National Pharmacare: Canada’s Prescription for Change

Brynne Moore

As Canadians, we take pride in our national health care system; and at its core, that system is about providing universal and equal access to medical and hospital care. The Canada Health Act (CHA) mandates that equitable health care be provided on the fundamental basis of medical necessity. While the specifics of what is “medically necessary” are largely determined by individual provincial governments, the CHA outlines that all such services provided in hospitals be covered at no expense to the patient. Unlike our neighbours south of the border, Canadians expect to be able to receive hospital care without fear of incurring astronomical medical bills.

However, due in large part to rapidly increasing hospital costs and issues of overcrowding, there has been a recent shift towards outpatient care. Many Canadians are now incurring out-of-pocket fees to fill prescriptions that are not only medically necessary, but which would have been fully-covered in a hospital setting. According to the Canadian Institute for Health Information (CIHI), Canadians spent $31.1 billion on prescription drugs in 2010, or about $910 per person. This amounted to about three times what was spent twenty years earlier.

In view of the rising costs of prescription drugs, nearly one in ten Canadians (9.6 per cent) requiring prescriptions have reported failing to re-fill or pick-up prescriptions because of high costs, and 26.5 per cent of those without supplementary insurance – typically provided as a benefit of employment – were not able to afford their prescriptions at all. This high percentage of Canadians not filling prescriptions can create negative externalities in other areas of the health care system, and can lead to increased emergency room visits and prolonged hospitals stays.

When accounting for the percentage of the overall population covered by a public insurance plan for prescription drugs, Canada currently ranks a disappointing 30th out of 32 OECD countries. Canadians pay on average $910 per capita annually on such drugs, a high amount behind only the United States. The same report found that Canada and the United States rank last and second last, respectively, among OECD countries in terms of price paid per volume of pharmaceuticals; and the high prices that provincial governments are currently paying for prescription drugs is having a direct impact on the price paid by Canadian consumers. These rapidly rising prices explain why Canada has the highest yearly per capita growth in expenditure on prescription drugs of any OECD country.

According to recent OECD research, out of pocket spending for prescription drugs now represent 18.2 per cent of total prescription drug expenditures in Canada. One could argue that the inconsistent framework that Canada uses to deliver prescription drug coverage violates the principle of equity as outlined by the CHA. Access is determined by insurance coverage and province of residency, as opposed to any measure of need — and while every province provides some level of public coverage for prescription drugs, that coverage varies significantly from coast to coast.

A recent study found that, among 58 drugs researchers surveyed, only 9 per cent were included in all ten provinces’ prescription drug formularies – an official list of drugs covered under public health insurance. In Jeffrey Simpson’s Chronic Condition, he emphasizes that provincial differences in coverage mean that, for example, a 73 year-old patient with a heart condition and high cholesterol who earns $44,806 annually, and takes six medications would incur costs varying from $60 in New Brunswick to $1332 in Manitoba. Even when out-of-pocket payments are small, these cost can prevent Canadians from taking necessary medication.

Quebec is particularly unique with respect to coverage for prescription drugs. An employer-based insurance market operates alongside government run programs to provide what some consider “universal” coverage. The province’s public plan is financed through a mix of general taxes, income-scaled premiums, and user fees. Those receiving public coveragevia the Régie de l’assurance maladie de Quebec (RAMQ) are either aged 65 and over, currently receive social assistance, or are self-employed, unemployed, and not eligible for private coverage. However, co-payments can still be high for those who are not covered by the RAMQ, and access to prescription drugs remains limited.

The creation of a single, national formulary for prescription drugs is arguably the best “first step” in a move towards a national pharmacare program, something many have deemed necessary moving forward. A formulary listing prescription drugs and their reimbursement rates would create an equitable baseline for universal coverage across the country. It would also help to reduce the administration costs associated with the creation of individual provincial formularies, and the cost analyses currently undertaken by the provinces.

Creating a national drug formulary would also enable the federal government to act as the central purchaser of all prescription drugs in Canada. This substantial increase in purchasing power would drive prices down, provided that the government buys in bulk. In the current system, provinces are responsible for purchasing all prescription drugs separately. While some success in lowering costs has been achieved through the Council of the Federation, pharmaceutical companies have seen arguably more success in pitting provinces against one another, given individual incentives to acquire prescription drugs at the lowest possible cost.

In 2002, the Senate Committee on Social Affairs, Science and Technology (Kirby Report) advocated for a national drug formulary compiled from the provinces and territories and different stakeholders. The committee concluded that a national formulary would pave the way for a one-buyer system that could help to dramatically reduce the cost of prescription drugs, thereby increasing access to all Canadians. It is a necessary foundation for any successful national pharmacare initiative.

Given rapidly increasing costs in an evolving health care landscape in Canada, due largely to the realities of an aging population, it has become increasingly clear that prescription drugs are indeed a medically necessary service. Regardless of whether or not they are administered in a hospital setting, most Canadians rely on prescription drugs at one time or another to remain healthy. The current unequal access to such drugs, and discrimination based on employment and social status, challenges the core principles outlined in the Canada Health Act, and calls for immediate and substantial reform.

Brynne Moore is a 2016 Master of Public Policy candidate at the School of Public Policy and Governance, University of Toronto. She holds a Bachelor of Arts in Political Science from McGill University, and has recently worked for both the House of Commons and the City of Ottawa. Her main areas of policy interest include health policy and fiscal policy.

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