1. Teresa Negrich Director, Group Product Development

2. The healthcare landscape is changing ….. rapidly
Drug plans
Hospitals and
Private clinics
Eligible
prescribers
Health and
Wellness

3. Today’s Topics Overview of Canadian Healthcare System
Coverage of Cancer Drugs
Provincial Pricing
Provincial Drug Tendering
Sustainability Principle
Generic drug pricing
Other trends

4. Overview of the Healthcare
System In Canada

5. Canada 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.”

6. Canada 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

7. Canada 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

8. 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

9. Cancer Drugs

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

11. Coverage of Cancer Drugs – Ontario 2006
Ontario 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

12. How do the provinces compare?
Source CACC report Card 2007

13. Source CACC report Card 2007

14. Private Clinics – The New Healthcare Reality
18 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

15. 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

16. Pharmaceutical Focus

17. Pharmaceutical 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

18. The 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
2003
4.9M
.07%
.02%
2004
5.1M
.08%
2005
6.0M
2006
(5,551) .09%
(5,611) .09%
(1,906) .03%
Over the last half decade the amount of catastrophic claims is rising. The number of cardholders claiming for $10,000+ is growing rapidly and helps to reiterate the importance of managed drug plans.
The number of cardholders claiming between $10,000 and $14,999 has increased over 200% from 1,413 to 4,476 between 2000 and 2005.
The number of cardholders claiming between $15,000 and $24,999 has increased over 300% from 1,029 to 4,530 between 2000 and 2005.
The number of cardholders claiming over $25,000 has increased over 800% from 153 to 1,413 between 2000 and 2005.
Source: Emergis 2007 Data

19. Provincial Pricing

20. Provincial 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

21. Rx = + Components of a Rx Ingredient Cost Markup Dispensing Fee
Bill 102 reduced from 10% to 8% +
Dispensing Fee

22. Components of Pharmacy Revenue
Prescription Drug Sales
Other Merchandise Sales
Generic Rebates
Other
Pharmacy markup reduced
Generic rebates reduced

23. 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

24. Provincial Pricing Quebec Newfoundland Nova Scotia
- 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 due to negative pharmacy reaction
Nova Scotia
Tariffs introduced on “Top 20” drugs

25. Provincial Drug Tendering

26. Provincial Drug Tendering
Province of BC negotiated a drug deal for Zyprexa
- Speculated that 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

27. Impact 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

28. Sustainability Principle

29. Provinces 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

30. Generic Drug Pricing

31. 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

32. “there can be no health without mental health”

33. Centre for Mental Health in the Workplace
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.
No notes on this page.
*Cubic Health study was based on 2004 and 2005 Great-West Life data

34. The impact of depression in the workplace
A claimant with depression is defined as any claimant with at least one net paid claim for an anti-depressant medication during the one year period.
A claimant with depression has an average amount paid of $1,259, whereas a claimant without depression is only $388. This is an increase of over 220%.
Note that this can not be compared to the average covered cost as it is for paid claims and not covered claims.
*Cubic Health Study: based on 2005 data from Great-West Life

35. Co-morbidities of depression
The co-morbidity with depression shows the impact that depression has on other conditions.
64.4% of the dollars paid for claimants with neurological pain are claimants that also have depression. This is followed by other mental health conditions like anxiety disorder at 61.0% and sleep disorder at 50.3%.
*Cubic Health Study: based on 2005 data from Great-West Life

36. Other Provincial Trends

37. Privatization
Governments 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

38. Alternative 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

39. 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

40. Other Trends

41. Medical 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

42. HPV 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)

43. Impact 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

44. Paramedical 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

45. Paramedical 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
3.66
3.52
3.39
3.30
Chiro
2.86
2.66
2.61
2.53
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
1.46
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

46. Thank you