Recent generic drug reforms in Ontario and British Columbia have proven that political will, economic analysis, and common sense can go a long way toward making medication more affordable and accessible to more Canadians.
A recent report, titled The Economic Case for Universal Pharmacare, takes a few steps forward in arguing that Canada needs a Universal Pharmacare Plan. The authors argue that a public drug plan is not only integral to public health care but can also prove cost-effective to tax payers. Authors Marc-André Gagnon and Guillaume Hébert write that “rational implementation of universal Pharmacare, with first-dollar coverage for all prescription drugs, would not only make access to medicines more equitable in Canada and improve health outcomes, but also generate savings for all Canadians of [approximately] $10.7 billion in prescription drugs. Canadians cannot afford not to have universal Pharmacare.”
Status of Drug Costs in Canad
The report reveals that only 45% of total drug expenditures in Canada come from public spending, which is well below the average of other OECD countries. In fact, Canada is second among OECD countries, just behind the United States, in the participation of private insurers in drug expenditures.
According to a survey by Statistics Canada, 24% of Canadians have no drug coverage, and 8 percent of Canadians claim they did not fill a prescription in the last 12 months due to the costs of drugs. Making matters worse, the report adds, is that drug costs in Canada have increased on average by 10.5% a year between 1985 and 2008.
The rise in drug costs in Canada has meant more spending by Canadians through their taxes, private insurance premiums, or from out-of-pocket expenses. Governments, the report argues, “are trying to reduce the burden of drug costs on public finances by forcing their citizens to have more private coverage and to spend more out-of-pocket. However, the willingness to reduce public coverage leads to higher expenses for the entire population, whether through the promotion of private insurance plans or the transfer of costs to out-of-pocket expenditures.” As a result, out-of-pocket expenses on prescription drugs total $4.6 billion dollars a year in Canada.
Why are Drugs more Expensive In Canada
The report suggests that a number of industrial practices are at the root of Canada’s rising drug costs. For one, Quebec negotiated a 15-year exclusivity protection deal with segments of the pharmaceutical industry. This exclusivity deal, according to the report, suggests that the province benefits from industry investment. However, patented prescription drug costs, increasingly paid for out-of-pocket or through private insurers, have risen approximately $102 million dollars a year since the deal took effect.
Similarly, the authors contend that “drug policies are inequitable on a provincial scale. The biopharmaceutical industry is concentrated in Ontario, Quebec, and British Columbia. These three provinces received 94% of venture capital in this sector in 2008.” Meanwhile, the poorest provinces, (Newfoundland and Labrador, New Brunswick, and Prince Edward Island), receive little benefit from the pharmaceutical sector, yet these provinces paid the same high prices as the rest of Canada “to promote the country’s pharmaceutical industry established in the wealthier provinces.” In effect, “the poorest provinces pay a share of the development costs of the rich provinces without getting anything in return.”
Aggregate drug costs escalate as governments defer to private insurers. Private insurers pay more and charge consumers more than a public plan would. In fact, the report states that private plans pay $383 million more a year in higher prices for generics relative to what the public plans pay. In effect, policies designed to unburden public budgets from the cost of prescription drugs result in higher costs to the individual consumer. The report states the public system also eventually pays in other ways.