High Drug Costs Flashcards
What are the general trends in drug costs in Canada?
- Costs increased steadily beginning in the early 1980s
- In recent years, costs have stabilized (7% in 2022, 4% in 2023)
- In 2023, spending on drugs and physicians was similar, both accounted for 14% each of healthcare spending
- 2% of benficiaries receive drug therapies that account for 40% of all drug spending
What are the top three drug classes by percentage of total public drug program spending?
- TNF-alpha inhibitors (6.2%)
- Anti-neovascularizing agents (5.3%)
- Selective immunosuppressants (3.6%)
Review slide 8 for the most significant contributing drug classes to the total public drug coverage
What percentage of drug spending is on biologics?
About 30%
What two drug/drug classes are responsible for 50% of total drug spending growth in 2022?
GLP1RAs (24%)
Trikafta (25%)
Combined are responsible for up to 50% of TPS growth
What is the benefit of increasing biosimilar use and reducign reference product use?
Declining drug costs, and savings are used to help fund drug costs for newer reference drugs
What are some main contributors to high drug costs?
- New cancer therapies
- End of the “patient cliff”
- Continuing trend toward higher rates of utilization
- Federal pricing policies (recently dropped US and Switzerland as comparator countries)
- Pharma industry consolidation
- Monopolistic pricing of old drugs
Why has the exclusion of the US and Switzerland from the list of PMPRB resulted in a group of countries that are more similar to Canada?
- Pricing policies
- Economic wealth
- Market size
What was a proposed change to federal drug pricing policy that did not get passed?
Price transparency (listed vs. actual)
Price justification prior to market approval
What is pharmaceutical pricing based on?
- Rarity and severity of the disease
- Absence of effective alternative treatments
- Indirect medical and social costs avoided
- Effectiveness of the drug
- What the company thinks it can get paid
NOT BASED ON THE COST TO DEVELOP THE DRUG
How does pricing for non-patent drugs work?
Not regulated by the PMPRB
Prices are generally influenced by provincial drug plan policies and hospital pharmacy committees
Competition among pharma companies
What are some characteristics of a free market?
- Many buyers and sellers (vendors compete for seller business)
- Homogenous products
- Freedom to enter and exit the market
- Complete, costless information on price and qualities
How are prices set in the free market?
They are organic and adjust according to market conditions (invisible hand)
What is the equilibrium price?
The price at which firms are willing to produce is equal to what households are willing to purchase
What are some ways the free market can erode?
Industry concentrations
Promotion of unique characteristics of products
Large and ongoing capital investments (high barrier to entry)
Proprietary information and NDAs
Do principles of the free market apply to the healthcare/pharma industry?
No, market failure is the norm
Powerful sellers secure high prices (monopolies and oligopolies)
Cost savings from efficiencies are not passed down to consumer, instead add to investor profits
How does the healthcare system respond to market failure?
Provincial buyers have come together to create a monopsony/oligopsony (Pan-Canadian Pharmaceutical Alliance)
Larger buyers have more negotiating power and secure more value for themselves
