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The Progressive Economics Forum

Avoiding a really bad drug trip – Pharmacare versus CETA

Boomers are getting blamed for an awful lot of fiscal problems these days.

But blaming an aging population for healthcare costs spiraling out of control is misplaced. Missing opportunities to manage and contain costs is the real culprit.

Take, for example, our spending on prescription drugs. Costs in that part of the healthcare system have been rising by almost 10% a year, on average, since 2000.

We spent almost $30 billion on prescription drugs in 2009, and the share of pharmaceuticals in total health expenditures has surged from 9.5% in 1985 to 16.5% nation-wide.

Drugs are now the second biggest ticket item in healthcare, second only to the amount we pay for hospitals (which accounts for 28% of all healthcare spending).

One in four Canadians had no insurance to cover their drug costs before the recession even began, and hundreds of thousands more have lost coverage since. The attack on retirement benefits has meant that thousands of pensioners are having more difficulty getting the medicines they need.

Out-of-pocket expenditures doubled from $2.3 billion in 1999 to $4.6 billion in 2009, and a growing number of Canadians are simply not filling in prescriptions because of their cost.

In fact, Canadians pay more for each pill than almost every other advanced industrial nation except Switzerland, and 30% more than the average cost in the OECD nations. When you spend $30 billion a year on something, why pay retail?

We can do better. In fact we can improve access and contain costs.

Sound impossible? A few months back Professor Marc-André Gagnon published a ground-breaking report with the Canadian Centre for Policy Alternatives outlining how pharmacare could meet these twin goals, by flexing our collective muscle in how we buy and getting smarter about what we spend on.

It all comes down to the power of a single, public program.

One that manages costs through four levers that decision-makers have been talking about for decades:
1) universal public insurance;
2) a national formulary of essential drugs;
3) independent evidence-based drug evaluation, and
4) bulk-purchasing.

One that identifies best practices. Wouldn’t it help to know which drugs and patterns of use are most effective?

One that could save us a stunning $10.7 billion in annual costs. Imagine what other things that kind of money could buy.

For this to happen we need our governments to work with us, not against us.

Instead the federal government seems more intent on escalating costs rather than reduce them.

The government of Canada is in the process of negotiating a free trade agreement with the European Union–the Canada-EU Comprehensive Economic and Trade Agreement (CETA) — which it hopes to have concluded by the end of 2011.

One of the things the Europeans hope to get from this deal is changes to our drug patent laws and regulations. Specifically, they’d like to see an extension to the exclusivity of patents on top-selling drugs. Pharmaceuticals account for 15.6 percent of total exports from Europe to Canada, with a value of more than $5 billion annually.

In early February a study by Professors Aidan Hollis and Paul Grootendorst, two of Canada’s top academics on pharmaceutical policy, showed that the changes sought by the European Union would add $2.8 billion to our annual expenditures on drugs.

The federal government is calling the shots, but it won’t shoulder the costs. Almost all the cost impact of the new rules will be borne by provinces, private insurers and individuals paying directly.

The Premiers come together at their annual Council of the Federation meeting in British Columbia next July. The topic of how to manage the rising costs of healthcare will likely come up.

Pharmacare should be on that agenda. Potentially huge savings are available for governments if they work together.

These savings could be re-invested in a program that provides first-dollar coverage for medicines, reduces waste, improves utilization and ensures better access to life-saving and life-enhancing treatments.

The sooner we act, the sooner we save. The more we save, the more we can do.

But we need a federal government that is on-side; helping us contain costs, not driving them up.

From psychedelic drugs in the ‘60s to prescription drugs in their 60s – boomers are poised to have their consciousness raised once again.

And if the grey tsunami finds out what Pharmacare could accomplish (and what CETA could undo), we might all be able to avoid a really bad drug trip.

A slightly different version of this article was published on-line with CARP, the Canadian Association of Retired Persons, which has 300,000 members aged 55 and older. CARP’s flagship magazine is Zoomer.

Enjoy and share:

Comments

Comment from Travis Fast
Time: February 27, 2011, 1:26 pm

We could also change the patent regime and save a bundle.

Comment from Paul Tulloch
Time: February 27, 2011, 3:17 pm

Pharmacare in this country is just so ripe for review it is insane that we don’t have much of any debate when it comes to the industry.

Thinking about health care and the seemingly endless upward spiral of costs, I am blown away hearing of more nurse layoffs and bed closure, service reductions and a whole host of such cuts. But you never once hear about a pharmacare review. Except a bit of prodding from by McGuinty in Ontario, and the result was the big pharma retailers, cutting free services to customers.

As a number two budget item in healthcare, I am simply amazed, and we are talking billions. Before we get much further in the attack by the right on healthcare it is time progressives- like you suggest Armine, got into this with both arms swinging. It will not be an easy fight. I do realize there have been some efforts, but they have yet to grasp the public space needed for such a political debate and to crank up the heat on the fat pharma companies.

Have you ever reviewed a pharma industries sales force, they are wickedly organized, every drug and every doctor has its sale staff. I was amazed at reviewing just how precise big pharma engages the sale of drugs with the healthcare industry.

I wouldn’t even know where to begin with such a critique but I would start here:

1) evidence based evidence have got to stop using sample sizes of less than 10

2) pharma has got to quit treating the baby boomer generation as a golden sea of docile lab rats. Have you every visited an elderly person lately that may have some kind of affliction. My friend who works in dollar start wholesale tell me the biggest selling items are multi tiered weekly drug dispensers. I am no medical doctor, but come on, these people are like kids in a candy store, with several and sometimes more drugs being taken. With sample sizes of less than one, don’t tell me they have even remotely tested these drugs for concurrency related effects let alone side effects.

Quite the golden goose. And backed by the hysteria of health discoveries, it definitely is the age of serving as a lab rat for big pharma.

But we do have to chose something to expand our economic surplus, and at least it is better than spending it on a military- ohh sorry didn;t we just order a bunch of new fighters and ships to kill better?

Just a bit more regulation, if we could just get that we would at least be peeling back one layer of this stinky big onion we call big pharma. So much money being made in this industry it is uncanny.

Paul

Comment from rcp
Time: February 27, 2011, 6:55 pm

It’s amazingly easy for people who have never developed a prescription drug to beat up on “Big Pharma”. It costs hundreds of millions of dollars. You want a 1900’s life expectancy, get rid of pharmaceuticals. If on the other hand you like your current life expectancy, you might want to think about this just a little more.

Comment from Paul Tulloch
Time: February 27, 2011, 7:47 pm

Rcp you seem to get into the thick of the hysteria, and your comment represents just about what the field wants you to regirgitate, don’t dare be critical of science. Sorry mate, it is not the since I am critical of, it is the interface with the social and the economic. Try not to buy into the discourse that big pharma is run by science. It is run by profit maximizers.

So please try another angle than some kind of purest devinity based defense.

Comment from rcp
Time: February 28, 2011, 4:28 am

Paul, if you reduce the financial incentive for a behaviour you get less of the behaviour. That’s pretty basic and is not a “devinity based defense”.

Comment from Travis Fast
Time: February 28, 2011, 8:45 am

@RCP,

Yep we would have never had insulin if were not for a monopoly patent regime:),

You do realize your argument amounts to a public goods argument?

Comment from Keith Newman
Time: February 28, 2011, 8:54 am

For rcp:
Some baisc information:

Very few of the new drugs ‘Big Pharma’ researches and produces are ‘break-through’ drugs. Almost all are approximate copies of existing drugs and many of these new drugs are less effective than the old ones.

Our longer life expectancy since 1900 has virtually nothing to do with pharmaceuticals. It is due to better public health measures and improved diet

Comment from Paul Tulloch
Time: February 28, 2011, 9:26 am

finally a real keyboard. the virtual and the small are, well just that.

All I am saying is have a look at the sales infrastructure and engagement in the delivery of drugs to the public. If that is science in action, then they could teach the MBA’s of the world a thing or two about profit maximization.

It is the second time in one week I am quoting Bruno Latour.

Like I am a fan of science, but not being used to drive the profit motives on the false hopes of a generation of baby boomers, somehow thinking there is a magic bullet for everything. The culture logic of some grand modernism narrative with all solutions is what is driving this.

Sadly the economic surplus being poured into this industry is not being examined with a critical eye and as things get ratcheted down pharma will claw out the eyes of all other aspects of health care because the politics. This has got to change and soon. I am not saying we got to stand it on its head to make sense of it, but we should be having some serious discussions and debates before making cuts to more nurses, more hospital beds, increasing patient workloads, and other such traditional resources in healthcare.

pt

Comment from Purple Library Guy
Time: February 28, 2011, 2:33 pm

To the extent that genuinely new and useful drugs are sold, an awful lot still originate from public research while the drug companies do the final trials and such and pocket the patents and the money. Socialize risk, privatize profits as usual.
Getting a drug to market is certainly a serious task; they do spend money developing drugs and testing them. But not near as much as they like to claim; the “hundreds of millions” figures are largely fabricated.

Comment from Travis Fast
Time: February 28, 2011, 3:12 pm

@PLG,

That is thing with pharmaceuticals. Unlike many other key sectors of the economy we already have the infrastructure and human capital to take the development of drugs public.

Comment from rcp
Time: February 28, 2011, 3:46 pm

Thanks to everyone for trying to educate me, I think. Some of the arguments seem unconvincing to me, though.

A profit-maximizing motive is not inconsistent with doing research: all kinds of companies (like Intel, say) are profit-motivated but still do research, so no blind faith in science is required.

And to the extent that newly-developed drugs are not an advance over existing ones, prescription of a cheap generic drug (or better yet, one that’s out of patent) is a perfectly sensible alternative.

Therefore it is by no means obvious that state control of the pharmaceutical sector is necessary or even a good idea.

Comment from rcp
Time: February 28, 2011, 4:30 pm

And for people who underestimate the cost of bringing a new drug to market, you might want to read the following link:

(http://www.businessweek.com/globalbiz/content/nov2006/gb20061106_713777.htm)

Comment from Travis Fast
Time: February 28, 2011, 4:55 pm

@RCP,

I agree, the private sector should be left to make iteration 110 of Prozak. With the caveat that it is not covered by a public drug plan.

Comment from Paul Tulloch
Time: February 28, 2011, 6:26 pm

Like I said profits are fine, assuming there is some competition and also assuming the drugs do what they say. Both I tend to believe are false to a degree that the out comes for society are very much sub optimal. Given the costs of healthcare, big pharma has got to step back and reexamine it’s strategic options. Otherwise spending will be cut and a new regulatory body will be put in place. What Armine suggests is just that. The question is how long will the monopoly like rents and snake oil tendencies dominate the pharma landscape of Canada.

I would say the answer lay I. The following. When the rest of the healthcare sector is cut back to a point of failure and politically privatization is finally handed it’s death blow, as the Canadian population will never let go of public health, then and only then will some serious political finger pointing be done towards the fat cats in big pharma.

They are very powerful so it will take a very coordinated effort, to right side the industry in favor of the public rather than profits. By the way healthcare and CPU chip production are hardly a model for comparison, you got to be joking right. Phrack man get a grip. Even if they were comparable InTel is by no means a marvel of innovation just ask Amd, and the entire gpgpu hpc industry.

Comment from rcp
Time: February 28, 2011, 6:40 pm

Paul, I actually have programmed GPU’s, so I get your point – I think. Intel may not be best at everything but they do spend money on R&D. To claim that pharmaceuticals are somehow special, compared with other industries, requires evidence, which you’re kind of light on.

Do you actually know how patents work? Because they are a limited period monopoly based on complete disclosure of the invention. Therefore after the patent period (say 20 years) the invention is in the public domain. This is an important part of the patent system – they are not a perpetual monopoly.

Travis, I agree with you. There is no reason to pay for iteration 110 of Prozac if iteration 1 is out of patent – unless, for instance, some people are suicidal on the old one but not the new one.

Comment from Paul Tulloch
Time: February 28, 2011, 7:30 pm

Rcp your getting my point.

It’s about about patents. It’s not about markets, it’s not about anything but a culture of habitual drug abuse. We have transformed into a society of drug users being led by many powerful interests.

Sure there are drugs that are useful. But it is they massive space the drug companies have usurped from health care.

Like I said it is not totally upside down, but it is a a tipping point of being an affordable culture without killing the rest of healthcare.

Just look at growth rates, and I am talking per capita controlling on age.

And why yes I do indeed get patents. But that is not the monopoly I am talking about. I am talking about the monopoly within the healthcare space that big pharma has carved ou for itself. It is not a healthy competitive environment, the notion prevails-take a drug and it will fix you. The entire population is on drugs, I guess I am talking more in terms of a crisis in late modernity, but I do not want to get philosophical cause bit is a very real force and a costly one. (assuming of course competitive pressures are
actually a sustainable space in such an unique industry and result in
bringing prices down). it is the whole industry.

Gpu programming huh, cuda or close to the metal (whatever amd / ati is calling their system now. A fellow programmer. Nice!) did you see my article in wired.com on the subject from a couple years back. It’s somewhere on my website.

Comment from Paul Tulloch
Time: February 28, 2011, 7:35 pm

Sorry that should be, it’s not about exclusively a monopoly patent question.

My iPad typing is sucking again. Got to slow down on virtual keyboards.

Comment from rcp
Time: February 28, 2011, 8:14 pm

The links seem to be kind of broken but this is the best I could find:

(http://gpgpu.org/2006/11/10/gpgpu-gets-wired-supercomputings-next-revolution)

If you have a better link please post.

Comment from Paul Tulloch
Time: March 1, 2011, 9:18 am

try this link , left labour economist turned supercomputing specialist, lol- it was a hoot also another article at HPC Wire the next spring, 5 years ago wow time flies. Still working on a porting a factor analysis followed with a cluster analysis routine to CUDA, a bit of my machine learning hobby, which helps keep on top of the tech from an economist point of view. Braverman would have been all over this stuff I know he would have. as it could be the next wave of deskilling.

Sorry for hijacking the comments- blame it on RCP lol.

http://www.wired.com/gadgets/pcs/news/2006/11/72090

Comment from rcp
Time: March 1, 2011, 3:00 pm

Very nice article, Paul. Thanks for posting the link. End of comments hijack.

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