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Better prescriptions for health costs

Good luck: efforts to reduce the cost of prescription drugs are worthy, but may prove difficult

The announcement last week that the Bermuda Health Council is working with pharmacies to reduce the cost of prescription drugs is welcome news.

Drugs make up just 6 per cent of the overall cost of healthcare in Bermuda. Many people might have expected that number to be higher, perhaps because there is often a copay involved with the purchase of prescriptions.

People may be more conscious of paying out of pocket than for a visit to the hospital, which, with luck, is a rarer occurrence. But the hospitals, according to the latest publicly available statistics, take up 45 per cent of Bermuda’s healthcare spending.

Still, prescription drugs are a good place to start as a means of reducing costs, if only to try to cut people’s out-of-pocket expenses.

According to the statistics, Bermuda residents spend about $700 annually per person on prescription drugs. That is less than in the US, where people spend about $1,000, but more than almost any other country. The average Briton, by comparison, spends $270.

This wide disparity is at the heart of the debate about prescription drug costs. There are two reasons why drug costs are higher in the US and Bermuda, and lower elsewhere.

The first is usage. About 58 per cent of Americans use prescription drugs compared with 48 per cent in Britain. Bermuda probably hews more closely to the US than Britain, and it will be important to know this number.

The second factor is the cost of the drugs from suppliers. Here again, costs vary widely from country to country. According to a 2017 study, US brand-name drugs can cost 30 per cent to 40 per cent more than the average price paid in the rest of the world.

While pharmacists in Bermuda have made strong efforts to find generic drugs, the US experience in that same study shows that even though 90 per cent of drugs bought in America are generic, this accounts for only 20 per cent of spending, a mind-boggling disparity.

Why is this not the case in other countries? In part, it is because large health systems such as Britain’s National Health Service or the Canadian Government system can negotiate lower prices based on the sizes of their markets. In other instances, countries actively cap the prices of drugs, and pharmaceutical companies must get in line.

This is not the case in the US, where there is little price regulation and where the health market is relatively diffuse.

Now the Bermuda Health Council is looking to negotiate on behalf of the pharmacies and to set a maximum price on certain drugs.

That sounds good in theory, but may be less simple in practice. That’s because the vast majority of drugs in Bermuda are now brought in by one supplier. Before it is assumed that company is pushing the price up, the reality is that Bermuda’s market of 60,000 people is minuscule.

The likelihood that the Government will be better able than a private importer to negotiate a lower price is vanishingly small.

There may be other options, although there is almost certainly no perfect solution. Bermuda could attempt to join forces with other small jurisdictions in the Caribbean or among British Overseas Territories to jointly negotiate better prices, but great care on the cost of logistics would be needed, as our isolation is already a costly challenge.

Another option would be to attempt to piggyback on a large country such as Britain or Canada, with whom Bermuda has long relationships.

The experience of Bermuda in getting Covid-19 vaccines is a good example of this. Had Bermuda negotiated for the vaccines on its own, it would have taken months longer than it did to receive them from Britain.

That was a unique situation and by all accounts, the NHS has its own problems. In addition, being part of a larger organisation could mean that local GPs would have trouble prescribing the drugs they prefer.

Still, all options are worth exploring, including sourcing drugs — after rigorous screening — from countries around the world from which Bermuda is not permitted to import at present.

Nonetheless, even if — as unlikely as it is — drug costs were cut in half, it would make little overall difference to insurance premiums. In that scenario, health costs would be 97 per cent of what they are now. That’s not nothing, but it’s not much.

There is no rabbit to be pulled out of a hat to reduce the cost of healthcare.

Leaving aside the obvious but apparently politically impossible solution of encouraging more young people to emigrate to Bermuda, where they would be healthy and would also be paying health insurance premiums, there is no easy short-term answer.

The long-term solution is to make a real effort to live healthier lives. This would require a genuine and committed effort to encourage healthier diets and for people to take exercise.

Some of the drugs people take now are for preventable conditions such as high cholesterol and type 2 diabetes where there are non-drug solutions to chronic health problems.

Finding alternatives to hospital admission, especially for chronic care, is another answer.

None of these are easy or can be done tomorrow. But they are the long-term answer to solving Bermuda’s chronic health costs.

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Published January 31, 2023 at 8:00 am (Updated January 30, 2023 at 3:44 pm)

Better prescriptions for health costs

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