Bulk purchasing pharmaceutical drugs

The Vancouver Sun is two for two! Another front page headline, this time pressing the case for bulk purchasing of pharmaceutical drugs. Bulk purchasing is but one of many policy options for reducing the cost of pharmaceuticals, and is generally the one that is the most palatable politically as it does not overtly challenge Big Pharma.

Other, more potent options, such as compulsary licensing (which pays a royalty to the patent holder but then licences generic companies to manufacture the drug as competition) and developing public domain patents, are vigorously opposed by the politically influential pharmaceutical companies. Generic production, for example, was in place in Canada from the late 1960s to the time of the Canada-US Free Trade Agreement, and was a highly successful health and industrial policy until it was canned as a concession to the US and Big Pharma – ostensibly due to CUFTA, but technically it could still be used today if we wanted to get aggressive.

Bulk buying of drugs would save Canada billions: New Zealand model negotiates prices of up to 90 per cent less

Pamela Fayerman

Canadians could save billions of dollars a year on prescription medicines if governments negotiated bulk-buying discounts from drug manufacturers, says a University of B.C. study being published today in the journal Healthcare Policy. Researchers from the Centre for Health Services and Policy Research at UBC used New Zealand as an example to show how strong negotiations can reduce expenditures by up to 90 per cent on some types of commonly used drugs.

On average, Canadian prices are 50 per cent higher than New Zealand’s in four categories of common medicines — for cholesterol control, high blood pressure, depression and ulcers or acid reflux.

… The UBC study follows a major report last month by the B.C. Medical Association that endorsed drastic actions by governments — including negotiated prices and bulk buying — to curb double-digit growth in prescription drug spending…. While every province operates its own formulary covering the cost of many drugs, in New Zealand, a country similar in population to B.C., the Pharmaceutical Management Agency, or Pharmac — a non-profit Crown corporation — manages access and expenditures to most pharmaceutical products.

Other countries with national programs include Australia, France, Italy, Sweden and the U.S., which bulk buys drugs for military veterans.

The New Zealand program has concentrated buying power and because it is national in scope, provides “a very powerful incentive for manufacturers to price their products competitively,” says the study.

For instance, in a class of brand-name drugs known as ACE inhibitors, used to reduce high blood pressure, New Zealand costs were 78 per cent lower. A class of brand-name patented drugs known as statins, used to treat high cholesterol, cost 45 per cent less in New Zealand. For generic drugs, ACE inhibitors were 93 per cent lower in New Zealand and statins were 91 per cent cheaper. SSRI drugs used for depression were 56 per cent less costly for combined brand and generic versions, and a class of drugs called PPIs, used for ulcers and acid reflux, were 51 per cent cheaper in New Zealand.

The New Zealand program operates under strict financial controls with fixed, capped budgets. Decisions about what products are listed and covered are based on various criteria, including evidence of product safety, cost and effectiveness. Pharmac uses negotiated rebates and discounts, and tenders contracts for supplies. That system “guarantees the winning manufacturer all or a significant share of the national market.”

“Because of the incentives created through these auction-style contracts for sole source supply, tendering of drug purchase can drive prices down substantially, often to commodity pricing levels that are a hallmark of perfect competition and economic efficiency. Moreover, it is often original brand-name manufacturers that win contracts for supplying medicines at such prices,” the report states.

2 comments

  • Bulk purchasing is a great idea to cut costs related to pharmaceutical use. The nationalized pharmacy provider in Sweden, Apoteket AB, is credited with giving Sweden some of the lowest pharmaceutical prices in the developed world. However, more importantly, we need to look at empowering health care providers besides physicians to do what they are trained for. For example, pharmacists have been locked into traditional dispensary roles for far too long when numerous studies have shown that if we are capable of so much more. Pharmacist interventions have been estimated to save the Canadian health care system upwards of $100 million per year. It is estimated that in the US, improper use of prescription drugs costs more than $75 billion per year. Pharmacist interventions could cut that in half, based on rough estimates.
    All these estimates are based on pharmacists’ current practice. Imagine if we were utilized to our full potential.

  • “and developing public domain patents..”

    Is there not a way to get a GPL (in software) like license for drug patents? Something that helps everyone out but still benefits the creators?

    I know public domain is not the best solution at all, in copyright or patents, if your goal is 1) profits OR 2) freedom, so the GPL reciprocal license was created for software.

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