Mina Tadrous is a scientist at Women’s College Hospital and an assistant professor at the Leslie Dan Faculty of Pharmacy at the University of Toronto. Tara Gomes is an epidemiologist at St. Michael’s Hospital. Michael Law is a professor in the Centre for Health Services and Policy Research at the University of British Columbia.
We are likely entering a golden era of drug innovation, with the rise of new drug development technologies and biologics. Over the past decade, we have seen several record-breaking years in terms of the number of new therapies being developed and approved. In 2019 alone, just before the pandemic, Health Canada approved 58 new prescription drugs, many of which were the first of their kind to treat several rare diseases. The COVID-19 pandemic has also focused further attention on the value of investing in drug treatments and vaccine development.
But this progress has, of course, come at a cost. In 2020, Canada spent $32.7 billion on medications. And this amount continues to grow: year-over-year spending on drugs for the past two decades has outpaced inflation threefold, averaging more than 6 per cent growth annually. In fact, drug spending is consistently the fastest growing segment in health care.
These were the striking findings of a recently released analysis, where we looked at medication purchases across Canada over the past 20 years. We also looked ahead to the future to see what was likely to come down the pipeline. What we saw was notable: in the future, this rate of growth will almost certainly continue, if not accelerate.
So why does this all matter? Because health care budgets are limited and there doesn’t appear to be any end in sight to the introduction of very expensive drugs. (While many Canadians rely on private drug coverage or go without, provincial funding covers medication for hospital patients, many seniors and people on social assistance.) In particular, much of the recent growth in medication costs is because of an explosion of newer treatments, which come with price tags of more than $10,000 annually.
Let’s be clear – many of these drugs represent incredible innovations for individual patients, but their costs are stretching public and private payers. This rate of spending growth is significant, and if it continues, it is likely that governments and employers will have to limit access to newer treatments for all Canadians.
This means that despite novel drugs providing new treatment options, without rapid change in how we manage drug costs nationally, public and private insurers will have difficulty absorbing these costs.
To avoid further problems, first we must continue to expand our capacity to ensure we pay for value. Canada is a global leader in assessing value for money, and has developed a pan-Canadian approach to drug-price negotiations – let’s build on this. Governments and private insurers should not be paying the prices that companies set, but rather the actual value of the drugs.
Second, we should be willing to pay for true innovation, but also have a system with the power to say “no thanks” to drugs that don’t add much to the current menu of medications already available in Canada. Not all new drugs offer a net benefit to the system.
Third, any national pharmacare plan must place front and centre mechanisms for managing high-cost drugs. We found that the top 25 most-costly products in Canada (less than 0.001 per cent of all products approved for use in the country) accounted for nearly one-third of all purchases. Further, these high-cost drugs often lead people to access provincial catastrophic drug coverage programs to help with costs, owing to the enormous pressure that they place on individuals without drug insurance. We previously found that the need for these programs has grown threefold over the past 20 years. Without addressing these high-cost drugs, pharmacare plans that have been touted by the federal Liberals and NDP will likely be unsustainable.
Lastly, we need innovative ways to pay for drugs. The way we currently leverage drug budgets (or health care budgets in general) is archaic and a fit for the age of tinctures and bloodletting. We need to develop flexible global health care budgets. Many drugs (and other health care interventions) are cost-effective because they help reduce other health care spending (i.e. by reducing emergency and hospital visits); however, budgets for different elements of the health care system are organized in silos. Reducing the cost of a hospital visit doesn’t move money back into the drug budget to pay for new drugs. This flexibility and communication between these siloed budgets is necessary in order to incentivize innovative policies that can expand access to cost-effective medications and reinvest savings into the health care system.
It’s time that Canada gears up for the next generation of drug innovations. If we do it right, we can improve our health without breaking the bank.
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