The Committee’s study showed that technological innovation has brought many benefits to health care delivery in terms of new ways of diagnosing, treating and understanding diseases. Furthermore, technological innovations in e-health and telehealth are improving access to health care for many Canadians, while reducing costs to health care systems. While witnesses saw investments in technological innovation as providing overall benefits to health care, the Committee also learned about the costs associated with the adoption of these innovations. This chapter focuses on the costs associated with the adoption of technological innovations in health care, as well as identifies ways to address these costs, as presented by the witnesses.

A. Overview of the Costs Associated with the Adoption of Technological Innovations in Health Care[179]

Witnesses provided the Committee with an overview of the direct costs associated with the adoption of different types of health technologies in their respective health care organizations. The Committee heard from Andrew Williams, President and Chief Executive Officer of the Huron Perth Healthcare Alliance that the adoption of MRI units, a common medical technology, cost $3.4 million for the purchase of the equipment and $800,000 per year in operating costs. He explained that his annual budget for information technology is $2.8 million and reflects 2.2% of the Alliance’s total annual budget. He said that annual IT budgets for other hospitals in his region range between 1.8% and 5.8% of total budgets. He noted that for his group of rural hospitals to have the complete adoption of a mature EMR system, a further investment of $2 million would be necessary along with three years of planning.

Other witnesses highlighted the fact that there are also indirect costs associated with the adoption of technologies. Branden Shepitka, the lead for the implementation of EMRs in the Emergency Department of Health Sciences North, explained that his organization faced large infrastructure costs associated with the implementation of IT projects. For example, the emergency departments, when initially constructed, lacked Ethernet connections and power outlets for computer stations, which are now being installed at significant cost because much of this work has to occur during night-time hours so as not to disrupt patient care. Furthermore, he explained that an additional $2 to $3 million would be required to implement a wireless network so that health care providers could use hand-held devices. Carolyn McGregor, Canada Research Chair in Health Informatics at the University of Ontario Institute of Technology, also explained that IT budgets need to include funds to support clinicians and informaticians in integrating the new technologies into their work practices.

The Committee also heard from Dr. Steven Morgan, Associate Professor at the Centre for Health Services and Policy Research at the University of British Columbia, that pharmaceutical drugs represent one of the largest costs of health care systems today, larger than all the care provided by physicians.[180] According to the Canadian Institutes of Health Information (CIHI), pharmaceuticals accounted for 15.9% of total health care costs in 2012, amounting to $33 billion in total or $947 per patient.[181] In addition, Dr. Morgan also explained that CIHI data shows that pharmaceutical costs were the fastest growing component of health care costs between 1980 and 2005, growing almost eleven-fold.[182] Finally, he noted that as of 2010, per capita spending on pharmaceuticals in Canada exceeded the median of per capita spending in the seven countries used by the Patented Medicine Prices Review Board to monitor drug prices in Canada, by $280.[183]

B. How to Manage the Costs Associated with the Adoption of Health Technologies

1. Determining Value for Money

Witnesses stressed the importance of HTAs in providing policy makers with the information necessary to make decisions regarding the value for money of different health technologies. Witnesses applauded the work of the CADTH in this area, particularly the Common Drug Review, which evaluates the clinical and cost effectiveness of different pharmaceuticals and makes recommendations as to whether they should be covered by publicly funded drug coverage programs.[184]

One witness suggested that developing a stricter regulatory process for medical devices would also help determine value for money in this area, as well as eliminate unnecessary costs to the health care system in the utilization of these devices.[185] Dr. Pascal-A Vendittoli, from the Université de Montréal, whose research focuses on the clinical assessment of new implant technologies for hip replacements, explained that his research had found that some of the newer implants approved by Health Canada are much costlier than conventional implants, but have higher failure rates, resulting in poorer health outcomes for patients and higher costs to health systems. He believed that this problem could be addressed by stricter regulation by Health Canada, which would limit the number of these devices on the market to those that are most clinically effective. He suggested that approval processes for medical devices should have similar data requirements as the approval processes for pharmaceuticals, including: pre-clinical trial data and additional tests and studies, such as preclinical tests, high precision metrics using small groups of patients, as well as randomized control trials. He also suggested that Health Canada establish a national registry for post-market approval surveillance of these devices.

He explained that this approach to the introduction of new technologies, called the “Stepwise Introduction of Innovation into Orthopedic Surgery” had been developed and implemented in Sweden and had successfully reduced the revision rate or the reoperation rate for patients with hip and knee implants in comparison to other countries, who had not introduced this strategy:

In this first slide, if you compare the revision rate or the reoperation rate of patients in the in the U.S.A versus Sweden, you can see that the Swedish action taken on the introduction of new technology was very effective, and I would say in Europe there is a broad change to move forward with the evolution of new technology, including precision technology.[186]

The Committee notes that the testimony received from this witness contradicts earlier testimony, which focused on the challenges that small businesses face in navigating Health Canada’s current medical devices regulations, as well as the costs associated with those regulations.

Finally, Dr. Doug Coyle, a Professor at the University of Ottawa, also explained that determining the value for money of health technologies should also take into account other health care services that may be more clinically and cost-effective than those produced by industry, such as physiotherapy, chiropractic services, exercise programs, home visits by public health nurses, respite services and mental health services.[187]

2. Managing the Costs of Pharmaceutical Drugs

Witnesses identified specific ways to help manage the costs of pharmaceuticals. The Committee heard cost savings could be realized through national bulk purchasing strategies. For example, the Committee heard from the Canadian Health Coalition that national bulk purchasing of plasma products had saved the Canadian Blood Services $160 million over three years.[188] Dr. Steven Morgan explained that a national strategy for bulk purchasing for pharmaceuticals would be necessary to negotiate lower prices for new specialized drugs that are expected to cost hundreds of thousands of dollars per patient.[189] Dr. Marc-André Gagnon from Carleton University suggested that different types of drug pricing policies could be adopted, such as reference-based pricing, which establishes a base price for a certain category of pharmaceuticals based upon their therapeutic value, or value-based pricing which determines the price of pharmaceuticals based upon their ability to achieve specific patient outcomes.[190] Finally, some witnesses also suggested that the cost of medications could be addressed by examining the prescribing behaviour of physicians.[191] However, two witnesses argued that many of these strategies would not be as effective unless the federal government played a leadership role in managing pharmaceuticals, which could be achieved through a national framework for pharmaceutical management and/or the establishment of national universal public drug plan.[192]

3. Using Patient Modelling to Implement Technological Innovations[193]

Dr. Carolyn McGregor explained to the Committee that patient modelling could be used by health care organizations to implement electronic health information systems and other technologies in an efficient way. She explained that “patient journey modelling” uses business processes to create diagrams that show the path that a patient takes through the health care system, including what health care workers they see, what steps and procedures are performed and which technologies are needed or used to support their care. It allows health care organizations to examine how new technologies can be integrated with existing ones, as well as identify how to increase efficiencies and streamline processes to improve patient outcomes. The Committee heard that patient modelling had been successful in promoting the adoption of EMRs in two mental health service providers in Ontario: Ontario Shores in Whitby and Providence Care in Kingston.

C. Committee Observations and Recommendations

While the costs associated with technological innovation in health care were considered by witnesses to be investments in better health care delivery, they also believed that it is important to determine the value for money of different health technologies in order to make best use of public funds. HTAs were seen as of great value in this area, particularly in relation to pharmaceutical drugs. However, the Committee heard from one witness that there is a need for better evaluation and regulation of medical devices and in particular implants for hip surgery, by Health Canada, which could also reduce costs associated with these devices. The Committee therefore recommends that:

19. Health Canada review its requirements for the regulation of medical devices to ensure that it is receiving sufficient data that takes into account the short- and long-term health outcomes of patients.