On supply management

The Hill Times' piece on pharmacare is worth pointing out on a couple of levels: both as an example of what the Harper Cons are predictably choosing not to do, and what one or more provinces could choose to do to rein in the fastest-growing part of health care costs while securing our supply of needed drugs.

To start with, it shouldn't come as much surprise that the Cons have declined to take the lead in addressing drug costs (and indeed have voluntarily driven costs up to benefit big pharma). But it's another step entirely for the federal government to be the lone jurisdiction refusing to participate in a national drug-purchasing alliance that figures to lower costs for all parties involved:

Premiers emerged from their summer Council of the Federation meeting in Winnipeg, Man., Aug. 6 with an agreement to establish a national public sector purchasing alliance of common drugs and medical equipment and supplies. The drug-buying alliance members would use their collective buying power to negotiate lower prices from drug manufacturers so that provinces could save money.
...
Nevertheless, NDP health critic Megan Leslie (Halifax, N.S.) said she is encouraged by the premiers' agreement.

"I think this is a perfect opportunity for the federal government to show a leadership role when it comes to our health system," said Ms. Leslie last week. "This is exactly what the federal government is for: bringing people around the table, working with the provinces collaboratively and consultatively to have a system like this."

She also said the federal government should join the alliance as a partner.

It spent about $600-million last year on drug benefits for populations under its health care jurisdiction including First Nations and Inuit, federal prison inmates, military families, RCMP and public servants. In 2009, the Canadian Institute for Health Information forecasted that to amount to about three per cent of total Canadian prescription drug spending. Not much, compared to the 39 per cent provincial and territorial share of drug spending and 55 per cent share of private insurers and individuals.

But, any savings would help, said Ms. Leslie.

The federal government is the fifth biggest health care spender in Canada, Ms. Bennett said, noting that the premiers' agreement to work together to buy drugs in bulk relates to one of nine priorities of a 2004 National Pharmaceuticals Strategy.

Of course, there's a long way to go from the current statement of intention to a functioning purchasing alliance. But one would expect the federal government to at least want to be involved in developing the model rather than electing not to get involved in a project where it should have something useful to contribute as both the lone government spanning the entire country and a significant purchaser of the drugs involved. And the fact that the Cons simply can't be bothered speaks volumes about how little interest they have in doing anything to improve Canada's health care system.

So what concerns could anybody possibly have about a national purchasing strategy? There is one counterpoint presented in the article which deserves some response, if more for the additional opportunities it raises than as a reason to avoid joint purchasing:

Whatever the federal government's role, some commentators are skeptical the premiers' national bulk purchasing plan would even work when put into practice.

"What we're concerned about, when you have bulk purchasing on a national scale, the companies that lose the tender for the bulk order tend to fall out of the market, so you end up with a monopoly situation," Jeff Poston, executive director of the Canadian Pharmacists Association, told The Hill Times. "Then if the manufacturer who's meeting the bulk order suddenly has a manufacturing problem, then you have a major drug shortage problem on your hands."

Of course, that has to be weighed against the presumed lack of desire to pay higher prices in order to keep a number of private suppliers in the marketplace at any given moment. And indeed it's not hard to see exactly the same situation developing if a single supplier manages to secure too much market share through provincial bids - only in a decentralized model, the provinces could be left competing with each other for the limited supplies available.

So what can be done to avoid that danger? Well, the plan for a national strategy may make for the perfect time to look at the possibility of setting up a public drug manufacturer which can both provide competition on price, and be prepared to produce additional drugs on an urgent basis when a private supplier fails. And if the end result is both better coordination at the start and a better backstop in the case of supplier failure, then we could end significantly strengthening our ability to provide for the health of Canadians - even without the federal government lifting a finger.