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A clear definition is needed before proceeding

By Helen Stevenson

Calls for national pharmacare, which have long been simmering, have boiled over as of late. The federal government has taken the first step toward a national strategy with the release of the 2018 Federal Budget. Dr. Eric Hoskins, the former Minister of Health and Long-Term Care in Ontario, will chair an advisory council to review options and establish ideas for the framework for a national pharmacare program. 

What was at first considered an exciting move toward progressivism and cost savings quickly turned to confusion and disappointment. Why? It has become clear that an understanding of what a national pharmacare plan would entail differs depending on who is writing the definition. Since the budget announcement was made, the government, advocacy groups and those commenting in the press through op-eds and columns have all used different descriptions to define what each is calling national pharmacare. 

Definitions are critical and should not be overlooked. Especially in this example, coming to a collective definition will be a critical component of putting together any proposal. In the Canadian context, national pharmacare could refer to one of many things – for example: a formulary of certain “essential” drugs that would be covered for all Canadians; a single national mandatory formulary for all Canadians that would eliminate all provincially funded and employer-funded drug programs in the country into one; or a social insurance model, similar to what exists in Quebec, whereby everyone is required to have drug coverage, either through their employer or through the government. 

There are several approaches for the government and its advisory council to consider. Some advocacy groups subscribe to the “single national mandatory formulary” approach, where all Canadians are on the same plan, but a more achievable approach to national pharmacare is likely best. 

A single, nationally mandated formulary would require every existing provincially funded and employer-funded plan to be dissolved.

A single, nationally mandated formulary would require every existing provincially funded and employer-funded plan to be dissolved. The reaction from stakeholders, namely pharmaceutical companies, pharmacies, insurance companies, advisors and unions, to name a few, would be spirited resistance. 

Employer-sponsored, or private, drug plans emerged around 1997. Until then, most private health insurance in Canada was offered through not-for-profit mutuals and cooperatives. Following some regulatory changes in 1997 and 1998, for-profit companies quickly grew to account for about 80 per cent of the private health insurance market in Canada. In 2017, private insurers are estimated to have spent more than $11 billion on prescription drug costs in Canada.

Hence, private drug plans have been in place for decades and more or less provide employees with comprehensive access to prescription drugs at varying coverage levels (i.e., co-payments). To dissolve them would disrupt benefit plans across the country – many of which are public sector unions, with 100 per cent coverage of all drugs – and without a clear plan of what is set to replace them, it’s not clear whether this change would be an improvement for people on private drug plans. 

Additionally, this kind of national pharmacare program would require agreement (or possibly a government mandate) from all provinces and territories to disband their own provincial programs and devolve all of the authority and funding to the federal government. As it stands, each province funds its provincial drug program for its own residents, based on its own formulary and decision-making model. Having endured significant backlash in Ontario during the government’s reforms, this approach would take tremendous political capital to achieve. 

Disruption and industry backlash aside, there are other problems associated with this kind of national pharmacare plan. The main economic argument made in favour of national pharmacare is that a single buyer – in this case the federal government – would result in significant buying power or leverage over pharmaceutical companies and thus a lower price for drugs. This is a valid point. 

That said, people tend to forget the importance of overall drug spending and, in turn, reduce the role of consumers. New drugs come on the market every month; many people perceive the latest to be the greatest. While there are some new drugs that offer significant improvements to Canadians, there are also a lot of new drugs that work the same and are more expensive. The $4 billion in savings laid out in the Office of the Parliamentary Budget Officer’s 2017 report acknowledges there is significant financial risk if drug consumption is underestimated. 

The funding model is also a problem. Would the federal government front the tab, given it is their initiative? Or are the provinces expected to share the costs? Regardless, government and taxpayers would be taking on billions of dollars from the private sector to cover a large chunk of Canadians that already have coverage. Why not focus on Canadians who are giving up necessities to pay for prescriptions or skipping out on them altogether? Given the amount of industry disruption and political capital required to achieve this result, there may be a better approach.

According to several studies, almost 15 per cent of Canadians either lack prescription drug coverage or have coverage but lack the financial means necessary to afford their prescriptions. Policymakers should be focused on covering Canadians who lack the means necessary to get the medicine they need, rather than taking on additional costs to cover Canadians who already have coverage. An achievable approach is setting up a program that provides prescription drug coverage to the 15 per cent of Canadians who currently do not have coverage and may find prescription drug costs unaffordable, providing them with a substantial benefit. 

There is a strong public policy imperative to cover Canadians that do not have coverage for prescription drugs through their employer or provincial plan, rather than uprooting existing programs and creating one national plan. As seen in subsequent interviews with the Finance Minister, the government is looking at a fiscally responsible way of providing drug coverage to those who need it most. In this scenario, existing plans could remain in place and the reported 15 per cent of Canadians who have no coverage get picked up by the federal government, on their tab. The Canadian Institute for Health Information reports that Canadians pay $7.3 billion out-of-pocket for prescription drugs and an additional $5.94 billion out-of-pocket for non-prescription drugs.

Drug plans should be based on an evidence-based formulary that covers the most cost-effective drugs. We have proof that when consumers are educated about prescription drugs and are offered well-researched alternatives, they tend to make smarter decisions that affect their finances and their health. 

Drug plans should be based on an evidence-based formulary that covers the most cost-effective drugs.

The government has taken a step in the right direction. Now the most important thing is to define national pharmacare and pursue an achievable approach. Will the government be successful? If so, they will provide prescription drugs for those who can’t afford it without disrupting an entire industry and taking on unnecessary costs. 

Helen Stevenson is the former assistant deputy Minister of Health and executive officer who oversaw Ontario’s $4-billion drug program, where she led prescription drug reform with Bill 102, saving Ontarians an unprecedented $1.5 billion and helping spark reform across Canada. 

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