Pharmacare: We Don’t Need a Leap of Faith

The federal report on national Pharmacare recommends a comprehensive program with national standards to be implemented over the next seven years. The report addresses a useful opportunity but its proposals will not receive provincial support.

It is telling that a council making dozens of recommendations affecting an area of provincial jurisdiction was chosen and mandated by the federal government acting alone.

Their report begins with the familiar lament that Canada is the only country with a national health program that does not cover drugs, and that we are missing the opportunity to save money through bulk purchasing. As always, the report neglects to mention that we are the only such country that has no deductibles or copayments for doctors and hospitals.

Drug costs can be reduced by enforcing rigorous competition between generic copies of brand name drugs that have gone off patent. The winning bidders get all the business for that drug.

The notion is that the Federal and Provincial Governments would jointly appoint an arms length agency. It would choose a formulary of drugs to be covered by the program over five years beginning in 2022.

The plan would cover this growing list at very little cost to patients (no more than $100 per year for a family; nothing for low-income families).

The Federal Government would contribute the incremental cost over what the provinces are spending today on programs for seniors and low-income families. The cost estimate is expected to rise to $15 billion by 2027.

The provinces have been burned by this kind of arrangement in the past. It matters not that there is hardly a Liberal Premier left in Canada. Regardless of stripe, Premiers will recall that Canada introduced Medicare with a promise to pay for half the cost, federally.

When federal finances got tight, they reduced their share to less than a quarter. The provinces have had to make up the difference. Abandoning the program was not an option.

The actual costs of the Pharmacare program will be driven by the choices of the arms length unelected agency. The report talks about a mechanism to prevent a repeat of the Medicare scenario but it looks constitutionally unworkable—today’s legislature cannot constrain the spending authority of tomorrow’s.

Per capita Pharmacare spending today varies considerably by province—$221 in BC and $288 in Nova Scotia, but $400 in Ontario and $497 in Quebec. The report recommends that “federal funding to Provincial and Territorial Governments must be fair and responsive to their different needs…”

But, “…it is important to treat all jurisdictions fairly. Provinces and territories that have already made substantial investments in prescription drug coverage should not be penalized for their contributions.”

So each province is supposed to be reimbursed for its incremental cost to provide the nationally prescribed plan, but those spending more today are not to be disadvantaged? You can’t have it both ways.

Nor is it likely that provinces currently having widely differing plans will agree on a single national version.
Provinces will respond more warmly to an approach that respects provincial differences.

Private sector employers currently spend $8 billion, projected to rise to $14.5 billion in 2027. The Pharmacare proposal would reduce this to $3 billion. In other words, almost 80% of the forecasted federal cost would accrue to the benefit of private sector employers and their employees. Is that a good use of taxpayer dollars?

Government drug plans for seniors, low income families, and government employees pay for more than half of Canadian spending on drugs. Start by focusing there.

Suppose that the governments begin with the programs taxpayers already fund. We don’t need 37 million participants to run successful auctions. Countries like New Zealand and Sweden, with far fewer citizens, have successful programs.

Set up the arms length agency to choose the formulary and let each jurisdiction decide what portion of costs they will reimburse. This eliminates the need for any subsidies, although the Federal Government could make a helpful contribution by funding the arms length agency.

If the concept proves to be valid, private employers and individuals will want in and should be welcomed. The Federal Government should extend tax deductibility to individuals but gradually reduce it for everyone to the cost level of the public sector plan.

Regardless of who forms the next Federal Government, the provinces are very unlikely to sign on to the report’s proposals. Far better to take advantage of the cost saving opportunity in a way that avoids constitutional wrangling.

The provinces can take the resulting savings and use them to reduce the payment ceilings for low income households for whom today’s subsidies are inadequate.


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