Ontario update

I had the opportunity to meet with a number of large organizations in Ontario and they are not going to sit on the sidelines of reform for much longer. With the recent announcements by the Ontario Gov., they are fully engaged in looking for changes. The news or public media war with the pharmacy has helped to move them in the direction of change management. Stay tuned for more news.

Ontario battle with Pharmacy

Well, things sure have heated up in the drug area. There are lots of discussions and stories about the current state in Ontario , Quebec, BC, Alberta. To a lesser extent in the other provinces.

Plant closures

A thought crossed my mind as I read in the local paper about yet another company closing a number of plants. What impact do these job losses have on other industries? I'm not thinking about suppliers to these businesses as we can all imagine the direct impact there. But what about its impact on industries not related in any way.

Well, there is something in the insurance industry called coordination of benefits or COB. If for example an employee or plan member has access to a spousal plan for drugs, often there is a sharing of the costs. Each plan will cover a portion of the cost of prescription drugs , or dental services etc. It is a way in which a plan actually can save money while providing employees and plan members a higher level of service.

So in the case of a business closing and perhaps hundreds or even thousands of employees effected by this, the net result will be to increase costs on a spousal plan. Even though the two industries may not be related , the job loss is felt by the other industry. If two plans were each covering $50 of a monthly drug spend , one will now have to cover the full $100 thus premiums will rise faster than anticipated.

Another area impacted by this is at the physician level. Some of these folks are not going to have a drug plan and they may end up at the physicians office looking to change medications or help with samples (Only the new products are found there and usually at a higher price) . Some, patients may stop taking their medications all together thereby increasing their risk of more serious events. Both of these add to the cost of our public plans.

Off Patent wars

The National Post reports today about a recent deal in Saskatchewan between Gen Med (a Pfizer Generic Company) and the provincial government for the supply of generic Norvasc. It appears that a tendering process was followed and that the bid was won by GenMed . Now , there are several things that are quite new here. One is that the government will restrict the choice of Pharmacy on which generic they will dispense for the public plan. This restriction is sure to raise a reaction of pharmacy as they typically had the choice of which company they would stock. Another is , what will happen to the private payers? In Ontario and across the country , typically the private payers saw increases in their rates after Ontario did a similar thing with a limited number of drugs. With a large number of blockbuster drugs due to come off patent in the next several years ,will we see more of this perhaps even on the private side?

It's a matter of choice

No matter what way you slice it , consumers want choice. It doesn't matter if the products are cell phones, automobiles, gas, electronics, internet, TV, radio , food , and I think you get the picture. So too do industries want choice. For example and I'll build on my earlier post. Retailers want choices. They want to decide which products they carry and which they don't. The manufacturer can create awareness of a product prompting the end consumer to ask for specific products, but it is the retailer that decides if they will indeed carry the product.

The end consumer can decide to shop at a store which carries a particular brand or they can choose to go elsewhere. That is the power of choice.

Now what if your choice was restricted in some way? Here is a far fetched example of this . Let's say a Municipality creates a bylaw that restricts your choice of automobile to only North American company manufacturers. What would be your reaction be to this? I believe the outcry would be huge. That was a far fetched example but let's look at a more realistic model of restriction in choice. What if you were restricted on choice of prescription pharmaceutical? This is a very interesting case , as you probably know that this , does exist. The crisis in healthcare spending being the key reason . The issue with such restrictions are varied as the impact on choice is felt in several silos in Health care. The obvious one is the end consumer's choice is restricted, but lets examine the implications of this further.

If we start with the Physician as writing a prescription , most often they have been detailed on newer products and will write a brand product. (Only Brand Name Pharmaceutical companies call on Physicians) The prescription goes off to pharmacy where the formulary is enforced. So, if a product is not covered the pharmacist and patient have to go through a number of issues ,which can include ,the patient footing the bill, a call back to the physician, increased paperwork for the physician, perhaps even another visit to the physician. In essence the restriction has added cost to the health care field . So who in this scenario feels the most restricted. I suggest it is the physician and the Patient. They want choice.

World of retail

In that world, shelf space is key. Eye level is where everyone wants to be and manufacturers actually count facings (number of units displayed) as they pay for such space. If a large manufacturer comes out with a new line of product or even a line extension of one product, they must pay the retailer to carry it (a listing allowance) then they must pay them for the amount of space they want, and at what level (eye level being the most expensive). Then they have to work out a deal for a promotion or end isle display etc all with volume expectations and more cost.

Now consider the retailers and drugs. The front of the store runs like above, but behind the counter, the brand manufacturer does not pay a listing allowance or anything like the above scenario. At least not to my knowledge. The store is obligated to carry the new product if a physician writes it. These products are the most expensive so they drive up the retailers inventory level and cost of goods sold. If the new product is accepted by the physician community, and takes off in sales, a larger space is required to store the product but still no manufacturer financial support for this. Unlike the front of the store, there are some extra fees the retailer charges the customer for; i.e. dispensing fees. Really the retailer is dictated to by the manufacturer of the patent protected products.

Once the product is off patent however, there is competition and the retailer gets rebates by the generics. It becomes much like the front store scenario with listing allowances, incentives or rebates. The cost of goods goes down as these products are less expensive but so too does retail sales. If they lower the price of these products they have to make up the sales dollars elsewhere as investors would hammer them if retail sales decline year over year. (a catch 22). So unlike the front store, where manufacturers pay for shelf space etc in the hope to increase sales and market share of their product, these manufacturers know that the overall market is going to decline or not grow as physicians switch to other promoted agents. And the cycle continues.

Power of promotion

An interesting Article from PharmExec.com back in August, discussed the situation with Statins in Belgium.

Belgium's statin stalemate

I think it clearly demonstrates that , whatever controls are placed on pharmaceuticals, you must bring physicians and pharmacies on side. If a drug with ample scientific research, major market share , and physician preference goes off patent, should we not encourage its continued usage? It is all well and fine to attack the pharmaceutical industry for their promotional activity but why not look at how we treat drugs that have faced the patent cliff. Currently , there are over 1000 drug plans across this country. Physicians can't and don't know which third party plan any patient has! There is a level of frustration with plans as controls most often mean more paperwork, callbacks, delays in therapy , etc. They have an obligation to give the best standard of care they can and that includes the best drug they believe available. The pharmaceutical companies direct the education toward their new products (some of which offer little or no advantage over existing medications) Perhaps it is time that we look to changes in how the conversion over the patent cliff is handled by the plans. Put in place, physician focused positive techniques rather than the negative methods currently used or a combination of these as controls are necessary too. To do this , Payers need to direct some attention to helping the primary decision maker (The Physician) .

The above example from Belgium clearly shows that you can lower prices but the primary decision maker must be part of the solution.

Health Care at the Forefront

I'm just back from a trip to Bethesda, Maryland and Washington, D.C., where Health care issues are front page news each and every day. Last night ABC had a one hour special featuring Oboma as he answered questions from a group of people at the East wing of the White house . It was really interesting and I think he spoke very clearly about the challenges to this reform. But, I was left thinking about how this issue is not a US issue , it is an issue facing virtually all countries. Here in Canada our Industries and governments are sharing in the pain. provincial budgets are hovering around 50% going to health care. Corporations, organization , unions, and private payers are all struggling with the rising cost of drugs. There does not seem to be any sort of Federal direction on reform and the provinces are individually dealing with the public side of things .

Now just recently, at the 2009 Western Premiers’ Conference , the premiers announced they were taking action on Pharmaceuticals and forming a buying group. So It would appear that they will tender for drugs which will increase competition between the Generic companies and now the Brand companies as well. So we will have a large public buying group out west, then the tendering in Ontario and most likely Quebec These three buying groups would represent over 90 % of the public drug spends in Canada. Unfortunately , Atlantic Canada doesn't seem to have moved in this direction yet but perhaps soon. In any event, they will remain a small piece of the puzzle and most likely to see higher prices than with the other larger groups.

So, what about the Private Plans that are actually footing a larger portion of the drug spend across the country? What will these changes mean to them? Most likely higher costs and as we have seen in Ontario , two prices for a particular drug. One price for the public insurance and another higher cost for third party.

Will the Plans react to this? Perhaps. There is an initiative developing in Atlantic Canada that is gaining momentum. But more on that later.

Another interesting , development is with GM and Chrysler. They have their service provider de-listing the generic versions of the following drugs.

Zocor, Vasotec, Fosamax, Neurontin, Zoloft,Diane-35, Adalat-XL, Zithromax.

They will be covering the brand drugs only here. So it is reasonable to assume that a deal was struck for better pricing of these products. It is unclear if the deal is with the insurance provider or with the individual companies. This move has major implications for the pharmaceutical industry , plan payers and insurance.

This is similar to what an Atlantic Canada based provider attempted to do with one pharmaceutical company last year but the attempt failed with pressure from several groups. This move may be smoother as it involves more than one pharmaceutical company, a need for cooperation by the pharmacies due to GM and Chryslers economic position and the sheer size of the business in the Ontario region.

Dependent upon how the deal above is structured, it gives the Brand companies stronger ties with the payer groups, allows them to better manage loss of patent, increases competition directly with the generics. But, It also gives them the opportunity to better manage their core business in the Physicians office.

If one manufacturer is supplying both the Patent drugs and off patent, and is also directing the physician education and marketing to the new products, they then have even more control over the supply chains. If GM and Chrysler don’t make a concerted effort to educate physicians to help then nothing has changed. The Pharmaceutical companies will educate the physicians that they can now get this new product as they just listed it directly with GM. Or help them walk through the process required to have it covered. It points to need of having a voice for GM and Chrysler and their employees directly involved with physician and employee education. Now is the time to initiate this.

No more free Samples

If you were about to purchase a new vehicle, you may want to test drive a number of cars to see which you liked best , felt the safest , liked the gas mileage, had the smoothest ride,  wanted a hybrid, etc.  Then you decide and with the assistance of your financial institute you make your purchase.   Just imagine, instead of being able to test drive a number  of vehicles, you are automatically directed  to test drive only the newer expensive models. If you want to try a less expensive model , you have to go down the street and you have to pay to try these models.  To make matters worse, these models have foreign names that you find confusing .  In fact the dealer may not even know the names!  

Nowadays, your choice of drug may cost as much as a new car over the course of several years.  Or in some case in just one year. 

Well, there is an article on Plos Medicine with the above title , you can click here for the link.  It makes the case for eliminating pharmaceutical samples or even vouchers from physicians offices.  I feel this is too big a change and one which may never occur.  One area not explored by this story is to actually increase the sampling to physicians.  If you read the article this sounds like a wild idea, but, consider that the article talks about samples that are the higher priced new drugs with relatively little number of studies .  So, what if there were samples of drugs with huge volumes of data behind them and that they were lower cost.  Now the physician would have to choose... Do I (A) write this drug that is being marketed by the industry  or  (B) continue to write this product that I have learned so much about.  I know its safety profile and efficacy and can leave the newer agent as my second choice or even third choice.  If evidence is provided to show the new drug does amazing new advances then the Physician may consider it.   

Here in Atlantic Canada  we have tried this very thing in our projects and have had great success with physicians and local pharmacists  but have been met with significant push back from some areas you never would have guessed.  We used a voucher system through the pharmacy to obtain the lower cost meds.  Physicians like the approach and so do patients.  A much larger trial is needed now.  

update

More charges laid in alleged Ontario drug reselling scheme... Canadian Press 

Travel

I had a very interesting and productive trip recently to Saskatchewan and had the opportunity to hear the deputy Minister of Health , Dan Florizone speak about their "Patient First Review " program.  He focussed on the difficulties of running the health system and the specifics to wait times within the system.  He made a humorous analogy to opening three restaurants (the only three in town) and waiting in line to get a table.  It really was an effective way to demonstrate the complexities and issues with wait times.  He cited lack of communication and respect as a major barrier and an abundance of administrative duties as some key areas. They recognize that it is the Patient that actually experiences the full process from beginning to end and they are trying to learn from this.  Fixing one area which may cause disruption in another is not the answer.  They are still struggling to make changes but certainly they appear to be seeking answers. 

Charges in Ontario for Drug resale plot

Yesterday , the Ontario government announced that charges were being laid against a number of Generic companies, pharmacies and drug wholesalers.  There is a good story at the Star.com   This once again points to the need for changes in the way we deliver pharmaceuticals in this country.  Transparency is necessary if we are to deliver the best value.  The rebating system in the US causes them to have the highest brand name pricing in the world and these rebates of generic drugs have the same effect here.   

The Power of Personal Contact

In this age of twitter, facebook, text messaging, e-mail, media, and all sorts of IT and high tech ways of communicating with one another, what has happened to face-to-face contact?  Who, in business still uses this ancient method to communicate with clientele or customers and is it still effective?

 

In sports, it is about the personalities.  Just look at how hockey has Wayne Gretzky and now Sidney Crosby. One could say they are the face of hockey. Most of us would love to meet them and for those fortunate enough to do so, it only reinforces their perspective and love for the game. The clubs know they have to do things for the fans to keep the sales up at the gate, and it is why, early on, in the careers of hockey players, programs and awards are set up for community involvement.  Wayne or Sid are well versed in Media and fan support techniques and so are their fellow players. These fan face-to-face exchanges are an integral part of sports.

 

 

Love them or hate them, politicians are experts at the art of personal contact.  If this is an election year in your province, you certainly will see efforts by the political parties to take every advantage of getting in front of a camera, a podium, or a group gathering.  Door to door contact is still a big undertaking even if the candidate themselves can't get out. Representatives will knock at your door and ask for support. In an effort to sway voters, these face-to-face contacts are as much about listening to the concerns of the electorate as it is about getting your platform across.  This is because often voters have not all made up their minds and just want to be heard by the politicians.  Some of these folks will vote based on the candidate that seams to listen the best, or said the right response to the concerns.  It is often the defining moment in how a voter will vote.  In the American election last year of President Obama, this face-to-face, eye-to-eye contact was visible each and every day. Obama certainly used the Internet as an effective tool to augment his efforts but it was his face-to-face efforts, and on the ground support where they really added shine.

 

One industry that most people know little about is the Brand Pharmaceutical Companies.  This group has taken the art of personal contact to levels that perhaps Obama could learn from.  The marketing efforts of these companies utilize, all of the typical media, Internet, and other support initiatives but the power of personal contact is the cornerstone to their success.  The industry may have pushed this contact to the extreme in the last few years which has lead to a bit of a backlash by physicians, academics, and politicians. They essentially had so many personal contacts that physicians began to see fewer representatives.  However the industry is adjusting to more acceptable levels, and make no mistake about it, personal contact remains the focus of these companies. They implement numerous face-to-face, eye-to-eye contacts with the physician to build business.  After all, it is the physician that will cast the vote (in this case a prescription).   These contacts are positive in nature and the companies listen to the needs of the physician much the same as the politician looking for support.

 

A recently released Report by the Canadian Institute for Health Information, “Drug Expenditure in Canada 1985 to 2008”  stated  “Over the last 20 years, drugs have consistently remained one of the major cost drivers in health care,” says Michael Hunt, Manager of Pharmaceutical Programs at CIHI. “Spending on pharmaceuticals has more than doubled over the past 10 years, outpacing growth in health spending by hospitals, physicians and other health professionals.”

 

This certainly points to the success of the Pharma business model and to the success or power of personal contact.

 

 

 

In an effort to control these rising costs, individual benefits groups have focused on a defensive strategy of adding restrictions, slowing authorization of drugs, cost shifting to members, plan management, and reduction of benefits where possible.  From the above report, this defensive strategy has not attained the desired effect.  We have all heard the old adage, “The best defense is a good offence”.  I suggest that the strategies currently in place neglect the prime decision maker the physician (who is equivalent of a voter or fan) and do little or nothing to garner their support.   To bring this back to hockey, this strategy is like having two teams in a constant rivalry and one team has a number of high scoring forwards and the second team has mostly defensive players and may include the best goalie in the league and perhaps some goon players.  The fans are supporting the team which continually is shooting at the net, winning the most games, constantly looking to please the fans,  .   Go Sid Go. 

 

So with all of the new technology and communication techniques , it appears from the above examples that the power or personal contact still reigns supreme.  If personal contact wasn’t so powerful, Hockey would ignore the fans, Politicians would only do advertising, and Brand pharmaceutical Companies would not spend detailing efforts on Physicians.

 

 

 

The new CIHI Report

Drug spending estimated at $30 billion in 2008 was released today  by the CIHI.  Clearly this report validates my earlier post (A Quick comparison of Canada and the US ). 

Canada ranks #2 behind the US in a per Capita spending on drugs.  This makes perfect sense when one compares the drug mix differences between the countries .  In another earlier CIHI document  there was a pie chart showing  that Canada was 3.8 % of the global spend on drugs .  I wonder if that now  has increased? That same report showed Britain as having 4.2% of the global pharmaceutical spend .  Considering the population of Britain is about 66 Million vs Canada's 33 Million , it clearly  displays  something is  not working.   

Drug pricing confussion

Back in February, Mike Sullivan had an article in Benefits Canada that centered around drug pricing issues in Canada and the wide swings in charges to plans vs the more stable pricing to the public plans here in Canada.   Dr. Adam Fein  had an article yesterday in his Drug Channels blog discussing pricing concerns in the US.  He demonstrates a wide variation in drug pricing.  So it appears that both in Canada and the US , consumers must shop around to find the best pricing.  However , I really don't know of too many people in my area that do this. Am I wrong?  In the first place, the patient or consumer usually has a pharmacy that they frequent and never really question the bill.  Here in Canada , I'm not aware of any site which posts comparative pricing for local pharmacies like Dr. Fein references in his article.  Most physicians here in Canada are not that aware of drug pricing  .  So we have a situation where a patient or consumer is diagnosed and given a prescription and neither knows the cost or comparative cost between alternatives.  If you are a Senior on the government plan or an employee with coverage, the actual cost may not be important as they just look at how much is out of pocket at that time.    In fact I had a recent discussion with a few seniors that said exactly that.  They were going to pay the same amount out of pocket if they got a drug for $150 as they would have if they shopped around and got it for $100.  Added to this was that the store they frequented offers a reward point system that kept them coming back.  So to their point, why would they even care about the cost, they pay the same amount, get reward points, and don't have to worry about anything and the Government picks up the bill.  We should learn something about the positive incentives vs using negative incentives to control costs.  

So, the question maybe this.  Which is the point of sale?  Is it at the physicians office when pen is put to paper, or is it at the retail Pharmacy when  the patient presents the prescription?   Brand name manufacturers concentrate on the pen to paper point of sale, generic companies concentrate on the Pharmacy and ignore the physicians.  Close 80% of our pharmaceutical expenditures are on Brand name products and 20 % on generic drugs.   

The PolyCap

Further to my last post, here are some considerations about the Polypill, which is five drugs combined into a single capsule. Firstly, the man behind the phase  2 testing of the drug.  Dr. Salim Yusuf, his bio can be found here, is a very, very respected investigator and physician in Canada.  In fact, it was through his work with the HOPE study (I think every physician in Canada knows this study inside and out), that lead to Ramipril becoming the #1 Ace Inhibitor in Canada.  Of course with a lot of marketing by the manufacturer.  Actually this points to another difference between Canada and the US.  The Number of total prescriptions for Ramipril in Canada was 4,736,000 for the one manufacturer that made the top 20 list from my previous post.  There are of course other manufacturers so that number is even higher.  It is the only ACE to make the list.  If you look at the US data you see that Lisinopril is the only ace to make their list and has 75.5 M prescriptions.  So the marketing efforts in the US for Ramipril were not as good. Two different companies had the marketing rights for Canada and the US.  

Ok, now back to the Polycap.  You can watch an ABC News story here to get more info, but I want to discuss what is next.   

They are suggesting a large follow up study.   This is a perfect time for Canada's Health bodies to get behind this world leader in his field and make the follow-up study happen.  It is most likely not a study that the BIG PHARMA group is going to fund.  These are drugs that have gone off Patent.  The Generic Industry most likely will not do this either.  One of the cornerstones of this product is that it can save $ and lives.  If, it saves dollars, then someone is not making as much.  That is a simple fact.  So who could see lost revenue from the introduction of such a pill.  I suspect the list includes the following, Big Pharma, Pharmacy (one prescription as opposed to 5), Insurance (if they are based on % of book of business), wholesalers, Generic companies (lost revenue of selling 5 products),  and perhaps even Consultants dependent on how their payments are structured.   So really it encompasses the whole supply chain.  But look at the masses that could potentially benefit.  Imagine, Benefit plans  and government plans could save money thereby  allowing more new break through drugs on their formularies.  The potential benefits may well be there in the end for the supply chain.  

The US Health structure promotes a desire to reduce pharmaceutical expenditures .   If a study is going to happen in the US , I hope we are getting behind Dr. Yusuf and helping him make this happen here in Canada. 

Something for future consideration is the following.... If the Study is done and indeed it proves that it saves lives, reduces expenditures, improves compliance,and makes it to market, how will it be promoted? Or Who will Promote it?  As from the Ramipril vs Lisinopril explanation, marketing is very very necessary.  

A Quick comparison of Canada and the US

IMS Health released the numbers last week for both Canada and the US .   It is interesting to compare some of the results as it gives a bit of insight into the differences between the two countries.   Firstly the US market as a whole is $291 B while Canada is $21.4 B.  So nothing startling there, Canada  is equivalent  7.3 % of US  Market.   

But we know that there are major differences in pricing between the US and Canada.  For example , US Brand pricing is the highest in the world and Canada is less due to our Price regulations.  The US has some of the lowest generic prices as seen with the Walmart introduction of $4 and $10 prescriptions which has lead most other retailers to follow suit.   In Canada, we have some of the highest generic prices in the world as there is little competition and a MAC pricing across the country.  So it is difficult to compare on $.  So lets look at Prescriptions.   ( I'll concentrate on statins here) 

If we look at Top 15 Drugs dispensed in the US you see 66.7 Million Prescriptions for Simvastatin (Primarily generic, trade name Zocor) and 57.9 Million Prescriptions for Lipitor.  Now compare this to The Top 20 Drugs Dispensed in Canada Table 6  .  Simvastatin is nowhere on that list, Lipitor has 14.8 Million Prescriptions and Crestor is there with 6 Million prescriptions.  My understanding is that Simvastatin has drastically declined in prescriptions in Canada while it has grown 39% in the US!   If you just look at Lipitor alone, as it is the only one with the high level data for both countries,  Canada is equivalent to 25% of the US usage. Think about that for a minute..... Canada is equivalent to 7.3 % of the total US Market in terms of dollars  but on a prescription basis for the #1 product in the world, Canada is equivalent to 25% of the prescriptions!!!!!  Obviously , Crestor has to have an even higher percentage and Simvastatin a really low number.     

So , some of the questions we need to ask are,  

1. Are all of these Americans at significantly greater risk than Canadians? 
2. Why is there such a difference? 
3. Why do Canadian governments and Industry not take advantage of the price reductions?
4. Can we learn from what is happening in the US ?
5. Are there ways the Canadian health Care system can save $?
6. etc. etc. etc

I've concentrated on Statins here but , we could have discussed other classes of drugs as well.  Perhaps my next post will be on the PolyPill .  You can read about it  here at the Lancet... 

Could save lives and money! 

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AZ going to battle again

This story just out from Reuters about the patent challenge on Crestor.  Quite a list of companies seeking to produce the generic form.  As the article states this is just the start of the battle.  You will recall that AZ has already inked a deal with Ranbaxy on some of their other products , such as   Nexium .  Perhaps this will lead to a deal on Crestor... Only time will tell. 

Pfizer is now increasing its Generic Business

Indeed things are very grey.  No longer can you assume that Brand and Generics are separate businesses..  Most if not all of the major Brand companies have either their own Generic Business or arrangements with generics.  Here is the latest from Reuters " Pfizer to license generics from India's Aurobindo"