by Wayne Schnarr
Healthcare
Success stories in Canadian healthcare:
BEYOND THE CELEBRATIONS C
anadian success stories need to be celebrated and, in the healthcare sector, we can applaud many people, discoveries, products and companies. However, honouring success is not sufficient since it generally focuses on past accomplishments. At the same time that we celebrate achievements, we need to ask the following questions. • Why were they successful? • Can these successes be repeated or were they unique events? • Why were other activities not successful? • Where are the opportunities of the future? The most prized and celebrated aspect of Canadian healthcare is its universality – every Canadian citizen has access to a basic set of health services. Access is not free since our taxes fund the 70 per cent paid for by governments, with individuals and companies paying the remainder either directly or indirectly through insurance and benefit plans. The basic set of health services may not include dental care, vision care or other healthcare services deemed non-essential by governments. Although universality is untouchable, it is no longer business as usual in Canadian healthcare as per capita spending cannot continue to increase at annual rates well above GDP growth rates. There are some trends which are beyond any control, such as the aging population. The healthcare system pays for treating the increasing incidence of chronic conditions, such as diabetes and obesity, but has little impact on real solutions including education and attitude changes. The biggest addressable challenge to healthcare budgets is an avalanche of new technologies, including drugs, imaging equipment and diagnostics. Total costs must be examined, such as the capital plus operating costs for every new medical product. Researchers, company management and healthcare administrators should always be asking the following
6 BIOTECHNOLOGY FOCUS
SEPTEMBER 2012
two questions about any new service or product. • Does the new service or product provide equivalent patient benefit at a lower total cost? • Does the new product or service provide improved patient benefit at the same or lower cost? A yes answer to either question probably justifies the development or purchase of the new service or product. Healthcare systems have the biggest problem when there is an increased patient benefit and an increased cost, and they have to answer the question ‘does the increased patient benefit justify the increase in costs?’ During the development of a product, management has to ask this question continually. If the answer is ever no, and new information is unlikely to change that answer, development should be terminated. However, that is a very difficult decision for a company whose valuation is based on that single product or where the board of directors is not sufficiently experienced or independent of management and founders. The question is extremely difficult for physicians, especially oncologists, when there is no test to determine if the patient will benefit from a new drug. With new cancer drug costs often over $50,000 and an increase in median survival during Phase 3 clinical trials of only about three months, it is very expensive to treat all patients when many will derive no benefit and only a small group will survive an additional year or more. The healthcare system will readily adopt clinical diagnostics which help it allocate resources more effectively. This question is also extremely difficult for governments because the public and political scrutiny and second-guessing is intense.
However, the financial impact of these new therapies should not come as a surprise – simply looking at the pipelines of the major pharma, biotech and medical device companies should tell governments what might hit their budgets over the next decade. The budget impact of any of these products can be assessed when one considers how many units are needed for a province, where they should be located to maximize use and minimize patient travel, what is the installation schedule, what is the initial capital cost, what are the annual operating costs and what are the dollar savings to the healthcare system from reduced use of other services.
Medical Research Canada has a rich history of medical research to be celebrated, ranging from insulin in the 1920s to polio vaccine manuA starting point for anybody assessing the Canadian healthcare sector is two CIHI reports – ‘National Health Expenditure Trends, 1975 to 2011’ and ‘Health Care Cost Drivers: The Facts’ – which contain the following data. • Health expenditure in 2011 is forecast to total $200.5 billion or $5,811 per capita. • Per capita health care spending increased by an average rate of 3.5% yearly from 1996 to 2009. • The major expenditure groups are: Hospitals. . . . . . . . . . . . . 29%; Drugs . . . . . . . . . . . . . . . . 16%; Physicians . . . . . . . . . . . 14%; Other professionals. . . 11%; and Other institutions. . . . . 10%.
