Inside Politics

Prescription drugs: How much you pay, depends on where you live

On the surface, the fact that prescription drug expenditures are increasing at a slower rate compared to previous years is good news. The story is based on the most recent drug expenditure report of the well-respected Canadian Institute for Health Information.

But dig a little deeper, and the news is not so good.

The numbers in the institute's report include expenses for prescription and over-the-counter (OTC) drugs. In an effort to drill deeper into the statistics, I asked for a new data set that excludes OTC drugs. That way I could determine how much of prescription drug expenditures was coming from public compared to private sector, and which sector was experiencing the fastest growth in spending.

Based on my analysis of the data, the new headline is this: Of the 13 jurisdictions, six - including B.C. and Ontario - are putting more pressure on private drug plans or out-of-pocket expenses to cover drug costs. What does this mean? How much you spend on prescription drugs depends on where you live.

But it doesn't end there. There will be even more pressure on the private side as more expenses drugs such as biologics come on to the market.

Barbara Martinez, a principal with Mercer, a company that works with employers to help keep drug costs down, predicts that there will be "massive increases" in private drug plans. "For biologic drugs, you're talking about $25,000 dollars per year, for example, for rheumatoid arthritis. And you're going to take that drug for 30 years. And your employer's going to be paying that bill. So biologic drugs are terrifying for employers. And there's a new one coming out every day."

According statistics the market research company IMS Brogan provided to CBC News, the number of prescriptions dispensed in Canadian retail pharmacies for biologics used in treating rheumatoid arthritis has increased 18.4 per cent from 2009 to 2010.

Why is there so much pressure on private drug plans?

Ontario is one of the few jurisdictions that still has a drug plan for seniors, who traditionally have been among the largest group of consumers of prescription drugs. Over the years, the province has used its bargaining power to negotiate lower prices for name-brand, prescription drugs, and their cheaper, generic equivalents.

In other jurisdictions, such as B.C. and Manitoba, there is no universal coverage for seniors. Instead, they have what's known as "catastrophic coverage," that is, a scheme that only reimburses individuals of all ages when drugs begin eating significantly into their household expenses. Here we're talking about people who may be taking drugs to treat several illnesses, or conditions such as multiple sclerosis. But even catastrophic coverage comes with a catch: patients are required to foot a proportion of the bill - a deductible that can range into the thousands of dollars - before the coverage kicks in.

Unless people in B.C. and Manitoba are receiving catastrophic coverage, they're on their own, which is why individuals in those provinces must rely more heavily on private insurance, or must pay out of their own pockets.

The statistics support this. In B.C., for instance, between 2006 and 2010, public coverage grew at a rate of 8 per cent. For the same time period, coverage depending on private insurance or out-of-pocket payments grew by 19 per cent, more than double the rate of growth in public spending.

The numbers are similar for Manitoba, Nunavut and the Yukon.

When did provinces begin shifting the emphasis to the private sector?

"The main story here was when British Columbia implemented the policy back in 2003," says Steve Morgan, associate director of the Centre for Health Services and Policy Research at the University of British Columbia. "The motive was to reduce the government share of the total cost of drugs. The government knew it was trying to shift costs from the public purse on to the private payer in the policy change that they adopted. The argument was they just couldn't afford it in order to balance the health budgets."

He predicts other jurisdictions will follow suit in a bid to save money, which then forces individuals to pick up more of the costs.

So we will have drug plans that cover medicine we receive in hospitals (medicare takes care of that) and help out in situations where drugs become too expensive, costing tens of thousands of dollars. Amounts ranging from a few hundred to a few thousand dollars will either come out of your pocket, or more likely, from an employer-based or private drug plan.

But employers are under pressure to keep their drug costs down. And this is why Barbara Martinez from Mercer predicts that to save money, employers will opt to pay less for drugs and force their employees to pay more. This could be bad news for unionized workers such as teachers, firefighters, police officers and other public sector workers.

Michael Hunt of the Canadian Institute for Health Information puts it this way:

"There is probably some concern about how sustainable the private programs are. There's potential if drug costs continue to go quite high and public programs are not picking up their share and we download those costs to the private programs, are the private programs sustainable?"

Barbara Martinez has the answer to that question.

A resounding "no."

David McKie can be reached at

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