Teresa NegrichDirector, Group Product Development

The healthcare landscape is changing ….. The healthcare landscape is changing ….. rapidlyrapidly

Drug plans Hospitals andPrivate clinics

Eligible prescribers

Health andWellness

Today’s TopicsToday’s TopicsOverview of Canadian Healthcare System

Coverage of Cancer Drugs

Provincial Pricing

Provincial Drug Tendering

Sustainability Principle

Generic drug pricing

Other trends

Overview of the HealthcareOverview of the Healthcare

System In CanadaSystem In Canada

Canada Health Insurance SystemCanada Health Insurance System

Federal legislation

Comprised of 13 interlocking provincial and territorial health insurance plans

Designed to ensure

- Reasonable access to “medically necessary” hospital and physician services- On a prepaid basis and- Without direct charges at the point of service

“to protect, promote and restore the physical and mental

well-being of residents of Canada and to facilitate reasonable

access to health services without financial or other barriers.”

Canada Health ActCanada Health Act

Defines the requirements that the provinces must fulfill in order to receive their full transfer payment under the Canada Health Act

- Public administration

- Comprehensiveness

- Universality

- Accessibility

- Portability

- No extra billing and user charges for insured services

- Reporting requirements to Minister of Health

Canada Health Act – Key DefinitionsCanada Health Act – Key Definitions

Insured health services- Medically necessary hospital, physician and surgical-dental services

Insured hospital services- Medically necessary in and outpatient services such as

• Accommodation and meals at ward level• Nursing services; laboratory, radio-logical and other diagnostic procedures• Drugs, biologicals and related preparations when administered in the hospital• Use of operating rooms, anesthetic facilities including equipment and supplies

Insured physician services- Medically required services rendered by medical practitioners- These are generally determined by physicians in conjunction with their

provincial health insurance plan

“Medically necessary” is not defined in the Canada Health Act

Canada Health Act Canada Health Act

Many provinces offer programs and services which fall outside of the Canada Health Act’s definition of insured health services i.e. Pharmacare, disease focused programs

Provincial governments have jurisdiction over administration and delivery of health care services in their provinces

- Can determine their own priorities- Determine their health care budget- Manage their own resources

The federal government sets out criteria that the provinces must satisfy in order to receive a full transfer payment for healthcare

Cancer DrugsCancer Drugs

““Tell me your postal code, and I will tell Tell me your postal code, and I will tell you your chances of surviving cancer,” you your chances of surviving cancer,” says Dr. William Hryniuk, past chair of the Cancer Advocacy Coalition of Canada.

Coverage of Cancer Drugs – Ontario 2006Coverage of Cancer Drugs – Ontario 2006Ontario working group - proposed that Ontario hospitals could administer some new IV oncology drugs on an outpatient basis

- However, the drug will NOT be an insured service

- Hospitals may charge an administrative fee for administering the drug

Why?

- To stop people from traveling to the U.S. to purchase these drugs at a much higher price

Not provincial policy yet

Does this violate the Canada Health Act? Is this service medically necessary?

Legal opinion obtained the working group supported this recommendation

- It appears as though a province can carve out (not insure) any service they want on an outpatient basis

Public policy decision that the Federal Government must address, but hasn’t

Source CACC report Card 2007

How do the provinces compare?How do the provinces compare?

Source CACC report Card 2007

Private Clinics – The New Healthcare RealityPrivate Clinics – The New Healthcare Reality18 private clinics in Canada make these drugs available to individuals

- 11 clinics recently opened across Canada

- They are funded by Roche Pharmaceuticals

- They administer more than just oncology or Roche drugs

Who will pay for these drugs?Who will pay for these drugs?

Private healthcare plans

If no private coverage

- Exhaust individual savings

- Cash out RRSPs

- Second mortgage your home

- Credit cards

This is a great opportunity for group Critical Illness

Pharmaceutical FocusPharmaceutical FocusDrug Name Estimted Annual Cost Source: Drug Manufacturer

Leukemia + Non-Hodgkin’s LymphomaFludara $8,000 Bayer Inc.Rituxan $41,000 Hoffmann-LaRoche LimitedMabcampath $28,000 Genzyme CorporationGleevec $60,000 Novartis P harmaceuticals Canada Inc.Breast CancerHerceptin $45,000 Hoffmann-LaRoche LimitedTaxotere $30,000 to $40,000 Sanofi-Aventis Canada Inc.Lung CancerIressa $16,000 Astrazeneca Canada Inc.Tarceva $15,000 Hoffmann-LaRoche LimitedTaxotere $30,000 to $40,000 Sanofi-Aventis Canada Inc.Alimta $60,000 Eli Lilly Canada Inc.Colorectal CancerAvastin $52,000 Hoffmann-LaRoche LimitedErbitux $130,000 Bristol-Myers Squibb CompanyCamptosar $100,000 to $150,000 P fizer Canada Inc.Ovarian + P rostate CancerTaxotere $30,000 to $40,000 Sanofi-Aventis Canada Inc.Head + Neck CancerTaxotere $30,000 to $40,000 Sanofi-Aventis Canada Inc.Erbitux $130,000 Bristol-Myers Squibb CompanyMultiple MyelomaVelcade $57,000 J anssen-Ortho Inc.Kidney CancerNexavar $33,000 Bayer Inc.Thyroid CancerThyrogen $1,500 Genzyme Canada Inc.

Pharmaceutical FocusPharmaceutical Focus

The focus is on cancer drugs and drugs to treat rare conditions

• It is estimated that there are 483 drugs in the pipeline- 25% are for cancer

- 18% are for specialty conditions

Private clinics will ensure that the drugs get covered by private payers

Movement to oral medications rather than intravenous ensures that the treatment does not have to be administered in a hospital and will be covered under private plans

The Rise of Catastrophic Claims – Drug Card OnlyThe Rise of Catastrophic Claims – Drug Card Only

  Total # of People Covered

$10,000 to $14,999

$15,000 to $24,999

Over $25,000

 Year % of Total Covered Who Have Incurred A Claim

2000 4.0M (1,1413) .03% (1,029) .03% (153) .01%

2001 4.4M .05% .03% .01%

2002 4.7M .05% .05% .01%

2003 4.9M .07% .05% .02%

2004 5.1M .08% .07% .03%

2005 6.0M .08% .08% .03%

2006 6.0M (5,551) .09% (5,611) .09% (1,906) .03%

Source: Emergis 2007 Data

Provincial PricingProvincial Pricing

Provincial Pricing – Ontario Bill 102Provincial Pricing – Ontario Bill 102

Bill 102 limited the amount that the ON government will pay for drugs for ODB plan recipients

Pricing applies to the public plan only

Changes

Pharmacy markup - reduced from 10% to 8% on all drugs (brand and generic).

Generic drugs - capped at 50% of the equivalent brand

Rebates have been reduced and replaced by professional allowances

This has impacted pharmacy revenue

Components of a RxComponents of a Rx

Rx = Markup

Dispensing Fee

+

IngredientCost

Bill 102 reduced from

10% to 8%

Components of Pharmacy RevenueComponents of Pharmacy Revenue

Other Other Merchandise Merchandise

SalesSales

Generic Generic RebatesRebates

PrescriptionPrescriptionDrugDrug Sales Sales

OtherOther

Pharmacy markup reduced

Generic rebates reduced

Impact of Ontario Bill 102 Impact of Ontario Bill 102

The principle of rebating was exposed

Dispense fees in Ontario increased by 20% immediately

Extra billing is occurring in some pharmacies on the drug card

Cash paying customers are funding a portion of the lost pharmacy revenue

Bill 102 created three tiered pricing

- One price for ODB recipients

- Another price for drug cards

- A third price for cash paying customers

Provincial Pricing Provincial Pricing Quebec

- First province to follow Ontario’s lead

- Maximum price structure to be implemented over 3 years• Generic drug prices capped • Maximum profit margin capped for the wholesaler

- This pricing structure applies to private plans

Newfoundland- Will follow Ontario’s pricing structure - effective Feb. 1, 2009- Pushed back new pricing structure due in February 2008

due to negative pharmacy reaction

Nova Scotia• Tariffs introduced on “Top 20” drugs

Provincial Drug TenderingProvincial Drug Tendering

Provincial Drug TenderingProvincial Drug TenderingProvince of BC negotiated a drug deal for Zyprexa

- Speculated that 10-15 more deals are in the works

Province of Alberta

- AB has announced that they will be establishing a bulk buy policy

Province of Ontario

- Tendering certain off-patent drugs where multiple generics exist

- First Wave: high blood pressure, gastrointestinal, diabetes, epilepsy and pain disorders

Impact of Provincial TenderingImpact of Provincial Tendering

Provinces are legislating on behalf of the public sector and ignoring the private sector

A two-tiered pricing system exists

- One price for pharmaceuticals purchased by the government

- A second higher price for the private sector and uninsured

Sustainability PrincipleSustainability Principle

Provinces Add Sustainability PrincipleProvinces Add Sustainability Principle

British Columbia

Province of BC added a sixth principle to Medicare Protection Act (April 2008)

- SUSTAINABILITY – The Medical Services Plan will be administered in a manner that is fiscally sustainable and provides for current healthcare needs without compromising the public health care system for future generations.

Alberta

Announced an aggressive action plan to improve efficiencies and the sustainability of their healthcare plan

Generic Drug PricingGeneric Drug Pricing

Generic Drug Pricing – is there cause for concern?Generic Drug Pricing – is there cause for concern?

Reasons For Competition Bureau Investigation- Concern over the high cost of generic drug prices in Canada

• Cost out of sync with other 10 out of 11 comparator countries

• Cost 32% higher than other countries

Findings

- Rebates are between 40 – 80%

- Lots of competition between manufacturers and suppliers BUT rebates are NOT passed along to the private sector

- This has created on over-inflated price

Mental HealthMental Health

“there can be no health without mental health”

Cubic Health Study Found

Employees with depression

- Drug claims were 2.5 times greater than employees who do not suffer from depression

Many co-morbidity conditions accompany depression

- Neurotic pain, anxiety disorders, sleep disorders, stomach hyperacidity and mild to moderate pain.

Centre for Mental Health in the WorkplaceCentre for Mental Health in the Workplace

*Cubic Health study was based on 2004 and 2005 Great-West Life data

*Cubic Health Study: based on 2005 data from Great-West Life

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Amount Paid ($) Per Claimant

All Claimants Claimants with Depression Claimants without Depression

The impact of depression in the workplaceThe impact of depression in the workplace

*Cubic Health Study: based on 2005 data from Great-West Life

0%

10%

20%

30%

40%

50%

60%

70%

Percent of Amount Paid for Claimants with Depresson

1 - Neurological Pain

2 - Anxiety Disorder

3 - Sleep Disorder

4 - Mild-Moderate Pain

5 - Stomach Hyperacidity

6 - Inflamation, Muscle / Bone

7 - Asthma / COPD

8 - Infection, General Bacteria

9 - Blood Pressure

10 - Elevated Cholesterol

Co-morbidities of depressionCo-morbidities of depression

Other Provincial TrendsOther Provincial Trends

PrivatizationPrivatizationGovernments are entertaining the value that the private industry brings to their budget concerns

Private medical clinics and online doctor services are quickly gaining momentum in many provinces

Quebec just introduced a bill that, if passed, could allow doctors to practice in both the public and private sector

Former Quebec Minister of Health, Philippe Couillard, has joined a private sector company only two months after retiring from politics• He is now a partner of PCP Healthcare Opportunities Fund which invests in private

healthcare businesses with the overall goal to improve healthcare system efficiencies

U.S. company launches a NAFTA-based lawsuit threatening Medicare

Alternative Healthcare ProfessionalsAlternative Healthcare Professionals

Pharmacists and nurse practitioners are being granted the right to prescribe and/or provide expanded services in many provinces

This is a positive change which will take some strain off physicians and increase compliance and health outcomes

Provinces Focus On Wellness

• Manitoba - Workplace In Motion – grants available to promote activity in workplaces

• Alberta - looking at disease management

• Ontario – The 2008 proposed $190M (over 3 years) to implement a chronic disease prevention and management strategy. Diabetes will be focused on first.

Provinces Ban on Mandatory Retirement• ON, BC, SK, NS and NF have put in place laws for provincially regulated employers

- can no longer force employees to retire solely because they have reached age 65 or more.

Provinces set to Create Electronic Medical Record• Each province is looking to capture medical information electronically so that all

healthcare providers have up to date relevant information

Other TrendsOther Trends

Medical Tourism - Sun, Sand and SurgeryMedical Tourism - Sun, Sand and Surgery

Sicko (Michael Moore) depicts the Cuban health care system superior to the U.S.

Entrepreneurial companies are providing a service of arranging trips to other countries for medical treatment and diagnostic tests

It is estimated that as many as 30,000 Canadians travel each year for medical and dental procedures

HPV VaccinationHPV Vaccination

Gardasil protects against high risk HPV types 6, 11, 16 and 18

Recommended for women ages 9 to 26

The Federal Government has provided $300M in funding to the provinces

Some provinces began vaccinations in the 2007 school year

Approximate cost $400 - $600 total (for 3 doses)

Impact on Private PlansImpact on Private Plans

As of July 2007, 37% of all vaccinations at GWL were for Gardasil*

- At July 2008, 22% were for Gardasil vaccinations (* GWL 2007 drug data)

A new HPV vaccination made by Glaxco Smith Klein is due to come into the market soon. This will increase media attention.

Gardasil is being fast tracked for women age 27 to 42 in the U.S.

- Only a matter of time before it is expanded in Canada

Paramedical TrendsParamedical Trends

The number of plan members using paramedical services is increasing and the number of services that they claim is also on the rise

“Blackberry thumb” is predicted to be the new upcoming problem

Despite increasing utilization, paramedical services should form part of every benefits plan

- Focus on health and wellness- Can improve physical and mental health- May prevent more serious long term illness

Paramedical Claims – % of healthcareParamedical Claims – % of healthcare

1999 2000 2001 2002 2003 2004 2005 2006

Massage 2.05 2.38 2.77 3.15 3.53 3.82 3.99 4.04

Physio 3.79 3.72 3.71 3.72 3.66 3.52 3.39 3.30

Chiro 2.86 2.66 2.61 2.53 2.61 2.69 3.58 3.68

Psych 1.62 1.57 1.54 1.47 1.43 1.36 1.26 1.24

Other 1.37 1.37 1.46 1.58 1.78 1.95 2.02 2.09

Total 11.69 11.70 12.09 12.44 13.00 13.34 14.25 14.36

Source: GWL data

Thank youThank you