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It’s the hole at the centre of medicare. Canada is the only developed country with a universal health-insurance plan that doesn’t include coverage for prescription drugs.

Canada also spends far more each year on prescription medicines than most developed countries, while paying some of the world’s highest prices. In 2017, individual Canadians, governments and private insurance plans spent an estimated $39.8-billion on drugs dispensed outside of a hospital.

Drugs are now the second-biggest item in Canadian health care, ahead of physicians.

When it comes to prescription medicines, Canada’s system looks a lot like the United States: Many people have drug insurance through their workplace; provincial plans cover some groups, such as seniors; and a lot of people simply fall through the cracks. Around 10 per cent of Canadians are believed to have no drug insurance at all. A similar number are believed to be underinsured.

The result is that the number of Canadians who don’t properly take their prescribed drugs, due to high out-of-pocket costs, is estimated by the Commonwealth Fund’s international survey to be more than 10 per cent – a dismal figure topped only by the United States. In a 2015 Angus Reid Institute survey, 23 per cent of Canadians said that tight finances had led someone in their household to not take medicine as prescribed.

The bottom line is that Canada outspends most of the world on prescription medicines, even while leaving many Canadians without coverage.

Done right, a national pharmacare plan can fix that. The federal Liberal government is almost certainly going to propose some kind of pharmacare plan later in the spring and attempt to negotiate its creation with the provinces, all in the runup to the fall federal election. The question is what such a plan should look like.

Pharmacare should have three big objectives.

The number of Canadians without drug insurance should be lowered to zero – just as medicare did two generations ago for physician and hospital services.

The number of Canadians who, due to inability to pay, are not taking a prescribed medication should be zero. Medicare did the same for physician and hospital services, by making them free for patients.

And drug costs for the system as a whole, largely borne by businesses and taxpayers, have to be significantly lowered. There’s no reason why Canada is paying so much more for meds than our peers in Europe, all of which have health-care systems that are Canada’s equal or better.

The last objective may be the easiest to address. The Trudeau government even had a plan to take a big step forward, which was supposed to go into effect this month – before talks on pharmacare. However, faced with pushback from the pharmaceutical industry, it’s in limbo.

Canada has something known as the Patented Medicines Prices Review Board. Established in 1987, it regulates prices for drugs that are still under patent. But due to a combination of poor design and poor operation, it’s doing a poor job.

The design flaw is that its prices are based on those in seven other developed countries – two of which, the United States and Switzerland, have the world’s highest prices. Regulations that were supposed to go into operation on Jan. 1 aimed to fix that by changing the basket to include countries with lower drug prices. There’s no good reason for this delay.

There’s also the pan-Canadian Pharmaceutical Alliance, which negotiates on behalf of provincial and federal drug plans. But a lot of drug buying, notably by private insurers, isn’t done though this body, which suggests that significant savings are being left on the table.

Compared to Canada, the average OECD country spends 30 per cent less per capita on drugs. If Canada could achieve those kinds of savings, not by rationing drugs but simply by paying the world price for the medicines, the national drug bill would drop by more than $10-billion a year.

The benefits would flow mostly to governments, in the form of lower costs for drug programs, and to businesses, in the form of lower employee drug-insurance premiums.

That would deliver a big cut to Canada’s total drug bill, which would be a very good thing. But it wouldn’t do anything about the fact that many Canadians have insufficient drug insurance, or none at all. How can pharmacare fix that? More next week.

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