Pharmacare - drug costs, dispensing fees, seniors' incomes

November 25, 2001

Click here for information on government's review of reference based pricing - an important cost control tool for Pharmacare.

October 24, 2001

Pharmacy Association's Self-Interest

Although the Pharmacy Association got an early July 25th meeting with the new Health Minister, it recycled its brief by presenting it a second time to the Finance Committee. Careful observers will note that the subsequent news headline reads "Cut Pharmacare coverage, save $100 million pharmacists tell Liberals," but the association that presented the brief to the legislature's Finance Committee is called the "Pharmacy Association" NOT the "Pharmacists Association". The British Columbia Pharmacy Association has as members 53% of the pharmacies and 45% of the pharmacists in BC.

Why would an association representing drug stores call for cuts to the public health insurance (Pharmacare) that covers its products and services? Could the answer be that while no jurisdiction has been able to control drug costs, Pharmacare has effectively made competition control the pharmacy's dispensing fees? Perhaps that is why the Pharmacy Association argues so strongly that Pharmacare should no longer separate dispensing fees and ingredient (drug) costs. It is pretty sad when if industry association is willing to shift $100 million in costs onto sick seniors so that it might have a better chance to increase its fees.

October 7, 2001

Making Sick Seniors Pay for Reckless Tax Cuts

Gary Collins, the finance minister who said that tax cuts would pay for themselves, now says that seniors should get ready for means tests to determine eligibility for Pharmacare.

The problem with rich seniors is there aren't enough of them. Not only that but rich seniors aren't as sick as poor ones.

The table shown here gives the percentage of BC seniors in each income bracket.

Income bracket	Percentage of taxpayers over 65
under $10,000	12.8%
$10K - $15K	30.3%
$15K - $20K	15.4%
$20K - $25K	9.7%
$25K - $30K	8.5%
$30K - $35K	5.8%
$35K - $40K	4.5%
$40K - $45K	3.0%
$45K - $50K	2.2%
$50K - $100K	6.1%
100,000 and over	1.8%

Family incomes might be slightly higher, but not much as many seniors are single. Where provinces have used income tests, the limits are set at or below $25,000 per year for a couple. Most BC seniors live with less than $25,000 per year annual income. If a couple is lucky enough to have $35,000 to live on, they don't need the extra burden of paying for the first $800 of their drug bills and 30% of the costs after that, but that is precisely what will happen if they are reduced to the same level of drug benefits that currently apply to younger British Columbians.

Seniors are different from younger British Columbians, they have much higher need for drugs and they have much lower incomes with no further opportunity in life to make up for loses. That is why Pharmacare has been there to protect them in BC since 1974. Dave Barrett started the program and Bill Bennett stood in the legislature and said that it was the best program ever brought in by the NDP. Now the Campbell Liberals are going to destroy it.

Dispensing Higher Fees

Not all want to put higher fees first. The BC Pharmacy Association (BCPhA) was quick to get an audience with the new government. The pharmacists lobbied to radically change the Pharmacare program and to restrict access based on income or means testing. The pharmacists went on to argue that any co-payment should then be based on the total prescription price (that is the combined drug cost and dispensing fee). These recommendations are truly unenlightened self-interest. It should be emphasized that the BCPhA is a voluntary association that by no means represents all pharmacists. The historical name change from Pharmacists Society to Pharmacy Association is noteworthy.

Pharmacists used to make their money through a combination of mark-ups on the product plus a dispensing fee. When Pharmacare came along it accepted the new method of pricing then in effect throughout most of the province, a professional fee plus the drug cost. It is questionable whether all pharmacists are really charging the actual ingredient cost or are also including a markup, but it is certain that their dispensing fee is clearly identified. Since seniors on Pharmacare pay the dispensing fee up to a maximum of $200 per year, there is a lot of competition. Some discount pharmacies have offered no dispensing fees or $1 fees. This has kept fees elsewhere from rising.

The effect of basing any user fee on the full price would be to submerge the dispensing fee and allow it to increase hidden by the much larger drug costs. These health "professionals" seem willing to discourage people from getting necessary medications so they can sneak in higher dispensing fees. Those same health "professionals" appear as donor number 418 on the list filed by the BC Liberal Party with Elections BC. For the sake of those needing prescription drugs, we can only hope that this interest group doesn't get a payoff for their $2,175.00 donation.

October 2, 2001

Alberta and Ontario Fail to Control Drug Costs

Premier Campbell and his supporters always drag out Alberta and Ontario for purposes of comparisons with BC. For once, that is exactly what should be done before the ax is taken to BC's Pharmacare program. Alberta and Ontario have not controlled drug costs.

Health Minister Hansen has been widely quoted comparing what the province pays for as a percentage of all drug expenditures compared to similar expenditures elsewhere. He has claimed that BC pays more of the total drug bill than any other province and, for some unknown reason, that is a reason for change. In fact, overall drug costs per person (ignoring who pays) are lower in BC. That is probably because the government exercises some cost control as it pays part of those costs.

When put under a little pressure as the result of 600 people attending a public meeting to object to cuts to Pharmacare and to demand public input, Minister Hansen said that he just wanted to stop the double digit increases in drug costs. If that is what he wants to do, he should quickly look to Alberta and Ontario - they have failed in their attempts.

Ontario's 2001/02 budget contains an interesting note about their drug programs which are estimated to cost $1.8 billion this year. On page 41 of Ontario's budget documents (big pdf) the note talks about an $877 million budget overrun for fiscal 2000/01. $105 million of that was an overrun in their drug programs. It appears that tough income tests didn't do the trick for stopping rising costs in Ontario.

Alberta isn't doing any better. A footnote on page 243 of Alberta's 2001/02 budget (big pdf) says "The Blue Cross Benefit program will receive $342.4 million in 2001-02, an increase of $31.6 million (10.2%) over the Comparable 2000-01 Preliminary Actual, to address increased utilization and the higher costs of new drugs."

Tough income tests and high user fees shift costs from taxpayers in general to those particular citizens who are sick (they are the ones who use prescription drugs). Shifting costs onto the sick is a particularly perverse way to run a government. After the shift, costs continue to rise at double digit rates for both the remaining government plan and for those paying out of pocket.

A study of the cost shift in Quebec showed some people will not get the drugs they need, but even that won't cut costs. Data from the Canadian Institute for Health Information shows that Quebec's costs for the government drug plan continue to rise at double digit rates.

If Premier Campbell and Health Minister Hansen really want to stop the rise in drug costs, they need to use the power of government to extend cost control programs like reference based pricing. They need to use the power of government to counteract the massive pressure drug companies put on physicians. And they need to clearly represent consumers rather than drug companies.

There is one reason why drug companies want less government involvement in drug programs. They want to eliminate any effort to control their prices and profits. Soon we'll see whose side Premier Campbell is on.

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Statistical Note: For fiscal year 2000/01, in BC the government paid an average of $155.15 for each of BC's 4,063,809 people. That was out of total drug costs averaging $385.67 per person (including over the counter drugs and some supplies such as needles for diabetics). In Alberta, the government paid an average of $116.26 for each of its 3,016,515 people out of total costs averaging $426.85 per person. In Ontario, the government paid an average of $164.25 for each of its 11,685,236 people out of total costs averaging $545.02 per person. So BC had a higher average payment by government as a percentage of total costs but a lower average overall cost per person. The data used in these calculations and comparisons comes from the Canadian Institute for Health Information. Total costs are on the basis of calendar years. The 2000/01 numbers are preliminary and are subject to revision but the relative comparisons are consistent with the immediately preceding fiscal years.