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Do Canadians really face a tradeoff between basic necessities and medicines?

Posted on January 19, 2019

Do Canadians really face a tradeoff between basic necessities and medicines?

By Brett Skinner, PhD, CEO Canadian Health Policy Institute

The federal government’s Advisory Council on the Implementation of National Pharmacare is expected to complete its work sometime this spring. That will be just on time for a fall election, in which the Liberal Party is expected to campaign partly on a promise to deliver National Pharmacare.

It is hard to say what version of pharmacare the Council will recommend. But the primary model being considered is a universal public drug plan managed by the federal government that will entirely replace existing public and private drug plans. That is the same model that was studied by the Parliamentary Budget Officer and recommended by the House of Commons health committee.

Alternatively, the Council might choose to limit the scope of pharmacare - targeting the relatively small number of people who face real challenges affording prescription drugs. If it does, it will have to refute the many myths driving support for a National Pharmacare monopoly.

Prime Minister Trudeau repeated one such myth at a recent town hall meeting hosted by Brock University. In response to a question about whether the Liberal Party would implement National Pharmacare, the PM had this to say: “we need to do a better job of making sure that vulnerable people don’t have to choose between paying their rent, eating, or treating their ailments or illnesses.”

The PM seemed to echo National Pharmacare advocates who say the program is necessary because out-of-pocket costs for prescription drugs are so high that it presents a tradeoff - forcing people to make a choice between basic necessities like food, heat and rent versus necessary medicines.  Indeed, a study published in the Canadian Medical Association Journal claimed that in 2016 nearly 1 million Canadians gave up food or heat to afford their medications.

Canadian Health Policy Institute investigated this claim and found it to be grossly exaggerated. Our study compared average household out-of-pocket spending on prescription drugs to income and select expenditures in 2016. Data were obtained by custom request from Statistics Canada and were sourced from its Survey of Household Spending.

Average out-of-pocket spending on prescription drugs ranged from $390 per year for the lowest income households up to $1,224 per year for the highest income households. But cost was much more affordable as household income increased. Out-of-pocket prescription drug costs ranged from 3 percent of income for the poorest households down to 0.4 percent of income for the wealthiest households.

On average people at all income levels had out-of-pocket prescription drug costs that are affordable relative to common discretionary expenses. Across every income decile, the cost of food purchased from restaurants exceeded out-of-pocket costs for prescription drugs. The same can be said for entertainment, TV and satellite radio taken together. And across every income decile, more is spent by households on tobacco and alcohol than is spent out-of-pocket on prescription drugs.

Claims that a National Pharmacare monopoly is needed because millions of Canadians face dire tradeoffs should be taken with caution. The data show that for most people, there are no such tradeoffs. The data also show that when necessary, there are many discretionary expenses that can be swapped to afford prescription drugs before giving up food, heat or rent.

And ultimately, out-of-pocket prescription drug costs are capped. Every jurisdiction in Canada has publicly funded safety net programs that cover people who don't have private drug benefits and who are not eligible for regular public drug plans. Ontario's Trillium Drug Program is one example. Typically, programs cover out-of-pocket prescription drug costs exceeding about 3 to 5 percent of income.

Yes, coverage includes only the drug products listed on the public formulary. The fact that many drugs are not covered under existing public drug plans is an affordability challenge in itself. But National Pharmacare will only universalize this shabby public drug coverage.

The Council should focus on people in the lowest income deciles with uninsured costs that exceed 3 percent of household income. It is wasteful and unnecessary to force the entire population into a national single-payer publicly funded drug insurance plan.

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