The Fixing Health Care series presents 10 common problems faced by patients in Canada, along with 10 solutions that the authors argue can be achieved within our existing publicly-funded health system. While the ‘problem’ scenarios in the series are fictional, the authors offer these examples to echo the patient experiences they have encountered through their work in health care and social services.
The Problem: Canada needs a national pharmacare program
Guys in Bill’s family seem to have trouble with diabetes and high blood pressure. His dad suffered from both conditions and died of a stroke in his fifties. His brother is on dialysis from diabetes-related kidney failure. Bill is not overweight and has always stayed in shape, so he ignored his family history until his wife convinced him to go for a checkup when he turned 40. The results came back showing that his sugar and blood pressure were quite high.
Bill’s doctor recommended that he start on some medications, but Bill runs his own small trucking business and the company doesn’t offer a drug insurance plan. His wife got laid off during the pandemic. His pharmacist checked if he qualified for any government health insurance but Bill makes just too much money to qualify. The pharmacist said the medications would cost more than $200 per month. Bill can’t pay for that without cutting down on food bills – his three teenagers can really eat.
He’s pleased that they live in Ontario, though. His youngest son has bad asthma and uses expensive inhalers; a government program pays for drugs for anyone under 24. That’s a lifesaver for Bill – but he wishes he were also eligible for that program.
The Fix: A four-point action plan to kick-start Canadian pharmacare
The facts are simple. Per capita, Canadians pay more for prescription medicines than most wealthy countries. The cost per drug is simply higher. When national drug costs are compared, we usually end up tied with Germany as the third- or fourth-highest spending country, just behind the United States and Switzerland. Yet paradoxically, despite spending so much on prescriptions, one in five Canadian households report that, for financial reasons, a family member foregoes the purchase of a medication they need. As former federal health minister Dr. Jane Philpott has written, many Canadians are forced to make difficult choices (like our man with diabetes and high blood pressure in the scenario above) between buying necessary medications and purchasing food for their families.
Making drugs accessible to all Canadians through universal pharmacare has been an item on government agendas from the earliest days of Canadian medicare. Roughly 7.5 million Canadians either have no drug insurance or have insurance that doesn’t fully meet their needs. As recently as 2019, the Trudeau government called for a commission to determine how public coverage of prescription drugs could be implemented across Canada. The commission, led by Dr. Eric Hoskins, agreed that yes, drug coverage should be part of Canadian medicare. But three years and two federal elections later, the path to pharmacare remains uncharted.
Can the country afford it? Definitely. In fact, far from costing us more, the program would actually save us money.
The Parliamentary Budget Officer estimated in 2017 that pharmacare would have cost Canadians about $4.2-billion less than the $28.5-billion they spent on drugs in 2015. Using estimates based on 2013 prices, one study showed that pharmacare would increase government costs by about $1-billion. But this same study demonstrated that pharmacare would save Canadians about $7.3-billion a year in reduced insurance and out-of-pocket expenses.
Given that pharmacare would improve health outcomes for lower-income Canadians and save money for all of us, why have we not implemented it, despite reports and Royal Commissions recommending it? To understand, we first need to review the current state of drug coverage across the country.
At the moment, there is no unified Canadian plan for drug coverage. Each province has a different drug plan with varying coverage schemes, totalling more than 100 publicly-funded – and a myriad of private – drug plans. Quebec insists on universal insurance for all its citizens, paid for either by employers’ private insurance or by a government insurance plan in which annual premiums cost up to $710 a person. Ontario arguably has the most generous public plan, with all seniors over 65 as well as uninsured people under 25 covered for all drugs on the public formulary with a small deductible. All the other provinces and territories have different approaches with varying formulary coverage, different deductibles, premiums, or co-pays.
Provinces jealously guard their constitutional right to manage health care, making any wholesale changes controversial. Universal pharmacare would need to be tailored to each province and territory according to the nuances of that region’s existing drug insurance program. The shared aim of the provincial and federal governments on this matter would be to ensure that each Canadian could access a list of essential medicines at a reasonable price. In a universal pharmacare system, the number of people covered by a provincial or territorial drug plan would expand and federal contributions would be needed to offset these incremental costs. Under this approach, individuals with pre-existing private drug insurance would not see changes to their coverage. Their employers would, however, pay less for drug benefit plans since branded drugs would be cheaper.
Another source of opposition comes from international pharmaceutical companies. The current system in Canada benefits these companies in a way that pharmacare would undercut. Here’s why.
Canadians have three ways of paying for their prescriptions: with the help of a government drug plan, with private insurance coverage (usually through work), or by paying out-of-pocket. As many Canadians will know, the prices of the drugs themselves vary according to which of these three methods of payment is used.
The Pan-Canadian Pharmaceutical Alliance (PCPA) is an affiliation of provincial, territorial, and federal government public drug plans. It negotiates a price with the drug manufacturer; that price, in turn, determines pricing for all federal, provincial, and territorial public drug plans. The PCPA delivers savings of more than $2-billion dollars a year for all of our Canadian publicly funded drug plans.
However, these public drug plans cover less than 44 per cent of Canadian costs for drugs. Most people in the country have private insurance through their work, or pay out of pocket, and the list prices for drugs paid for by private insurance (or paid out of pocket) are higher than the costs negotiated by the PCPA for public plans.
Less than 50 per cent of prescribed pharmaceuticals in this country are bought at the lower price negotiated by the PCPA. The higher “list price” set by drug manufacturers for sales funded by private insurance is approved by a federal agency called the Patent Medicine Prices Review Board (PMPRB). The regulations used by the PMPRB to approve manufacturers’ list prices result in Canadians paying much more in annual prescription costs than most Western Europeans, Australians or New Zealanders.
Since 2019, the federal government has been attempting to reform PMPRB regulations, but they have been thwarted by the pharmaceutical industry, which has fought back time and again with advocacy, threats of cutting Canadians off from effective new drugs, and court challenges.
How do we break this log jam? We propose four action items that will start Canadians down the road to a cost-effective pharmacare future. These actions require the federal government to use its power and influence to achieve a typical Canadian compromise.
The first action is actually well on its way to becoming reality, and involves the PMPRB changing the way list prices are approved. The PMPRB currently determines list pricing by comparing prices among a “basket” of other countries around the world. This comparison group currently includes the high-priced jurisdictions of the United States and Switzerland. Instead, we believe the PMPRB should implement a new “PMPRB11″ comparison list, which would remove those two high-priced countries and only include 11 countries with health systems comparable to Canada. This would immediately reduce list prices for drugs and is in fact currently slated to happen in Canada on July 1, 2022, but has been previously delayed on several occasions (though the federal government has recently committed to enacting this regulation change this year.)
The second action is that private insurance plans in Canada should join the Pan-Canadian Pharmaceutical Alliance (PCPA). Private insurance representatives have expressed a willingness to participate in the PCPA to achieve savings for the employers that they represent (most Canadian companies contribute to employee health benefits and are concerned about rising drug-plan costs). Giving insurers access to lower PCPA prices would reduce all drug costs in the country by saving money on the 45 per cent of prescriptions currently paid for by private health insurance. Consolidating all pharmaceutical buying in the country is a powerful opportunity. During the pandemic, Canadians saw a precedent for this approach with the success of purchasing COVID vaccines through a single, national procurement process.
Canada’s premiers control membership in the PCPA and can make this change happen, and the companies that pay for drug insurance benefits would likely insist on insurers joining the PCPA if it reduces corporate drug benefit costs.
The third action will require the federal government to convince provincial and territorial governments to accept federal involvement in a new drug insurance system. The Advisory Council on the Implementation of National Pharmacare has suggested that provincial sensitivity to federal constitutional trespass would be reduced if the federal government agreed to develop a strategy for managing rare diseases across the country and paid for the high future costs of drugs for rare diseases. Following this recommendation from the council, $1-billion dollars over two years was allocated to this initiative in the 2019 federal budget.
As of 2019, there were 93 drugs for rare diseases approved in Canada that cost over $100,000 a patient each year, with half costing more than $200,000 and some exceeding $1-million a year for each patient treated. This is due to an ongoing and groundbreaking revolution in genomic diagnosis, which is now constantly identifying gene alterations that cause rare diseases and enabling new therapies in the process. While this has been a very positive development for patients with rare diseases, these treatments also have a very limited market, which means the costs for each patient are extremely high. With small numbers of families afflicted by rare diseases scattered across the country, this is an ideal place for the federal government to develop a strategy and a commitment to deal with the future cost of new therapies for rare conditions. We believe all provinces will accept federal investment in paying for the expensive drugs in the rare-disease pipeline.
To that end, the fourth action we recommend is for the federal government to insist on a precondition for all provinces – if provincial governments are to receive federal dollars for paying for the high cost of drugs for rare diseases, they must also accept federal dollars that are specifically earmarked to pay for an essential drugs list for all citizens. Our man “Bill,” described above, would probably find all the medications to treat his diabetes and high blood pressure on this list. Achieving universal access for these medications will require the federal government to negotiate a Canadian compromise that can kick-start Canadian pharmacare.
Under the plan we propose, each province would keep track of prescription costs for a list of essential drugs, with the funding for these essential drugs offset by federal funding for citizens who are not currently covered by private insurance or existing government drug plans. Since most essential drugs have generic options, the cost would not be excessive and all drug costs in the essential medications list would be negotiated by the PCPA.
However, the federal government would also need to accept that each province would likely put the money for essential medications to different uses. Ontario might use the money to extend drug benefits to all uninsured citizens, as it has done for children with the OHIP+ program. Quebec, on the other hand, might insist that Quebeckers already have universal access to essential drugs, and that a fair estimate of pharmacare funding for Quebec must be contributed to general health revenues.
This tailored approach to each province’s pre-existing system is similar to the federal strategy used in negotiating a national daycare program. This will not be the final form of our pharmacare program, since more drugs will be added to the essential drugs list in the future using the same funding formula. But this four-point action plan immediately reduces drug prices for all Canadians, and gets pharmacare started for all.
As a country, once the PMPRB changes are implemented in July this year, we would save money on all drug purchases thanks to the resulting reductions in list prices, as well as private insurer access to PCPA negotiated prices. No one would be worse off since individuals currently enjoying drug coverage through their workplace would see no change – employers would also reap the benefits, since private insurance drug costs would also be reduced.
Most important, the gentleman described above would have the same access to diabetes and high blood pressure medications that his son now has for asthma treatments. Hopefully, he would then avoid the bad health outcomes these diseases have caused for his family in the past.
About the authors:
Dr. Robert Bell is professor emeritus in the Department of Surgery at the University of Toronto, former Deputy Minister of Health for Ontario, and former CEO of the University Health Network. Anne Golden is past president of the United Way of Greater Toronto and the Conference Board of Canada. Paul Alofs is former CEO of the Princess Margaret Cancer Foundation. Lionel Robins is past chair of the Princess Margaret Cancer Foundation, and a board member for the United Jewish Appeal Federation and the Betel Senior Centre.
More from the Fixing Health Care series:
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