CompassRx, 6th Edition

Annual Public Drug Plan Expenditure Report, 2018/19

Acknowledgements

This report was prepared by the Patented Medicine Prices Review Board (PMPRB) as part of the National Prescription Drug Utilization Information System (NPDUIS) initiative.

The PMPRB wishes to acknowledge the members of the NPDUIS Advisory Committee for their expert oversight and guidance in the preparation of this report. Please note that the statements and findings for this report do not necessarily reflect those of the members or their organizations.

Appreciation goes to Yvonne Zhang for leading this project, and to Tanya Potashnik and Jeffrey Menzies for their oversight in the development of the report. The PMPRB also wishes to acknowledge the contributions of analytical staff Nevzeta Bosnic and Ai Chau and editorial staff Sarah Parker and Shirin Paynter.

Disclaimer

NPDUIS operates independently of the regulatory activities of the Board of the PMPRB. The research priorities, data, statements, and opinions expressed or reflected in NPDUIS reports do not represent the position of the PMPRB with respect to any regulatory matter. NPDUIS reports do not contain information that is confidential or privileged under sections 87 and 88 of the Patent Act, and the mention of a medicine in a NPDUIS report is not and should not be understood as an admission or denial that the medicine is subject to filings under sections 80, 81, or 82 of the Patent Act or that its price is or is not excessive under section 85 of the Patent Act.

Although based in part on data provided by the Canadian Institute for Health Information (CIHI), the statements, findings, conclusions, views, and opinions expressed in this report are exclusively those of the PMPRB and are not attributable to CIHI.

Contact Information

Patented Medicine Prices Review Board
Standard Life Centre
Box L40
333 Laurier Avenue West Suite 1400
Ottawa, ON K1P 1C1

Tel.: 1-877-861-2350
TTY 613-288-9654

Email: PMPRB.Information-Renseignements.CEPMB@pmprb-cepmb.gc.ca

Executive Summary

Prescription drug expenditures for the NPDUIS public drug plans increased by 5.6% in 2018/19 to reach $12.1 billion, driven primarily by a marked increase in the use of higher-cost drugs and the introduction of Ontario’s OHIP+ program.

The PMPRB’s CompassRx report monitors and analyzes the cost pressures driving changes in prescription drug expenditures in Canadian public drug plans. This sixth edition of CompassRx provides insight into the factors driving growth in drug and dispensing costs in 2018/19, as well as a retrospective review of recent trends in public drug plan costs and utilization.

The main data source for this report is the National Prescription Drug Utilization Information System (NPDUIS) Database at the Canadian Institute for Health Information (CIHI), which includes data for the following jurisdictions: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, and the Non-Insured Health Benefits Program.

The findings from this report will inform policy discussions and aid decision makers in anticipating and responding to evolving cost pressures.

Key findings

Prescription drug expenditures for the NPDUIS public drug plans increased by 5.6% in 2018/19, bringing annual spending to more than $12 billion.

• Between 2013/14 and 2018/19, the total prescription drug expenditures for Canada’s public drug plans rose by $3 billion, for a compound annual growth rate of 5.5%.
• Drug costs, which represent 80% of prescription drug expenditures, grew by 5.8% from 2017/18 to 2018/19, while dispensing costs, which account for the remaining 20% of expenditures, grew by 5.1%.
• The NPDUIS public drug plans paid an average of 87% of the total prescription costs for 292 million prescriptions dispensed to almost 8 million active beneficiaries in 2018/19.
• The OHIP+ program accounted for a 7.6% increase in total prescription drug expenditures for Ontario in 2018/19 and a 4.4% push on spending for all NPDUIS public drug plans.

Drug cost growth for the NPDUIS public plans in 2018/19 was primarily driven by a greater use of higher-cost drugs as well as the introduction of the OHIP+ program in Ontario, and was offset in part  by savings from generic price reduction and substitution.

• The increased use of higher-cost drugs continues to be the most pronounced driver, pushing costs upward by 6.7% in 2018/19, despite more modest impacts from the use of DAA drugs for hepatitis C.
• More than half of the total drug costs in 2018/19 can be attributed to less than 5% of public drug plan beneficiaries. High-cost drugs, which were used by less than 2% of beneficiaries, accounted for over one third of costs.
• The overall increase in costs was also heavily influenced by Ontario’s universal coverage program for youth aged 24 and under. Without OHIP+, the 5.8% total drug cost growth in all NPDUIS public drug plans would have been reduced to 1.1%.
• In 2018/19, generic pricing policies and substitution had a notable -6.2% effect on costs, due in large part to recent policies reducing the maximum price of many top-selling generics to 10%–18% of the originator price.
• Other factors, including the volume of drugs and the size of the beneficiary population, had a relatively small influence on the growth in drug costs for public plans.

Dispensing costs in the NPDUIS public plans reached $2.4 billion in 2018/19, marking notable growth over the previous year, largely as a result of Ontario’s OHIP+ program.

• The overall growth in dispensing costs was 5.1% (or $117.4 million) in 2018/19, a steeper increase than that observed in the previous three years, though results varied among individual plans.
• The OHIP+ program had a significant impact on the growth in dispensing costs, pushing costs upward by 3.5% ($80.5 million) nationally and by 6.3% in Ontario.
• Apart from changes due to OHIP+, an increase in the number of active beneficiaries had the greatest impact on the dispensing costs in 2018/19, pushing overall costs up by 2.0%.
• The decrease in the volume of units dispensed to patients and a decline in the overall average dispensing fee per prescription pulled dispensing costs down by nearly 1%.

Introduction

Canadian public drug plan expenditures represent a significant portion of the overall healthcare budget. The Canadian Institute for Health Information (CIHI) estimated the total cost of prescription drugs in Canada to be $34.3 billion in 2019, with the largest component (43.1%) financed by the public drug plans and the remainder paid by private plans (36.9%) or out of pocket by households and individuals (19.9%).^{Footnote 1}

CompassRx is an annual PMPRB publication that explores trends in prescription drug expenditures in Canadian public drug plans. It focuses on the shifting pressures that contribute to the annual change in drug and dispensing costs, including the switch in use between lower- and higher-priced drugs and changes in the beneficiary population, drug prices, and the volume of drugs used, as well as other key factors.

This edition of the report centres on the 2018/19 fiscal year, with a retrospective look at recent trends. The results of this study aid stakeholders in anticipating and responding to the evolving cost pressures that affect Canada’s public drug plans.

Methods

The main data source for this report is the National Prescription Drug Utilization Information System (NPDUIS) Database, developed by the Canadian Institute for Health Information (CIHI). This database houses pan-Canadian information on public drug programs, including anonymous claims-level data collected from the plans that participate in the NPDUIS initiative. Data is reported on a fiscal year basis.

Results are presented for the following public drug plans: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador, Yukon, and the Non-Insured Health Benefits (NIHB) Program.

The analysis focuses exclusively on data for beneficiaries that met their deductible and received public reimbursement. Results reported for Saskatchewan and Manitoba include the accepted prescription drug expenditures for individuals who are eligible for coverage but have not submitted an application and, therefore, do not have a defined deductible. Results reported for New Brunswick include the number of active beneficiaries enrolled in the Medavie Blue Cross Seniors’ Prescription Drug Program and their related drug expenditures, which are offset by monthly premiums.

In Ontario, long-term care (LTC) prescriptions were separated out from the dispensing costs analysis, as their dispensing patterns may differ from those of the general beneficiary population.

As of October 2017, claims processed on behalf of the First Nation Health Authority (FNHA) in British Columbia are no longer submitted to the NPDUIS Database, including those previously captured through the NIHB Program. To mitigate the impact of this shift on the results for 2018/19, any remaining claims through the NIHB in British Columbia were excluded from the analysis in cases where the NIHB is reported individually but included in national totals.  

The analysis of drug and dispensing cost drivers follows the methodological approach detailed in the PMPRB’s The Drivers of Prescription Drug Expenditures: A Methodological Report.^{Footnote 2} Drug costs include any associated markups. Analyses of the average prescription size, as well as pricing, are limited to oral solids to avoid data reporting inconsistencies that may exist in the days’ supply and unit reporting of other formulations. Anatomical Therapeutic Chemical (ATC) levels reported here are based on CIHI NPDUIS data and reflect the ATC classification system maintained by the World Health Organization Collaborating Centre for Drug Statistics Methodology. Vaccines and pharmacy services are not represented in this report.

The methodological approach used in CompassRx is reviewed on an annual basis and updated as required to respond to changes in the pharmaceutical landscape and data access. Thus, the scope of the report and the data analyzed may vary slightly from year to year. New changes to the methodology are detailed in Methods and Limitations sections of each edition.

For a Glossary of Terms, see the Resources section of the NPDUIS Analytical Studies page on the PMPRB website.

Limitations

Expenditure and utilization levels vary widely among the jurisdictions and cross comparisons of the results are limited by the plan designs and policies of the individual public drug plans, as well as the demographic and disease profiles of the beneficiary populations.

For example, public drug plans in British Columbia, Saskatchewan, and Manitoba provide universal income-based coverage, while other provincial public drug plans offer specific programs for seniors, income assistance recipients, and other select patient groups, and the NIHB provides universal care to its entire population.

The NPDUIS Database includes sub-plan data specific to particular jurisdictions. This further limits the comparability of results across plans. For instance, Alberta, Nova Scotia, and Prince Edward Island submit the data for a select sub-plans to NPDUIS. A comprehensive summary of the sub-plans available in the database, along with the eligibility criteria, is available in the Resources section of the NPDUIS Analytical Studies page on the PMPRB website.

Drug claims for beneficiaries in Ontario who also have coverage through the NIHB are primarily reimbursed by the Ontario Drug Benefit program, with any remaining drug costs covered by the NIHB. Therefore, claims reported for the NIHB include those coordinated with the Ontario Drug Benefit program.

Totals for the NPDUIS public drug plans are heavily skewed toward Ontario due to its size, and as such, the introduction of the OHIP+ program for Ontario residents aged 24 years or younger had a notable impact on the overall trends for 2018/19.

High-cost medicines are defined as having an annual treatment cost greater than $10,000. If medicines reach this threshold in any given year, they are included in the count for all other years. Thus, the number and composition of high-cost medicines in any given year may vary depending on the time of analysis.

As the methodology for this edition of the report has been revised to exclude NIHB service providers in British Columbia, historical results for the NIHB may not match those reported in previous edition.

Drug costs reported are the amounts accepted toward reimbursement by the public plans, which may not reflect the amounts paid by the plan/program and do not reflect off-invoice price rebates or price reductions resulting from confidential product listing agreements.

The prescription drug expenditure data for the public drug plans reported in this study represents only one segment of the Canadian pharmaceutical market, and hence, the findings should not be extrapolated to the overall marketplace.

This edition of the CompassRx reports on data up to and including the 2018/19 fiscal year. Any plan changes or other developments that have taken place since then will be captured in future editions.

1. Trends in Prescription Drug Expenditures, 2013/14 to 2018/19

Prescription drug expenditures for public plans increased by 5.6% in 2018/19, following a notable rise of 7.4% the year before. The introduction of the OHIP+ program in Ontario contributed considerably to the overall annual increase in expenditures, offset in part by cost reductions resulting from recent initiatives aimed at lowering the prices of generic medicines in Canada.

Prescription Drug Expenditures = Drug Costs (80%) + Dispensing Costs (20%)

Between 2013/14 and 2018/19, annual prescription drug expenditures for the public drug plans grew at a compound annual growth rate of 5.5%, rising from $9.1 billion to $12.1 billion with a steady increase of $0.7 billion in each of the last two years (Figure 1.1).

The prescription drug expenditures reported in this section represent the total amounts accepted for reimbursement by the NPDUIS public drug plans, including drug costs (with any associated markups) and dispensing costs. The overall growth in expenditures in 2018/19 consists of a 5.8% growth in drug costs and a 5.1% increase in dispensing costs. As both components grew at a similar rate, the drug cost and dispensing cost shares of expenditures remained consistent with the previous year, at 80% and 20%, respectively (Figure 1.2).

These amounts reflect both the plan-paid portions of the prescription costs as well as beneficiary-paid portions, such as co-payments and deductibles.

In 2018/19, public plans paid an average of 87% of the total prescription drug expenditures, while the remainder was paid by the beneficiaries either out of pocket or through a third-party private insurer. The beneficiary-paid share varied across jurisdictions, ranging from 10% to 35%.

The annual growth in prescription expenditures is a function of increases in the number of active beneficiaries and their drug costs. While the size of the beneficiary population in most jurisdictions remained somewhat stable in 2018/19, the overall NPDUIS public plan beneficiary population grew by 15.1%, mainly due to a near 25% increase in Ontario following the implementation of the OHIP+ program. For more details on the impact of this change, see the program summary at the end of this section.

In 2018/19, almost 8 million active beneficiaries filled approximately 292 million prescriptions that were accepted towards a deductible or paid for (in full or in part) by the NPDUIS public drug plans. Seniors made up a slight minority of the total active beneficiaries, due to the influx of beneficiaries under 25 in Ontario, though this share varied greatly across jurisdictions as a result of differences in plan design, eligibility, and the demographics of the beneficiary population (Figure 1.3).

Prescription Drug Expenditures = Drug Costs (80%) + Dispensing Costs (20%)

Drug costs, including markups, represent the largest component of prescription drug expenditures and have the greatest influence on overall trends. Following a notable 8.3% increase in 2017/18, drug costs rose by an additional 5.8% in 2018/19. The average rate of change over the last three years was 5.3% across the public plans.

Figure 1.4 reports the annual rate of change in drug costs for each NPDUIS drug plan from 2016/17 to 2018/19. Drug costs increased in all plans in 2018/19, though the rates of change varied across jurisdictions, ranging from approximately 1% to 13%.

Figure 1.5 breaks down the annual rate of change in drug costs from 2017/18 to 2018/19 by market segment (bar chart) and gives the corresponding market share in 2018/19 for each (pie chart). These results provide a snapshot of how the distribution of sales across market segments has shifted over the last year. As the market status of a medicine is dynamic, the medicines contributing to any one segment may differ from year to year. This can have a significant effect on how changes are interpreted; for example, although the growth in sales for the overall Canadian patented market was -0.6% in 2018, the growth rate rose to 6.5% when previously patented medicines were included, which suggests that medicines that left the patented market continued to be strong contributors to overall spending.^{Footnote 3}

Patented medicines represent the largest segment of the market, capturing 59.9% of public plan drug costs in 2018/19. Since 2017/18, some of the top-selling patented medicines in Canada have shifted out of the patented market segment, including the biologic medicine Remicade (infliximab), which was responsible for $420 million in annual drug costs for the public plans in 2018/19. Despite this pull, the segment still increased by a modest 1.2%, driven mainly by the use of DAA drugs. Apart from the influence of DAAs, high-cost patented medicines— those with an average annual cost per beneficiary greater than $10,000—and patented biologics both showed a negative growth rate in 2018/19 due to the change in patent status for Remicade.

Shifts in the patented market were also reflected in the single-source non-patented market, which experienced a remarkable growth rate of 43.1% as a handful of commonly used medicines changed patent status. Novorapid (insulin aspart), a diabetes treatment, moved from the patented to single-source non-patented market segment over the course of 2017/18, becoming the top medicine in the segment in 2018/19 with over $40 million in sales. The high rate of increase among single-source non-patented medicines had a limited impact on the overall growth given their relatively small 5.2% share of total drug costs. Multi-source generics, which accounted for 18.3% of drug costs, declined by -7.8% in 2018/19. The next section will further elaborate on these findings.

Prescription Drug Expenditures = Drug Costs (80%) + Dispensing Costs (20%)

Dispensing costs make up an important part of prescription drug expenditures. Overall, dispensing costs in the NPDUIS public plans grew at a sizable rate of 5.1% in 2018/19, for a compound annual growth rate of 3.5% over the last three years. Figure 1.6 reports the annual rate of change in dispensing costs for each NPDUIS drug plan from 2016/17 to 2018/19. Jurisdictional variations may be due to changes in dispensing fee policies and plan designs, as well as changes in the number of prescriptions and their size, among other factors.

As dispensing costs have grown at a slower rate than drug costs over the last three years, their share of overall prescription drug expenditures has declined slightly from 21.0% in 2016/17 to 20.2% in 2018/19.

Figure 1.7 depicts the trend in the dispensing cost share of total prescription expenditures for each NPDUIS drug plan from 2016/17 to 2018/19.

2. The Drivers of Drug Costs, 2017/18 to 2018/19

Drug cost increases in the NPDUIS public plans in 2018/19 were primarily driven by a continued rise in the use of higher-cost medicines, counterbalanced by significant savings from generic price reductions and substitution. Plan design changes in Ontario accounted for a 4.7% upward push on drug costs, resulting in an overall increase of 5.8%.

Figure 2.1 provides insight into the pressures driving the rates of change in drug costs from 2013/14 to 2018/19.

In any given year, changes in the patient population and the volume of drugs will typically exert a slight to moderate upward pressure on drug costs. In 2018/19, these costs were significantly impacted by the addition of the OHIP+ program in Ontario, which extended drug coverage to all Ontario residents aged 24 and younger. The combined effect from this change resulted in an upward push of 4.7% on total drug costs for the NPDUIS public plans. Excluding OHIP+, the impact of the demographic effect has declined in recent years, from between 2% and 3% prior to 2016/17 to 1% in 2018/19, indicating a slower rate of growth in the number of active beneficiaries. The volume effect, which has steadily contributed an increase of approximately 1% to drug costs over the last few years, marked no significant change in 2018/19.

The most pronounced upward push on costs can be attributed to the use of higher-cost medicines. The drug-mix effect exerted a significant 6.7% pressure on drug costs in NPDUIS public plans in 2018/19. While the use of DAA drugs for hepatitis C made up a smaller portion of this effect, the use of other higher-cost medicines jumped from a consistent 4% to 5% push on annual costs in recent years to a high of 6.1% in 2018/19.

Counterbalancing these upward cost pressures, generic substitutions and price reductions generally exert a downward pull on costs. The magnitude of these effects can vary from year to year depending on the timing of generic market entries and the implementation of policies lowering maximum generic prices. Cost savings from price reductions were more significant in 2018/19 with an impact of -4.0%, largely due to a wide-reaching generic pricing initiative introduced in April 2018. Generic and biosimilar substitution pulled costs down by an additional 2.2% over the course of the fiscal year, for a combined total pull of -6.2%. In the absence of these cost-saving effects, drug costs in NPDUIS public plans would have increased by 12% in 2018/19.

The overall 5.8% increase in drug costs in 2018/19 represents an absolute growth of $527 million, with varying rates of growth among the public drug plans ranging from approximately 1% to 13% (Figure 2.2). These variations were mainly driven by differences in the magnitude of the opposing components of change. Jurisdictions with higher overall growth rates included Yukon (13.4%), Ontario (7.5%), and Alberta (6.9%).

The increased use of higher-cost drugs other than DAAs had the greatest push effect, with an overall impact of 6.1% ($549 million) ranging from 3.1% to 8.5% across jurisdictions. The pressure from DAA drugs for hepatitis C increased drug costs by an additional 0.6% ($52 million). Differences in the drug-mix effect across public drug plans may be related to plan designs, formulary listing decisions, or the disease profiles of the population, among other determinants. The impact of DAA drugs also varied, with the largest upward push in the Yukon (6.2%), followed British Columbia (4.6%), Nova Scotia (2.8%), and New Brunswick (2.8%). The use of DAAs declined slightly in Ontario, pulling costs downward by -0.6%.

The OHIP+ program in Ontario generated $427 million in drug cost growth over 2017/18, pushing costs upward by 7.9% in Ontario and  4.7% across all NPDUIS plans.

The demographic effect boosted drug costs in the NPDUIS public plans by 1.0% ($92 million) in 2018/19. The increase in the active beneficiary population may be the result of growth in the overall population of a jurisdiction, an increase in the number of Canadians eligible for senior coverage (65+), and/or plan design changes that expanded coverage to new population or patient groups. Note that demographic changes due to OHIP+ are presented separately.

The volume effect, which has been relatively stable over the past few years, pulled costs downward by a slight 0.3% ($24 million) in 2018/19. However, this effect was an important driver in Manitoba (4.8%), Saskatchewan (2.9%), and New Brunswick (2.5%).

The cost-saving effects of generic and biosimilar substitution (-2.2% or -$199 million) and price reductions (-4.0% or -$362 million) were more pronounced in all jurisdictions. Together they represented 6.2% ($562 million) in savings for the NPDUIS public plans in 2018/19, compared to just 2.3% the year before.

The key effects for 2018/19—price change, substitution, and drug-mix—are explored in more detail in the following section.

Price Change Effect

This effect captures changes in the prices of both brand-name and generic medicines. In 2018/19, reductions in drug prices generated significantly greater savings than the year before, pulling the overall cost levels downward by 4.0% ($362 million). An analysis by market segment suggests that the downward pull was mainly due to the reduction in the average unit costs reimbursed in the multi-source generic category, as the average unit costs of patented medicines remained relatively stable while the costs of single-source non-patented medicines increased.

The price change effect in 2018/19 was heavily influenced by the pan-Canadian Pharmaceutical Alliance (pCPA) and Canadian Generic Pharmaceutical Association (CGPA) joint five-year pricing agreement initiated on April 1, 2018, which reduced the prices of 67 of the most commonly prescribed generic medicines in Canada to approximately 10% to 18% of their equivalent brand name product. This initiative alone accounted for a -3.7% impact on the growth in overall drug costs in 2018/19. As the agreement consisted of a one-time reduction in costs, it is not expected to further impact cost growth in coming years.

Figure 2.3 reports long-term trends in average unit costs from 2009/10 to 2018/19 by market segment for (a) patented medicines; (b) multi-source generic medicines; and (c) single-source non-patented medicines, along with their corresponding 2018/19 market shares. The results are presented as an index, with the base year (2009/10) set to one and subsequent years reported relative to this value. The findings were calculated using the cost-weighted average of the average reimbursed unit cost changes at the individual medicine level. The analysis was restricted to oral solid formulations to ensure unit consistency.

From 2009/10 to 2018/19, the prices of patented medicines, which represent the largest market segment (59.9%), were relatively stable, while the prices of single-source non-patented medicines, the smallest market segment (5.2%), increased by an average of 25%. Despite this significant rise, the impact of the single-source non-patented market segment was limited due to its small size.

The multi-source generic market segment shows a similar trend across all NPDUIS public drug plans: a rapid decline in the first few years after generic price reforms, followed by a more gradual decline from 2014/15 to 2016/17 as generic prices stabilized. Following the most recent price reforms, prices declined by an average of 3% in 2017/18 followed by a more notable 11% drop in 2018/19. As a result, the average multi-source generic unit cost across all jurisdictions in 2018/19 was less than half of the 2009/10 average.

Substitution Effect

Shifts from brand-name to generic or biosimilar medicines pulled overall drug costs down by 2.2% in 2018/19, translating to a savings of $199 million for the NPDUIS public plans. Three medicines—two ACE inhibitors and one antipsychotic—were responsible for the majority of the savings from generic substitution: perindopril (-0.8%), aripiprazole (-0.3%), and perindopril/diuretics (-0.2%). The total savings offered by biosimilars remained limited, with two immunosuppressants, one immunostimulant, and one insulin making a small but growing difference in overall drug costs: Inflectra/Renflexis (-0.1%), Brenzys/Erelzi (-0.07%), Grastofil (-0.04%), and Basaglar (-0.02%).

The share of prescriptions for multi-source generic medicines in public plans increased to 71.2% in 2018/19, a significant rise over 61.9% in 2013/14, while their corresponding share of total drug costs decreased over the same time period, from 24.9% to 18.3%. This six-year trend reflects the implementation of generic pricing policies, as well as the genericization of a number of commonly used medicines that lost patent protection over the past decade.

Patented medicines accounted for a decreasing share of prescriptions in 2018/19, dropping from 14.2% to 9.8% since 2013/14. However, their share of costs rose from 56.6% to 62.6% of total public plan drug costs between 2013/14 and 2017/18, remaining near 60% in 2018/19 despite the change in patent status of a few top-selling medicines. This trend has been primarily driven by the increased use of high-cost drugs such as biologics, oral oncology medicines, and the DAA drugs for hepatitis C.

Figure 2.4 reports the 2013/14 to 2018/19 trends in market shares by market segment: patented, multi-source generic, and single-source non-patented medicines.

Compared to traditional generic drug markets, the savings from biosimilars are limited by a slower initial uptake and lower price reductions. The biosimilar market is a more complex space; unlike generics, biosimilars are not identical to their reference products, but are rather highly similar versions, making it more difficult to exchange one drug for another.^{Footnote ii} Table 2.1 provides an overview of the biosimilars recently approved in Canada.

Inflectra, which was approved in Canada in 2014 and became available in the public market in 2016, was one of the first biosimilars available on the Canadian market^{Footnote iii} and has the highest list price discount. Inflectra and Renflexis, which was approved in 2017, were both approved for most of the same autoimmune inflammatory disease indications as their reference product Remicade. But despite having list prices set at approximately half that of Remicade, their market uptake has been slow, acquiring just 8.9% of the infliximab market by 2018/19. For more information on the market distribution of biologic disease-modifying antirheumatic drugs in the public drug plans, see Appendix B.

It was observed that biosimilars with an acute indication had significantly higher rate of uptake than biosimilars with a chronic indication. Grastofil, a biosimilar of the white blood cell stimulator Neupogen, has the highest uptake in the public plans, at 92.4% in 2018/19. However, its 25% discount from the reference product list price places it at the bottom of the biosimilars in terms of price reductions. Brenzys and Erelzi, biosimilars of the anti-TNF drug Enbrel, were approved for market in Canada in 2016 and 2017, respectively. At approximately two thirds of the list price of their reference biologic, they had captured 11.9% of the prescription share of the etanercept market by 2018/19.

Recently, Canadian payers including public drug plans in Manitoba, British Columbia, and Alberta have undertaken or proposed a number of initiatives to increase biosimilar uptake. Future editions of this report will include the impact of these initiatives as they are implemented.

Drug-Mix Effect

Shifts in use between lower- and higher-cost drugs pushed overall cost levels for the NPDUIS drug plans up by 6.1% or $549 million in 2018/19. While the drug-mix effect was more pronounced in 2018/19 than in 2017/18, the impact of direct-acting antiviral (DAA) drugs for the treatment of hepatitis C, which is reported separately in this analysis, was less significant than previous years, adding 0.6% ($52 million) to the total push effect.

Figure 2.5 reports the 10 drugs that made the greatest contribution to the drug-mix effect in 2018/19, together accounting for an upward push of 3.3% on overall drug costs. The three drugs that made their first appearance on this list in 2018/19—Entyvio, Ibrance, and Tresiba—received their market authorization from Health Canada as little as two to four years before. Ophthalmological drug Eylea had an appreciable uptake in 2018/19 and topped the list of high-impact drugs with a 0.5% contribution to the growth in drug costs. Five of the major contributors were oral oncology products and immunosuppressants with average annual treatment costs exceeding $10,000, two of which exceeded $50,000. The remaining four drugs were used by larger beneficiary populations to treat more common conditions.

The share of total drug costs for each of the top contributors is reported in the accompanying table. Note that this value differs from the contribution to the drug-mix effect, which measures the growth (increase or decrease in costs over time) rather than the costs themselves.

A growing number of high-cost drugs have been reimbursed by NPDUIS public plans in recent years, often targeting relatively small patient populations. The number of medicines with an average annual cost per beneficiary exceeding $10,000 increased significantly from 71 in 2013/14 to 115 in 2018/19. These drugs, which accounted for 17.8% of the overall NPDUIS drug costs in 2013/14, accounted for 34.0% of the costs in 2018/19, representing only a very small percentage of active beneficiaries (1.7%).

Although there has been a sustained growth in the drug cost share of all high-cost drugs in recent years, the steepest increase has been among those in the highest-cost band ($50,000+). Figure 2.6 reports on the trends in the market for high-cost drugs from 2013/14 to 2018/19 by average annual drug cost per active beneficiary determined at the medicinal ingredient level: $10,000–$20,000; $20,000–$50,000; and $50,000 or more.

Figure 2.7 provides a more detailed breakdown of the share of high-cost drugs by jurisdiction in 2018/19. High-cost drugs account for a greater share of costs in income- and premium-based programs; for example, they make up more than half of the total drug costs for public plans in Manitoba (54.6%) and British Columbia (50.0%). These types of programs require beneficiaries to be responsible for a portion of prescription costs, either as a percentage of income or a premium. As such, plan spending is more heavily skewed toward beneficiaries with higher overall costs, and therefore high-cost drugs.

NPDUIS public plans have paid the majority of drug costs for a relatively small number of high-cost beneficiaries in recent years^{Footnote 1}. As shown in Figure 1.2, NPDUIS public plans paid an average of 87% of total prescription costs in 2018/19, while the remaining 13% was paid by the beneficiaries either out of pocket or through a private insurer. To understand to what extent the plan-paid and beneficiary-paid portions of prescription costs are associated with the beneficiary’s total annual drug costs, Figure 2.8 provides a breakdown of the plan-paid share of NPDUIS drug plan expenditures by average beneficiary annual drug cost level in 2018/19. Beneficiaries are grouped into five cost tiers: less than $5,000; $5,000–$10,000; $10,000–$20,000; $20,000–$50,000; and $50,000 or more.

The figure shows that plans paid for a larger portion of prescription costs for higher-cost beneficiaries. In 2018/19, just under 5% of beneficiaries had annual drug costs over $5,000 and accounted for over 55% of overall drug costs for the public plans. For beneficiaries in the highest-cost band—those with annual costs over $50,000—the plan-paid share of costs ranged from 97% to close to 100%.

There were considerable jurisdictional differences in plan-paid shares due to variations in plan design, eligibility, and other factors.

Table 2.2 reports the 10 highest-cost drugs reimbursed by the NPDUIS public plans in 2018/19 ranked by their average annual drug cost per active beneficiary. All 10 drugs were indicated to treat rare diseases, and eight had treatment costs exceeding $100,000. Note that although Table 2.2 presents the overall results for all NPDUIS public drug plans, there are significant variations at the individual plan level.

Over the past few years, biologic medicines have captured an increasing share of the total drug costs for the NPDUIS public plans. In 2018/19, the biologics market share grew by 13.8% to reach 28.1% ($2.7 billion) of drug costs. The top four biologics—Remicade, Humira, Eylea, and Lucentis—were responsible for 13.5% of total NPDUIS drug costs.

Figure 2.9 reports on trends in the biologic share of total drug costs for the NPDUIS public drug plans, along with the growth in drug costs for this market segment and the current list of top 10 biologic drugs.

Alberta and Saskatchewan had the highest levels of biologic-related costs relative to total drug costs in 2018/19 (38.1% and 36.8%, respectively), while Yukon and Prince Edward Island had the highest rates of growth (28.8% and 22.7%, respectively). Variations among plans may be driven by differing plan designs, eligibility for reimbursement, the disease profiles of the population, and the size of the plan, among other considerations.

An analysis by therapeutic class suggests that over two thirds of the total drug costs in 2018/19 were concentrated in a few classes. Antineoplastic and immunomodulating agents topped the list of therapeutic classes at 25.8% of drug costs in 2018/19, reflecting shifts in the funding of oral oncology medicines and a higher use of immunomodulating drugs. Alimentary tract and metabolism drugs now hold the second highest share of costs (12.4%), due in part to the newer antidiabetic therapies in the class. The drug cost share held by cardiovascular drugs, which include relatively low-cost drugs used by a large number of active beneficiaries, has decreased from nearly 15% in 2013/14 to just under 8% in 2018/19.

3. The Drivers of Dispensing Costs, 2017/18 to 2018/19

Dispensing costs grew at a steeper rate in 2018/19 than the year before, driven mainly by the introduction of the OHIP+ program. Growth was tempered by a sustained decrease in the volume of units dispensed to patients as well as a decline in the overall average dispensing fee per prescription.

Dispensing costs in the NPDUIS public plans increased by 5.1% or $117.4 million in 2018/19, reaching a total of $2.4 billion, a steeper growth rate than the 3.8% reported in 2017/18.  

Ontario’s OHIP+ program, which provided coverage to all Ontario residents age 24 and younger for the full course of fiscal year 2018/19, added $80.5 million to the dispensing costs, pushing costs upward by 6.3% in Ontario and 3.5% across all the NPDUIS public drug plans.

Figure 3.1 provides insight into the pressures driving changes in dispensing costs from 2013/14 to 2018/19. Excluding the impact of OHIP+, the demographic effect was responsible for the largest annual contribution to dispensing cost growth in 2018/19, pushing costs up by 2.0%. The prescription size effect, which has been an important cost driver in previous years (ranging from 0.8% to 2.5%), contributed a 1.2% upward pressure on the growth in dispensing costs. Changes in the average dispensing fee per prescription decreased dispensing costs by 0.2%, while the volume effect was negative for the second consecutive year at -0.7%, reflecting a decline in the number of units dispensed to patients.

The overall rate of change in dispensing costs varied widely among individual plans, from a high of 8.6% in Ontario to a low of -3.4% in Alberta (Figure 3.2). The high growth in Ontario was driven mainly by OHIP+, without which dispensing costs would have increased by a more moderate 2.4%. In Alberta, changes in prescription sizes and fees, which were push effects in 2017/18, pulled costs down in 2018/19.

Long-term care (LTC) prescriptions were separated out from Ontario results in this cost drivers analysis, as they may not have a typical dispensing frequency, e.g., a significantly higher number of prescriptions per patient than in the general beneficiary population due to the more specialized needs of their patients. LTC patients only accounted for a small portion of all beneficiaries in 2018/19, contributing less than 0.1% to the 8.6% rate of growth in Ontario dispensing costs, and are therefore not displayed in the figure.

The contribution of the fee effect, which reflects changes in the average dispensing fee per prescription, is directly related to the individual reimbursement policy of each public drug plan.

In 2018/19, the rates of change in the average dispensing fee per prescription varied across NPDUIS drug plans. Most plans showed modest changes ranging from -1.9% to 1.4%, with the exception of Manitoba, which had a relatively large drop of 7.1% due to its recent fee-capping policy initiative. Over the past five years, Prince Edward Island and the NIHB have had a relatively high growth in fees, with compound annual growth rates of 2.7% and 0.9%, respectively.

Table 3.1 reports the average dispensing fee per prescription from 2013/14 to 2018/19, along with the rate of growth between 2017/18 and 2018/19 and the compound annual growth rate for the entire period. The results are an average across all prescriptions and include a range of dispensing fees. An overview of the dispensing fee policies of the NPDUIS public drug plans is available in the Resources section of the NPDUIS Analytical Studies page on the PMPRB website.

Various plans have specific policies in place related to fill frequency and compensation. The average dispensing fee per prescription is also related to prescription size: plans with lower average dispensing fees generally reimburse prescriptions with shorter days’ supply and vice versa. British Columbia, Manitoba, Ontario, and the NIHB, which had some of the lowest dispensing fees in 2018/19, generally reimbursed prescriptions with relatively small average sizes. Decreases in the average days’ supply per prescription can exert an upward pressure on dispensing costs, as a greater number of prescriptions are required to dispense the same volume of drugs.

The results for the average days’ supply per prescription suggest that prescription size was either stable or declined slightly in most public drug plans from 2017/18 to 2018/19, with the exception of Alberta, where the average days’ supply increased by 6.8% over the previous year. Manitoba and New Brunswick had the largest proportional decreases in average prescription size, at -7.5% and -3.1%, respectively.

Figure 3.3 depicts the trend in average days’ supply per prescription from 2013/14 to 2018/19. The results represent the average across all prescriptions for oral solid formulations and encompass brand-name and generic medicines for both acute and maintenance therapies.

Although the average days’ supply and dispensing fee per prescription are useful measures for comparison, the roster of medicines covered by each plan also factors into the average dispensing cost. Comparing the dispensing costs for the same suite of medicines can provide greater insight into the differences between plans.

Figure 3.4 compares the dispensing costs across jurisdictions for the generic medicines reduced to 10% (previously 18%) of their brand-name reference price through the recent pCPA–CGPA agreement. Dispensing costs for one million tablets of each medicine are given for two fiscal years: 2012/13, which is the year prior to the implementation of the pCPA’s first generic initiative, and 2018/19. These medicines collectively accounted for 19.7% and 21.8% of the total NPDUIS public drug plan dispensing costs in 2012/13 and 2018/19, respectively.

Dispensing costs for the select medicines increased between 2012/13 and 2018/19 in most provinces, although the size of the increases varied considerably. The highest rates of increase were observed in British Columbia and Ontario, while only Saskatchewan experienced a moderate decrease. In British Columbia, Saskatchewan, Manitoba, Newfoundland and Labrador, and the NIHB, dispensing costs for one million tablets exceeded $200,000.

While the same drugs were studied across all plans, the disease profile of the beneficiary populations and the type of therapy for which the drugs were prescribed (acute or maintenance) influenced the average days’ supply and, hence, the overall dispensing costs for each jurisdiction.

Appendix A: Drug Reviews and Approvals

In Canada, Health Canada, the Patented Medicine Prices Review Board (PMPRB), and the Canadian Agency for Drugs and Technologies in Health (CADTH) are responsible for drug approvals, price reviews, and health technology assessments, respectively. This appendix provides an overview of recent trends in drug reviews and approvals.^{Footnote v}

Health Canada

Health Canada grants the authority to market a drug in Canada by issuing a Notice of Compliance (NOC) once it has met the regulatory requirements for safety, efficacy, and quality. In 2018, Health Canada issued NOCs for 40 new active substances: 15 biologics and 25 small molecule pharmaceuticals.

Patented Medicine Prices Review Board

The PMPRB reviews the factory-gate prices of patented medicines sold in Canada and ensures that they are not excessive. As part of the current price review process, the PMPRB’s Human Drug Advisory Panel (HDAP) evaluates each new medicine and assigns a recommended level of therapeutic improvement.

The PMPRB completed scientific reviews for 160 of the 179 medicines approved by Heath Canada between 2014 and 2018. Over this five-year period, only 8% were classified in the Substantial Improvement or Breakthrough categories. Of the rest, three quarters demonstrated Slight or No Improvement over existing therapies, while 18% were classified in the Moderate Improvement category (Figure A2).

Canadian Agency for Drugs and Technologies in Health

CADTH’s Common Drug Review (CDR) provides reimbursement recommendations and advice to Canada’s publicly funded drug plans (except for Quebec) based on an evaluation of the clinical, economic, and patient evidence of drugs marketed in Canada. The jurisdictions take these recommendations under advisement when making formulary listing decisions and in price negotiations.

Figure A3 summarizes the CDR recommendations for fiscal years 2014/15 to 2018/19.^{Footnote vi} The total number of CDR recommendations has varied from year to year, from a low of 31 in 2017/18 to a high of 51 in 2016/17. In 2018/19, 38 recommendations were issued: 29 medicines were recommended as “reimburse with clinical criteria and/or conditions” and 9 received a “do not reimburse” recommendation.

As of April 1, 2016, CADTH no longer accepts confidential drug prices, as the submitted prices are disclosed in the recommendations and reports.

Appendix B: Distribution of New Patients on Select DMARDs by Jurisdiction, 2018/19

To monitor the uptake of biosimilars in a key therapeutic market, Figure B1 presents the distribution of new public drug plan patients on biologic or targeted synthetic disease-modifying antirheumatic drugs (DMARDs) by NPDUIS jurisdiction.  

Xeljanz, a new targeted synthetic drug introduced in 2014, has quickly captured a significant share of the market for this class, accounting for 15% of new patients nationally in 2018/19, due in large part to its 28% share of new patients in Ontario. Market shares increased in 2018/19 for Humira, which is listed along with Xeljanz among the top medicines by drug cost in Appendix C.

Due to the relatively small number of new patients across jurisdictions, interpretation of these results is limited. Variations among plans may be driven by differing plan designs, eligibility for reimbursement, and the demographic and disease profiles of the beneficiary populations, among other considerations.

Recently, Canadian public payers including Manitoba, British Columbia, and Alberta have undertaken a number of initiatives to increase biosimilar uptake. Associated with the policy implementation time frame, the changes will be reflected in the corresponding future editions of this report.