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Centralizing Government Control of Prescription Drugs Not the Answer to Improving Patient Choice and Access

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Release Date: March 15, 2005
Provinces whose Pharmacare plans try to contain costs by micro-managing the medicines that beneficiaries use short-change both patients and taxpayers, according to Canadian Pharmacare: Performance, Incentives, and Insurance, released today by The Fraser Institute.

This finding should cause provincial governments to re-think approaches such as the Common Drug Review, whereby a government-appointed committee makes national recommendations on the benefits of individual drugs.

Provincial drug-benefit plans now account for almost half of the country's prescription spending and provinces vary widely in how they provide this coverage. This new study discusses the differences between provincial drug plans with respect to breadth of coverage and cost sharing between patients and taxpayers, and introduces two new measurements to describe how provincial Pharmacare plans perform as insurers and how generous they are to their beneficiaries.

Success on both the new performance indexes in this study, and in managing spending, are associated with policies such as cost-sharing with beneficiaries (through co-payments and deductibles) and limiting benefits via income-testing. However, government-run drug benefit plans should not be interfering in deciding which medicines are best for patients.

"The government should be subsidizing the patient, not the producer," said John R. Graham, co-author of the paper and an Adjunct Scholar at The Fraser Institute. "If there are people who can't afford to eat, the best policy is to give those people money to buy groceries, not for the government to promise to feed everybody at nominal cost, and then ration out bread and water to the whole population. Unfortunately, that's the way many provinces have approached prescription benefits."

The first measure in this new study is the Prescription Choice Index. The index assesses how quickly provinces accept new medicines for coverage by their public drug-benefit plans. It addresses the question of how patients might rank different provinces' programs, if they were able to choose easily between them. Quebec, Alberta, and Saskatchewan lead by this measurement, with the Atlantic Provinces faring the worst.

The second measure in the study is the Prescription Insurance Index, which gauges how well provincial Pharmacare plans function as insurers, which offer protection against catastrophic disease rather than relatively predictable illness.

This is an important index because provincial Pharmacare plans operate differently from the government monopoly for supplying "insurance" for physicians' and hospitals' services, which covers costs from the first dollar. Provincial drug-benefit plans have patients pay some costs, thus giving them some control of how the money is spent.

Saskatchewan, Alberta, and Quebec lead this index as well, with Prince Edward Island, Ontario, and Newfoundland lagging. When the two indexes are combined, Quebec likely performs best overall, with the Atlantic provinces performing the worst.

The study also compares these results with how much each provincial drug benefit plan spends per resident, on an age-adjusted basis. Again, Quebec likely performs best on "value for money" according to these criteria, whereas Saskatchewan and Alberta purchase their performance at a high cost to taxpayers.

"Ontario spends a lot but buys little, according to our measurements. On the other hand, New Brunswick and Prince Edward Island spend little on Pharmacare and receive little in return," noted Graham.