National pharmacare program—the threat to patients and innovation
Prescription medicines are expensive, especially in Canada. In 2019, Canada spent more per capita on pharmaceuticals than other OECD country except for the United States, Germany and Malta. And there’s some evidence that Canada pays more while providing less access to new life-improving drugs. This combination has again helped fuel calls for a national pharmacare program.
But while the benefits to a national system for drug coverage are easy to imagine—reduced pharmaceutical expenditures and potential universal coverage, albeit for a limited selection of drugs—Canadians should realistically evaluate such a proposal and fully consider all the consequences.
Why? Because any national pharmacare program may be accompanied by legislation meant to reduce drug prices via government mandate. Indeed, the Trudeau government took has proposed new regulations for the Patented Medicine Prices Review Board, presumably in anticipation of a future national pharmacare plan. The catch is, while the government can mandate lower prices, it cannot force pharmaceutical companies to launch innovative new drugs in Canada.
In this context, it’s worth considering the national pharmacare programs in other countries such as New Zealand, Australia and the United Kingdom. While these programs reduced both expenditures and the average price paid per-drug relative to earlier averages, these savings are accompanied by some unintended consequences that may not be so favourable.
For example, the policies used to achieve the necessary cost savings include sole tendering, reference-based pricing, restrictive formularies and cost-effectiveness analysis. Their implementation generally limits patient (and physician) choice, risks drug shortages, rations medicines and therapies, and reduces treatment effectiveness. Furthermore, the lack of access to new drugs may result in additional consequential expenditures in other areas of the health-care system, which may represent a significant burden for Canadian patients.
Arguably, the single most significant benefit of universal pharmacare would be lower pharmaceutical expenditures for insurers and individuals. However, it must be done right. Current proposals in Canada fail to do this, but the experiences of Switzerland and the Netherlands exemplify how to provide universal access to high-quality health care with shorter wait times, greater availability of medical resources, and often superior outcomes compared to Canada. And importantly, both countries also maintain universal coverage for pharmaceuticals through a regulated—but competitive—market of private insurers. Individuals must pay health insurance premiums and are subject to some cost-sharing (co-payments and/or deductibles). Low-income citizens and those facing high drug costs are protected through premium discounts, cost-sharing exemptions and other public safety nets.
Unfortunately, in Canada the proposed pharmacare programs are setting us up for failure. Specifically, Canadians may experience more limited access to new drugs, poorer health-care outcomes, excess burdens of taxation, and reduced pharmaceutical innovation. While not guaranteed, these outcomes are typical of such policies. As with many public policy proposals, the devil is in the details and the true consequences for Canadian patients remain to be determined.
Again, a national pharmacare plan may result in drug shortages and reduced access, and the potential for worsening health outcomes and suboptimal therapeutic substitution. Policymakers should have answers for how they’ll address and avoid these problems. Further, they should calculate and transparently present the true tax burden to the Canadian public. Arguably, a national drug plan would require significant administrative coordination across provinces, adding complexity and expense to the existing system.
Finally, vulnerable Canadians already benefit from provincial coverage for pharmaceuticals across Canada. Those that slip through the cracks shough be identified and given assistance. Instead, evidence suggests that a national plan will only expand coverage to those who can already afford private coverage while increasing bureaucracy and complicating delivery of services, without adding value for patients. Canada must cautiously approach any policy change that puts patients, innovation and innovative industries at risk. A national pharmacare program is no exception.
Subscribe to the Fraser Institute
Get the latest news from the Fraser Institute on the latest research studies, news and events.