Pharmacare Now!

After establishing medicare in the nineteen sixties, extending this to pharmaceuticals was always seen as the logical next step.

But, one by one, the decades have ticked by until we find ourselves still, fifty years on, with a patchwork of private and public plans with significant gaps, but no comprehensive national coverage.

Early in its mandate in this 42nd parliament, the House of Commons Standing Committee on Health (HESA), of which I am a member, took up the challenge to study this question.

Among other things, we learned that:

“In Ontario alone, over 700 diabetic patients under the age of 65 died prematurely each year between 2003 and 2008 because of inequitable access to essential prescription drugs.”
— Dr. Steven Morgan, UBC

Individuals not taking their medications because they cannot afford them costs health care systems in Canada between $7 billion and $9 billion per year.
— Dr. Monica Dutt, Chair, Canadian Doctors for Medicare

  • More than one in five Canadians forgo taking their prescription drugs because of cost;
  • Between 10% and 20% of Canadians do not have adequate coverage for prescription drugs;
  • Canada performs poorly in comparison to other countries in its ability to manage the costs of prescription pharmaceuticals;
  • There was unanimous agreement among stakeholders appearing before the Committee, including patient groups, health care providers, the private insurance industry, innovative drug manufacturers, unions, employers, and academics that the gap in prescription drug coverage in Canada and the inequity that it creates among Canadians needs to be addressed;
  • Witnesses differed on whether gaps should be addressed through the expansion of current programs or the creation of a targeted program, but the vast majority agreed that they should be addressed through a national universal pharmacare program.

Recommendation

As a result, the committee’s recommendation to parliament is to implement:

  • A national universal single-payer system  (everybody is covered, medicare pays);  based on
  • A comprehensive national formulary  (a defined list of pharmaceuticals)  created and maintained in partnership with participating provinces and territories;  as
  • An insured health service under the Canada Health Act  (i.e.:  it’s an extension to medicare);  with
  • Increases in Canada Health Transfer payments to those provinces and territories who sign on to the expanded program;  and maintain
  • A comprehensive and coherent national baseline for medical and pharmaceutical services, to which provinces and territories can offer additional coverage as they might choose.

PBO Summary

The committee asked the Parliamentary Budget Officer (PBO) to evaluate the costs of such a plan using the extensive Québec formulary.  The PBO study, based on 2015/16 data, is thorough and persuasive, and its results are clear:

Direct
Payer
Current
(Billion)
Pharmacare
(Billion)
Difference
(Billion)
Federal and Provincial Plans$13.1$20.0 $6.9 
Companies and Individuals$4.7$0.4*($4.3)
Private Insurance Plans$10.7$0.0 ($10.7)
Total$28.5$20.4 ($8.1)

* Evaluated scenario includes small co-payments when a patient chooses a brand-name over a generic

About the Numbers

  1. The total spend for pharmaceuticals goes down by $8.1 billion. This is due to a number of efficiencies and economies of scale, a substantial portion of which is being able to aggressively negotiate better prices. The assumptions in the scenario are modest, and the experience of other jurisdictions suggests that we can in practice do much better, meaning the total spend and the cost to the public plans would be less than indicated.

  2. The $10.7 billion reduction in spending by private insurance plans is NOT a savings for them.  These payouts are one of their costs of doing business, and this means a loss of a profitable $10.7 billion (plus) line of business.  As such, this proposal will not be well received by that industry.  The industry will need to design new products to fit around the edges or develop new lines of business.

  3. Companies and individuals who have been paying for these private plans will not need to buy $10.7 billion (plus) worth of insurance, so that the nominal savings for companies and individuals is $15.0 billion (plus), not just $4.3 billion.

  4. The net increase in direct public spending — to be shared among provincial, territorial, and federal governments — is only $6.9 billion.

Who benefits?

Higher income people will of course benefit, but such individuals are more likely to have employment-related health plans that now cover these costs, and are in any case less burdened by them.

This will, however, be of particular benefit to low- and middle-income individuals and families: the unemployed, the elderly, single parents, children, and youth — who are less likely to be covered by an employment-related plan, and for whom in any case drug costs are a greater, often onerous, burden.

It is also important to remember that patients who cannot afford to take their prescribed medicines often end up in the hospital, incurring additional public costs on the order of thousands of dollars a day.  And, too often, by failing to properly treat their condition, they succumb to additional or more-serious illnesses or disabilities, incurring even greater health-care costs or even early death.

Who pays the bill?

Some of these new costs will be accounted for from other areas on the balance sheet, such as by avoiding un-necessary hospital stays, or improved productivity leading to better tax revenues, and it bears repeating that people not taking their medications because of cost currently costs health care systems as much as $7 billion.

But even if some portion of the additional $6.9 billion in public costs is ultimately passed on to Canadians — against that noted $15.0 billion (plus) — this still leaves at least $8.1 billion in savings for the Canadian public.

In terms of cost sharing between the federal and the provincial or territorial governments, the committee recommended that the federal government pay up to 50% of the cost, which in this scenario, absent recognition of contributions accruing from elsewhere in the balance sheet, would mean $10.0 billion.  Note that that is “up to” and I’d suggest something like a federal share of one third ($6.67 billion) or one quarter ($5.0 billion) might be more appropriate, remembering in any case that the federal and provincial plans in total already pay the piper to the tune of $13.1 billion.

At the end of the day, however, the cost-sharing formula is a matter to be negotiated between the provincial and federal governments.

Pharmacare Task Force

Budget 2018 introduced a pharmacare task force, headed by former Ontario Minister of Health, Dr. Eric Hoskins, whose job it is to examine proposals such as our committee report, and others, and chart the specific direction forward.  Whether this will be a “fill in the gaps” solution as the insurance industry would prefer, or the comprehensive single-payer universal system we have proposed, as well as what cost-sharing approach with the provincial and territorial governments would be workable, remains to be seen.

I am looking forward to the opportunity to work with the task force, to help move this along.

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