Single payer systems have lower drug spending than do multi-payer systems

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Jun 16 2017
Don McCanne
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http://www.pnhp.org/news/2017/june/single-payer-systems-have-lower-drug-spending-than-do-multi-payer-systems

Drivers of expenditure on primary care prescription drugs in 10 high-income countries with universal health coverage

By Steven G. Morgan, PhD, Christine Leopold, PhD, Anita K. Wagner, PharmD, DrPH
CMAJ, June 12, 2017

Abstract

BACKGROUND: Managing expenditures on pharmaceuticals is important for health systems to sustain universal access to necessary medicines. We sought to estimate the size and sources of differences in expenditures on primary care medications among high-income countries with universal health care systems.

METHODS: We compared data on the 2015 volume and cost per day of primary care prescription drug therapies purchased in 10 high-income countries with various systems of universal health care coverage (7 from Europe, in addition to Australia, Canada and New Zealand). We measured total per capita expenditure on 6 categories of primary care prescription drugs: hypertension treatments, pain medications, lipid-lowering medicines, noninsulin diabetes treatments, gastrointestinal preparations and antidepressants. We quantified the contributions of 5 drivers of the observed differences in per capita expenditures.

RESULTS: Across countries, the average annual per capita expenditure on the primary care medicines studied varied by more than 600%: from $23 in New Zealand to $171 in Switzerland. The volume of therapies purchased varied by 41%: from 198 days per capita in Norway to 279 days per capita in Germany. Most of the differences in average expenditures per capita were driven by a combination of differences in the average mix of drugs selected within therapeutic categories and differences in the prices paid for medicines prescribed.

INTERPRETATION: Significant international differences in average expenditures on primary care medications are driven primarily by factors that contribute to the average daily cost of therapy, rather than differences in the volume of therapy used. Average expenditures were lower among single-payer financing systems that appeared to promote lower prices and the selection of lower-cost treatment options.

From the Methods

This is a comparative economic analysis of market research data from calendar-year 2015 for 10 selected, high-income countries with a variety of systems of universal health care coverage: Canada, Australia, New Zealand, Norway, Sweden, the United Kingdom, France, Germany, the Netherlands and Switzerland.

We chose these countries because they are all high-income countries offering universal health coverage, and all were part of a large study involving countries that have participated in the Commonwealth Fund’s International Health Policy surveys. We did not include the United States in this analysis because it is an outlier in 2 important ways: first, it has not yet achieved universal health coverage; second, it has such exceptionally high pharmaceutical expenditures that its inclusion in this analysis would skew comparisons among the 10 more comparable countries studied here.

Residents of all countries except Canada were eligible for universal health coverage that included universal coverage of outpatient prescription drugs. The systems of drug coverage in Australia, New Zealand, Norway, Sweden and the UK can be described as universal public systems. In these countries, prescription medicines are financed predominantly by government, and either government or an arm’s-length public body manages the selection and the price-setting of medicines to be covered by the universal system of public financing. Prescription drugs in France, Germany, the Netherlands and Switzerland are financed through multiple-payer, social insurance systems with various statutory policies governing minimum coverage and pricing for brand-name and generic drugs.

From the Interpretation

Across 10 high-income countries with universal health care systems, the average expenditure per capita on 6 of the largest categories of primary care medicines varied by more than 600%. The volume of therapies purchased varied by only 41%, which meant that most of the differences in average expenditure per capita were driven by differences in the average mix of drugs selected within therapeutic categories and differences in the prices paid for medicines prescribed. In New Zealand, estimated costs per day of therapy were about one-third the level in comparator countries; in Switzerland, estimated costs per day were nearly double the level in comparator countries.

Conclusion

Substantial international differences in average expenditures on primary care medications are driven primarily by factors that contribute to the average daily cost of therapy, rather than differences in the volume of therapy used. Average expenditures are lower among single-payer financing systems, which appear to promote lower prices and selection of lower-cost treatment options within therapeutic categories.

http://www.cmaj.ca...

Commonwealth Fund report on performance of health systems of 11 high-income nations:
http://www.commonwealthfund.org...

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Comment:

By Don McCanne, M.D.

This study of ten high-income countries with universal coverage demonstrated that those with single payer systems spent less on prescription drugs than did those with multi-payer systems. This is one more bit of evidence confirming that the United States is correct in continuing its pursuit of a national single payer financing system - an improved Medicare for all.

The ten nations studied were from those reported previously in the Commonwealth Fund studies of eleven nations in which the United States was ranked last overall on various measures of performance (link above). The United States was omitted from this study because it does not have universal health care coverage, and it has exceptionally high pharmaceutical expenditures that would have skewed the study.

Switzerland presents a special case that should be of interest to single payer supporters in the United States. Their system is financed by highly regulated private insurance plans  - a system which has been praised by U.S. advocates of consumer-directed health care for placing a greater financial burden on patients in need. Switzerland has twice rejected ballot measures which would have established a single payer system within their nation. As a result, amongst other features of their system, they now enjoy paying the highest drug costs of these nations - nearly double the level in comparator countries (but still far less than drug costs in the United States).

We can learn much about health care financing from other high-income nations with universal health care systems. Here we see that a universal system alone is not enough. It needs to be a well designed single payer system. We have the rudiments of that in our traditional Medicare program, but it still needs a lot of work.

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