Employers and Drug Policy

Chris Bonnett

Editor, businesshealth

bh IN BRIEF

Government drug plan cost-shifting to private plans has been an issue for years. Changes to the Ontario Drug Benefit Plans in 2006 changed a sleepy market into an us-and-them free-for-all. The government (“them”) effectively exercised its new authority and cut several hundred million dollars from its plan by squeezing manufacturers and pharmacies…who promptly passed those costs over to private plans and patients (“us”). New negotiations appear set to remedy that problem, with hope – but no promise – there will be a one-price policy for generic drugs and pharmacy costs in Ontario, as was recently announced in Alberta.

I’ve been privileged to be part of the insurer-led discussion group working with the Ontario Ministry of Health and Long-Term Care as they review the provincial Drug Benefit Plans (ODBP). After effectively inviting myself through a last minute plea to consider the needs of small and mid-sized employers, I attended meetings in July and August. Also present were several insurers and the Canadian Life and Health Insurers Association, pharmacy benefit managers, a couple of large employers, and a handful of consultants representing very large employers. In short, this was a very well-informed and senior group representing the interests of the private payer community.

It’s worth noting most of the players took a national perspective on the issues, considering the scope of their operations, that all provinces have similar issues, and that opportunities to engage with provincial governments are rare indeed. The Ontario Ministry is to be commended for organizing such an extensive consultation.

It also started as a very rushed one – the government originally wanted consultations closed in September with policy and program changes to immediately follow. That timetable soon became unworkable, and with a new Minister and advisors, the process has slowed, and there have been no sectoral meetings for over two months. Other than insurers, the Ministry is consulting with brand-name and generic drug manufacturers, the pharmacy profession, and there are two topic-focused groups cutting across industry and professional lines.

From the Ministry’s perspective, the original focus was on pharmacy and generic manufacturers, particularly on professional allowances. A number of very high-cost brand-name drugs are scheduled to come off patent over the next few years, transferring most supply to generic manufacturers. These companies have Ontario prices set much higher than most other jurisdictions, even though most are now multinationals, and they still pay significant ”educational” allowances to pharmacies. While these payments are capped at 20% for government-listed drugs in Ontario, there is no ceiling for privately purchased drugs. A drug consultant noted one generic product where the private price nearly tripled after the last round of Ministry drug plan controls was implemented in 2006. The government price had been cut in half; a classic ‘squeeze-the-balloon’ story, and one private insurers do not want to see reprised this time around. To its credit, Alberta’s Pharmaceutical Strategy recognizes the need for identical generic drug pricing (at 45% of the brand-name drug price) regardless whether the payer is government, employer, or individual.

Meanwhile, the generic industry is working hard to keep their Ministry price from falling through the floor to just 25% of the original product price. Brand-name drug companies seem to have escaped the crosshairs, though the secrecy of their competitive agreements has inspired some to pursue similar discounts for large private payers.

The pharmacy lobby has implemented a grassroots campaign to get its members engaged with local MPPs. The Ministry has bluntly stated they think there are too many pharmacies, making too much money. Even with controlled fees and mark-ups, 23% of the ODB budget is paid to the profession, and the Ministry is well aware that the fees they haven’t paid since 2006 have simply been transferred to private payers…and disproportionately more to patients without drug plans. The Ministry is also concerned that 42% of pharmacies provide none of the routine disease management services they listed, for example, only 30% provide diabetes care, and just 14% provide consultations to help manage cholesterol or asthma.

At this point, it is expected the Ministry will ban professional allowances outright because of abuse and lack of transparency, but allow a transition period for pharmacies and generic manufacturers. It is hoped that, like Alberta, there will be one price for generic drugs in Ontario. The insurer group wants greater transparency on brand product pricing, and would like to see both recognition of the important role private drug plans play in ensuring access to prescription drugs, and some reward as well, such as the elimination of the retail sales tax on group insurance premiums.

With a projected deficit of some $25 billion, tax reductions may be a dream, but it is certain the new Minister cannot afford these discussions to stall, and she will have to make the proverbial “tough choices” in order to deliver the next round of cost savings for the government drug plan, and hopefully level the playing field for private payers too.

As events unfold in coming months, we’ll keep you posted.