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A new report shows prescription-drug spending is holding steady in Canada, but rapidly growing spending on certain classes of drugs, notably biologics, is threatening to substantially drive up costs.

The report, released Thursday by the Canadian Institute for Health Information, shows public and private drug spending grew only 0.9 per cent to $28.8-billion in 2014, the lowest rate since spending was first tracked in 1975. Of that amount, 42 per cent, or $12.1-billion, was paid for by public drug plans. Drug spending has been relatively stagnant since 2000 because a plethora of medications came off patent and cheaper generic versions became available.

But the picture isn't entirely rosy. The CIHI report shows that spending on biologic drugs, which are made from living organisms, is escalating quickly.

Tumour necrosis factor alpha inhibitors, or anti-TNF drugs, used to treat conditions like rheumatoid arthritis and Crohn's disease, were responsible for the highest proportion of drug spending in 2014. Anti-TNF drugs include adalimumab, sold under the brand name Humira, and infliximab, sold under the brand name Remicade. While the development of biologic drugs is a major step for patients because they can target specific molecules or sites in the body and result in major improvements – the drugs can alleviate symptoms and prevent the progression of joint damage in rheumatoid-arthritis patients, for instance – they are difficult and costly to produce.

BCC Research, a market-research firm based in Massachusetts, said in a January report that the global market for biologics was $200-billion (U.S.) in 2013 and is expected to reach $386.7-billion by the end of 2019.

As more biologics come on the market, and pharmaceutical companies increasingly focus their sights on expensive niche drugs for less common diseases, public and private drug plans will face a serious challenge in the coming years on how to meet the dramatically rising costs.

"They represent a great policy challenge that Canada has to grapple with," said Steve Morgan, professor of health policy at the University of British Columbia School of Population and Public Health. "I suspect the next 10 years are going to look a lot more difficult than the last 10 years unless we get our policies in line."

Specifically, Prof. Morgan argues that Canada should focus on negotiating with pharmaceutical companies on a united front, instead of having provinces work separately. Canada only represents 2 per cent of the world's pharmaceutical market, so provinces should stick together in order to have the greatest possible influence when working with the drug industry to determine what prices provincial drug plans pay for various drugs, he says. There is a growing move by countries in the European Union and elsewhere to more aggressively challenge companies over the true cost of those medications.

Because biologics are so costly to produce, there is considerable debate over how deep the market for generic versions will become. Prof. Morgan suspects that generic versions of biologics will never be as cheap as generic versions of other drugs because of the complex manufacturing process that is involved.

Earlier this year, Canada and the United States approved the first-ever generic versions of biologic drugs, referred to as subsequent entry biologics (SEBs), and it is expected that more will follow. While those generic versions represent a potential cost savings to provincial drug plans, there are also concerns over the safety of SEBs, considering how carefully biologics must be manufactured and how sensitive they are to any change in the manufacturing process.

A look at Ontario's drug spending in 2013 shows how expensive biologics are. According to CIHI data, anti-TNF drugs were the second-most expensive drug in the province. The province paid more than $200-million and there were about 10,700 beneficiaries taking the drug. The third-most expensive drug class was the cholesterol-lowering drugs known as statins. They cost the drug plan $179-million, but more than one million beneficiaries were taking those drugs.

The CIHI report found that four of the top 10 drugs that cost public drug plans the most in 2014 were biologics. Anti-TNF drugs alone increased nearly $234-million between 2008 and 2013.

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