Are US and Canadian Rx Policies Converging?

As the US pharmaceutical industry anxiously watches the rapid onset of Obamacare, certainly one of the more pressing issues is the debate over the number of drugs that will be reimbursed in each therapeutic class under the Essential Health Benefits (EHB) program.  To say that this is a critical concern for the future of the US pharmaceutical industry would be a gross understatement.

Status of EHB and the “One Drug Per Therapeutic Class” Issue

Where does the EHB Rx situation stand at this point?  To date, things have gone from the “You-have-got-to-be-kidding!” stage - where HHS initially determined that only one drug per therapeutic class would be available under Obamacare’s EHB - to the latest HHS pronouncement in November 2012 which appeared to accept that more than one drug per category may be an option for patients.

I say “may” because this recent HHS opinion on drug availability states that more than one drug per class could be provided - depending on the various “benchmark” insurance plans that each state exchange might or might not adopt.

How did this change in attitude come about?  It seems in 2011/12 HHS was pressed on this “one drug per therapeutic class” policy by dozens of disgruntled patient advocacy groups.   In the end, HHS decided to review the drug policies of several potential state “benchmark” insurers.  They found, apparently to their surprise, that most current insurance policies that would likely serve as “benchmarks” provided several drug offerings in each therapeutic class.

Therefore, the emerging reality for Obamacare patients is that their Rx care most likely will vary from state to state, depending on how robust each state’s “benchmark” insurance policy may be. That’s how it stands now.

US v. Canadian Rx Policy

Coincidental to these Rx developments  in the US, which at best suggest that future access to prescription drugs under Obamacare may be a “hodgepodge” of state insurance coverages, it’s interesting to note that pharmaceutical access issues are also a growing issue in Canada, where universal healthcare for all citizens has been available since 1984.

Broadly put, it appears just as the US is plunging headlong into a major expansion of its public healthcare system, Canada, according many recent articles in the Canadian press, seems to be gradually inching away from its public system.  Instead, it is gradually moving back towards an enhanced private/public healthcare alternative.  The evidence for this?  In one of those stories, it’s pointed out that last year more than 30% of healthcare provided in Canada was delivered through private resources.  An important element of this trend is the emphasis on Rx services in many of the private insurance plans. 

Why is this movement toward private insurance occurring?  It’s because Canada’s public healthcare focuses primarily on full coverage for ‘hospital’ and ‘physician’ services.  Indeed, no Canadian province allows for private insurance payments for either of those health services.  Hospital and physician care are provided exclusively through the provincial health programs.

However, prescription drug care is a different story.  In Canada, while many provinces do cover various levels of outpatient Rx drugs, private insurance for prescription drugs is also widely utilized because there is great variation in provincial outpatient drug coverage policies.  Overall, drug coverage paid for by private Canadian insurance entities account for a large part of the Canadian private healthcare delivery.

In fact, as you review recent Canadian publications on the topic of outpatient drug coverage, and who should be paying for what in Canadian Rx coverage – individuals or the province – it is very much an ongoing debate in Canada, right now.

Here’s a good example.   A recent article in the Toronto Globe and Mail detailed a series of cases that highlighted the disparity between full, government-provided coverage for hospitals and physicians services - versus the provincial outpatient drug coverage (In this case, in New Brunswick) provided for those who need drugs for cancer, debilitating arthritis, and other diseases. You have to say it’s a mixed bag, at best.

Actually, the Canadian examples noted in the story reminded me of many of the accounts we have heard in the US for years, especially during the run up to the passage of Obamacare.  The stories essentially go like this: “Life threatening diseases-only a few drugs available to deal with the illness-each very expensive to buy-and once the person leaves hospital coverage, the individual goes broke trying to pay for the uncovered prescription products.”

What’s interesting here is that from the Canadian point of view, given nearly 30 years of national universal health coverage, this situation is viewed as nothing short of a “healthcare travesty.” One of the individuals quoted in the Globe and Mail story, who is battling cancer, framed it this way: “It was a shock to me that I had to pay for cancer treatment. That’s not how it’s supposed to be in Canada.”

Right. But actually, that is the way it is in many Canadian provinces.  This is because Canada has its own “hodgepodge” of provincial public drug coverages, and outpatient prescriptions, particularly for high cost drugs, are not provided under most of the provincial health systems.

What solution have an estimated 60% of Canadians adopted?  As pointed out a moment ago, they are buying a lot of private health insurance to cover access to a wide range of Rx products (see page 9).

Canadian and US Drug Policy Convergence?

So, will the US drug reimbursement system under Obamacare converge on the Canadian approach to Rx reimbursement? Or is it the other way around, with the Canadians regressing back to the old US private pay drug reimbursement system?  Obviously, at this early point in the onset of Obamacare, it’s hard to say “who’s on first.” But by the design, what is clear now is that within both systems there are, and likely will be, Rx coverage gaps. Patients in both countries will demand and likely find ways to obtain these drugs.

So let’s consider all this for a moment.  Is there a solution for Americans who may be swept into Obamacare on January 2, 2014 and who find their Rx care lacking?  Yes, I suggest we have to look no further than the way that many Americans currently manage their public Medicare benefit.  Today, 25 percent of Medicare patients carry additional, privately generated supplemental Medicare insurance, or “Medigap” coverage.  It’s specifically designed to cover the many medical services that “traditional” Medicare does not cover.  Given the variations we are likely to see in the state “benchmark” insurances, I’d be looking for “MediGap-like” insurance appearing shortly as a supplement to Obamacare Rx coverage.

Therefore, in managing the coverage gaps in Obamacare, is it an overstatement to say that Americans will likely be adopting a version of the current Canadian model of public/private Rx care?  Actually, yes, it is a stretch, but that’s because Americans will need more comprehensive Rx coverage than their Canadian counterparts currently require.  Americans will need not only insurance for high-cost prescription drugs, but also coverage for more than one drug in each therapeutic category.

In sum, whose Rx policy is converging on whose?  It’s hard to say exactly, but the way things appear to be developing, it looks like one day soon, citizens of both countries may be presented with very similar public Rx coverage policies, as well as private insurance options.

Taken to its logical public policy conclusion, in the future, Americans may possess an “Obamacare drug card,” as well as supplemental drug insurance that will be good for prescription drug coverage not only in New York City, but also in Toronto, as well.

Those are my thoughts on the converging Rx policies of Canada and the US.  I would be interested in hearing your views on this topic.

Tom Norton is principal at NHD Smart Communications. He can be reached at tnorton@nhdcomm.com