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A Different Prescription

Pharmacare isn’t the only solution to high drug costs

A country that prides itself on its universal healthcare system has a glaring coverage gap: pharmaceutical drugs. As doctors and academics in this field, we see the consequences. Take, for example, one of our patients: a 60-year-old Calgary woman with high blood sugars and very high blood pressure. She paid for medications out of pocket each month; she had no employer insurance and couldn’t afford the premium for Blue Cross. One month, however, when facing extra car expenses, she didn’t have enough money to pay for her more expensive diabetes and blood pressure medications. She ended up in the hospital.

The woman would likely have avoided the emergency room if she’d stayed on her medications. Stories like hers will become more common. Already, roughly one in 10 Canadians is unable to afford prescription drugs—perhaps not surprising given that prescription medications in Canada have higher list prices than most other countries. Canada is one of only five OECD nations whose public health system don’t provide publicly funded drug insurance at the national level to all citizens (the others are Estonia, Israel, Mexico and the US).

How should we address this shortcoming? Many voices in Canada have been advocating for a national pharmacare program. In 2015, for example, six well-known leaders in healthcare from Canada and around the world issued a manifesto urging our country to adopt a national pharmacare program by 2020. Their goal is “universal coverage of selected medicines at little or no direct cost to patients …a single-payer system with a publicly accountable management agency.” That call has since been supported by other organizations, including the National Association of Federal Retirees.

One in 10 Canadians is unable to afford prescription drugs. Such medications in Canada have higher list prices than most other countries.

The public is broadly supportive of national pharmacare. A 2015 poll found that nine out of 10 Canadians supported the concept of a national program. Politicians seem to be listening. The federal NDP and Green parties made pharmacare part of their 2015 platforms. In March 2016 the House of Commons standing committee on finance recommended that government “pursue the feasibility of a universal, national prescription drug program and enhanced investments in home care.” Ontario in 2017 introduced free prescription drugs for citizens aged 24 and younger, with some calling it “the first step in a national pharmacare program.”

Is now the time for Canada to introduce universal pharmacare?

In 1966 the federal government mandated publicly funded universal healthcare through the Medical Care Act to ensure that all Canadians receive necessary physician and hospital care. By 1971, every province had implemented a plan meeting the Act’s conditions. The federal government covered half of all the provinces’ costs for hospital and physician care. But prescription drugs were not included. Back then, relatively few effective medications could be purchased from a pharmacy and administered outside of a hospital.

The 1984 passage of the Canada Health Act ensured that each province’s healthcare system met several conditions, including that all citizens have reasonable access to healthcare administered by a public entity. While the Act mandates that Canadians receive necessary hospital and physician care without user fees, it is silent about other services, such as outpatient prescription medications, dental care, rehabilitation and home care.

Healthcare funding is now primarily a provincial responsibility, and significant differences in coverage exist across Canada for services that fall outside the physician and hospital “basket.” Each province and territory has its own public drug plans, and private companies offer insurance either as an employment benefit or for purchase by individuals. Quebec is the only province with mandatory drug insurance—in some ways similar to Obamacare—requiring that every citizen obtain insurance.

Alberta provides drug coverage for people on social assistance, subsidies for seniors, and specialized plans for people with specific conditions such as cancer, transplants, major heart surgeries, HIV and infectious diseases. Albertans on social assistance pay no premium and pay nothing out of pocket to fill a prescription. Seniors don’t pay a premium but must cover 30 per cent of the cost of the medication out of pocket, to a maximum of $25 per prescription. The government pays the rest. Single Albertans under the age of 65 can buy Blue Cross drug insurance for a monthly cost of $63.50 (or $44.45 if they are low-income). As with seniors’ coverage, these plans include a 30 per cent out-of-pocket cost, to a maximum of $25 per prescription. Here too, the government pays the rest.

These plans are affected by the overall price of drugs. The cost of prescription drugs has grown substantially over the past 15 years. Pharmaceutical companies argue that the high cost is a result of the complexity of developing new drugs and getting them approved. In 2000 the average spend per Albertan was $334, with the province covering 39 per cent. By 2015, Albertans were shelling out an average of $728 per year for their prescription drugs. Private insurers and patients paid 56 per cent of these costs, and government covered the remaining 44 per cent.

On the face of it, national pharmacare would seem to present a solution to rising drug costs. A March 2015 paper in the Canadian Medical Association Journal concluded that such a program could reduce net prescription drug spending by $7.3-billion. Private insurers’ costs would be reduced by $8.2-billion, while the cost of public plans would go up by about $1-billion. These estimated savings would be achieved by creating a larger market share, with the government able to negotiate lower prices for drugs, more in line with what other countries pay.

This may be an overestimation of the potential cost savings. All provinces and territories have been working together for 15 years to negotiate price reductions. In 2004 first ministers—premiers and the prime minister—agreed to what was called the National Pharmaceuticals Strategy, an accord between the provinces, territories and federal government that aimed in part to address access and cost issues. The strategy mapped out nine elements of national collaboration to advance prescription drug coverage. Although an impasse on the funding arrangement and a change in the federal government stalled the initiative, the elements have been advanced, to varying degrees, through cross-provincial collaboration. One major initiative, for example, is price negotiations involving every province and territory.

Drug costs have grown substantially. Companies argue it’s a result of the complexity of developing new drugs and getting them approved.

Drug prices in Canada are monitored by the Patented Medicine Prices Review Board, an arms-length body established in 1987. The board, comprised of healthcare and pharmaceutical leaders, lawyers and academics, compares the cost of prescription drugs to the cost of their equivalents, and then sets prices, using prices in seven other countries (France, Germany, Italy, Switzerland, Sweden, the UK and the US) as reference points. Many feel the Patented Medicine Prices Review Board needs an overhaul, as it’s questionable whether its original intent—to increase drug industry investment in Canada—has been achieved.

Provinces and territories can also negotiate a lower list price (the price posted publicly by the pharmaceutical company)—which makes the price decrease transparent—or a confidential lower price, which typically involves a rebate to the government. These agreements allow the list price to appear high while what the government actually pays is secret. Though governments win, patients don’t always benefit—the out-of-pocket portion you pay when you fill your prescription is based on the list price.

In August 2010 the pan-Canadian Pharmaceutical Alliance was established to achieve lower prices for publicly funded drug programs. All provinces and territories participate; the federal drug plans (for Indigenous people, prisoners, the military, diplomats and RCMP) also recently joined. The objectives include better access to drug treatment options, lower drug costs, more consistent pricing across Canada and improved consistency of coverage criteria. Through joint negotiation, the provinces, territories and federal drug plans form a larger market share (collectively, virtually all 36 million Canadians are represented) and use their clout to drive down the prices of brand name and generic drugs alike.

Although the negotiated prices are confidential, the provinces and territories estimate their savings so far at $712-million. In spite of this progress, however, Canada still has some of the highest prescription drug list prices in the world, including the highest list generic drug prices. In other words, although we’re paying less than we did five years ago for some drugs (as a result of confidential rebates), the publication of list prices still makes it appear that our prices are the highest. And our price-fighting efforts fall far short of countries such as New Zealand, which has used its single national formulary (the list of prescription drugs an insurance plan will pay for) to drive the list price of brand-name drug prices down to 40 per cent lower, and generic drug prices to 90 per cent lower, than the prices in Canada.

Canada, by comparison, has no such national formulary. Creating one is not dependent on the existence of a national pharmacare program. In fact, there’s little reason to think a national pharmacare program could achieve more than the pan-Canadian Pharmaceutical Alliance could, since the alliance involves the participation of all provinces, territories and federal drug plans—one of the key justifications put forward for a national drug program.

Doubt about the potential to negotiate further cost savings is not the only argument against pharmacare. Brett J. Skinner, CEO of the free-market Canadian Health Policy Institute, argued in an op-ed in the National Post that a “pharmacare monopoly” would actually shift $13.2-billion in private prescription-drug-related costs onto the provinces. Citing research done for CHPI, Skinner predicted that coverage for many Canadians would be cut—since a public plan might cover fewer medications than private ones currently do—and that “innovative treatments” would be approved more slowly. Canadians with private drug plans “would be forced… to accept the inferior coverage provided by public plans,” he wrote.

Notwithstanding polls showing widespread support among Canadians for the concept of pharmacare, the House of Commons standing committee’s recommendations, and recent changes to drug coverage in Ontario, pharmacare is not on the table in current health accord negotiations. “Right now, our biggest priority is to make sure we reduce pharmaceutical costs, and there are a lot of ways we can do that,” said Minister of Health Jane Philpott in a December 2016 interview with Global News. “So before we take on responsibility for even considering an expansion of what will be publicly funded, we need to drive down drug costs.”

If the two biggest issues around prescription drugs are financial barriers for some and high drug costs overall, then a national pharmacare program may not be the most effective solution. Other strategies may work instead.

Tackling administrative barriers would help. Approximately one in five Canadians report they don’t have drug coverage. Administrative hurdles are a legacy of a system that was dependent on paperwork, and today these “red tape” barriers could be eliminated by linking existing data and “push” systems. For example, in Alberta, when a person turns 65, a paper-based enrolment form mail-out is triggered. The senior is required to complete and return the form by mail or in person at a registry office. If data that’s already captured through other government databases were used instead, then the senior could be automatically enrolled in the public insurance plan, thus more quickly reducing their prescription drug costs.

We also need to think more carefully about cost sharing—the requirement that the patient pay a portion of every drug purchase. Even though such an approach isn’t the standard for any other essential health services (we don’t pay anything to visit a doctor or hospital), it is the norm for prescription medication in all OECD countries, in part because of concerns about the potential abuse of “free” prescription drugs.

We should also differentiate essential medications from those that don’t work as well. Among the vital ones are antibiotics (when they are truly needed), blood pressure medications and certain drugs for reducing blood sugar in diabetics, for instance. The World Health Organization (WHO) has developed a list of essential prescription drugs that it argues governments should make accessible for all citizens at no cost. Recent work has shown that access to these medicines improves a patient’s ability to follow a prescribed treatment, which in turn improves patient outcomes and may lower overall health system costs. As a start, we could consider having patients pay nothing for the drugs on the WHO list, while maintaining co-payments for other drugs.

Finally, we could focus on ensuring access for the most vulnerable. Ontario attempted to do this by expanding drug insurance for youth up to age 24, though this is only one vulnerable group. If we shifted available government funding to those who need more support, those who can afford to pay could pay more. Premiums are often unpopular, but they are a more equitable way to share costs. Instead of a person paying for prescription drugs when they’re unwell, ongoing premiums would ensure everyone contributes, thus decreasing the burden on the sick. With an appropriate income-based premium structure, we may be able to substantially reduce or even eliminate cost sharing when a prescription is filled.

If Canada were building a healthcare system from scratch, then a national pharmacare program might make sense. But the complex system that has evolved over many years means other mechanisms may be more fruitful in achieving the goals of removing financial barriers to access and reducing the cost of drugs. The structure of cost sharing, the formulary, the people included in public plans, and ways to facilitate price negotiation between provinces and suppliers can all be addressed by provincial health ministries. In the absence of federal leadership and additional federal dollars, changes may be easier to achieve through provincial collaboration.

Our most important goal should be to ensure that no Canadian goes without the drugs necessary to their health. In the longer run, our federal government may opt for including prescription medication coverage under the Canada Health Act. This would compel public funding for medically necessary drugs and standardize plans across provinces. It would undoubtedly require an increased federal financial contribution. Such leadership, however, could also motivate provincial action, as it did after the establishment of medicare.

 

Drs. Fiona Clement and Braden Manns work in health technology and health economics, respectively, at the University of Calgary.

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