National pharmacare: quality coverage or just cheap drugs?

Nigel Rawson and John Adams | CHP Opinions | 28 OCT 2020

According to the Throne Speech, Canada’s federal Liberal minority government is “committed to a national, universal pharmacare program.” Many Canadians support this initiative, although the kind of plan they envision varies widely. Most, especially those with unmet health needs, want national pharmacare to cover medicines when medically necessary, i.e. provide more, than the current provincial and federal programs.

However, the cost of a comprehensive system will be expensive because it may prove challenging to cover more drugs with the same amount or less money. In 2019, the government’s own Advisory Council on the Implementation of National Pharmacare put the cost at $40 billion and the Canadian Taxpayers Federation estimated $48.3 to $52.5 billion. In the present economic climate, this may be thought unaffordable.

But doing national pharmacare on the cheap most likely means some, even many, Canadians will end up with less coverage.

Indications exist that Ottawa plans, at least initially, an extremely limited national formulary covering mainly generic medicines used in primary care, such as antibiotics and drugs for common conditions like hypertension, diabetes and asthma. We can call this “pharmacare-lite.”

In fact, some Canadian academicslabour unions and the NDP have encouraged the federal government to introduce a program covering only so-called “essential medicines.” The risk of starting with a frugal scheme is that any later extension intended to cover specialized, costly and breakthrough medicines that treat or cure unmet needs will be long delayed or not occur at all. A suffering patient, who may be an academic, union member or social democrat, with a desperate need for a medicine excluded from the list may feel differently about what is “essential.”

The federal government may not actually intend to have national pharmacare cover higher cost drugs because its approach to dealing with them is to impose severe price reductions by regulation through its tribunal that sets ceiling prices for new medicines. Government pharmacare in New Zealand, elements of which have been praised by Canadian academics, provides an example of the outcome of tightly controlled price rules resulting in patients getting access to fewer new drugs.

Drug developers see New Zealand as a low priority market, which is in a large part due to issues with the government’s policies. This has resulted in marketing approval being sought for fewer drugs often later than in Canada and most other countries in the Organization for Economic Cooperation and Development (OECD). The policies impact public reimbursement.

New Zealand ranked second to last out of 20 comparable OECD countries for government coverage of newly registered drugs between 2012 and 2017 (Figure 1), with only 23.5 percent reimbursed (Canada ranked third to last with 38.1 percent funded). A later study found only six percent of 403 modern medicines publicly funded in 20 OECD countries between 2011-2018 were funded in New Zealand. This does not seem to place much value on the lives and wellbeing of New Zealanders.

Even when marketing approval is obtained in New Zealand for a medicine, manufacturers sometimes let it lapse or choose not to pursue selling it, especially when their drug is not covered by the country’s pharmacare program. The lack of public coverage leads to limited choices of medicines, which can have an adverse impact on health outcomes.

For example, New Zealand’s government pharmacare has significantly fewer anti-hypertensive and statin drugs to combat cardiovascular disease and fewer medicines to treat breast, colorectal, lung and prostate cancers than most Canadian provincial drug plans. It also has higher mortality rates from circulatory system diseases, such as ischemic heart disease and cerebrovascular disease, and malignancies, such as colorectal and prostate cancers (Figure 2). The true value of medicines can be seen when we examine patient health outcomes, instead of just the narrow focus of drug budgets. There is always a trade-off between patient care and government budgets.  

Figure 1: Percentage of new drugs reimbursed of those registered in each country, 2012-2017.


Source: Medicines Australia

Figure 2: Mortality per 100,000 population (standardized rate), 2015.


Source: Rawson, 2020

What about expensive drugs for rare disorders? In a recent study, only 58.3 percent of 36 rare disorder drugs approved for sale in Canada were approved in New Zealand (Table 1), of which more than three-quarters were approved a year or longer after Canada. Just over half were listed in the public drug plans of six or more provinces, but only 22.2 percent were listed in New Zealand’s national formulary. In other words, neither country provides good coverage of these drugs, but Canada is not yet as bad as New Zealand.

Table 1: Drugs for rare disorders approved for marketing in Canada, 2014-2018.

Source: Rawson, 2020

The same Throne speech said that Ottawa will also “accelerate steps to achieve … a rare-disease strategy to help Canadian families save money on high-cost drugs.” Regulating drastic price cuts will certainly save money, but at what cost to patient health?

Ottawa’s approach to high-cost drugs is introducing new rules that come into effect in January 2021 that may require manufacturers to reduce prices to unsustainable levels, despite the fact that drugs for rare disorders only accounted for 2.5 percent of total pharmaceutical spending in Canada in 2019, which itself is a fraction of the overall health care expenditure of $264 billion. This will not achieve the kind of national pharmacare that provides appropriate treatment to all Canadians with a medical need.

It’s just the opposite. It undervalues innovative advances and discourages medicine developers from bringing better products to Canadians. Universality is one of the principles of Canada’s health system, meaning all residents are uniformly entitled to publicly-funded health services based on medical need. It does not mean universal denial to all Canadians as a result of initiating policies and practices that sacrifice the health of Canadians as a way to ration access to new drugs.

Canada already has a model for national pharmacare in the comprehensive private drug plans that cover all 600,000 federal employees and their families. These plans have unrestricted formularies for all 13,000 drugs approved by Health Canada, with generally only a 20 percent copayment for each prescription (average out-of-pocket spending made up 36.7 percent of private expenditures on prescription medications in 2019). Federal politicians and many of the academic and union advocates of pharmacare-lite also have access to such plans. These comprehensive plans should set the standard for national pharmacare, not a list of so-called essential medicines. If coverage of up to 13,000 medicines is acceptable for our federal politicians and civil servants, it should be appropriate for all Canadians.

If Ottawa is to introduce national pharmacare, it should implement policies which value innovative life-changing medicines and target quality drug coverage to benefit Canadians with unmet pharmaceutical needs. Examples of these needs exist in many therapy areas, like cystic fibrosisneuromuscular diseaseseye diseases, and cancers. The modern era of cell and gene therapies has arrived and Canadians should not be denied access to them by bureaucrats.

Canada needs a program that includes all medicines determined to be medically necessary by patients and their health care providers, not just cheap knock-offs on a short list drawn up by anonymous and unaccountable government officials and their advisors working behind closed doors.

Nigel Rawson, PhD, Affiliated Scholar, CHPI; John Adams, CEO, CanPKU and Allied Disorders 

Nigel Rawson and John Adams | CHP Opinions | 28 OCT 2020