November 25, 2001

Eliminating Reference Based Pricing Puts Pharmacare at Risk

On Friday afternoon, government's favorite time for making announcements it doesn't want covered, Health Planning Minister Sindi Hawkins announced the appointment of "A panel to seek cost-effective alternatives to B.C. Pharmacare's reference drug-pricing program."

"A reference drug will be selected by the Health Resource Commission for each group of drugs based on peer reviewed and other literature and these reference drugs will make up the formulary. Criteria for selecting the reference drug is that it is as effective as other drugs in the group for initial treatment and is more cost effective than other drugs in the group." (Oregon Governor John Kitzhaber)

No the above quote doesn't come from the NDP's reference drug program that the Campbell government has promised to dismantle as it rewards the pharmaceutical industry, nor does that quote come from the panel appointed by Hawkins. That quote comes from Oregon Governor John Kitzhaber's news release as he shows the leadership necessary to preserve that state's prescription drug program. The Campbell government seems to like to pick and choose from economic examples south of the border. Perhaps it should also look at how our southern neighbours are copying some of our ideas to save tax dollars.

Why wasn't Hawkin's panel appointed to seek cost-effective ways of delivering Pharmacare benefits? Why was it specifically focused on how to do in what is already one of the cost effective tools used by Pharmacare? The answer of course is that "As part of its New Era document, the provincial government committed to work with doctors, pharmacists and others to find a cost-effective alternative to reference-based pricing." The BC Liberals appear to have done that so as to pay off the drug companies.

Reference based pricing is a simple idea. It goes one step beyond generic substitution. Generic substitution is when a chemically identical drug is substituted for a brand name drug. Reference based pricing looks at chemically different drugs that are intended to treat the same condition. The least expensive drug in a particular therapeutic class is what Pharmacare will pay for unless a medical reason can be given for paying for a more expensive alternative. Of course, this won't work for all therapeutic classes which is why Pharmacare relies on the advice of an independent therapeutics committee.

At the time the NDP government introduced reference based pricing, the alternative cost control that was suggested for Pharmacare was no cost control at all. That alternative was to shift costs from government onto those who need prescriptions by increasing user fees. Schemes to use larger deductibles, larger co-payments and perhaps even restrictions on eligibility not only shift costs but they also provide a deterrent to filling the needed prescription.

It is true that some physicians write unnecessary, and sometimes even harmful, prescriptions. Patients, however, are not qualified to second guess their physician's advice. Restricting eligibility or introducing user fees puts patients in that second guess position. A better approach is to educate physicians so as to improve their prescribing habits.

Since Pharmacare was introduced in BC in 1974, prescribing profiles have been available. It has always been difficult to get recognized medical authorities to use the information so as to assist their colleagues. Meanwhile the pharmaceutical industry is estimated to spend $20,000 per physician per year to encourage them to prescribe particular drugs. The alternative to reference based pricing would be dramatically improved prescribing patterns by BC's physicians. That is not going to happen without significant well directed expenditures so as to counter the drug industry. In the meantime, referenced based pricing is a very necessary cost control tool for the Pharmacare program.