CAPDM Witnesses Before Senate Committee on Bill C-64, An Act respecting pharmacare

On Thursday, September 26, 2024, Angelique Berg, President & CEO of CAPDM, presented virtually before the Senate Standing Committee on Social Affairs, Science and Technology on Bill C-64, An Act respecting pharmacare.

Read her full remarks and recommendations below:

Thank you, Madam Chair and members of the Committee. It is my pleasure to participate today.

I am Angelique Berg, President & CEO at CAPDM, the Canadian Association for Pharmacy Distribution Management. CAPDM is the trade association for the wholesale distributors that handle over 90% of the medicines our country consumes.

With their trading partners, distributors form our safe, timely, and reliable supply chain that ensures physical access to medicines. So, naturally, we support the aim of Bill C-64. We support both affordability and access to medications for all Canadians, in balance, and not at the expense of one or the other.

We seek and encourage greater clarity with respect to Bill C-64. Many aspects have yet to be articulated, to be determined until after Royal Assent, which presents concerns about the potential risks and impact to supply chain stakeholders. 

To appreciate our comments, I’ll provide some basics about the supply chain – because – like how electricity reaches our homes – we rarely think about how our medicines get to us, so long as they do.

The supply chain begins with manufacturers, who sell to distributors, who then sell to pharmacies and hospitals. It is a pull model, where prescriber and patient demand drive purchases by pharmacies and hospitals, which drives purchases by distributors from manufacturers. The majority of Canada’s pharmacy supply chain companies are CAPDM members and form the critical infrastructure that equips the healthcare system and its professionals with medicines for the patients they treat.

Distributors are important pharmacare stakeholders, streamlining orders and deliveries for 15,000 products between hundreds of manufacturers and over 12,000 points of dispensing. This consolidation is estimated to deliver savings to the country of over $1 billion dollars annually. Their safety stock also provides short-term buffer against drug shortages.

Distributors employ over 46,000 people in Canada, and our industry’s over 30 distribution centres must comply with at least three overarching acts, up to seven different Health Canada licenses, and use advanced technology to meet these requirements.

Pharmaceuticals are sensitive products. They cannot be kept in just warehouses or any truck like an Amazon package. The handling of medicines is extremely complex, highly regulated, requiring temperature-controlled storage and packaging. They do not store or move cheaply.

Drug distribution is an expensive undertaking in our vast country. Our market is not only physically challenging due to this geography, temperature swings, and climate events – but it’s a controlled market where funding is limited, yet operating and regulatory costs are uncontrolled.

Distribution is funded – rather than on the cost of the service provided – is largely funded as a factor of listed drug prices, which are regulated and out of our control. For example, in 2007 the first generics pricing agreement reduced funding to the distribution sector by $50 million. The lower the price, the less available funding to get medications to Canadians, especially to rural regions.

On the cost side, costs in the last 5-10 years have increased at least 2.5 times faster than volumes with market forces, such as rising fuel and labour costs. Increased regulation also drives costs – Health Canada regulations on temperature control alone cost the sector $20 million.

The result is a very low margin business, under pressure from shrinking funding and rising costs to the tune of over $100 million annually.

Distributors have been able to absorb the reduced costs with only minimal impact to Canadians to date.

As written, Bill C-64’s potential unintended consequences could erode the supply chain infrastructure, resulting in contracted physical access and exacerbated drug shortages.

With further cost reductions, which will happen with price savings, and absent reinvestment of the savings into strengthening the supply chain, distributors will have few options left but to reduce services. The unenviable choices are:

• Stop carrying the growing number of money-losing products, which include many long-standing medicines for chronic conditions.
• Further reduce the expense of “safety stock,” significantly reducing the ability to prevent or mitigate drug shortages.
• Reduce overall service frequency and speed to rural/remote regions, which are the highest cost-to-serve.

Secondly, a restrictive national formulary and bulk purchasing could disrupt Canada’s drug supply. This can already be seen with the proposed National Pharmacare list of diabetes drugs, which only includes half of the diabetes drugs in the market today. Affected Canadians would be forced to switch from their current therapy to something on the list.

This will have a domino effect on the supply chain, as distributors’ buffer stock is depleted and manufacturers of drugs not on the list leave the market. Over time, the drug supply will be more vulnerable to shortages.

The same applies to how “bulk purchasing," whatever it means, will be pursued, particularly if it results in restrictive formularies and Canada relying on fewer suppliers.

We are concerned about the lack of focus on the actual infrastructure that ensures drugs physically reach Canadians and the patients who treat them. This supply chain is how medications get to the healthcare system and the professionals within it to treat patients. This supply chain must be considered and protected for the system to work. It is critical that those in the supply chain – those who actually touch the product – play a part creating the solution.

We call on this Committee to carefully consider Bill C-64 and introduce an amendment to the legislation that includes a principle clearly addressing timely physical access of pharmaceutical products for Canadians by ensuring the sustainability of pharmaceutical distribution and pharmacy services, especially for those in rural and remote regions of the country.

As a partner to government, our goal is to act as a resource and collaborator to you, to ensure the health and well-being of Canadians through their safe, secure, and timely access to medicines.