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Strategies to Reduce the Cost of Drugs for Young Adult Workers Within a A Health Management Perspective Name: Faith Widjaya Student Number: 211709813 Course: HLST 1010 Professor Lillie Lum T.A: Darko Giacomini November 18, 2011

Introduction Drug expenditures account for a rapidly growing component of the overall health budget and $420 billion is spent roughly worldwide, on prescription drugs each year. Of that, $19 billion is spent in Canada (Tamblyn, 2006, p. 153). However, with the growing needs of an ageing population, the healthcare system's budget is expected to take a harder hit (Busby & Robson, 2011). Under the Canada Health Act, drugs are covered provided that they are administered in hospitals (Tamblyn, 2006). This poses a challenge in the Canadian healthcare system because the only other alternative for drug coverage is to be privately insured (2006). The high cost of drugs therefore becomes a financial burden especially for people who are uninsured. Within the last twenty-five years, the number of obese Canadians has tripled (Health Canada, 2006). Changes in leisure, work, and society have great influence on diet and activity which can result in a rise in obesity and health related problems. Society has changed in a way in which inexpensive food has become more accessible and the consumption of larger portions of food is common. Maintaining a healthy weight has thus become difficult (2006). With weight related health problems on the rise, people must be increasingly concerned with covering the costs of drugs for chronic diseases such as diabetes. Those that are likely to fall victim to high drug costs are young adult workers. They currently do not have the luxury of a drug program like the Ontario Drug Benefit (ODB) program put in place to cover drug costs for such diseases, and even those who have insurance may only receive partial drug coverage. Through improving catastrophic drug programs, implementing reference drug programs (RDP), proposing drug coverage be universal, implementing a drug assessment process, and partial prefunding for the Ontario Drug Benefit (ODB) program, a health manager can help sustain the healthcare budget, while improving the costs of drugs for young adult workers today. Catastrophic Drug Programs

Catastrophic drug coverage is defined as the provision of a general level of coverage that protects individuals from drug expenses that threaten their financial security or cause undue financial hardship (Phillips, 2009, p. 1). Since it has been introduced, catastrophic drug coverage has run into a few problems. The Health Council of Canada (2009) explains that a

high-priced drug might be covered in one province, but might not receive coverage in another. They also state that catastrophic drug coverage has not been affordable for some healthcare budgets (2009). One option to ensure catastrophic drug plans are offered to all Canadians is to supply funds from the federal government to improve current provincial and territorial programs (2009). Provinces, such as British Columbia and Saskatchewan, who have adopted a catastrophic drug plan, have used the federal funds to expand their drug formularies, providing more coverage for blood products, cancer drugs and supplies for diabetics (2009). It appears that the federal government's contribution appears to have benefited British Columbia and Saskatchewan's catastrophic drug coverage plans. Groodendorst & Veall (2005) propose a second option, which is to develop a national catastrophic drug program. They argue that the provincial, federal, and territorial governments should share equal responsibility for drug costs. Romanow has recommended that the federal government pay 50% of the provincial governments drug insurance costs in excess $1,500 per person annually (Grootendorst & Veall, 2005). Romanow's proposal is one method in which Canadians can be covered for drug costs. Grootendorst & Veall (2005) explain another method discussed by the Kirby Senate Committee in which the federal government reimburse 90% of annual beneficiary drug costs for persons with total expenses surpassing $5,000 per year. Phillips (2009) argues that although those proposals made by Romanow and Kirby seem promising, they fail to discuss how the costs would be allocated amongst the provincial, federal, and territorial government. Through carrying out the suggestions made to improve the catastrophic drug program idea and given further information on how Romanow and Kirby's proposals can go through, such as how the costs would be distributed to the provincial, federal, and territorial government, it can be argued that a catastrophic drug plan would be an effective strategy in improving the cost of drugs for young adult workers. Catastrophic drug plans seem to be a good strategy for helping young adult workers financially afford drugs, however another method has been proposed to solve the problem.

Reference Drug Programs

Reference Drug Programs (RDPs) is another strategy that can help reduce the costs of drugs for young adult workers. Already adopted by British Colombia's healthcare plan, Schneeweiss (2007) explains Reference Drug Programs (RDPs) for pharmaceutical reimbursement are based on the assumption that drugs within a drug group are clinically interchangeable and that a common reimbursement level can thus be established (p. 18). Prescribing for common medical conditions is thus made more cost-effective. Schneeweiss (2007) explains the benefits of implementing an RDP is that drug expenditures decrease, while patients receive full drug coverage and pharmaceutical manufacturers have more of an incentive to reduce prices and provide a wide range of choices to patients that are fully covered under RDP. Schneeweiss (2007) further explains that if a patient is prescribed a drug that is more expensive than the preference price, the difference in cost must be paid by the patient and it is up to the physician to propose other drugs that are covered under the reference drug price. Patients are given an advantage through RDP because they do not have to give a co-payment if a therapeutically equivalent drug is chosen below the reference drug price (2007). If a health manager proposes an RDP to the government, they will be one step closer to ensuring young adult workers have the means to purchase drugs. Although, RDPs present a way for young adult workers to afford drugs, it is not the only strategy being suggested. A Universal Drug Plan Even though provinces are already struggling to meet the costs of healthcare, the overall goal in the Canadian healthcare system is to extend universal healthcare coverage to include prescription drugs for everyone. Gagnon states, A universal Pharmacare would allow for a 2% reduction in all prescription drug expenses by decreasing the dispensing fees, which would translate into a savings of about $502 million a year (Gagnon, 2010, p. 44). The Canadian Center for Policy Alternatives and Canadian Health Coalition (2008) explain a universal drug plan can be implemented to replace high-priced private and public plans. Similar to the catastrophic drug plan, the cost would be shared between federal and provincial governments, employers, and administered by provinces and territories. Through this strategy, the accessibility

of drugs is improved and through a regulated and efficient system, the cost of drugs is reduced. With a universal drug plan, the cost of drugs would be lower with the help of bulk purchasing (Center for Policy Alternatives and Canadian Health Coalition, 2008). The Canadian Center for Policy Alternatives and Canadian Health Coalition (2008) recommends that within a universal drug plan, A national public drug information system, free of conflict of interest with the pharmaceutical industry, to provide unbiased drug information for all healthcare professionals and the public (p. 30), should be implemented as well in order for patients to seek other alternatives to treat their health condition without paying the expensive cost of drugs at the hands of the pharmaceutical manufacturers. One can see that providing universal drug coverage in Canada will benefit all, however another strategy in collaboration with a universal drug plan has been proposed. Drug Assessment Process A drug assessment process determines if a drug is most effective and safe (Gagnon, 2010). Through implementing a drug assessment process along with a universal drug plan, it will improve the quality of medical practice and stop the selling of expensive drugs without any therapeutic benefits. Gagnon states the following: If Canada establishes a rigorous drug assessment process conjunction with a universal Pharmacare plan, it is estimated that it could make savings at least equalling those of British Colombia: around 8% of total costs per annum, this would mean savings of $2 billion across Canada as a whole. (p. 44) He argues that it would give the pharmaceutical industry an incentive to push the manufacturing of innovative drugs rather than promote drugs that are not as effective (2010). Thus, by presenting drug assessment process in combination with a universal drug plan to the government, one can see this strategy is effective in helping to sustain the healthcare budget, while reducing the costs of prescription drugs for young people. Nevertheless, another option has been explored

to address the issue of increasing drug expenditures as a result of the growing needs of baby boomers. Partial Prefunding for Ontario Drug Benefit (ODB) Program Public-sector spending on prescribed drugs in Canada reached an estimated $11.4 billion in 2009, and we know that seniors account for a large portion of these expenditures (CIHI, 2010). Busby & Robson (2011) explains that the Ontario Drug Benefit (ODB) program has been implemented to offer coverage for seniors aged 65 and older, however with the growing needs of an ageing population, the healthcare system's budget is expected to take a harder hit. The results are higher taxes in the future and young workers having to carry the responsibility for supporting the costs of pharmaceuticals for baby boomers. In this case, young workers are at a strong disadvantage in society as they must work to cover the costs of drugs for themselves and the elderly (2011). Busby & Robson (2011) illustrates that if these drugs benefit the seniors in the future, it will be at the cost and expense of what future young workers will want for them and their families and this will inevitably increase the chances of injury to the economy and may lead to conflicts between generations. Busby & Robson (2011) state that the solution to distributing funds more equally is partial prefunding of ODB, which is to set aside additional resources today, while most baby boomers are still economically active, to retrieve from to help cover the cost of drugs young adult workers will have need for later. A health manger can implement this strategy is by allying with the provincial government to propose a charge per working-age person per year, which will increase with wage growth over time, similar to a tax poll, therefore employment earnings, would be cutback for those employed at the threshold for employment income was chosen (2011). Partial prefunding of ODB seems a promising strategy to help cut back on the healthcare budget and to distribute funds more equally for the future, however it does not directly benefit young adult workers today. Other options that address current drug cost problems should be explored.

Conclusion

Through improving catastrophic drug programs, implementing reference drug programs (RDP), proposing drug coverage be universal, implementing a drug assessment process, and partial prefunding for the Ontario Drug Benefit (ODB) program, a health manager can help sustain the healthcare budget, while improving the costs of drugs for young adult workers today. It is through these strategies that further advancement in healthcare would be achieved. The issues revolving pharmaceutical policy presents an interesting topic because it differentiates itself from other components of healthcare in that it often crosses with health, industry, and science (Tamblyn, 2006). When a new and effective drug is developed, health and service delivery can undergo great changes (2006). In our current world, drugs can cause harm, evident with rehabilitation facilities in existence and the number of drug-related deaths. Drugs, however, have become optimal in sustaining and prolonging life; for example, chemotherapy can help extend the life of a cancer patient. Tamblyn (2006) says, Drug policy is the land of social experimentation. Things change rapidly in the drug policy world because with minor change in policy, you can dramatically influence drug expenditures (p. 154). As drug policy undergoes rapid changes, there is an opportunity for it to be further explored.

References

Busby, C. & Robson, W. B.P. (2011). A Social Insurance Model for Pharmacare: Ontario's Options for a More Sustainable, Cost-effective Drug Program. C.D. Howe Institute Commentary.

Canadian Center for Policy Alternatives and Canadian Health Coalition (2008). Life Before pharmacare: Report on the Canadian Health Coalition's Hearings into a Universal Drug Plan Program (p. 30). Ottawa: Canadian Center for Policy Alternatives. Retrieved on November 17, 2011 from http://www.policyalternatives.ca/sites/default/files/uploads/publications/National_Office_ Pubs 2008/Life_Before_Pharmacare.pdf

Canadian Institute for Health Information (2010). Drug Use Among Seniors on Public Drug Programs in Canada, 2002 to 2008. Retrieved on Nov. 9, 2011 from http://www.cihi.ca/CIHI-ext-portal/pdf/internet/SENIORS_DRUG_INFO_EN

Gagnon, M., & Hebert, G. (2010). The Economic Case for Universal Pharmacare: Costs and Benefits of Publicly Funded Drug Coverage for All Canadians (p. 44). Canadian Centre for Policy Alternatives. Retrieved on November 17, 2011 from http://ezproxy.library.yorku.ca/login?url=http://search.proquest.com/docview/887498007 ?accountid=15182; http://www.policyalternatives.ca/publications/reports/economic-caseunivers

Grootendorst, P.V. & Veall, M.R. (2005). National catastrophic drug insurance revisited: who would benefit from senator Kirby's recommendations? Canadian Public Policy / Analyse de Politiques, 31(4), 341-358. Health Canada (2006). Its Your Health: Obesity. Ottawa: Public Health Agency of Canada. Retrieved on November 17, 2011 from

http://www.hc-sc.gc.ca/hl-vs/alt_formats/pacrb-dgapcr/pdf/iyh-vsv/life-vie/obes-eng.pdf Phillips, K. (2009). Catastrophic Drug Coverage in Canada (p.1). Ottawa: Library of Parliament. Retrieved on November 17, 2011 from http://www.parl.gc.ca/Content/LOP/ResearchPublications/prb0906-e.pdf

Schneeweiss, S. (2007). Reference drug programs: Effectiveness and policy implications. Health Policy, 81(1), 17-28. doi:10.1016/j.healthpol.2006.05.001

Tamblyn, R. (2006). Opening remarks. In C.M Beach, R.P. Chaykowski, S. Short, F. StHilaire, & A. Sweetman (Eds.), Health Services Restructuring in Canada: New Evidence and New Directions (pp. 153-154). Kingston: John Deutsch Institute for the Study of Economic Policy, Queen's University.

The Health Council of Canada (2009). A Status Report on the National Pharmaceutical Strategy: A Prescription Unfilled. Toronto: Health Council. Retrieved on November 16, 2011 from www.healthcouncilcanada.ca/docs/rpts/2009/HCC_NPS_Commentary_WEB.pdf