Drug pricing in Canada needs an injection of transparency
Imagine walking into a bakery to buy a loaf of bread. The sticker price on the bag says $2.99. Ahead of you in the checkout line are other customers also buying bread. As each one gets to the front, the customer and cashier whisper to each other back and forth. The customer pays, and the cashier gives each one – it seems to you – a different amount of change.
This is, in a very simplified sense, how public and private insurance plans buy drugs, a critical part of our health-care system. It needs to change, because it threatens the stability of workplace plans and the generic-drug industry. Private insurance plans are never invited to the table. Yet they are responsible for about 62 per cent of all spending on prescription drugs, according to the Canadian Institute for Health Information. Some of the largest ones can negotiate their own deals but, again, they have no idea how those side deals compare to each other or to public buyers. This leads to unnecessarily high costs for the plans, and higher premiums for employers and workers.
There is reason to have some doubt. For example, in 2017 Ontario’s auditor-general compared some of the drug purchases of public plans against what some hospitals paid. It found the hospitals were able to get prices 85 per cent lower, saving them $271-million in one year. That’s good. What is not so good: the price is assigned as a percentage of the sticker price of the patented version of the drug. So it is not 25 per cent of the price that was actually paid, but more likely something higher.
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