Canada: Another step towards national pharmacare

In the recently released federal budget (Budget 2019), the Canadian government announced its intention to move forward with a national pharmacare plan.

What you need to know

With the stated goals of lower drug costs and improving drug coverage, the federal government has allocated funds to:

• establish a single coordinated entity, the National Drug Agency, to assess and negotiate drug prices for listing on a newly established national formulary;
• create a Canadian Drug Agency Transition Office within Health Canada to support the development of the Agency; and
• develop a national strategy for expanded orphan drug access and coverage.

Discussion

Last year, Budget 2018 announced the creation of the Advisory Council on the Implementation of National Pharmacare, to consult with Canadians and make recommendations to help realize the goal of national pharmacare. The Council published an interim report, with recommendations to improve coordination among drug plans in Canada. Guided by the Council’s consultations and recommendations, Budget 2019 announced the government’s intention to move forward with a national pharmacare plan and proposed implementation steps. The key elements of the proposal follow.

Canadian Drug Agency. Budget 2019 proposes the establishment of a new National Drug Agency, which would assess the effectiveness of new prescription drugs, negotiate drug prices on behalf of Canada’s drug plans, and recommend which drugs represent the best value for money for Canadians. Working with provinces, territories and other partners, the new agency would identify which drugs could be listed on a future national formulary. The agency is intended to provide impartial and independent advice. Because drug evaluation and price negotiation would be carried out by this single coordinated entity rather than the provinces/territories, the government expects that the price of prescription drugs covered by public drug plans would be lowered. It is not clear whether CADTH, INESSS and other agencies involved in the current system would be part of the new regime.

National formulary. Budget 2019 proposes the development of a comprehensive, evidence-based list of prescription drugs covered by national pharmacare for eligible Canadians. This national formulary would be developed in partnership with provinces, territories and other partners, and would likely replace the current provincial/territorial/federal public plan formularies. The proposal contemplates the creation of a Canadian Drug Agency Transition Office, which would support the development of the Canadian Drug Agency and its mandate to develop a national formulary. Budget 2019 proposes to provide $35 million to Health Canada over the course of four years, starting in 2019-2020, for the creation of the Transition Office.

Orphan drug strategy. Budget 2019 proposes developing a national strategy for high-cost drugs for rare diseases (often referred to as orphan drugs). The strategy would involve gathering and evaluating evidence on orphan drugs, implementing consistent decision-making policies, and negotiating prices with drug manufacturers, with the aim of ensuring that patients have access to effective treatments. The proposal contemplates an investment up to $1 billion over the course of two years, starting in 2020-2023, with up to $500 million per year ongoing.

Impact

It is difficult to predict the impact of this proposal on the industry at this early stage. With the establishment of the Canadian Drug Agency as a single coordinated entity, the process for drug price negotiation and formulary listing should be more streamlined, compared to the existing system in which each province or territory maintains its own public drug formulary and negotiations involve the pan-Canadian Pharmaceutical Alliance as well as individual provinces and territories. The government expects that cost saving will result from this consolidated approach to drug negotiations. If implemented, the new framework would provide Canadians with access to drugs that are consistent across the country for those eligible for public plan coverage. The proposal does not discuss whether the federal government intends to make any regulations that would impact private drug plan coverage. Nor is it clear whether individual public plans would have discretion to include additional drugs on their formularies that are not part of the national pharmacare formulary.

What’s next

The federal government will work with provinces, territories and other partners over the coming months to develop a mandate for the Canadian Drug Agency. The Advisory Council’s final report is expected to be released this spring and will be tabled in the House of Commons to address the issue of access to drug coverage.