British Columbia Pharmacare's controversial
Reference Drug Program (RDP) has been a failure, according to a
new study,
The Fantasy of Reference Pricing and the Promise of Choice in BC's Pharmacare, released today by The Fraser Institute.
"Despite years of analysis, independent researchers disagree on
the fiscal consequences of the Reference Drug Program. Meanwhile,
prescription drug costs in BC have increased much faster than
they have in other provinces, without benefiting patients or
reducing other heath care costs," says John R. Graham, author of
the study and director of pharmaceutical policy research at The
Fraser Institute.
In 1995, the government of British Columbia launched the RDP,
which clustered supposedly similar prescription drugs into five
therapeutic classes for certain cardiovascular conditions,
arthritis, and heartburn. (Medicines for these conditions account
for approximately two-thirds of Pharmacare's costs).
Pharmacare stopped automatically fully subsidizing newer, more
expensive drugs in those classes, and instead, tried to encourage
patients to use older, cheaper medicines by fully subsidizing
those drugs.
At around the same time, some other Canadian provinces, increased
patients' share of prescription costs in a way that did not
discriminate between more expensive and less expensive drugs.
The Failure of the Reference Drug Program
Since the introduction of the Reference Drug Program:
• BC Pharmacare's costs have increased 38 percent more than costs
in provincial drug benefit programs in the rest of Canada;
• Private spending on prescription drugs increased 23 percent
more in BC than in the rest of Canada;
• Total spending on prescription drugs increased 20 percent more
in BC than in the rest of Canada;
As well, there is tentative evidence that patients' health
suffered due to the RDP. For certain cardiovascular drugs:
• Seniors who had been taking more expensive medicines that
became restricted under the RDP had a higher (but not
statistically significant) risk of death from cardiovascular
disease;
• In the short run, seniors who had been taking more expensive
medicines that became restricted likely had a higher risk of
admission for coronary artery bypass grafts or angioplasty;
• In the short term, there was also evidence of longer stays in
hospital, and more visits to physicians and emergency rooms, for
patients exposed to the RDP;
• In the long run, exposure to reference pricing increased the
odds of admission to hospital for coronary artery bypass or
angioplasty by six or seven times.
Reforming Pharmacare
"Reforms to BC Pharmacare must recognize that centralized
judgments by a government-appointed committee about the relative
values of medicines are inferior to decentralized decision-making
by the doctors and patients who actually prescribe and use the
drugs," says Graham. "The government's goal should be to ensure
that British Columbians can afford prescription drugs, rather
than choosing medicines for them."
Reforms to Pharmacare should include:
• Eliminating the Reference Drug Program, which biases patients'
choice against innovative new medicines, (which can more than pay
for themselves by reducing other health care costs);
• Continuing to increase the annual deductible in accordance with
an income-based means test, thereby restoring patients' ability
to make responsible choices about the medicines they use; and,
• Developing a multi-tiered structure of co-payments that
motivates patients and doctors to consider "value for money" when
choosing medicines.
Long term reforms should include establishing tax-advantaged
Medical Savings Accounts (MSAs), thereby encouraging British
Columbians to save money throughout their working lives in order
to pay for prescription drug costs that are predictable and
budgetable.
"On January 1, 2002, the BC government took a positive first step
by increasing the deductible and co-payment for patients,
irrespective of what drug they use. It is regrettable that the
government has reneged on its commitment to implement a
means-tested deductible in the new year. The status quo, which
caps senior's prescription costs at 75 cents a day, and shovels
the rest onto taxpayers, simply means that Pharmacare has less
resources to act as a 'payer of last resort' for those who cannot
afford more expensive medicines. It's that sort of policy that
leads to failures like the Reference Drug Program," says
Graham.