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CHP blogazine

National pharmacare could be costly for patients and taxpayers

Posted on March 2, 2016

National pharmacare could be costly for patients and taxpayers

By Brett J Skinner, Ph.D. | Founder and CEO, Canadian Health Policy Institute

How many Canadians are insured, uninsured and under-insured for their prescription drugs? How will access to prescription drugs be affected by national pharmacare and what are the health implications for patients? How much cost will be shifted from private plans onto taxpayers under pharmacare? These are fundamental questions that pharmacare advocates fail to answer.

Since 2013, some academics and unions have been advocating for a national pharmacare program. The idea has been gaining political traction. Several provincial ministers of health have called for federal action on national pharmacare and both the NDP and Green Party made it part of their federal election platforms.

Pharmacare is proposed as a universal, publicly-funded, single-payer, prescription drug insurance system. It would replace Canada’s mixed system of public and private drug plans. Pharmacare would be either a federal program or a joint federal-provincial scheme. In other words, pharmacare would be a government-run monopoly.

The public discussion of this issue has been informed almost entirely by pro-pharmacare academics. Most recently, the Canadian Medical Association Journal published a study that estimated the cost of establishing pharmacare, concluding that it would reduce spending on prescription drugs. The authors argued that pharmacare could be made affordable by leveraging the buying and regulatory power of governments to achieve dramatic price reductions, and by limiting the range of therapeutic products available to patients through increased generic substitution and formulary restrictions.

In a recent study, colleagues and I took a counter view. We re-examined what a pharmacare monopoly will mean for patients and taxpayers. After looking at the evidence we concluded that there are at least three reasons why Canadians should be skeptical about pharmacare.

First, assuming realistic prices and no changes to the drug benefits currently enjoyed by Canadians, pharmacare will shift $13.2 billion in private prescription drugs related costs onto taxpayers. If implemented entirely as a federal program, pharmacare would shift $25.5 billion in current provincial government and private sector expenditures onto the federal budget. Employment losses and other indirect economic costs resulting from the government take-over of the private drug insurance industry could add another $4.1 billion in the first year.

This realization reinforces our second point, which is that to avoid these costs pharmacare would have to cut current drug benefits dramatically. Canada’s experience with government-run drug plans strongly suggests that pharmacare would indeed reduce patients’ access to medicines. Private plans provide faster and better access to the most innovative treatment options for patients. Our analysis showed that of the 39 new drugs approved by Health Canada in 2012, 36 (92%) were covered by at least one private drug plan compared to only 11 (28%) that were covered by at least one public plan - as of December 1st, 2013. For the new drugs that were covered, private drug plans took 143 days on average to approve coverage compared to 316 days for public drug plans.

Pharmacare will not improve benefits for the 11 million Canadians who are currently eligible for existing public drug plans. However, a pharmacare monopoly will force 24 million Canadians with private drug plans to accept the inferior coverage provided by public drug plans. This could have profound health and economic consequences. Research shows that access to newer medicines leads to more efficient achievement of better health outcomes. A 2013 study published by the Conference Board of Canada found that the costs associated with the use of innovative pharmaceuticals were offset by reductions in the use of other types of health care resources and a reduction in the productivity losses associated with disease as a result of improved health outcomes. In particular, the $1.22 billion spent on six classes of innovative drugs in 2012 generated offsetting benefits of nearly $2.44 billion in the same year.

Our third conclusion is that a centralized national pharmacare monopoly is not necessary. Canada already has universal drug insurance coverage for catastrophic expenses, and near universal insurance coverage for ordinary prescription drug costs. Provincial and federal governments can and do act independently to achieve universal drug insurance systems within their respective jurisdictions. International experience also proves there are other less intrusive ways to achieve universal drug insurance coverage. Several advanced countries have universal private health insurance systems supported by means tested public subsidies. Quebec’s drug insurance system is somewhat similar to these countries and Quebec provides the best access to innovative prescription drugs among all of Canada’s publicly funded drug plans.

The real problem with drug insurance in Canada is that public plans are under-insuring patients compared to the coverage provided by private plans. Public drug plans simply provide many fewer treatment options for patients. A national pharmacare monopoly would impose this inferior coverage on all Canadians.

Brett J Skinner (Ph.D.) is co-author of the study “Pharmacare: what are the costs for patients and taxpayers?” which was published at Canadian Health Policy.

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