National pharmacare: who are the winners and losers?

The Canada Health Act includes public coverage of services provided in hospitals and by doctors, but not prescription medications taken outside of hospital. Most provincial drug plans do provide some public coverage, but many Canadians lack drug coverage.

In the last 25 years, prescription medications have become both more important and more expensive.

Bringing prescription medications into Medicare would produce winners and losers. Understanding who wins and who loses is crucial to understanding whether a national pharmacare program should be implemented.

Adrianne Lee is a fictional name given to a single mother of two young children who lives in a mid-sized city in Ontario and works as a grocery store clerk. She gets by each month, but only barely, and after paying for rent, food, child care and other essentials, has nothing left to spend.

Lee recently developed rheumatoid arthritis, and after several failed attempts with less expensive medications, her rheumatologist recently recommended a medication that costs $1700 per month. The new medication should prevent permanent joint damage. Lee doesn’t have drug coverage through her job and she can’t afford a private insurance plan. Because Lee lives in Ontario, she can apply for the province’s Trillium drug program, and will only have to pay about 3% of her income toward her medications. Even this will be hard for her, but if she lived in a different province, she might be completely out of luck.

Lee doesn’t understand why visits to her doctors and hospital admissions are covered by the health care system, but the drugs to manage her rheumatoid arthritis and decrease future complications are not.

Paying for medications in Canada

When universal coverage for doctor and hospital services was introduced in Canada in the 1960s, there were few effective medications, and prescription medications that were especially expensive were usually provided to patients in the hospital setting. Prescription drugs were mentioned in neither the 1966 Medical Care Act nor the 1984 Canada Health Act. As a result, provinces do not provide universal coverage for prescription medications. Some provinces, like Ontario, cover citizens through a patchwork of programs, with cost-sharing arrangements for some people, like Lee, and nearly complete coverage for others, such as the elderly and those on social assistance. Other provinces leave large groups of people with no coverage at all.

Spending on medications makes up a growing part of health care costs in Canada, with $25.1 billion spent in 2008, accounting for 16.4% of total health spending . This amount includes money spent by governments, private insurers, employers and individuals. More than half of drug spending in Canada is paid for out of Canadians’ pockets or through private or employer health insurance plans. In most European countries, a much larger share of prescription drug costs are paid for publicly. In fact, in an international survey, Canada was second only to the United States in personal drug costs, with over 10% of Canadians paying more than $1000 per year out of pocket for medications.

Over the last 25 years, the pharmaceutical industry has developed effective medications for a plethora of diseases – not just common conditions such as high blood pressure, diabetes and asthma, but also less common disease such as HIV, rheumatoid arthritis, some cancers and pulmonary hypertension. Effective treatment for these diseases requires long-term medication regimens that can cost tens of thousands of dollars per person per year.

The amount spent on prescription drugs across Canada has increased by about 9% each year since 1985, however this increase has slowed somewhat in recent years. Rising costs are mainly due to increased volume of use, and the introduction of expensive new drugs, and have led many to call for a national pharmacare program.

What if prescription drugs were paid for publicly? Would this be affordable and feasible? Understanding whether such a program would be good public policy or not requires an understanding of who stands to win and who stands to lose.

What is national pharmacare?

National pharmacare would be a publicly funded medication insurance plan that would work much like Medicare works for doctor and hospital services. This plan would cover all essential drug costs. A recent report argues that “Canadians cannot afford not to have universal pharmacare” stating that national pharmacare, if implemented with rigorous processes of drug assessment and reimbursement, could result in net savings of up to $10.7 billion per year while improving access at the same time.

There are many groups that have a stake in how medications are prescribed and paid for in Canada. If a national pharmacare program was introduced in Canada, who would the winners and losers be?

The effect on the public

One effect on patients like Lee is clear – extending public health care to include prescription medications would save her money and help improve her health. Many studies in both the United States and Canada have shown that patients are less likely to take important drugs when they have to pay for them. With almost 1 in 10 Canadians unable to afford the prescription drugs they need, the health of many Canadians could be improved with a national pharmacare program.

But not all Canadians take expensive drugs, and there is no doubt that governments would need to raise additional revenue to pay for prescription drugs. So some Canadians would pay more in taxes – in effect, a national pharmacare program, like Medicare, would result in a transfer of wealth from the relatively healthy and wealthy to the relatively “unhealthy and unwealthy”.

The effect on the private sector

The Canadian pharmaceutical industry is an important contributor to Canada’s economy. Research-based pharmaceutical companies employ approximately 15,000 people across Canada. Russell Williams, President of Rx&D, argues that research-based pharmaceuticals contribute to Canada’s knowledge based economy, and that research dollars and industry-sponsored clinical trials flow money directly “into hospitals, universities and patients, having a direct, real impact on the health care system”.

Some suggest that drug prices are kept artificially high to encourage drug companies to do business in Canada. If the prices for pharmaceuticals were lowered, it is possible that Canadian workers and researchers in the pharmaceutical industry could lose their jobs.

However, Danielle Martin, a family doctor and chair of Canadian Doctors for Medicare says that “Canada pays among the highest prices in the world for drugs” and “we are captive to an industry that is aggressive in maximizing its profits.” Martin says that Canada should work to reduce drug prices through aggressive negotiation, bulk purchase and the promotion of less expensive generic drugs. These changes would appear to be a net positive for generic manufacturers and a negative for brand name manufacturers.

However, just as physicians have benefited from publicly-funded health care, it is possible that even the brand name pharmaceutical industry will benefit from national pharmacare. If the 10% of Canadians who currently cannot afford medications were to be brought into the market, then pharmaceutical companies might increase their revenues and profits even if prices were to fall.

Private insurance companies would almost certainly lose, since a lucrative portion of their business would shrivel up if national pharmacare were to be introduced.

The effect on governments

Would raising taxes to pay for a national pharmacare program be a political win or loss for governments? Steve Morgan, a health economist and professor at the University of British Columbia says that the current federal government “is not a government that will go ahead with a significant pharmacare program” and that Prime Minister Stephen Harper is “on record saying that there will be no new federal programs on matters of provincial jurisdiction.”

Morgan also argues that national pharmacare is not on the agenda of many Canadians, saying “it has never had a place of prominence in the public debate on health care policy.” However, Helen Stevenson, a former assistant deputy minister responsible for prescription drugs in Ontario, says that “provinces could get together and start … to align the formulary and different provincial programs”.

Williams says that national pharmacare or a coordinated provincial approach does not align with the realities of Canada’s health care system, which “is built on 13 different provincial and territorial health care systems” and he “does not believe that a centralized model of decision making would be helpful in responding to the diverse needs and priorities of Canada’s regions”.

Polls continue to indicate that healthcare is the number one issue that Canadians want their governments to address, and surveys from other countries indicate a willingness to pay higher taxes if revenues are earmarked for specific programs. Some suggest it would be political suicide for a provincial or federal government to introduce a pharmacare tax. Others suggest that Canadians would rally around a party that offers them protection from potentially catastrophic drug costs, as well as a more aggressive approach to price negotiation.

National pharmacare – “shockingly little has been accomplished”

National pharmacare was a key issue on the public agenda in health care reform during the 2003 and 2004 Health Accords. As part of the Health Accord, the leaders of Canada’s provinces and territories stated that “no Canadian should suffer undue financial hardship in accessing needed drug therapies, and that affordable access to drugs is fundamental to equitable health outcomes for all our citizens.” Based on this statement, a federal National Pharmaceuticals Strategy was proposed, with the focus on obtaining the best prices on medications, broadening access for catastrophic medication coverage and establishing a better process of assessing the effectiveness and safety of new medications. Yet progress has been exceptionally slow. A recent editorial from the Canadian Medical Association Journal declared that “shockingly little has been accomplished towards these goals” and is little reason to think that national pharmacare will become a greater priority in the near future.

The omission of prescription drugs from Medicare is largely an accident of history. Will this accident soon be corrected?

Will Canada have a national pharmacare program in the near future? Yes, rising prices will forces politicians and governments to take action

No, private interests are too strong and will oppose change

No, Canadians aren’t interested and politicians aren’t willing to get engaged in this complex issue.