The Incredible Bulk: Why province-led drug talks are the key to Pharmacare’s success
By: Matthew Pelletier
Tags: Health, Covid 19, Pharmaceutical, Canada, Canadian Politics

Ottawa cannot deliver Pharmacare if the provinces and territories are not partners in drug negotiations. Canada’s premiers have a solution for this problem.

Canadian First Ministers’ Meeting in 2016. Photo from the Prime Minister’s Office.

COVID-19 has highlighted the importance of collaboration between Canada’s provinces and territories. At a national stage, provincial and territorial governments have been instrumental in in implementing pan-Canadian responses such sectoral bailouts and the rollout of Canada’s COVID Alert App. At a regional level, cooperation has allowed for interprovincial policies that balance public safety with economic mobility, such as the Atlantic Bubble.

These initiatives have shown how Canadian federalism is strengthened when subnational actors work together. As Canada begins to contemplate a pandemic-free future, it is clear that the provinces will play a key role in improving pharmaceutical access to the residents who need it most.

Canada is one of the only member states of the Organization for Economic Cooperation and Development (OECD) that does not include universal, comprehensive pharmaceutical coverage (or Pharmacare) in its national healthcare system. As a result, many Canadians depend on private insurance or out-of-pocket spending to fill their prescriptions. Pharmacare has been recommended as a solution to this problem since the 1960s, but lawmakers chose not to implement the program on each occasion that it was proposed.

Recently, however, public support for Pharmacare has surged. An Angus Reid Poll conducted last October found that 86% of Canadians support the adoption of Pharmacare. In 2019, the Advisory Council on the Implementation of National Pharmacare reaffirmed this recommendation in their final report, calling for universal coverage within the next three years. The report concluded that a single payer Pharmacare program could save taxpayers up to $5 billion by 2027 through the prevention of untreated illnesses and avoidable hospital visits.

The Advisory Council argues that Pharmacare’s benefits can only be attained if the federal, provincial, and territorial governments contribute to negotiations. Although centralizing pharmaceutical negotiations would weaken the direct role of individual provinces, it isn’t far off from how drug prices are currently negotiated for public plans. This model, inspired by an alliance of provinces and territories, could set the standard for a national pharmaceutical strategy.

Strange Med-fellows: The pan-Canadian Pharmaceutical Alliance

The Council of the Federation, the body representing Canada’s premiers, has been negotiating pharmaceutical prices on behalf of provincial and territorial plans for over a decade. In 2010, the Council formed the pan-Canadian Pharmaceutical Alliance (pCPA), a loose collection of provinces and territories seeking to increase their bargaining power when in talks with big pharmaceutical companies. By negotiating on behalf of larger population bases, the pCPA can reach agreements to list drugs at lower unit costs than would be attained through individual talks.

Premiers from Canada’s 13 provinces and territories attending the 2019 Council of the Federation Meeting. The Council provides a unified lobbying front for provincial and territorial governments. Photo courtesy of Ipolitics.

Initially, the pCPA had a limited impact on purchasing power because Quebec hesitated to join the group. After the 2014 provincial election, Quebec joined the pCPA, thus ensuring representation from every province and territory. Two years later, the federal government announced its participation with the pCPA in order to obtain lower list prices for federal drug plans covering the RCMP, Canadian Forces members, veterans, refugees, and First Nation and Inuit populations. Since 2016, the pCPA has been operating as Canada’s de facto negotiator for public plans.

The pCPA has been able to deliver exceptional results for Canadians currently enrolled in public drug plans. Between 2013 and 2018, drug prices negotiated between producers and the pCPA have dropped between 10% and 18% for many publicly listed drugs. Additionally, the pCPA has a strong record in securing agreements through collective list price negotiations. Of the over 500 completed and current drug negotiations, almost 400 have resulted in a pan-Canadian agreement. Fewer than 80 negotiations have resulted in no collective or individual agreement being reached.

Outcomes of negotiations between the pan-Canadian Pharmaceutical Alliance and drug manufacturers (as of December 14, 2020).

In 2018, the pCPA struck a monumental agreement with Canada’s generic drug lobby group to reduce the prices for 70 commonly prescribed drugs by 25% to 40%. Given that generic drugs are already seen as less expensive alternatives to leading brand name options, the agreement now allows public plans to list products that are up to 90% cheaper than their brand name equivalent.

The pCPA offers a number of advantages to provinces, patients, and producers alike. Provincial and territorial plans can offer a greater variety of drugs at lower cost to taxpayers. Patients can benefit from increased access to life-saving medicines without having to spend a significant portion of their income on treatment. Drug manufacturers, while being forced to sell their products at lower unit costs, can end up better off by selling in larger volumes to previous untapped regional markets. The increased market reach also gives generic drug companies the incentive to team up with other producers in collective negotiations with the pCPA.

The success of the pan-Canadian Pharmaceutical Alliance has not gone unnoticed by Pharmacare advocates. In its final report, the Advisory Council on Pharmacare celebrated the pCPA’s successes, highlighting that the pCPA saves taxpayers nearly $2 billion a year in drug cost; however the report argued that the pCPA’s potential is hindered by its narrow bargaining scope. Provincial plans list a small number of drugs in relation to the health needs of residents. Additionally, these plans are often only eligible to older or lower-income residents. As a result, the pCPA doesn’t have the capacity to negotiate for the entire Canadian population.

The Advisory Council’s solution is to establish a Canadian drug agency to conduct bulk purchase negotiations for a national list of insurable drugs. This approach would give plan providers additional purchasing power that can secure more products at lower process.

This agency would build on the successes of the pCPA by integrating negotiations for Pharmacare with other health regulatory bodies such as the include the Patented Medicine Prices Review Board (PMPRB) and the Canadian Agency for Drugs and Technologies in Health (CADTH). Although such a move would reduce the direct role of subnational actors in drug talks, the proposed agency would be governed by a board of representatives appointed by each provincial and territorial government.

What does this mean for federalism?

The evolution of the pCPA from a decentralized group to a cohesive bargaining unit shows the crucial role of provinces in addressing Canada-wide policy issues. Although the federal government has participated in collective drug negotiations since 2016, the success of the pCPA has been largely driven by Canada’s provinces and territories.

The pCPA has also strengthened federalism by improving the regional accessibility of life-saving drugs. The collective approach of the provinces and territories has made drugs more accessible and less expensive. Although provinces have occasionally chosen to negotiate drug prices independently, this a rare (and often temporary) occurrence. For example, the pCPA and Allergan were unable to reach a collective agreement on the list price for Botox and recommended that individual governments pursue negotiations at their own discretion; however, discussions between the two parties recently resumed and may result in a collective list price.

Individual agreements are uncommon, but can be costly for both the province and the broader pCPA. These experiences demonstrate not only the benefits of working together as a federation, but the political and economic drawbacks of provinces working apart. The pandemic has similarly demonstrated the same effect when provinces chose to defect from collaboration on responses to broader health and social issues. For example, provincial leaders sought to use the pandemic as an opportunity to assert their autonomy from Ottawa by rejecting the national COVID Alert app. This has resulted in the break down of contact tracing in provinces where infections are among the highest in the country, and a further need for emergency field hospitals from the federal government they sought to oppose.

Despite the adverse experience of Canada’s more cavalier provincial leaders, COVID-19 and the pCPA have both shown how the Canadian federation is stronger when the provinces and territories work together. Increasing drug affordability and accessibility has been made possible through past collaboration, but further teamwork will be needed to obtain single payer Pharmacare. If provincial and territorial governments don’t have a say in how this collaboration takes place, the Advisory Council’s recommendations will join the list of unfeasible health policy proposals.