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Inter-jurisdictional cooperation on pharmaceutical product listing agreements: views from Canadian provinces Morgan, Steven G; Thomson, Paige A; Daw, Jamie R; Friesen, Melissa K Jan 31, 2013

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RESEARCH ARTICLE Open AccessInter-jurisdictional cooperation on pharmaceuticalproduct listing agreements: views from CanadianprovincesSteven G Morgan*, Paige A Thomson, Jamie R Daw and Melissa K FriesenAbstractBackground: Confidential product listing agreements (PLAs) negotiated between pharmaceutical manufacturersand individual health care payers may contribute to unwanted price disparities, high administrative costs, andunequal bargaining power within and across jurisdictions. In the context of Canada’s decentralized health system,we aimed to document provincial policy makers’ perceptions about collaborative PLA negotiations.Methods: We conducted semi-structured telephone interviews with a senior policy maker from nine of the tenCanadian provinces. We conducted a thematic analysis of interview transcripts to identify benefits, drawbacks, andbarriers to routine collaboration on PLA negotiations.Results: Canadian policy makers expressed support for joint negotiations of PLAs in principle, citing benefits ofincreased bargaining power and reduced inter-jurisdictional inequities in drug prices and formulary listings.However, established policy institutions and the politics of individual jurisdictional authority are formidable barriersto routine PLA collaboration. Achieving commitment to a joint process may be difficult to sustain amongheterogeneous and autonomous partners.Conclusions: Though collaboration on PLA negotiation is an extension of collaboration on health technologyassessment, it is a very significant next step that requires harmonization of the outcomes of decision-makingprocesses. Views of policy makers in Canada suggest that sustaining routine collaborations on PLA negotiationsmay be difficult unless participating jurisdictions have similar policy institutions, capacities to implement coveragedecisions, and local political priorities.Keywords: Prescription drugs, Reimbursement mechanisms, Risk sharing, International cooperation, CanadaBackgroundTo avoid the negative effects of widely-used externalreference pricing policies, manufacturers are placingtighter restrictions on list prices for prescription drugs[1-3]. Final drug prices are therefore increasingly deter-mined by confidential contracts negotiated between drugplans and manufacturers [4,5]. The secrecy of negotiatedprice rebates effectively segments the market, allowingfirms to price discriminate across payers. This givespayers an opportunity for savings but also creates newchallenges related to negotiation and enforcement.While there are several examples of inter-jurisdictionalcooperation on health technology assessment (HTA) fordrug coverage decision-making [6-8], there have been fewinstances of inter-jurisdictional cooperation on price nego-tiations. However, to increase purchasing power, reduceadministrative costs, and prevent unwanted price dispa-rities across payers, cooperation on price negotiationmight be justified in some cases. Canada offers an illustra-tive example.Canada differs from some other federal states, such asItaly or Australia, where pharmaceutical pricing policiesare centralized with a national authority. Responsibilityfor health care in Canada is devolved to its ten pro-vinces, which vary considerably in population size andincome – see Table 1. Prescription drug coverage policy* Correspondence: morgan@chspr.ubc.caCentre for Health Services and Policy Research, School of Population andPublic Health, Faculty of Medicine, University of British Columbia, 201-2206East Mall, Vancouver V6T 1Z3, Canada© 2013 Morgan et al.; licensee BioMed Central Ltd. This is an Open Access article distributed under the terms of the CreativeCommons Attribution License (http://creativecommons.org/licenses/by/2.0), which permits unrestricted use, distribution, andreproduction in any medium, provided the original work is properly cited.Morgan et al. BMC Health Services Research 2013, 13:34http://www.biomedcentral.com/1472-6963/13/34is highly decentralized as there is no federal fundingincentives to promote consistency of public drug cover-age across provinces [9]. As a result, each provinceindependently operates limited public drug benefit pro-grams. These programs vary widely in structure andaccount for 26 to 45% of prescription drug expendi-tures in their provinces, leaving a significant role forprivate financing through insurance and out-of-pocketpayments. All provinces except Quebec cooperate onhealth technology assessment for public drug cover-age decision-making [7]; however, they remain re-sponsible for their own coverage decisions and pricenegotiations.Price contracts for pharmaceuticals are known asproduct listing agreements (PLAs) in Canada. Prior toapproximately 2006, they were seldom ever used by anyprovince. Today, use of PLAs varies widely across pro-vinces: they are virtually never used in Quebec andNewfoundland and Labrador; they are used for virtuallyall drugs covered by the public drug plans in Ontarioand Manitoba; and they are used to varying degrees inother provinces.In 2010, provincial premiers announced that a Pan-Canadian Purchasing Alliance would facilitate jointprice negotiations among interested provinces [10].Joint negotiations related to three drugs had taken placeby mid-2012 [11]. Such collaboration indicates potentialfor joint PLA negotiations; however, it is not yet clearwhether PLA collaboration can be sustained and applieduniversally to new medicines as is collaboration onHTA. We therefore sought to explore provincial policymakers’ views of the benefits and drawbacks of jointnegotiations and the potential barriers to making suchcollaborations routine.MethodsAfter ethics review and approval, we conducted tele-phone interviews with purposefully selected provincialdrug plan executives. In January 2012, we sent studyinvitations to each of the ten provincial drug plans. Invi-tations were sent to the most senior executive withineach plan or, where identifiable, the executive respon-sible for contract negotiations. Invitees were asked toparticipate in a telephone interview or to identify an ap-propriate individual to speak on behalf of their jurisdic-tion. Nine provinces agreed to participate; only oneprovince, Newfoundland and Labrador, declined.Seven of the nine policy makers interviewed hadworked with their respective drug plans for at least fiveyears. The other two policy makers were hired more re-cently to manage new PLA negotiation processes intheir jurisdictions. All policy makers from provincesthat had used PLAs had direct experience with PLAnegotiations and related inter-provincial collaborationefforts.The confidential nature of PLAs meant that policymakers could not be asked to comment on particularnegotiations or signed PLAs. Participants were there-fore asked to describe the general benefits and draw-backs of collaboration on PLA negotiation and toprovide their opinion about the barriers and facilitatorsto collaborating on a routine basis. Additional file 1contains the interview guide.Interviews lasted an average of 40 minutes (range 28to 54 minutes), and were recorded and transcribed forthematic analysis [12]. All four authors read all tran-scripts and independently identified themes thatemerged from the text. Authors met and jointly devel-oped a coding scheme that then was used by twoTable 1 Statistics on Canada’s provincesPopulation(2011)Gross domestic productper capita (CAD$, 2010)Total prescription drug expenditureper capita (CAD$, 2011)Share of total prescriptiondrug expenditure financed byprovincial government (2011)Canada (total) 34,482,779 $47,000 $788 38%Ontario 13,372,996 $46,000 $785 43%Quebec 7,979,663 $40,000 $912 33%British Columbia 4,573,321 $44,000 $575 36%Alberta 3,779,353 $70,000 $725 45%Manitoba 1,250,574 $43,000 $710 34%Saskatchewan 1,057,884 $60,000 $799 38%Nova Scotia 945,437 $38,000 $985 34%New Brunswick 755,455 $39,000 $937 26%Newfoundland andLabrador510,578 $55,000 $920 32%Prince Edward Island 145,855 $34,000 $791 31%Sources: Authors’ analysis of data from Canadian Institute for Health Information and Statistics Canada.Morgan et al. BMC Health Services Research 2013, 13:34 Page 2 of 6http://www.biomedcentral.com/1472-6963/13/34authors to independently code each transcript. Codingdiscrepancies were resolved through consensus or byconsulting the lead author.ResultsTable 2 lists the benefits, drawbacks and barriers to jointPLA negotiation most commonly mentioned by partici-pating policy makers. Key themes are described here.Benefits of collaborationPolicy makers from all participating provinces expressedgeneral support for collaborative PLA negotiations. Sevenof the nine policy makers participating in our study notedthat the increased bargaining power achieved through col-lective negotiations would likely lead to lower prices andcost savings for participating jurisdictions (see Table 2).Several policy makers noted that this benefit would not beshared equally as price savings are likely to be greatest forthe smaller provinces, which in isolation have lower bar-gaining power due to population size.Five policy makers also explicitly identified interprovin-cial price consistency as a benefit of a joint negotiationprocess. Under the current system of independent nego-tiations, policy makers in several provinces expressed con-cerns that manufacturers may provide the first and mostgenerous price concessions to one or two large provinces,increasing political pressure on other provinces to providecoverage. This strategy, known as whipsawing, could forcesmall provinces – with limited negotiating capacity andpurchasing power – to pay the highest prices. Policymakers from five provinces – large and small – statedPLA collaboration may be one way of addressing this issueand improving interprovincial equity in medicine pricesand access. As a policy maker from one of the larger pro-vinces stated, by working together, provinces could“. . .break down barriers [to access] wherein depending onwhere you live, you may have different access to medica-tions” (Interviewee #6).Drawbacks from collaborationPolicy makers from five of the participating provincesexpressed concerns that joint negotiations might increasethe time it takes to list a drug on provincial formularies.They argued that multilateral negotiations, by nature ofthe number of stakeholders at the table, would requiremore time than bilateral negotiations. Two policy makersalso noted that joint negotiations may require moreresources overall because each jurisdiction would stillneed to bear the cost of evaluating and adapting PLAs forthe local health system and policy framework.Perceived loss of provincial autonomy was one the mostcited drawbacks of joint negotiations. This includedconcerns about lines of accountability for PLA decisionsthat often have significant budget impacts. It also includedconsiderations related to the ability of individual jurisdic-tions to respond to the varying politics of their jurisdic-tion, each with different political parties, priorities, anddominant interest groups. One policy maker noted that“politicians have different pressures at different times”(Interviewee #3) making it difficult to predict whether ajointly negotiated PLA will have local support.Barriers to expanded collaborationInstitutional barriersPolicy makers from six provinces mentioned institutionalbarriers to routine collaboration on PLA negotiations, ran-ging from constitutional authority over health care to localpolicy processes. Related to the former, several policymakers noted that provinces have independent authorityfor health care policy and related decision-making. It wasargued that co-operation among the autonomous pro-vinces is difficult without financial incentives from thefederal government. Reflecting more local considerations,policy makers also noted that drug coverage decision-making processes vary considerably across provinces.While some provinces cede coverage decisions to execu-tives responsible for public drug programs, others requireministerial or even cabinet approval. These differencesTable 2 Most frequently mentioned themes concerningthe benefits, drawbacks, and obstacles to collaborationon product listing agreementsNumber ofpolicy makersthat mentionedtheme (n = 9)BenefitsIncreased bargaining power 7Provincial equity in price 5Provincial equity in access 5Administrative efficiency 2Increased access, can fund more drugs 1DrawbacksDelay/length of process 5Reduction in provincial autonomy 4Savings may be lost for large provinces 2Resource-intensive 2Decreased access in some jurisdictions 1BarriersDifferences in policy institutions 6Provincial and/or federal will 6Differences structure of drug benefit programs 5Technical and administrative resources 5Political acceptability of the decision 4Morgan et al. BMC Health Services Research 2013, 13:34 Page 3 of 6http://www.biomedcentral.com/1472-6963/13/34affect decision-making timelines and consultation require-ments in ways that might impede routine collaboration.Policy makers from five provinces also cited institutionalvariations in provincial drug benefit structures as a barrierto routine collaboration on PLA negotiation. Given thatsome provinces provide comprehensive coverage for theelderly and the poor and others only cover residentsagainst “catastrophic” drug costs, the coverage priorities,decision-making frameworks, and even bargaining posi-tions will differ significantly from province to province.One policy maker went so far as to conclude that jointnegotiations are unlikely to become commonplace unlessall participating provinces offered comparable drug benefitplans: “Fundamentally, you’ve got to have the same drugbenefit plan before you actually negotiate together”(Interviewee #5).Political barriersPolitical will was one of the most frequently mentionedobstacles to routine collaboration on PLA negotiation.Policy makers from several provinces felt that jointnegotiations are likely to be explicitly or implicitly drivenby larger provinces – because they have the greatest pur-chasing power and political influence – and that thiswould not sit well with some governments. Reflectingthe constitutional autonomy mentioned above, somepolicy makers said that provinces would not voluntarilycede the decision-making authority required to sustainjoint PLA negotiations. As one policy maker stated,“[you have to] give one group authority to make decisionsthat would be binding on all provinces, which isn’t goingto happen” (Interviewee #7).Related to the broader concerns about political will, pol-icy makers from four provinces cited concerns about thelocal political acceptability of final listing decisions thatwould result from a joint negotiation. Two of these policymakers specifically noted that there is a risk of provincescircumventing the collective process on a drug-by-drugbasis, either by pursuing individual negotiations or by“cherry-picking” only those jointly-negotiated PLAs thatsuit their interest. Though acting in the interest of one’sown jurisdiction is the primary responsibility of provincialpolicy makers, such outcomes were viewed as significantthreats to the effectiveness and sustainability of routinejoint negotiations.Resource barriersPolicy makers from five of the participating provincescited scarcity of required resources as a barrier to expan-ding joint PLA negotiations. As stated above, some policymakers felt that joint processes, at least currently, repre-sent an increase in negotiation costs. Some provincialpolicy makers argued that the federal government shouldsupport the infrastructure required for collaborationamong the provinces. They also noted that this was un-likely given the federal government’s current spendingpriorities and fiscal constraints.DiscussionPolicy makers from Canadian provinces express generalsupport for joint PLA negotiations. Despite supportin principle, none suggested that routine collaborationswould be sustainable at present because of variations inexisting policy institutions and politics. This view mightbe surprising given the longstanding collaborations amongall but one province on health technology assessmentrelated to drug coverage decision-making [7]. However, acritical difference in these processes is that collaborationon health technology assessment harmonizes the evidenceunderpinning coverage decisions while collaboration onPLA negotiations effectively harmonizes the coveragedecisions. To provide firms with maximum incentive tonegotiate better deals than would be the case in independ-ent negotiations, a PLA collaboration has to result in con-sistent funding decisions: failure to reach agreeable termsthrough joint negotiations must result in a “no” listing de-cision by all participating drug plans, and a successful jointnegotiation must result in a “yes” decision. Achieving andsustaining such commitment to joint decision-making is aformidable challenge.The insights provided to us by policy makers fromCanadian provinces illustrate that joint negotiations maybreak down for a number of reasons. Acting in self-interest, payers may perceive that a better (or faster) dealcan be achieved by negotiating independently or mayresort to “cherry picking” their commitment to joint nego-tiations. Manufacturers may even have incentive to try tobreak a negotiation alliance by offering side deals in thehope that individual drug plans could be played againsteach other.Beyond these self-interested incentives to defect,policymakers expressed greater concern that solidarity innegotiations would break down as a result of institutionaland political barriers. Willingness to implement consistentfunding decisions through joint negotiations requires, atleast, that participating drug plans have comparabledecision-making frameworks and negotiating leverage. Dif-ferences in policies as simple as decision-making protocolscan limit the potential for routine collaboration. Variationsin the benefit structure of drug programs – that is, who iscovered and with what types of user charges-are even moreimportant because they may be more costly to harmonizeand they have a more profound effect on decision-makingframeworks. This raises the broader issue of the politics ofdecision making autonomy and accountability.Being committed to the decision-making outcomesassociated with joint PLA negotiations requires thatdecision-making autonomy be ceded to a collectiveMorgan et al. BMC Health Services Research 2013, 13:34 Page 4 of 6http://www.biomedcentral.com/1472-6963/13/34process. This requires a great deal of political will be-cause different governments have different health carepriorities and competing interests, such as attracting orretaining pharmaceutical industry investment. It was notstated explicitly by any policy makers in our study, butvariations in provincial incomes and, therefore, govern-ments’ revenue generating powers will also affect theacceptability of centralized decisions. Given the signifi-cant economic disparity among negotiation partners,some participating jurisdictions may simply not be ableto “afford” to commit to collective decisions.LimitationsOur study is not without limitations. First, we only inter-viewed one policy maker in each province. These policymakers were senior executives and managers with directexperience related to PLA negotiations and relatedcollaborative efforts, or direct experience with drugcoverage decision-making if PLAs were not used in theirprovince. Their views are those of people closelyengaged in the file but will not necessarily reflect viewsof other officials, such as ministers or deputy ministersof health. As with any study of this kind, the viewsexpressed by respondents represent a snapshot of per-ceptions in a complex policy arena. Policy makers’ per-ceptions will evolve as provinces’ gain more experiencewith PLAs and related cooperative efforts. Finally, weare aware that interview responses may have been influ-enced by social desirability bias. In an effort to mitigatethat bias, participants were informed that our studywould not attribute themes or quotes to specific pro-vinces or speakers unless absolutely necessary and onlyafter consent was provided.ConclusionsJoint negotiation of PLAs may be seen as a logical exten-sion of inter-jurisdictional cooperation on health tech-nology assessment; however, the extension is arguably asignificant leap, one requiring a move from collaborationsimply on decision-making processes to collaboration ondecision-making outcomes. Canada’s experience suggeststhat building and sustaining a PLA negotiation alliancewill likely require more than simple commitment toavoid defection due to self-interest. Differences in policyinstitutions, political pressures, and economic opportun-ities of participating jurisdictions can place considerablestrain on a joint negotiation process.Choice of “negotiating partner” is a key determinant of ef-fective, routine collaboration on PLA negotiations. Sustain-ing routine collaborations on a voluntary basis will requirepartners with similar drug plans, compatible priorities forhealth care and industrial development, and comparable in-come levels. Whether across provinces in Canada or acrosscountries internationally, such collaborations would addresssome of the shortcomings of by increasing purchasingpower and administrative efficiencies among negotiationpartners. They would not, however, address concerns aboutglobal disparities in drug prices that might arise in the newparadigm of confidential drug pricing.To promote equity in negotiation processes and out-comes in a federation such as Canada, it would be possiblefor the federal government to either centralize this policyfile as is done in countries like Italy and Australia, or to ac-tively encourage collaborations among disparate states/pro-vinces. Given the politics of jurisdictional responsibility inCanada, centralization is unlikely. The Canadian govern-ment could, however, exercise its spending power to en-courage collaboration. By sharing part of the cost of thenegotiation process and related funding decisions, condi-tional on provinces harmonizing the structures of drugbenefit programs, it could incentivize participation whileequalizing decision-making frameworks and addressing in-come disparities that limit voluntary efforts by provinces.While centralization by way of vertical policy integra-tion is possible in the context of a federation, it is notpossible across countries. It will therefore be more diffi-cult to improve equity in drug pricing across nationswith disparate income levels. If the new global pricingparadigm is resulting in increasingly inflated list pricesfor medicines, mechanisms will be needed to assist lesswealthy countries in negotiations, co-ordinated throughagencies such as the World Health Organization.Additional fileAdditional file 1: Appendix 1. Interview Guide.AbbreviationPLA: Product listing agreement.Competing interestsSteven Morgan has been retained as a consultant on matters related topharmaceutical policy by Health Canada, the Department of Justice Canada,and the British Columbia Ministry of Health Services. The other authors haveno conflicts of interest to declare.Authors’ contributionsSM is responsible for project conception and acquisition of funding. Allauthors contributed to the study design. SM and PT conducted thetelephone interviews. All authors contributed to the thematic coding ofinterview transcripts. SM wrote the first draft of the paper. All authors revisedand provided comments on paper drafts and have approved the finalversion of this paper.AcknowledgementsFunding for this project was provided by the Canadian Institutes of HealthResearch. The sponsor had no role in the project or in decisions to publishresults.Received: 11 September 2012 Accepted: 23 January 2013Published: 31 January 2013Morgan et al. 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Miles MB, Huberman AM: Qualitative data analysis: An expanded sourcebook.2nd edition. Thousand Oaks: Sage Publications; 1994.doi:10.1186/1472-6963-13-34Cite this article as: Morgan et al.: Inter-jurisdictional cooperation onpharmaceutical product listing agreements: views from Canadianprovinces. BMC Health Services Research 2013 13:34.Submit your next manuscript to BioMed Centraland take full advantage of: • Convenient online submission• Thorough peer review• No space constraints or color figure charges• Immediate publication on acceptance• Inclusion in PubMed, CAS, Scopus and Google Scholar• Research which is freely available for redistributionSubmit your manuscript at www.biomedcentral.com/submitMorgan et al. BMC Health Services Research 2013, 13:34 Page 6 of 6http://www.biomedcentral.com/1472-6963/13/34

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