Medical Research Increased Throughout Decade of PharmaCare Reference Pricing
Media Release
The University of British Columbia
Jan. 23, 2008
Ten years after BC PharmaCare implemented spending limits for equivalent prescription drugs — a policy known as reference pricing — investments in British Columbia medical research are as strong as ever and continue to increase, according to a UBC study.
The findings from the UBC Centre for Health Services and Policy Research (CHSPR) demonstrate B.C.-based pharmaceutical R&D grew from $16 million in 1994, the year before B.C. changed its policy on drug coverage, to $50 million in 2005. This news comes one week before a special task force is to report on drug coverage policy in B.C.
“The research disproves claims that pharmaceutical cost-controls impact investment in local research and development initiatives,” says CHSPR’s Steve Morgan, lead author on the study published today in Healthcare Policy. “These potentially surprising results are actually consistent with business fundamentals: firms locate R&D based on the cost and productivity of scientific activity in a given area.”
Beginning in the 1990s, BC PharmaCare — the provincial government drug plan in B.C — refused to pay more for newer brand-name drugs unless manufacturers could prove that such products produced better results than older generic ones.
The UBC researchers studied whether pharmaceutical R&D in B.C. had fallen behind other Canadian provinces as a result of the policy change. On a per capita basis, pharmaceutical R&D grew more rapidly in B.C. than in the rest of Canada, suggesting that reference pricing did not affect R&D investments.
The UBC researchers also reviewed international economic literature and compared both pharmaceutical and non-pharmaceutical R&D data from other provinces. The economic literature showed that the location of R&D is driven by the availability and cost of scientific infrastructure and skilled workforces, and the proximity to pharmaceutical headquarters. The data also demonstrated that B.C.-based biotechnology investment far surpassed most other provinces, putting B.C. among the top centers for biotech research worldwide.
Spending on prescription drugs in Canada topped $21 billion in 2006, or nearly $650 per capita. Prescription drug costs in B.C. are just under $570 per capita, or 12 per cent below the national average. “Reference pricing and other government policies are among the reasons for relatively low spending in B.C.,” added Morgan. “Government estimates suggest that reference pricing has saved approximately $10-million per year since its introduction in the mid 1990s.”
A 2002 study by Canada’s Patented Medicine Prices Review Board had shown that global pharmaceutical R&D is highly concentrated in specific countries. In 2000, pharmaceutical companies invested the equivalent of $30 per capita on R&D conducted in Canada, compared to $52 per capita in Germany, $75 per capita in France, $108 per capita in the UK, $118 per capita in the US, $164 per capita in Sweden and $386 per capita in Switzerland.
According to Morgan, “While B.C. can’t change its geographic location relative to dominant pharmaceutical industry centres, it has been wise to control drug spending while simultaneously investing public funds into the scientific infrastructure and personnel necessary to attract world-calibre investment into strategically focussed areas like biotechnology.”
The article is available for free at the journal’s website:
Healthcare Policy / Politiques de Santé: Longwoods Publishing
www.longwoods.com/pages.php?pageid=108&cat=247.