The Conference Board of Canada’s Canadian Alliance for Sustainable Health Care (CASHC) has released the first of a series of research reports that aim to bring greater transparency to a number of healthcare issues.
In Health Care Aware: Understanding Pharmaceutical Pricing in Canada, the CASHC sought to establish better understanding around the retail cost of pharmaceutical products. It found that pharmacy markups — the dollar amount added to the cost of ingredients of a medication — can cause those costs to vary greatly.
“Several factors contribute to the final retail costs of prescription medication, which leads to uneven access for Canadians across the country and raises questions about fairness," said Isabelle Gagnon-Arpin, associate director for Health Economics and Policy.
The report found that the same drug can have different final retail costs across provinces and territories, which could be a source of confusion for many Canadians. Ingredient costs were found to make up around three-quarters of prescription drug expenditure in the country, while the rest came from dispensing fees and markups by pharmacies or wholesalers.
All Canadian jurisdictions regulate the public reimbursement of pharmacy markups. Such reimbursements are typically set as a percentage of the ingredient cost, though the rates can vary based on the territory or province.
“[Pharmacy] markups remain largely unregulated for individuals who are insured under a private drug plan or who are not covered under any plan,” the report said, adding that most private insurers contain costs by imposing dollar caps on markups or contracting with specialty pharmacies.
The report also put a spotlight on the increasing use of high-cost drugs in Canada, largely driven by specialized medicines and biologics. Because of the growing costs of such medications, some governments and private plans have instituted different markups and started applying dollar caps. The trend is also raising concerns from both a cost-containment and value perspective, with questions arising over whether a percentage model is appropriate given the costs of getting specialty drugs to patients, the need to ensure their effective use, and the sheer volume of prescription drugs being used today.
Wholesaler markups are also regulated in most Canadian jurisdictions, though each one uses different mechanisms. The mechanisms vary based on the design of the province or territory’s public plans; the local pharmaceutical market; and the jurisdiction’s relationship with manufacturers, distributors, and pharmacists. The amount reimbursed also differs across locations, with most setting it as a percentage of the ingredient cost.
“Better understanding is needed to ensure that markups reflect the true operating and investment costs incurred by wholesalers and pharmacies,” the Conference Board of Canada said. “Markups and professional fees would also need to be addressed and reviewed as part of a national pharmacare program to ensure equitable access to medications for all Canadians.”
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