Pharmacare For All – Chapter 2

The Canadian Medical Association Journal (CMAJ) has published an advocacy piece for a national single-payer pharmacare program. This repeats and expands on arguments made by the same authors in earlier publications by various think tanks. It makes it sound so easy and attractive.

At present the provinces spend $9.7 billion on public sector programs and $2.4 billion for public sector employee benefits. Private sector benefit programs cost $5.7 billion and patients spend a further $4.5 billion of their own money.

The advocates propose a national program providing universal coverage for a formulary of approved drugs, subject only to a co-payments averaging $10 for brand-name prescriptions and $2 for generics, with exemptions for low-income families. They contend that it would save about 30% on overall costs.

Of this 22% of total cost would come from improved pricing of generic and brand-name drugs, much of which would come from pharmacy profit margins. A further 12% arises from “improved product selection”, by which the authors mean that the differing copayments would coax patients toward the most cost-effective drug, typically generics. Pricing in the United Kingdom is assumed to be representative of what Canada could attain.

An allowance of 3% for increased utilization is incorporated in the calculations. The combined net savings would pay for all but $1 billion of the cost to be absorbed by the public sector.

The forecast reductions are based on spending levels in some other OECD countries, primarily in Europe. The article skips past some rather pertinent questions.

Is it necessary to have a single payer to achieve these savings? Apparently not. Switzerland and the Netherlands provide their programs through private insurers which compete based on their ability to extract cost savings from suppliers, including pharmaceutical companies.

To achieve the savings, is it necessary for the whole country, or even an entire province, to participate? It is not obvious that it should be. Ontario already provides benefits to more people than the entire population of Finland or New Zealand. If the idea appears to be workable it could be tested there, with other provinces that wanted to join. No doubt the remaining provinces, and private insurers, would be happy to join in if it showed signs of success.

Why spend so much of the savings (most of the $5.7 billion currently spent on private insurance) for the benefit of large corporations? Would it not be better to focus savings on improved support programs for low income patients and their families? There would be money left over for other health services, or perhaps to help provinces balance their books.

Are drug costs independent of other aspects of the health care system? No.  In the United Kingdom general practitioners are paid not by the number of patient visits but rather by “capitation”, a fee for each patient on the physician’s roster. They act as gatekeepers to specialists as well as prescriptions, and are accountable for keeping costs per patient within a budget. Their incentives are thus the opposite of those in Canada, where seeing more patients and writing more prescriptions is the way to make more money.

Switzerland uses mandatory deductibles and co-payments on almost every health service to discourage excessive usage. Canadian governments pay the highest proportion of hospital (92%) and doctor (99%) costs of any OECD country. One problem with existing pharmacare for Canadian seniors is that it makes overprescribing more likely, which is good neither for patients nor for taxpayers. Switzerland, having a national drug program, pays a lower proportion of heath costs than Canada, which does not.

Who will be the single payer? There is nothing to prevent the provinces from collaborating and setting up a national system. They already work together for some of their programs. But that is not what the authors have in mind. Lead author Steven Morgan was quoted as saying “”We’re in an election year. And so this is an important year … in terms of thinking about what Canadians want and what Canadians in essence will ask their governments to do. “

If the federal government paid for the whole program its spending would go up by $13.2 Billion while the provinces would save $12.2 billion. One could anticipate continuous tensions as provinces agitated for the circle of included drugs to be widened.

All of this is not to dismiss the article’s core thesis. It is possible to provide government drug programs more cost effectively and the opportunity should be pursued. That does not necessarily mean that we should have a federally funded universal regime.

The CMAJ article should be viewed as a political document rather than a work of science. If it promotes thoughtful discussion on a complex topic it will have made a valuable contribution. Unfortunately the heat of battle in a federal election campaign is an unlikely venue for such a debate.