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Business Commentary Prime Minister Trudeau’s national pharmacare plan will come with side effects

As Prime Minister Justin Trudeau’s Liberals mull investing billions in a national pharmacare program, they face intense lobbying by proponents who want Ottawa to “go big” on a universal scheme that would eliminate private drug plans, and by an insurance industry that is urging the federal government to adopt an incremental approach to closing current gaps in coverage.

The Trudeau government’s Advisory Council on the Implementation of National Pharmacare, led by former Ontario health minister Eric Hoskins, is to table its recommendations in the spring, helping the Liberals shape what could be their signature campaign promise for the 2019 election. A massive expansion of public health care to include prescription drugs would be the biggest pan-Canadian social-policy initiative in ages, at an initial annual cost of $20-billion.

It could also be the rabbit-out-of-the-hat the Liberals are seeking to hold onto left-leaning voters who supported them in 2015, but who have been disappointed by the government’s support for the Trans Mountain pipeline expansion and broken promise on electoral reform.

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Promising a national pharmacare program would also carry significant political and financial risks, however, as the 25 million Canadians already covered by employer-provided prescription-drug insurance could end up with a potentially inferior, one-size-fits-all federal plan, whose costs could skyrocket as new and expensive drugs come on the market and demand grows.

The Canadian Life and Health Insurance Association (CLHIA), which represents providers of group-benefit plans, is cautioning the federal government about the consequences of moving to a universal public program for prescription drugs that would wipe out thousands of private-sector jobs and leave most Canadians with less comprehensive coverage than they now get through their employers.

Indeed, based on existing provincial drug plans that cover seniors and low-income Canadians, a single pharmacare program would only cover about 60 per cent of the more than 13,000 prescription drugs licensed in Canada. Most private plans generally cover all licensed drugs.

Drug insurance accounts for the lion’s share of the group-benefits business for Canada’s major insurers. Sun Life Financial, Manulife Financial and Great-West Life control about two-thirds of the group-benefits business, with each holding more than 20 per cent of the market. They are followed by Desjardins, SSQ Financial, Industrial Alliance and various Blue Cross plans, which all have single-digit market shares. Together, private insurers paid out $11-billion in prescription-drug claims in 2015, in what is considered a fairly profitable business.

Besides listing fewer medications, most of the $4-billion in aggregate savings that could be achieved through national pharmacare would come from bulk buying by the government, which could negotiate lower prices on brand-name and generic drugs than multiple private insurers, each covering a much smaller pool of beneficiaries. But the CLHIA argues that such savings could be achieved under the existing system by allowing private insurers to join the pan-Canadian Pharmaceutical Alliance, which negotiates bulk purchases on behalf of existing provincial and federal drug plans. The provinces and Ottawa have so far snubbed the industry’s request to join the pCPA.

Indeed, the provinces may be an even bigger obstacle to the creation of a national pharmacare program than the insurance industry. And at July’s Council of the Federation meeting, the premiers insisted the “provinces and territories must retain responsibility for the design and delivery of public drug coverage.”

Still, proponents of a single-payer national pharmacare plan appear to have momentum on their side. They argue that anything less than a national program would fail to adequately eliminate current gaps in coverage.

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In April, the Liberal-dominated House of Commons standing committee on health recommended that Ottawa and the provinces move forward with a single-payer, cost-shared national pharmacare program, citing Carleton University professor and leading pharmacare advocate Marc-André Gagnon, who told the committee: “In trying to preserve the [current] fragmented system while filling the gaps, we end up thinking of the public system as some sort of trash can for bad risks.”

In addition to seniors and the poor, government plans are forced to cover high-cost patients that private insurers won’t take on. The result, according to Mr. Gagnon, is a patchwork system “based on the commercial needs of the private plans, not the health needs of Canadians.”

A study released in July by the University of Ottawa’s Institute of Fiscal Studies and Democracy came to a similar conclusion. It cited the “hodgepodge” of provincial plans to underscore the difficulty of coming up with a federal program that simply fills in the current gaps, arguing instead for a universal, national pharmacare plan. The institute suggested Ottawa increase the federal goods and services tax to pay for it.

By appointing Mr. Hoskins, the Trudeau government has already raised expectations among proponents of national pharmacare. Now, it must come up with a policy prescription that doesn’t carry debilitating political and fiscal side effects.

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