Will likely result in reduced access to new drugs, and delay research and development
By Kristina Acri
Senior Fellow The Fraser Institute
Given
that proponents in Canada often cite government-funded pharmacare
programs in the United Kingdom, Australia and New Zealand, it's helpful
to evaluate these programs and their impact on patients.
While
these programs have reduced government expenditures and the average
price paid per drug, they've produced some unintended consequences. A
recent Fraser Institute study spotlighted four issues Canadians should ponder.
First,
a national pharmacare program will likely result in reduced access to
new drugs as pharmaceutical companies delay or withhold the production
of certain drugs if the price offered through the government program
isn't satisfactory.
Among
20 comparable Organization for Economic Co-operation and Development
(OECD) countries, New Zealand ranks last for access to innovative
medicines. And of all the drugs approved in the country from January
2009 to December 2016, barely 16 per cent were added to the public drug
formulary, the worst result among 31 comparable countries.
Even
after New Zealand agrees to list a drug, it can take more than 13 years
before it's covered by the country's pharmacare plan, as the budget
ceiling is reached. Among 13 comparable countries, New Zealand ranks
last in access to cancer medicines.
In
the U.K. between 2012 and 2014, the National Health Service rejected 22
new cancer drugs comprising 61 per cent of cancer treatments analyzed
over that period. That's not surprising since numerous studies have
shown that access to new and innovative medicines in the U.K. is delayed
compared to other industrialized countries.
Second, a national pharmacare program could decrease pharmaceutical innovation in Canada.
A
national pharmacare program will likely require pharmaceutical
companies to cut their prices, essentially institutionalizing price
controls through the program. This is a major problem. Historically, as
revenues to finance research and development are reduced, innovation
suffers.
The
United States has always been the global leader in new drug
development, and that lead widened after Japan and Germany imposed price
controls over the past few decades. The result is that all major
international pharmaceutical companies, without exception, have
established research and development and commercial operations in the
U.S. to take advantage of its pricing environment.
Moreover,
the percentage of new chemical entities (new drugs that have not
previously been approved) originating from U.S.-based companies rose
from 31 per cent in the 1970s and '80s, to 42 per cent in the 1990s to
57 per cent in the 2000s.
In
the mid-'80s, pharmaceutical research and development by European
companies was 24 per cent higher than in the U.S. Following the adoption
of price controls, European pharmaceutical research and development
grew at half the U.S. rate and today substantially trails American
research and development.
Canadians
can also expect tax hikes to pay for the government drug program. In
late 2017, an analysis by the parliamentary budget officer estimated a
national pharmacare program would cost around $20 billion a year. And
former federal budget officer Kevin Page says that without tax
increases, governments will see their shortfalls balloon and deficits
double.
Lastly,
and worst of all, the evidence suggests a national pharmacare program
may produce poorer health-care outcomes for Canadians.
Again, the experiences of other countries are illustrative.
Relative
to Canada, access in New Zealand to histamine H2-receptor antagonists
(used to treat ulcers) and new oncology and rare disease drugs are much
lower. The resulting health consequences are striking. Again, relative
to Canada, mortality rates for acute myocardial infarction,
cerebrovascular disease, chronic obstructive pulmonary disease,
musculoskeletal conditions and peptic ulcers in 2011 were more than 30
per cent higher in New Zealand.
In
the U.K., lower access to certain drugs has contributed to lower
survival rates for various cancers compared to other developed
countries. According to a 2015 report, the U.K. ranks among the worst of
all developed countries for survival rates for the 10 types of cancers
analyzed. In the case of liver and lung cancer, the five-year survival
rate is half the Canadian rate.
As
the Liberal government pushes for a national pharmacare program, with
an eye on the October federal election, Canadians should understand the
experiences of other countries.
Canada
must cautiously approach any policy change - including the introduction
of national pharamacare - that puts patients, innovation and innovative
industries at risk.
Kristina M.L. Acri is an associate professor of economics at Colorado College and a senior fellow at the Fraser Institute. |
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