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• Access to Medications
• Cost Containment
  • Reference Based Pricing
  • Therapeutic Substitution
  • Tendering
• Pharmaceutical Task Force
• Pharmacy Agreement in BC

Reference Based Pricing

Reference-based pricing policies are used by private and public drug plans to contain costs. Under reference-based pricing, drug plans reimburse the cost of the reference drug or drugs in an entire class¹. Most often, this is the most inexpensive drug in the class.

Under reference-based pricing, reimbursement for the cost of the drug(s) is based on the assumption that certain medications within a specific drug class are interchangeable, having the same therapeutic benefits; therefore, a common level of reimbursement can be established. Reference-based pricing policies apply to drugs that are within the same class and considered therapeutically equivalent, but are different chemically and structurally².

Therapeutic substitution is a type of reference-based pricing policy. A policy of therapeutic substitution affects patients starting new medications, as well as patients already on medications. Under therapeutic substitution policies, if a patient is starting a medication for the first time, they are forced to begin with the reference medication, even if this was not the one prescribed by their doctor. Or, if patients are already taking a medication, a policy of therapeutic substitution forces them to make a medically unnecessary switch from the medication prescribed by their doctor to another medication that is chemically different, but within the same therapeutic class of medications³.

The BC Experience

The Reference Drug Program was introduced in British Columbia in 1995 as one of the programs that BC PharmaCare implemented to help contain drug costs. Under this program, reference-based pricing was applied to five different classes of drugs⁴:

1. Histamine - 2 receptor antagonists (H2RA) for the treatment of certain upper gastrointestinal complaints, ulcers and heartburn;
2. Nitrates for the treatment of stable angina;
3. Non Steroidal Anti-Inflammatory Drugs (NSAIDS) for the treatment of all types of arthritis;
4. Angiotensin Converting Enzyme (ACE) Inhibitors for the treatment of high blood pressure;
5. Dihdropyridine Calcium Channel Blockers (CCBs) for the treatment of high blood pressure.

Under the Reference Drug Program, BC PharmaCare coverage is based on the cost of the reference drug or drugs in a class that are considered to be therapeutically the same, while being chemically different. If a patient wants to have coverage for a drug that is not the reference drug(s), then they are required to pay the difference between the reference drug and the drug their doctor has prescribed. If a patient needs a non-reference drug in the category for medical reasons, their doctor may obtain "Special Authorization" from PharmaCare for full coverage of that drug.

Reference-Based Drug Pricing has been reviewed by the BC Government twice (the 2002 George Morfitt report and the 2004 Chris Corbett Report), which found that the evidence of stakeholder support for the program in BC is varied and remains controversial. At this time, BC continues to be the only province in Canada that supports a Reference Drug Program.

International comparisons

Some countries and jurisdictions in North America have implemented reference drug programs similar to British Columbia's, including New Zealand, Australia and the Netherlands. However, many countries have either decided not to expand these programs or have opted not to implement them at all. For example, in 1991, Germany introduced a reference based program similar to BC's; however, in 1996 this was discontinued. Similarly, Norway also decided to discontinue its reference-based pricing program. France considered introducing reference-based pricing, but elected not to. Sweden and Denmark have generic substitution policies, but do not use reference-based pricing⁵. Under generic substitution policies, a switch is made from a brand name drug to a generic drug product that has the same active ingredients and is considered chemically and therapeutically identical in strength, concentration, dosage, form and administration.

A close look at the example of New Zealand's medicine rationing policies reveals a trend towards higher disease burdens and worse health care outcomes compared to other OECD countries where access to innovative medicines is not restricted (e.g. NZ has the highest frequency of coronary by-pass surgery compared to France, UK, Italy, Canada and Australia).

What impact do reference drug programs and reference-based pricing have on patients in BC?

Reference drug programs and policies of reference-based pricing restrict patient access to medications prescribed by their physicians. This hurts patients and drives up costs. When reference drug programs include policies of therapeutic substitution, the impact on patients can be particularly harmful. Often, under therapeutic substitution policies there is only one medication that is listed for reimbursement out of the entire class of medications. Therefore, even if you are well managed on your current medication, you could be forced to use another medication that your doctor did not prescribe⁶.

Moreover, under some therapeutic substitution policies, such as the one currently used for proton pump inhibitors (PPIs) in BC, patients are not able to pay the difference between the reference drug and the one prescribed by their physician. This means that if you choose to stay on the drug your physician prescribed all costs for the drug come directly out of your pocket⁷.

Worse yet, under the current therapeutic substitution policy in BC, even if a patient chooses to pay the full cost of the drug their doctor has prescribed, this does not count toward their public drug insurance deductibles that all citizens who rely on the public drug plan have to pay⁸.

Better Pharmacare Coalition Concerns:

The BPC has serious concerns about the impact of reference drug programs and reference-based pricing on the health of BC patients and the health system:

• Governments and policy makers cannot appropriately establish whether two different drugs are therapeutically equivalent, meaning they provide the same therapeutic benefits, as there is no evidence to support these decisions⁹.
  
  
  • There are no head to head clinical trials comparing two or more different drugs in the same class within the same populations of patients.
    
    
  • Indirect comparisons of several different drugs by looking at placebo-controlled studies do not provide appropriate information as each study may have different populations.
    
    
  • Decisions about reference-based pricing are often made before there has been enough time to collect evidence that demonstrates the impact of reference-based pricing policies.
    
    
• Patient access or choice to a wide range of effective medicines and health products is limited.
  
  
• Patients are being denied best care and treatment options because BC PharmaCare restricts coverage in many cases to the least expensive or 'best deal' medications and devices.
  
  
• Experts are not able to prescribe the medications they feel are most effective to their patients. This has a negative effect on the doctor/patient relationship and threatens quality health care.
  
  
• Reference drug programs and reference-based pricing push costs to other parts of the healthcare system and generate negative health outcomes for patients.
  
  

Better Pharmacare Coalition Recommendations:

The Better Pharmacare Coalition was formed as a direct result of reference-based pricing, which was the name of the policy when it was introduced in 1995, prior to the name being changed to the Reference Drug Program.

The Better Pharmacare Coalition is opposed to reference drug programs, reference-based pricing and policies such as therapeutic substitution. Now, as then, we are concerned that these government policies will continue to be driven solely by cost rather than patient care.

• The Better Pharmacare Coalition feels that the health of BC patients comes first. Patient care is enhanced by increasing choice; limiting choice to medications flies in the face of patient individuality.
  
  
• Government must discontinue the reference drug program and the practice of reference-based pricing. Those are choices to be made together by doctors and patients; the people who know the medical and experiential circumstances and the experts who have the education, training and experience to make such judgments.
  
  

1. Skinner et al. (2009), Alimentary Pharmacology and Therapeutics'. Postpring: doi: 10.1111/j.1365-2036.2009.-3940.x
2. Schneeweiss, S. (2007). Health Policy, Vol. 81: 17-28.
3. Gainor et al. (2003): 654.
4. http://www.health.gov.bc.ca/pharme/rdp/rdpindex.html
5. Report of the Reference Drug Program Consultation Panel: http://www.health.gov.bc.ca/library/publications/year/2002/rdppanel.pdf
6. Gainor et al. Hospital Pharmacy, Vol. 38(7): 652-658.
7. Skinner et al. Ibid.
8. Ibid
9. Schneeweiss, S., et al. Ibid: 19.

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