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BC's Reference Drug Program a Failure, Government Must Empower Patients

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Release Date: November 29, 2002
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.