Healthy Skepticism Library item: 17383

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Publication type: news

Wilton K
Part 1: Union urges Quebec action to cut pharmaceutical costs
Montreal Gazette 2002 Apr 8

Full text:

The Quebec government is not doing enough to curtail skyrocketing prescription-drug prices, union officials complained yesterday.

Higher prices are contributing to increases in premiums for group health-insurance plans used by 4.5 million Quebecers, said Claudette Carbonneau, vice-president of the Confédération des Syndicats Nationaux.

“Over the past five years, the cost of some drugs has increased by 15 to 20 per cent each year,” Carbonneau said. “This is costing workers a lot more money. It is especially hard on people who have low salaries.”

For example, a family that paid $575 a year for drug coverage in 1997 will pay about $1,440 in 2003, she said.

Several new drugs that are more expensive than the ones they replace are helping to push up costs, Carbonneau said. Drugs represent between 65 and 80 per cent of medical-plan costs.

To combat the problem, the CSN wants Quebec to limit drug price increases and reduce the length of patents on new drugs, among other measures.

“We want this government to adopt a drug policy,” she said.

Heavy Marketing

Carbonneau also complained that doctors are too heavily influenced by harmaceutical companies that spend millions to market new drugs.

In a survey of Canadian health-care trends, group-plan providers said they expect costs to grow between 8 and 17 per cent this year because of higher prices for drugs and other services.

Greater use of services offered under health-care plans, like physiotherapy, and a demand for private hospital rooms are also driving up costs.

Marcel Pepin, a CSN researcher, said other factors include the aging population and the fact that people are more knowledgeable about health care.

“When people hear about a new drug that might help them, they want to try it. Each year, there are more and more prescriptions (being filled).”

Carbonneau said government officials are quick to complain about the rising costs of Quebec’s public drug-insurance plan, which is limited mostly to the elderly and welfare recipients, but are slow to take steps to help those covered under private plans.

She suggested the government could start by reducing the 9-per-cent surtax on health-insurance premiums, which adds $150 million annually to Quebec’s coffers. “The rising costs of drugs is not a problem that will go away. Something must be done about it urgently.”

Part 2. TWO MUCH OF A GOOD THING

With drugs now the fastest-rising element of health-care costs, consumers and taxpayers will find great interest in a Université du Québec à Montréal study that shows that pharmaceutical manufacturers rake in profits of 40 per cent a year.

For comparison, the researchers listed net profit rates for other sectors in 2000: banks, 16.7 per cent; chemical products, 15.9 per cent; telecommunications 10.9 per cent.

In the past 10 years, the nine biggest global pharmaceutical firms – Merck Co., Bristol-Myers Squibb Co., Pfizer Inc., Abbott Laboratories, Warner-Lambert Co., Eli Lilly Co., Schering-Plough Corp., SmithKline Beecham and GlaxoWellcome – have realized net profits of $190 billion U.S. Of that sum, they have funneled $146 billion U.S. to their shareholders in the form of dividends or share buybacks. These numbers suggest that it’s time to re-evaluate our patent laws, which keep the cost of medicines high for a long and profitable time.

Pharmaceutical companies say they need huge profits to cover the huge costs involved in research and development. The industry cliché is that it costs $1.3 billion U.S. to bring a single drug to market.

On the other hand, Canada’s Patented Medicine Prices Review Board estimates that it costs about $10 million to bring a new drug to market. The board says the companies spent $945 million on research and development in Canada in 2000 to produce 93 new products, or roughly $10 million per product.

The UQÂM study says that between 1991 and 2000, the big nine pharmaceutical manufacturers spent $316 billion on advertising and management, nearly three times the $113 billion they spent on research. Would pill buyers view the two types of spending as equally necessary?

By any standard, breakthrough drug therapies, including preventive medications, have worked wonders, giving many Canadians extra years of vigorous life. The companies responsible for these miracles deserve a profit. But the average Canadian spends $360 a year on medicine, a per-capita pill bill that is among the world’s highest.

While it has benefited Canada, and notably Quebec, enormously over the years to be home to pharmaceutical manufacturers, there is a point at which questions need to be asked. Intellectual capital is very good. But at what cost?

Consider how our health-care dollars are being spent. Between 1996 and 2000, healthcare workers in Quebec saw their salaries increase by two per cent, or $106 million, while the cost of medicine rose 205 per cent, or $913 million.

And now Quebec is preparing to raise premiums under the province’s drug insurance plan. Treasury Board president Joseph Facal says plan costs have jumped by 15 per cent a year since 1997, mainly because of the rise in the cost of drugs, not increased reliance on drugs.

Existing patent laws are designed, and rightly so, to protect and encourage innovation and reward research. But the present system has tipped the profit pendulum too far in one direction.