Medicare doesn’t have to be expensive…just look at Israel

This was the fourth of a five-part series in The Globe and Mail on modernizing medicare considering lessons from home and abroad.

Bruce Rosen is director of the Smokler Center for Health Policy Research at the Myers-JDC-Brookdale Institute in Jerusalem.

In Canada, there is an ongoing debate about whether to expand medicare to include a national pharmaceutical benefit on a universal basis. There is widespread recognition that this could make a major contribution to the health of Canadians. However, there are concerns about affordability – particularly among some of Canada’s political leaders and government officials.

These concerns about affordability encouraged some of Canadian health care’s thought leaders to explore how pharmaceutical expenditures are contained in other countries, and I was asked to share the Israeli experience.

In Israel, everyone is insured for prescription drugs as part of the basic benefits package. Yet, per-capita pharmaceutical spending in Israel is $287 (all figures U.S.), well below that of Canada’s $761 and the OECD average of $527. To some extent, Israel’s lower spending levels are due to it having a relatively young population; but only about one-third of the Israel/Canada difference can be attributed to age.

So, how does Israel achieve broad access to pharmaceuticals at a low cost? And could some of Israel’s efficiency-promoting strategies be applied in Canada?

One key element of Israel’s achievement is at the level of shared understandings. In Israel, there is a broad consensus that a) pharmaceuticals can make a significant and unique contribution to health; b) our society cannot afford all the pharmaceuticals we would like to have; c) we should therefore be judicious about the adoption of pharmaceuticals at the macro/policy level and about their use at the micro/care delivery level; and d) cost-containment efforts should give particular attention to newer and particularly expensive pharmaceuticals.

From conversations with my Canadian colleagues, I sense that Canada also has an emerging consensus about the value and affordability of pharmaceuticals, albeit a somewhat different consensus than Israel’s. Canadian health and political leaders may want to take steps to crystallize this consensus, in parallel with practical efforts in Canada to promote efficiency and effectiveness.

In terms of macro-level practical mechanisms, Israel has a multistep annual process for deciding which new pharmaceuticals should be added to its National Health Insurance benefits package. It begins with all of the government’s ministers collectively deciding how much money to allocate in the coming year for new pharmaceuticals and other new health-care technologies. The government then effectively entrusts the decision about how that budget can be used most effectively to a special public committee.

The committee includes representatives of the Ministry of Health, the Ministry of Finance, the health insurers, the health professions, and the general public. The committee’s work is carried out with a substantial and increasing degree of transparency, including very serious media coverage.

The committee bases its recommendations on extensive preparatory work regarding the costs and benefits of the new drugs proposed by the pharma companies and others. This work is undertaken by Ministry of Health staff along with an economic subcommittee. When the price of a drug is the main obstacle to its prioritization, Ministry of Health officials will encourage the pharma company to lower its price. The companies are also sometimes encouraged to take on financial responsibility for those situations where actual utilization levels exceed company projections.

Several Canadian provinces already have procedures in place for deciding which new medications to add to their provincial drug programs and for negotiating prices with the pharmaceutical companies. They may wish to consider adopting or adapting several features of the Israeli approach not currently prevalent in Canada. These include the setting of an annual budget; the consideration of all proposed new medications simultaneously, rather than sequentially; the involvement of all key players in the prioritization process; using the prioritization process to secure concessions on both components of overall expenditure – price and volume; and a growing level of transparency.

At the micro-level, Israel engages its front-line physicians in “choosing wisely” when prescribing medications. This is done largely by the country’s four HMOs (health maintenance organizations), through which all Israelis receive their health care. These non-profit HMOs use their advanced health-information systems to provide their physicians with real-time, patient-specific and condition-specific information about the benefit and safety of relevant medications, and to encourage the use of lower-cost substitutes.

The HMOs also promote a culture of cost-consciousness, provide professional education to place the claims of the pharma companies in a broader context, and incentivize their physicians to engage in effective prescribing behaviour.

In Canada, which does not have HMOs, some of these measures to encourage efficient prescribing behaviour could perhaps be undertaken by provincial governments, medical associations, pharmacist associations, and others – either separately or through collaborative efforts.

In short, the Israeli experience suggests that to get value for money in pharmaceutical care it can be important to engage a very broad set of actors, work on both shared understandings and practical arrangements, and move forward at both macro and micro levels.

Some of these ideas and strategies may be adaptable to Canadian efforts, at both federal and provincial levels, to maximize value for money in Canada’s substantial pharmaceutical outlays.

By drawing on the experience in Israel and other countries, Canada should also be able to implement universal access to pharmaceuticals without breaking the bank.