The BC experience with reference-based pricing

The Reference Drug Program was introduced in British Columbia in 1995 as one of the programs that BC PharmaCare implemented to help contain drug costs. Under this program, reference-based pricing was applied to five different classes of drugs: Under the Reference Drug Program, BC PharmaCare coverage is based on the cost of the reference drug or drugs in a class that are considered to be therapeutically the same, while being chemically different. If a patient wants to have coverage for a drug that is not the reference drug(s), then they are required to pay the difference between the reference drug and the drug their doctor has prescribed. If a patient needs a non-reference drug in the category for medical reasons, their doctor may obtain "Special Authorization" from PharmaCare for full coverage of that drug.

An economic study in the Canadian Medical Association Journal, published in 2002, revealed that BC's reference-based pricing policy pushed costs to other parts of the health care system, generating negative health outcomes for the elderly and low-income patients. Subsequent research published in 2003 in the BC Medical Journal demonstrated that the RDP was not effective in slowing pharmaceutical spending and consumers had to pay for more out-of-pocket.

In 1996, patient groups got together and formed the Better Pharmacare Coalition (BPC) in response to the government's introduction of reference-based pricing policy in BC. One of these patient groups, the Canadian Society of Intestinal Research, led a study 2009 study that showed changing medication against doctor's orders, which BC PharmaCare predicted would preserve $42 million in the drug budget, actually cost the BC government $43 million more, a difference of $85 million over three years. This policy actually resulted in an increase in the drug budget itself, as patients used more medications when switched than they did before switching.

In 2014, BC Pharmacare announced the province was dropping one of the drugs it had covered for people with diabetes. The drug, Januvia, is one of a number of drugs within a class known as DPP-4 inhibitors. Patients no longer have access to public funding in B.C. for the drug. Instead, they have access to only one of two remaining DPP-4s or are forced to pay for Januvia out of their own pockets. Patients on this medication were forced in 2015 to switch to one that is still publicly covered.

British Columbia continues to be the only province in Canada that supports a Reference Drug Program. Ontario legislation even goes out of its way to say it does not permit therapeutic substitution. Similarly, Health Canada's Non-Insured Health Benefits program concluded that therapeutic substitution did not save the program money.