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Pharmacare Council dismissed less costly, less disruptive policy options and misdiagnosed the gap.

Posted on June 20, 2019

Pharmacare Council dismissed less costly, less disruptive policy options and misdiagnosed the gap.

Only $5.2 billion would cover drugs excluded from public formularies.

The federal Council on the Implementation of National Pharmacare recently released its final report. The Council chose a universal public single-payer plan after considering alternatives including a public catastrophic safety-net, like Ontario’s Trillium program; and a universal public-private system, similar to Quebec. At the press conference announcing the report, Chair Eric Hoskins said they also rejected a fill-the-gaps model designed to cover people with insufficient drug insurance.

According to the report, “the council felt that any advantages presented by these models—either because they already exist in some form in Canada or because they might initially entail a lower level of public investment—were outweighed by the longer-term efficiency and sustainability of a single payer model.” 

But according to Brett Skinner, CEO of the Canadian Health Policy Institute, the result was predetermined. Quoting directly from the report Skinner said that “the council deliberated the merits of these models only as stepping stones toward the creation of a universal, single-payer, public pharmacare plan.”

Skinner believes that the Council was too quick to dismiss less expensive and less disruptive policy options that would fill the gaps in the current system. “There was no genuine consideration of contrary evidence. The report is based on false assumptions regarding drug costs and insurance coverage, and it failed to identify the real cause of prescription affordability challenges.” 

The report’s first justification for single-payer pharmacare is that drug costs are unsustainable - particularly for patented medicines. But research by CHPI has shown that there is no spending crisis regarding patented medicines in Canada. Total sales of patented medicines before rebates were only $16.8 billion in 2017, a fraction of the $34 billion cited by the Council which includes non-patented drugs, supply-chain and drug plan administration costs. Other components of the healthcare system account for much larger shares of spending than patented medicines. Adjusting for factors like population, CPI and GDP, the total direct cost burden from patented medicines is stable and moderate. Prices are also stable and moderate relative to CPI or comparable countries.

The report also claimed that millions of Canadians have no (or inadequate) drug insurance, forcing trade-offs between necessary medicines and food, heat or rent. Yet CHPI research has shown that all Canadians are insured under existing private, public and safety-net drug plans. There are cost-sharing eligibility requirements for safety-net coverage under existing public drug plans. But in every province, public plans are the payer of last resort and out-of-pocket costs are capped at affordable levels across all income levels.

The real coverage gap occurs because existing public plans exclude many drugs from their formularies. CHPI research shows even the best public drug plan in Canada (Quebec’s RAMQ) covered only one-third of all new drugs approved by Health Canada from 2008-2017, and the wait for coverage of these few drugs was more than a year on average. By contrast, the Parliamentary Budget Officer found that 94% of private plans had an open formulary – meaning all prescription drugs are covered. Skinner argues that, “It is the formulary exclusions in existing public plans and safety-net programs that cause catastrophic affordability challenges because patients are exposed to 100% of the cost of their prescribed drugs as an out-of-pocket expense. Closing the insurance gap caused by public formulary exclusions is of greater social importance than reducing out-of-pocket costs related to premiums, deductibles, coinsurance and copayments.”

The Council estimated their plan will add $3.5 billion in new costs to cover a short-list of essential medicines, rising to $15.3 billion to cover a government-determined “comprehensive” list of drugs. However, in 2016 the PBO estimated that a pharmacare program built on Québec’s public formulary would cost almost $20 billion after $10.8 billion in “savings” from rationing, price controls and patient copayments.

Skinner said that in April 2019 CHPI published an analysis for a less disruptive, less costly federal option for pharmacare that fully closes the insurance gap caused by formulary exclusions under existing public drug plans. “The model doesn't require shifting the full cost of existing provincial public drug plans onto the federal budget, nor require the government to cover privately paid costs.” He added, “and it respects provincial authority for healthcare.”

It calls for the federal government to offer funding to all provincial public drug plans to help them expand their formularies to match Québec’s RAMQ, with the option to further add the non-RAMQ drugs covered under Quebec's private drug plans. Matching RAMQ would incrementally cost taxpayers $2.6 billion. Adding non-RAMQ drugs would cost an additional $2.6 billion. 

Skinner continued, “the model makes no changes to the existing benefits of privately insured people, while effectively closing the benefits gap in public plans. Vulnerable populations remain insured under existing public plans and safety-net programs. Out-of-pocket costs from premiums, deductibles, coinsurance and copayments are unchanged.”

Skinner believes that Pharmacare will be an issue in the upcoming federal election, “Single-payer pharmacare will disrupt employment-based drug benefits for 23.2 million privately insured Canadians and increase the tax burden for the 13.7 million Canadians who pay 95% of federal-provincial income taxes. These voters have a lot to lose under the Council’s plan.”

See the counter evidence and policy options – click CHPI research below.

1. Close the Gaps: Patient Benefits and Taxpayer Costs of 3 Pharmacare Options.

2. Facts about the cost of patented drugs in Canada: 2018 Edition.

3. VIDEO - National Pharmacare Facts.

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