Generics help provinces hold the line on prescription drug costs

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The amount of money provincial governments dole out for prescription medications held steady last year, part of an encouraging trend of slower growth in public drug spending across the country over the past six years.

Experts attribute the smaller increases largely to the expiration of patent protection on some widely prescribed pharmaceuticals – the blockbuster anti-cholesterol drug Lipitor, for example, came off patent at the end of 2011 – and to provincial governments banding together to negotiate better deals with drug makers.

"What we've seen recently is the provinces reducing the prices they're willing to pay for generics," said Jordan Hunt, the manager of pharmaceuticals for the Canadian Institute for Health Information, which released its annual report on prescription drug spending on Thursday. "That impact would be seen particularly in the last year or two."

Public drug payouts increased by less than 0.1 per cent in 2013, the lowest annual increase since 1996, when public drug spending last fell.

Canadian governments spent $12.2-billion on prescription drugs last year, essentially the same as the year before.

Overall spending on prescription drugs, including medications Canadians pay for out-of-pocket or through private insurance plans, totalled $29.3-billion last year, up 2.3 per cent from the year before.

Public-sector spending on prescription drugs made up just over 40 per cent of the total.

The proportion varies from province to province, depending on the generosity of each jurisdiction's public drug coverage. In New Brunswick, the public share of spending on prescribed drugs is lowest, at just over 29 per cent. Saskatchewan's is highest, at more than 47 per cent.

Canada's premiers announced in January, 2013, that they had set new, lower prices for six of the most commonly prescribed generic drugs, including versions of Lipitor, and Effexor, an antidepressant.

Where provinces used to pay between 25 and 40 per cent of the brand price for these drugs, they now pay 18 per cent, which the premiers estimated would save public drug plans $100-million per year.

"That was a massive change for the way they priced those generic drugs, and it led to a whole lot of savings," said Michael Law, an expert in pharmaceutical policy at the University of British Columbia.

He noted, however, that the spending slowdown began before the premiers joined forces because the end of some major patents "saves public drug plans money without them even trying."

The provinces are also negotiating with brand-name drug makers to buy in bulk at a lower prices.

While the publicly financed tab for some widely prescribed drugs has declined, the bill for others has gone up.

That is one of the reasons it is hard to say if provincial governments, which oversee health care, can keep the brakes on prescription drug spending, Mr. Hunt said.

The biggest increase is in a class of expensive biologic agents used to treat inflammatory conditions such as rheumatoid arthritis and Crohn's disease. Called tumour necrosis factor alpha inhibitors, the drugs accounted for 54.8 per cent of the growth in public drug spending between 2007 and 2012.

Biologic treatments for rheumatoid arthritis, an autoimmune disease that can cause crippling inflammation of the joints, cost about $20,000 a year, and a recent study found the number of cases in Ontario alone more than doubled between 1996 and 2010.

Next on the list of pharmaceuticals driving public spending growth are a class of drugs that treat age-related macular degeneration, which accounted for 12.6 per cent of the increase in public drug payouts between 2007 and 2012.

Patients requiring such pricey treatments accounted for the bulk of public spending on prescription drugs, the report found.

Just over 12 per cent of people accounted for 60 per cent of public-sector spending on medications.