CompassRx, 7th Edition

Annual Public Drug Plan Expenditure Report, 2019/20

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, Jeffrey Menzies, and Caroline Peterson for their oversight in the development of the report. The PMPRB also wishes to acknowledge the contribution of the analytical staff Ai Chau and Ian Detta and editorial staff Sarah Parker, Shirin Paynter, and Laura Fortune.

This report is dedicated to the memory of Ai Chau who sadly passed away in March 2021. He was a valued employee of the PMPRB for over 20 years and an integral part of the development of the CompassRx reports. Ai is greatly missed and fondly remembered by his friends and colleagues.

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 an 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 rose to $12.5 billion in 2019/20, an increase of 3.7% over spending in 2018/19. While new restrictions on eligibility requirements in Ontario’s OHIP+ program had a significant impact on costs, the overall growth in prescription drug expenditures continued to be primarily driven by notable increases in the use of higher-cost drugs.

The PMPRB’s CompassRx report monitors and analyzes the cost pressures driving changes in prescription drug expenditures in Canadian public drug plans. This seventh edition of CompassRx provides insight into the factors driving growth in drug and dispensing costs in 2019/20, 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 3.7% in 2019/20, bringing annual spending to $12.5 billion.

• Between 2014/15 and 2019/20, the total prescription drug expenditures for Canada’s public drug plans rose by $3.1 billion, for a compound annual growth rate of 5.5%.
• Drug costs, which represent 80% of prescription drug expenditures, grew by 4.3% from 2018/19 to 2019/20, while dispensing costs, which account for the remaining 20% of expenditures, grew by 1.4%.
• The NPDUIS public drug plans paid an average of 87% of the total prescription costs for 300 million prescriptions dispensed to almost 7 million active beneficiaries in 2019/20.
• Changes to the OHIP+ program accounted for a 4.8% decrease in total prescription drug expenditures for Ontario in 2019/20 and a 2.9% pull on spending for all NPDUIS public drug plans.

Drug cost growth for the NPDUIS public plans in 2019/20 was primarily driven by a greater use of higher-cost drugs and was offset in part by the decreasing use of DAAs for hepatitis C and plan design changes in Ontario.

• The increased use of higher-cost drugs continued to be the most pronounced driver in 2019/20, pushing costs upward by 5.8%, while declining use of direct-acting antivirals (DAAs) for hepatitis C had a pull effect of -1.6%.
• Nearly 60% of the total drug costs in 2019/20 were attributable to just 5% of public drug plan beneficiaries. High-cost drugs, which were used by 2% of beneficiaries, accounted for more than one third of costs.
• The overall increase in costs was tempered by changes in eligibility for Ontario’s program for those age 24 and younger. Without OHIP+, the 4.3% total drug cost growth in all NPDUIS public drug plans would have been 7.8%.
• Changes in the size of beneficiary populations pushed costs up by 3.0% in 2019/20, due in large part to the expansion of British Columbia’s income-based plan.
• Following a substantial 6.2% pull on costs from generic pricing initiatives in 2018/19, price reductions and generic and biosimilar substitution had a very slight -1.2% effect in 2019/20.

Dispensing costs in the NPDUIS public plans increased slightly to $2.5 billion in 2019/20 due to opposing forces from plan design changes in British Columbia and Ontario.

• The overall growth in dispensing costs was 1.4% (or $35.4 million) in 2019/20, a more modest increase than the 5.1% growth observed in 2018/19, though results varied among individual plans.
• Modifications to the OHIP+ program had a significant impact on the growth in dispensing costs, pulling costs down by 2.3% ($56.3 million) nationally and by 4.1% in Ontario.
• An increase in the number of active beneficiaries pushed overall costs up by 2.7% in 2019/20 as a result of demographic changes in British Columbia.
• Changes in prescription size and the volume of units dispensed to patients pushed costs upward by 2.3%, while there was no change in the overall average dispensing fee per prescription.

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 financed by the public drug plans (43.6%) and the remainder paid by private plans (36.9%) or out of pocket by households and individuals (19.9%).^{Reference 1}

CompassRx is an annual PMPRB publication that explores trends in prescription drug expenditures in Canadian public drug plans. It focuses on the 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 focuses on the 2019/20 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.

In British Columbia, claims for the NIHB were included in national totals but excluded from the analysis where the NIHB is reported individually as data from the First Nation Health Authority (FNHA) in British Columbia was unavailable. Unlike most NPDUIS public drug plans, the NIHB program covers a significant range of medical supplies and equipment (MS&E). Cost growth results excluding MS&E claims are provided in Appendix C.

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.^{Reference 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.

In this edition, the multi-source generics market segment was redefined as multi-source non-patented medicines, which captures not only generics and their reference brand-name drugs, but also biosimilars and their originator biologics. Multiple-source generics are presented as a sub-segment of the multi-source non-patented segment where required.

The methodological approach used in CompassRx is reviewed on an annual basis and updated as needed 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.

A glossary of terms for NPDUIS studies is available on the PMPRB website.

Limitations

Expenditure and utilization levels vary widely among the jurisdictions and cross comparisons of the results are limited by differences in 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. As Yukon is a small jurisdiction, any plan design changes will result in more significant fluctuations in their rates of growth.

The NPDUIS Database includes select sub-plan data specific to particular jurisdictions, such as Alberta, Nova Scotia, and Prince Edward Island. This further limits the comparability of results across plans. A comprehensive summary of the sub-plans available in the database, along with their eligibility criteria, is available 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 and subsequent revision of the OHIP+ program for Ontario residents age 24 years or younger had a notable influence on the overall trends for 2018/19 and 2019/20.

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.

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 CompassRx reports on data up to and including the 2019/20 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, 2014/15 to 2019/20

Prescription drug expenditures for public plans increased by 3.7% in 2019/20. High-cost patented medicines (other than DAAs for hepatitis C) continued to be the most significant contributor to the growth in public plan drug costs, offset in part by a decline in the use of new hepatitis C drugs as well as changes to the eligibility requirements for Ontario’s OHIP+ program.

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

Between 2014/15 and 2019/20, annual prescription drug expenditures for the public drug plans grew at a compound annual growth rate of 5.5%, rising from $9.4 billion to $12.5 billion, with $1.1 billion of this growth seen over 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 2019/20 consists of a 4.3% growth in drug costs and a 1.4% increase in dispensing costs. Due to the disparity in their rates of growth, the drug cost component continued to capture a greater share of overall expenditures (80.3%), while the dispensing costs share dropped slightly below 20% (19.7%) (Figure 1.2).

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

In 2019/20, public plans paid an average of 87% of the total expenditures for prescription drugs that were eligible for reimbursement, with the remainder paid by the beneficiaries either out of pocket or through a third-party private insurer. The beneficiary-paid share varied across jurisdictions, ranging from 9% to 34%.

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 2019/20, the overall NPDUIS public plan beneficiary population declined by 13.1%, mainly due to a 22.0% decrease in Ontario following the revision of eligibility requirements for the OHIP+ program. For more details on this change, see the program summary at the end of this section.

In 2019/20, almost 7 million active beneficiaries filled approximately 300 million prescriptions that were accepted towards a deductible or paid for (in full or in part) by the NPDUIS public drug plans. The distribution of beneficiaries by senior and non-senior populations has been impacted by changes in the number of patients covered under the OHIP+ program over recent years. As the number of beneficiaries age 24 and under in Ontario decreased in 2019/20, seniors once again made up the majority (55%) of the total active beneficiaries, 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 an increase of 5.8% in 2018/19, drug costs rose by an additional 4.3% in 2019/20. The average rate of change over the last three years was 6.1% across the public plans.

Figure 1.4 reports the annual rate of change in drug costs for each NPDUIS drug plan from 2017/18 to 2019/20. Many plans experienced positive rates of change in 2019/20, ranging from 4.1% in Manitoba and Ontario to 9.9% in New Brunswick. Drug costs in British Columbia and Yukon declined by 1.4% and 24.9% respectively.

Figure 1.5 breaks down the annual rate of change in drug costs from 2018/19 to 2019/20 by market segment (bar chart) and gives the corresponding market share in 2019/20 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.

Patented medicines represent the largest segment of the market, capturing 57.5% of public plan drug costs in 2019/20. Since 2018/19, some of the top-selling patented medicines in Canada have shifted from the patented market segment to either the single-source or multi-source non-patented segments. In addition, costs for direct-acting antivirals (DAAs) for hepatitis C decreased by 5.6% in 2019/20, reflecting a decline in the use of these medicines. Despite these pulls, the patented market segment still increased slightly by 0.2%, driven mainly by the use of high-cost medicines—those with an average annual cost per beneficiary greater than $10,000, other than DAAs—which grew by a considerable 10.8%.

The single-source non-patented market experienced substantial 94.0% growth in 2019/20 as a handful of commonly used medicines changed patent status. The anti-VEGF biologic medicine Lucentis (ranibizumab) and the diabetes treatment Tresiba (insulin degludec) both moved from the patented market to the single-source non-patented market over the course of 2018/19, becoming the top medicines in the segment in 2019/20 with over $272 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 share of total drug costs (9.7%).

Costs for multi-source non-patented medicines, which include generics and their reference brand-name drugs as well as biosimilars and their originator biologics, increased by 1.2% in 2019/20, now accounting for 28.8% of drug costs. This segment can be broken out into two distinct sub-segments: multi-source generic medicines made up 17.5% ($1,753 million) of drug costs in 2019/20 but had nearly no growth, while the remaining medicines, consisting mainly of off-patent biologics and biosimilars, grew by 3.1% to reach 11.4% ($1,148 million) of drug costs. Multi-source non-patented biologics are expected to be an important group of medicines to monitor in future years as biosimilars gain traction in the public plans.

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 modestly by 1.4% in 2019/20, for a compound annual growth rate of 3.4% over the last three years. Figure 1.6 reports the annual rate of change in dispensing costs for each NPDUIS drug plan from 2017/18 to 2019/20. 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 20.2% in 2018/19 to 19.7% in 2019/20.

Figure 1.7 depicts the trend in the dispensing cost share of total prescription expenditures for each NPDUIS drug plan from 2017/18 to 2019/20.

2. The Drivers of Drug Costs, 2018/19 to 2019/20

Drug cost increases in the NPDUIS public plans in 2019/20 were characterized by a decrease in the use of DAA drugs and a continued rise in the use of other higher-cost medicines. Growth in the number of active beneficiaries and their utilization patterns added to the push on drug costs while plan design changes in Ontario pulled costs down, resulting in an overall increase of 4.3%.

Figure 2.1 provides insight into the pressures driving the rates of change in drug costs from 2014/15 to 2019/20.

Annual changes in the patient population and the volume of drugs used generally exert a slight to moderate upward pressure on drug costs. Over the past two years, these costs have been significantly impacted by the addition and subsequent redesign of the OHIP+ program in Ontario. In 2019/20, Ontario revised the program by omitting residents age 24 and younger who were already covered by private insurance, which resulted in a pull-down effect of 3.0% on total drug costs for the NPDUIS public plans. The demographic effect, which excludes the effects of OHIP+, contributed 3.0% to the rise on costs in 2019/20. In comparison with its 1.0% impact the year before, this rate of change indicates a more pronounced growth in the number of active beneficiaries over the past year. Following a slight decrease in 2018/19, the volume effect returned to a steady contribution to growth of 1.3% in 2019/20.

The most pronounced upward push on costs can be attributed to the use of higher-cost medicines (other than DAAs for hepatitis C), which contributed a consistent 4% to 5% to annual growth between 2014/15 to 2017/18 and an average of 6% over the past two years. The use of DAAs, however, decreased in 2019/20, pulling drug costs down by 1.6%. The combined effects of DAAs and other higher-cost drugs still added a sizable 4.2% upward pressure on drug costs in NPDUIS public plans.

Counterbalancing these upward cost pressures, generic and biosimilar 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 and biosimilar market entries and the implementation of policies lowering generic prices. In 2019/20, the pull-down effect from substitutions and price reductions diminished from a combined rate of 6.2% in 2018/19 to a historical low of 1.1%.

The overall 4.3% increase in drug costs in 2019/20 represents an absolute growth of $417 million, with varying rates of growth among the public drug plans ranging from approximately -1% to 10%, apart from a 25% decrease in Yukon (Figure 2.2). These variations were mainly due to differences in the magnitude of the opposing components of change. Jurisdictions with higher overall growth rates included New Brunswick (9.9%), the NIHB (9.8%), and Alberta (9.2%).

The increased use of higher-cost drugs other than DAAs had the greatest push effect, with an overall impact of 5.8% ($562 million), ranging from 0.6% to 7.7% across jurisdictions. A decline in the use of DAA drugs for hepatitis C drove costs down by 1.6% ($151 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 overall declining impact of DAA drugs also varied, with the largest downward pull in British Columbia (-6.0%), followed by Yukon (-4.1%) and Manitoba (-2.6%). The use of DAAs in Newfoundland and Labrador and New Brunswick pushed costs upward very slightly (0.4% and 0.1%).

The OHIP+ program redesign in Ontario reduced drug costs by $289 million in 2019/20, pulling costs downward by 5.0% in Ontario and 3.0% across all NPDUIS plans.

The demographic effect boosted drug costs in the NPDUIS public plans by 3.0% ($289 million) in 2019/20, completely offsetting the pull from OHIP+. This 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. For example, effective January 1, 2019, British Columbia lowered the threshold of their income-based coverage, thereby increasing the population eligible for inclusion. Note that demographic changes due to OHIP+ are presented separately.

The volume effect continued to have a relatively small impact on growth in 2019/20, pushing overall drug costs by 1.3%, or $129 million. This effect was an important driver in the NIHB (3.8%), Prince Edward Island (3.4%), and Saskatchewan (2.9%).

The cost-saving effects of generic and biosimilar substitution (-0.6% or -$61 million) and price reductions (-0.5% or -$52 million) were almost equal in magnitude in 2019/20 and were relatively uniform across jurisdictions. The exception was British Columbia, which had a more pronounced substitution effect of -2.4% as a result of its recent non-medical biosimilar switching initiative. Together, these two drivers represented a -1.1% (-$112 million) counterweight for the public drug costs in 2019/20, markedly below their -6.2% impact the year before.

The key effects for 2019/20—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. Since the significant one-time drop in generic prices resulting from the implementation of the pan-Canadian Generic Price Initiative in April 2018, the influence of this driver has diminished. In 2019/20, reductions in drug prices pulled the overall cost levels down by a modest 0.5% ($52 million).

An analysis by market segment suggests that the downward pull was mainly due to a reduction in the average unit costs reimbursed in the multi-source non-patented category, as the average unit costs of patented medicines remained relatively stable while the costs of single-source non-patented medicines increased.

Figure 2.3 reports long-term trends in average unit costs from 2009/10 to 2019/20 by market segment for (a) patented medicines; (b) multi-source generic medicines; and (c) single-source non-patented medicines, along with their corresponding 2019/20 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 are a cost-weighted average of changes in the reimbursed unit costs for individual medicines. The analysis was restricted to oral solid formulations to ensure unit consistency.

From 2009/10 to 2019/20, the prices of patented medicines were relatively stable while prices of single-source non-patented medicines increased by an average of 29%, mainly due to the change in patent status of two top-selling drugs, Lucentis (ranibizumab) and Tresiba (insulin degludec). Despite the significant rise, the impact of this segment was limited due to its small size: single-source non-patented medicines make up just 9.7% of the market, while patented medicines represent a 57.5% share.

The multi-source generics market shows a similar trend across all NPDUIS public drug plans that is tied to the various waves of generic price reforms. Average unit costs declined rapidly in the first few years after the initial wave of reforms and then decreased more gradually from 2014/15 to 2016/17 as generic prices stabilized. Following the most recent pricing initiatives, prices declined by an average of 3% in 2017/18 before a more notable 11% drop in 2018/19, then remained steady in 2019/20. As a result, the average multi-source generic unit cost across all jurisdictions in 2019/20 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 0.6% in 2019/20, translating to a savings of $61 million for the NPDUIS public plans. The modest change indicates that there were no launches of high-selling generics in 2019/20 and year-over-year savings offered by biosimilars remained slow and steady. The top three generic contributors to the substitution effect, which included two antipsychotics (aripiprazole and quetiapine) and one antiepileptic (lacosamide), offered just 0.2% in savings. The total savings from biosimilars rose slightly, with two immunosuppressants, one insulin, and two immunostimulants making a small but growing difference in overall drug costs: Inflectra/Renflexis (-0.2%), Brenzys/Erelzi (-0.1%), Basaglar (-0.04%), Grastofil (-0.01%), and Lapelga (<-0.01%).

The share of prescriptions for multi-source non-patented medicines in public plans increased to 86.5% in 2019/20, a significant rise over 83.0% in 2015/16, while their corresponding share of total drug costs decreased over the same period, from 29.9% to 28.8%. 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 in recent years. Multi-source generics alone accounted for 71.6% of prescriptions and 17.5% of drug costs on 2019/20.

Patented medicines accounted for a decreasing share of prescriptions in 2019/20, dropping from 11.5% to 9.0% since 2015/16. Their share of total public plan drug costs also fell slightly to 57.5% due to changes to the patent status of a few top-selling medicines. Despite the loss of patent for a few significant medicines, this segment has held relatively steadily around 60% as a result of the increased use of high-cost drugs such as biologics and oral oncology medicines and the introduction of new high-use drugs such as antidiabetics.

Figure 2.4 reports the 2014/15 to 2019/20 trends in market shares by market segment: patented, multi-source non-patented, and single-source non-patented medicines.

Compared to traditional generic drug markets, the savings from biosimilars have been limited by slower initial uptake and smaller price discounts from their originator products. The biosimilars market is a more complex space; unlike generics, biosimilars are not identical to their originator biologics, 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 marketed publicly in 2016, was one of the first biosimilars available on the Canadian market and has the highest list price discount. Inflectra and Renflexis, approved in 2017, are both indicated for most of the same autoimmune inflammatory diseases as their originator infliximab product Remicade, but despite having list prices set at approximately half that of Remicade, their initial market uptake was slow. Over the last year, Inflectra and Renflexis have doubled their share of the infliximab market, now capturing 18.4% of prescriptions.

Brenzys and Erelzi, biosimilars of another anti-TNF-α drug Enbrel (etanercept), were approved for market in Canada in 2016 and 2017, respectively. At approximately two thirds of the list price of their originator biologic, they had captured 30.6% of the prescription share of the etanercept market by 2019/20.

To explore the impact of biosimilar entry in a key therapeutic market, Figure 2.5 assesses the distribution of patients receiving anti-TNF-α drugs in the public plans before and after the introduction of biosimilars. Although this market has grown considerably over the last several years, patients on originator biologics without available biosimilars continued to make up the majority (53%) of anti-TNF-α beneficiaries in 2019/20. Although the number of beneficiaries in this class has increased, the introduction of new biosimilars and ongoing initiatives to improve biosimilar uptake have stabilized spending on these medicines.

It has been observed that biosimilars used to treat acute indications often have a significantly higher rate of uptake than those used for chronic indications. Grastofil and the recently approved Lapelga, biosimilars of the white blood cell stimulator Neupogen (filgrastim) and Neulasta (pegfilgrastim), respectively, have the highest uptake in the public plans, at 94.0% and 94.4% in 2019/20, despite the latter having been available in NPDUIS plans for only one year (Table 2.1). However, their 25% discount from the originator biologic list price places them at the bottom of the biosimilars in terms of price discounts.

Recently, Canadian payers, including public drug plans in Manitoba, British Columbia, Alberta, and New Brunswick, have undertaken or proposed a number of initiatives to increase biosimilar uptake. For more information on the market distribution of biosimilars and their originator biologics in each jurisdiction, see Appendix B. Future editions of this report will continue to follow 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 5.8% ($562 million) in 2019/20. The separately reported DAA drugs for the treatment of hepatitis C, which have had significant impacts on public plan drug costs trends over the last few years, cost $151 million less in 2019/20 than they did in 2018/19, pulling overall costs downward by 1.6%.

Figure 2.6 reports the 10 medicines that made the greatest contribution to the drug-mix effect in 2019/20, together accounting for an upward push of 2.8% on overall drug costs. Three medicines made their first appearance on this list in 2019/20, within two years of receiving market authorization: Ozempic (semaglutide); Biktarvy (bictegravir); and Neulasta/Lapelga (pegfilgrastim), which was largely attributable to the addition of its 2018 biosimilar.

The top three contributors to the drug-mix effect in 2019/20 were diabetes treatments, led by the long-acting insulin Tresiba (insulin degludec), which received market authorization from Health Canada three years prior. Three of the other top contributors were oral oncology products and immunosuppressants with average annual treatment costs ranging from $16,902 to $74,346 and the remaining four were either high-use drugs or had relatively low annual treatment costs.

Revlimid, Humira, and Janumet, which were reported as top contributors in the 2018/19 report, continued to have a sizable impact on the drug-mix effect and remained among the top 20 contributors in 2019/20.

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 85 in 2014/15 to 140 in 2019/20. These drugs, which accounted for 19.4% of the overall NPDUIS drug costs in 2014/15, made up 33.9% of costs in 2019/20, while representing only a very small percentage of active beneficiaries (2.1%).

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+), other than DAAs. Figure 2.7 reports on trends in the market for high-cost drugs from 2014/15 to 2019/20 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 2.8 provides a more detailed breakdown of the share of high-cost drugs by jurisdiction in 2019/20. High-cost drugs account for a greater share of costs in income- and premium-based programs; for example, they make up approximately half of the total drug costs for public plans in British Columbia (46.5%) and Manitoba (56.2%). 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. As shown in Figure 1.2, NPDUIS public plans paid an average of 87% of total prescription costs in 2019/20, 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 2.9 provides a breakdown of the plan-paid share of NPDUIS drug plan expenditures by average beneficiary annual drug cost level in 2019/20. 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 a larger portion of prescription costs for higher-cost beneficiaries. In 2019/20, the 5% of beneficiaries that had annual drug costs over $5,000 accounted for nearly 60% 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 2019/20 ranked by their average annual drug cost per active beneficiary. All 10 drugs were indicated to treat rare diseases and 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 2019/20, the biologics market share grew by 7.3% to reach 28.9% ($2.9 billion) of total drug costs. The top four biologic medicines—Remicade and biosimilars (infliximab), Humira (adalimumab), Eylea (aflibercept), and Lucentis (ranibizumab)—were responsible for 13.3% of total NPDUIS drug costs.

Figure 2.10 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 medicines.

Alberta and Saskatchewan had the highest levels of biologics-related costs relative to total drug costs in 2019/20 (38.6% and 38.5%, respectively), while New Brunswick and Prince Edward Island had the highest rates of growth (16.6% and 15.1%, 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 area suggests that over two thirds of the total drug costs in 2019/20 were concentrated in just five classes. Antineoplastic and immunomodulating agents topped the list of therapeutic classes at 27.1% of drug costs in 2019/20, reflecting a shift towards oral oncology medicines and a higher use of immunomodulating drugs. Alimentary tract and metabolism medicines held the second highest share of costs (13.5%), due in part to the newer antidiabetic therapies in the class. The drug cost share held by cardiovascular medicines, which include relatively low-cost drugs used by a large number of active beneficiaries, decreased from 13.5% in 2014/15 to 7.4% in 2019/20, primarily due to significant increases in other therapeutic areas.

3. The Drivers of Dispensing Costs, 2018/19 to 2019/20

The rate of change in dispensing costs in 2019/20 was decidedly lower than the growth in drug costs. Upward cost pressures from a rise in the number of active beneficiaries, smaller prescription sizes, and an increase in the volume of units dispensed over the fiscal year were counterbalanced by a significant downward pull from Ontario’s redesign of the OHIP+ program.

Dispensing costs in the NPDUIS public plans increased by 1.4% or $35.4 million in 2019/20, reaching a total of $2.5 billion. This growth rate was markedly lower than the 5.1% reported in 2018/19.

The modification of Ontario’s OHIP+ program to cover only Ontario residents age 24 and younger who do not have private insurance reduced dispensing costs by $56.3 million in 2019/20, pulling costs downward by 4.1% in Ontario and 2.3% across all the NPDUIS public drug plans.

Figure 3.1 provides insight into the pressures driving changes in dispensing costs from 2014/15 to 2019/20. The demographic effect, which excludes any impact from OHIP+, was responsible for the largest annual contribution to dispensing cost growth in 2019/20, pushing costs up by 2.7%. The prescription size effect contributed a 1.4% upward pressure on the growth in dispensing costs, while the volume effect exerted an upward push of 0.9%, reflecting an increased quantity of drugs dispensed to patients. The average dispensing fee per prescription remained virtually unchanged in 2019/20.

The overall rate of change in dispensing costs varied widely among individual plans, from a high of 9.8% in the NIHB, to a low of -1.9% in Ontario (Figure 3.2). The high growth in the NIHB was driven by a steady increase in all factors. In Ontario, the reduction in dispensing costs resulted mainly from the redesign of OHIP+, without which dispensing costs would have increased moderately by 2.3%.

Long-term care (LTC) prescriptions were separated out from Ontario results in this cost driver 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 account for a small portion of all beneficiaries and typically contribute less than 0.1% to the growth in Ontario dispensing costs. However, as the result of a new LTC capitation funding model introduced in the last quarter of 2019/20, the LTC program pulled Ontario dispensing costs down by 2.0%, contributing -1.1% to the growth of dispensing costs to the total NPDUIS public plans. The impact of this change is expected to continue into 2020/21.

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

In 2019/20, the rates of change in the average dispensing fee per prescription varied across NPDUIS drug plans. Most plans showed modest changes ranging from -0.5% to 1.7%, with the exception of Yukon. Over the past five years, Yukon, Prince Edward Island, and the NIHB have had a relatively high growth in fees, with compound annual growth rates of 4.4%, 2.3%, and 1.0%, respectively.

Table 3.1 reports the average dispensing fee per prescription from 2014/15 to 2019/20, along with the rate of growth between 2018/19 and 2019/20 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 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. Manitoba, the NIHB, British Columbia, and Ontario, which had some of the lowest dispensing fees in 2019/20, 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 declined in all public drug plans from 2018/19 to 2019/20. Manitoba and Prince Edward Island had the largest proportional decreases in average prescription size, at -4.7% and -3.3%, respectively.

Figure 3.3 depicts the trend in average days’ supply per prescription from 2014/15 to 2019/20. 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 2018 pCPA–CGPA agreement. Dispensing costs for one million tablets of each medicine are given for two fiscal years: 2014/15 and 2019/20. These medicines collectively accounted for 17.9% and 19.9% of the total NPDUIS public drug plan dispensing costs in 2014/15 and 2019/20, respectively.

Dispensing costs for the select medicines were stable or increased between 2014/15 and 2018/19 in most provinces, although the size of the changes varied considerably. The highest rates of increase were observed in the NIHB and Prince Edward Island, while Saskatchewan experienced a notable decrease. In more than half of the NPDUIS plans—British Columbia, Saskatchewan, Manitoba, New Brunswick, Newfoundland and Labrador, and the NIHB—dispensing costs for one million tablets exceeded $200,000 in 2019/20.

While the same medicines were studied across all plans, the disease profile of the beneficiary populations and the type of therapy for which the medicines 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 iv}

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 2019, Health Canada issued NOCs for 35 new active substances: 10 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 179 of the 214 medicines approved by Heath Canada between 2014 and 2019. Over this six-year period, only 8% were classified in the Substantial Improvement or Breakthrough categories. Three quarters of the medicines reviewed demonstrated Slight or No Improvement over existing therapies, while 17% 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 2019/20.^{Footnote v} The total number of CDR recommendations has varied from year to year, with a high of 51 in 2016/17. In 2019/20, 31 recommendations were issued: 26 medicines were recommended as “reimburse with clinical criteria and/or conditions” and five received a “do not reimburse” recommendation.

In October 2020, CADTH consolidated its multiple-pathway product review processes (e.g., the pan-Canadian Oncology Drug Review and the Common Drug Review programs) into one pathway. Future editions of this report will reflect the newly aligned CADTH Drug Reimbursement Review process.

Appendix B: Distribution of Patients on Biosimilar Initiative Medicines by Jurisdiction, 2019/20

Recently, numerous Canadian public payers have announced or undertaken initiatives to increase biosimilar uptake. In 2019, British Columbia became the first Canadian province to initiate a switch to biosimilar medicines for patients covered under the PharmaCare program. Since its launch in May 2019, the two-phase non-medical switching policy in British Columbia has required originator biologic patients on Remicade (infliximab), Enbrel (etanercept), and Lantus (insulin glargine, 100 IU/ml) for select indications to switch to a biosimilar.

To monitor the uptake of biosimilars and explore the early impact of switching policies in the public drug plans, Figures B1 and B2 present the distribution of public plan patients on anti-TNF-α drugs and insulin glargine by NPDUIS jurisdiction. Future editions of this report will continue to monitor the impact of these initiatives as they take effect.