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UPDATE 1-Canada to create national drug agency to help cut cost of medicines

David Ljunggren

(Adds reaction from insurers, pharmaceutical firms)

OTTAWA, March 19 (Reuters) - Canada will create a national drug agency to help cut the cost of prescription medications as part of a plan to broaden the state-funded healthcare program, the finance ministry said in its budget on Tuesday.

Unlike other countries with universal healthcare, Canada does not cover prescription drugs, leaving most Canadians to rely on a mixture of public and private insurance plans.

Prescription drug spending in Canada has jumped to C$33.7 billion ($25.3 billion) in 2018 from C$2.6 billion in 1985 and a promise to boost drug coverage is set to be a major plank for the ruling Liberals in an election this October.

Branded medicines cost, on average, 20 percent more in Canada than in other advanced economies, and around 20 percent of Canadians are uninsured or underinsured, Ottawa says.

The new Canada Drug Agency would "take a coordinated approach to assessing effectiveness and negotiating prescription drug prices," which could help lower the cost of medications by up to C$3 billion a year in the long term, the budget said.

The agency - which is not scheduled to start work until the 2022-23 fiscal year - would assess the effectiveness of new drugs, negotiate prices and recommend which medications represented the best value for money.

"These measures alone will not fully close the gap for people who need prescription drugs and can't afford them. But they do mark important first steps on the way to a system that helps all Canadians get the medicine they need," Finance Minister Bill Morneau said in his budget speech.

Innovative Medicines Canada, the main lobby group for patented drugmakers, said it would welcome any move to streamline what it called a very complex drug regulatory process, but added it was not clear where the government planned to make the C$3 billion in annual savings.

"The industry is very aware of the sustainability issue on drug costs. ... I think there will be some very good conversations coming up in the next few weeks and months," the group's president, Pamela Fralick, said by phone.

Ottawa will also create a national strategy to improve access to high-cost drugs for rare diseases, investing up to C$1 billion over two years starting in the 2022-23 fiscal year.

SCOPE FOR NEGOTIATIONS

The Canadian Life and Health Insurance Association said it was cautiously optimistic about the measures.

"We believe it leaves scope there for them to be negotiating on behalf of all Canadians, which includes private and public payers," Chief Executive Officer Stephen Frank said by phone, adding he was not too concerned by how long it would take to set up the agency.

"There's no way to snap your fingers and cut the price of drugs," he said.

Reuters reported in late January that the government was set to unveil a limited expansion to the healthcare system to help cover the cost of drugs.

A senior government official, who requested anonymity given the sensitivity of the situation, said the Liberals would disclose more plans for dealing with high-drug costs during the election campaign.

Those plans would depend in part on the final report of a Canadian advisory council studying prescription drug coverage, which is due in August, added the official.

(Reporting by David Ljunggren in Ottawa; Editing by Denny Thomas and Peter Cooney)