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HESA Committee Report

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Pharmacare Now; Prescription Drug Coverage for all Canadians

Summary

There remain many unanswered questions following the Standing Committee on Health’s (HESA) study of pharmacare that still need to be addressed. Having taken over two years, and having heard the testimony of 99 witnesses, the HESA report entitled Pharmacare Now; Prescription Drug Coverage for all Canadians, represents both the findings and the recommendations of the majority of committee members. However, having not yet consulted with the provinces and territories, who have jurisdiction to deliver this service, questions still remain about implementation and discrepancies in costing figures.

Firstly, there were many unknown or roughly estimated costs in the Parliamentary Budget Officer’s (PBO) costing report. Varying from out-of-date data to uncertainties in the area of jurisdictions, many aspects of the PBO’s report need to be further researched and resourced. For example, the PBO report assumes 2 % of people have no coverage at all based on 2002 data, whereas more recent data suggests this figure is closer to 10 %. This would add increased cost to the PBO estimate.  The PBO report also assumes a total cost for prescriptions in Canada which differs from other, more recent, figures. Therefore, the actual cost of implementing pharmacare could be significantly more costly than what has been presented to the Committee.

Secondly, according to the ranking of OECD countries, Canada currently has the highest per capita prescription drug cost in the world.[1]  Before adopting a national pharmacare program, per capita drug costs must be addressed in order to reduce costs. A plan to pay for the program must be developed ahead of any implementation. This could include measures such as volume purchase leveraging, conversion to generic brands, reducing over prescription, and conversion of prescription medications to over the counter.

Thirdly, the impact of a national pharmacare program raises many questions about the impacts of such a program on private insurance companies; in terms of jobs, the willingness of Canadians who currently enjoy private coverage that is superior to the public system to change, and the jurisdiction of provinces and territories in this area. Currently, 88 % of Canadians have prescription medication coverage either through private or public insurance plans.[2]

Cost Uncertainty

The PBO report considered 2% of Canadians as not having any form of coverage, and costed their plan accordingly; that information was obtained from 2002 data.[3] More recent reports from Steve Morgan show this figure to be nearly 10% of Canadians lacking any form of coverage and 10% of Canadians having gaps in coverage.[4]  In addition to this, the total amount spent for prescription drugs annually, according to the PBO’s report, was 24 billion.[5] However, CIHI has reported this number to be 39.8 billion.[6] The discrepancies in these figures further highlight the need for further study.

The PBO report indicates that the current public share of prescription drug expenditures is $13.1 Billion plus the $10.7 Billion described as being from private sources.[7] The argument is being made is that, for an additional net $5 Billion, a national pharmacare program could be realized.  How this shall be paid for has not been determined, other than a discussion about increasing taxes, which the Conservatives oppose.

The PBO report also estimated that by leveraging volume purchasing of medication across provinces, $4 Billion in savings could be realized.[8] However, the Canadian Generic Pharmaceutical Association (CGPA) said that this is not the case due to pricing established in a 2014 agreement with the pan-Canadian Pharmaceutical Alliance (P-CPA).[9] A national pharmacare plan is not required for provinces and territories to initiate bulk purchasing.

More investigation is required to substantiate why Canada spends such a higher monetary amount on prescription drugs than other OECD countries- $USD713 per capita compared to the average of $USD515 in other countries.[10] Some smaller countries, such as Denmark spend as little as $USD240 per capita.[11] Identifying plans to address these cost discrepancies could make a pharmacare program more affordable as well as more realistic.

Similarly, recommendation 16 of the committee’s report recommends the development of a national data system on the utilization of prescription pharmaceuticals in Canada to support the management of such medications in Canada. We are strongly opposed to this recommendation as this government has not demonstrated any ability to execute national data management programs, such as Phoenix, and no costing has been done to this effect.

Impact on Private Insurance

Private insurance makes up $10.7 Billion of the $28.5 billion spent on prescription drugs each year.[12] If a national pharmacare program were to be adopted, this part of the private insurance sector would most likely be eliminated. An understanding of the anticipated industry job losses is important, as is an understanding of whether these jobs would be transferrable to whatever new entity would be responsible for the administration of such a program.  

Another important consideration is the willingness of Canadians who are currently covered by private insurance plans to transition to a mandatory public program, which in most cases, will provide less coverage than they are currently receiving. It is anticipated that many of the unions who have fought for what are considered excellent coverage plans may be unwilling to convert to a public plan, and that there may be court challenges on that front. The shifting of coverage from private plans to a public plan is not fully understood and more needs to be done to inform the public of any proposed changes.

Jurisdiction of the provinces

One of the common areas of discussion in any national pharmacare plan will be the role of the provinces and territories as well as jurisdictional limitations. Today, the provinces and territories have jurisdiction over prescription drug coverage in their respective regions. As such, provinces and territories currently determine their formulary, their eligibility criteria and their programs and procedures surrounding exceptional drugs. For the federal government to set a national formulary, significant negotiating would be required, and the provinces would have the right to refuse adherence.

There will also be discussion about who pays to move those currently covered privately to provincial and territorial plans. The recommendation from the government heard at committee would be a 50/50 split, or a 75/25 split, between the federal and provincial/territorial governments. However, it is likely that many provinces and territories will call on the federal government to cover the entirety of the costs, thus making it even more important to understand what the true costs of this program will be.

Alternatives to a National Pharmacare

Although pharmacare has been the focus of the committee’s study and report, there already exists a variety of means by which to improve prescription drug access in Canada.

The majority of witnesses that appeared before the Committee agreed that there is indeed a gap in prescription drug coverage in Canada, as well as discrepancy in prescription drug coverage between varying federal, provincial, territorial and private plans. However, not all witnesses were in agreement that a national pharmacare program was the best way forward. Many witnesses expressed uncertainty about the extent and nature of the gap of those covered, due to the limited, dated, and often conflicting data being cited. Mr. Neil Palmer, President and Principal Consultant for PDCI Market Access, states that more data regarding the extent of these coverage gaps is necessary before being able to responsibly move forward which such a program.[13] Varying program options brought forward at the Committee included; addressing current gaps through the expansion of existing provincial or territorial programs, creating a targeted program to address Canadians currently not covered, or an all-encompassing pharmacare program.

One option of interest could be the cost saving measures that would result from transferring current Canadian prescription medications that have been over the counter in the United States and the United Kingdom for more than a decade over-the-counter products in Canada. The Consumer Products Association provided the Committee with information that this change would save billions of dollars in prescription drug costs; moving only the top three relevant prescriptions to over the counter would save $1 Billion.[14]

These savings, along with any savings that could be realized from generic price leveraging, volume leveraging, or from better drug selection (refer to the case of medications for Hepatitis C, and diabetes, in which drugs are prescribed which are 5-20 times higher in cost than their alternatives), could be applied to find the funds needed to ensure all Canadians have coverage.

Respectfully submitted,


[1] CIHI, Information Sheet: Drug Spending at a Glance, 2017. P. 1

[2] Office of the Parliamentary Budget Officer (PBO), Federal Cost of a National Pharmacare Program, 28 September   2017, p.27

[3] PBO, Federal Cost of a National Pharmacare Program, 28 September 2017, p.27

[4] Steven G. Morgan et. al, “Estimated cost of universal public coverage of prescription drugs in Canada,” Canadian Medical Association Journal, 16 March 2015.  

[5] PBO, Federal Cost of a National Pharmacare Program, 28 September 2017, p.33

[6] CIHI, Information Sheet: Drug Spending at a Glance, 2017. P. 1

[7] PBO, Federal Cost of a National Pharmacare Program, 28 September 2017, p.33

[8] Ibid, p.50

[9] Emily Haws. “Pharmacare Not Really the Answer to Lowering Drug Prices, Say Industry Associations.” The Hill Times, 17 Nov. 2017. https://www.hilltimes.com/2017/11/15/pharmacare-not-really-answer-say-industry-associations-despite-academic-saying-otherwise/125520

[10] Ibid

[11]Ibid

[12] PBO, Federal Cost of a National Pharmacare Program, 28 September 2017, p.33

[13] HESA, Evidence, 2May 2016 (W. Neil Palmer, President and Principal Consultant, PCDI Market Access).

[14] Consumer Health Products – The Conference Board of Canada. 3 November 2017, Value of Consumer Health Products, p.iii