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The Fantasy of Reference Pricing and the Promise of Choice in BC's Pharmacare

Type: Research Studies
Date Published: November 29, 2002
Research Topics:
For defenders of government-run health care, the existence of provincial drug benefit plans is actually a blot on Canadian health care, in that they are not part of single-payer, first-dollar coverage, medicare (National Forum on Health, 1997:22). When the state took over health care, it left prescription drugs out of its grasp. As of 2001, governments in Canada paid for an estimated 49 percent of prescription costs, private insurers 30 percent, and individuals 21 percent (CIHI, 2002a:44).

It is not surprising that politicians avoided bringing prescription drugs into medicare. According to the Canadian government's interpretation of the Canadian Health Act, patients or private insurers are not supposed to pay any money for health services insured by the government, under any circumstances. For most services, governments can control the supply, cutting off access while still pretending to provide universal health care. For example, the supply of doctors can be kept low by restricting admissions to medical school, preventing physicians with foreign qualifications from practicing, or simply making the environment so unrewarding for them that they leave.

"Reference pricing" is an activity in which everyone engages during commercial transactions: compare two competing products; if the more expensive one is not worth the premium, then buy the cheaper one. Who could object? When government agents make the decision on behalf of patients, however, the issue is not so clear.

There are often a number of competing prescription drugs that address a given medical condition. Reference pricing occurs when a government takes away its citizens' freedom to buy medicines of their choice for that condition, by taxing them and allocating the proceeds to drugs selected by a government appointed committee.

This is one method of sharing the cost of a prescription drug between patients and the taxpayer. Another is for the government to give a partial subsidy to patients, but not to become involved the details of how the subsidy is spent.
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