices, Canadians already pay half as much for drugs as patients in the U.S. They charge what the market will bear, which for Canada, with its socialized Medicare, is not very much. American consumers believe this is unfair – high American drug costs are funding pharmaceutical companies’ research and development, and Canadians are enjoying the benefits.

According to Johnson and Johnson, it takes 12 to 15 years and $500 million to bring a new drug to the marketplace, and less than one-third of drugs that make it to the market recoup their R&D costs.

Drug companies currently get about a six year lead time in the market before other generic brands can start marketing similar medicines. They argue that this isn’t enough time to recoup their investment and are currently lobbying to have their patents extended to about 25 years. Before his defeat in 1993, Prime Minister Brian Mulroney’s government approved Bill C-91, which effectively gave pharmaceutical companies up to 20 years, although this is dated to the time the drug is patented, not to the drug’s release, which could be anywhere from 10 to15 year later. Because every province evaluates a drug individually before it’s approved and added to the formulary, that can cut additional years off a company’s lead time.

If drug companies are successful, it could easily cost Canadians billions more each year by taking the generic option away.

Some citizen’s groups favour a tax increase. The federal government is itself looking at creating a national drug program because pharmaceuticals are becoming indivisible from Medicare – they were left out of big picture in the past because they weren’t nearly as common.

Employers currently bear the brunt of drug spending, which represents as much as four per cent of payroll expenses – and those costs are increasing by five to 10 per cent annually.

Drug companies oppose a national drug program on the basis that it will increase the use of less expensive remedies, reduce the use of more expensive remedies, and tighten restrictions on prices which the pharmaceutical industry needs to keep high to recoup their investments. They believe it will also limit doctors and their ability to prescribe the best drug for patients.

Other groups, which favour two-tier health systems, are opposed to the national drug program on the basis that it will increase taxes for everybody for the benefit of the few. The basis of two-tier systems is that you and your insurer pay only for what you need, receiving the best of everything, and not for what everyone else needs.

Either way, the price of medical care will go up – most experts feel that we should be paying more for the level of service we have come to expect, anyway, and that the Medicare system is starving the entire health industry by keeping costs down.

In British Columbia – which has recently increased health care spending by 13 per cent, most of which will go towards raises and incentives for doctors, nurses and other health professionals – the reduction of drug costs is being looked at as a priority in getting health finances in order.

B.C.’s is the only province with a "nominally universal drug program," according to Health Canada, "although for the under 65 population the deductibles are (deliberately) set high enough that there are few beneficiaries, and the coverage for those over 65, which was once first-dollar, now includes a co-payment."

It’s called "reference-based pricing" – although drugs may have a different chemical composition and mode of action, if they are used to treat the same condition they are assigned to the same reference class. Doctor’s are encouraged to use the lowest cost drug in that reference class that would be effective, although they can make exceptions if it’s medically necessary.

Bill C-91, however, is catching up with us by making fewer generic choices available to doctors.

On Nov. 3, the provincial government announced that it would create a panel to seek a cost-effective alternative to B.C. Pharmacare’s reference drug-pricing program, which is already the most cost-effective program of its kind in Canada.

Nobody knows what this alternative might look like, although nobody has ruled out the possibility that non-essential drug costs would be off-loaded onto patients, or that deductibles will increase. With no generic alternatives available for many conditions, doctor’s will have no choice but to prescribe brand names.

In October, the B.C. government removed six drug groups from Pharmacare coverage, including anabolic steroids, growth hormones, Flavoxate (used to treat individuals with involuntary urine loss), Nasal corticosteroids (and other drugs used to treat seasonal allergies), Vancomycin (used to treat diarrhea caused by antibiotics), and all topical antifungal skin preparations used to treat conditions like athlete’s foot and ringworm.