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Price tag on national pharmacare will dissuade Ottawa

A national pharmacare program could save $4.2-billion a year, according to a new report by the Office of the Parliamentary Budget Officer.

That's good news for Canada's perennially beleaguered and cash-strapped health system – at least in theory.

But the 93-page report is math-heavy and politics-light.

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Picard: Bernie Sanders' Medicare-for-all plan should leave Canadians drooling with envy

Ideas, no matter how well-costed and well-reasoned, rarely result in significant policy change unless they are politically palatable.

In 2015, Canada spent $28.5-billion on prescription drugs, including $13.1-billion (46 per cent) paid by public drug plans, $10.7-billion by private drug plans (37 per cent) and $4.7-billion (17 per cent) paid out of pocket by individuals.

The way prescription drugs are funded is an unholy mess. The PBO estimates that roughly 700,000 Canadians have no drug coverage and another 3.6 million have inadequate coverage – meaning they can't afford their prescription drugs.

Coverage varies wildly depending on where you live, and your employer. The non-system is also bureaucratic: There are 102 public drug-subsidy programs in Canada, and a bunch of private insurers.

In short, it is the antithesis of what medicare is supposed to be: a guarantee that no one is denied care based on their ability to pay.

So, in September of last year, the PBO was tasked (if you will forgive that bureaucratic verb) by the House of Commons Standing Committee on Health to cost out a national single-payer system. In other words, a single entity would be responsible for purchasing all prescription drugs and providing public insurance to all Canadians.

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Coverage was to be based on Quebec's formulary (a list of drugs covered by insurance – and Quebec is the country's most generous), with a $5 co-pay for brand-name drugs, but not generics.

The single most important assumption in this actuarial exercise was that centralized bulk buying would reduce the cost of drugs by 25-per-cent over all. The PBO also assumed that generic substitution would be the norm – meaning brand-name drugs would only be covered if generics are not available.

In the calculations, it was also assumed that, because of lower prices, consumption of prescription drugs would increase, by about 12-per-cent over all.

So, given those parameters, what do the numbers look like?

According to the PBO analysis, total prescription-drug costs would be $24.6-billion currently. With a pharmacare program, that same coverage would cost $20.4-billion. That's where the $4.2-billion in annual savings comes from. Patients would see many benefits. So, too, would employers.

Out-of-pocket drug costs would fall by 90 per cent, and private-insurance premiums, deductibles and co-payments would disappear, replaced by a $5 co-pay on brand-name drugs.

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Insurance companies would be the big losers, as they would lose billions of dollars in business – similar to what happened when hospital insurance was nationalized in the 1950s and medical insurance for physician care in the 60s.

But here's the thing: If you largely eliminate private insurance and out-of-pocket payments, all costs fall on the public treasury.

The PBO estimates that the additional cost to taxpayers would be $7.3-billion a year. (The math is as follows: $13.1-billion in current public spending, plus $7.3-billion equals $20.4-billion.)

That means higher taxes. Or, put more precisely, people will still pay for their drugs, but through a progressive tax system (as with hospital and physician services), rather than a mish-mash of public and private plans.

The real bombshell in this report, however, is stated a little too matter-of-factly: "… The net cost to the federal government would be $19.3-billion … and this cost would grow to $23.7-billion by 2020-2021."

No government in its right mind is going to take on $20-billion a year in additional costs – especially when it involves the federal government absorbing $13-billion in provincial expenses.

Further, in our decentralized health system, where delivery of health services is principally a provincial responsibility, it makes no sense for Ottawa to create a single, national program – even if it does save money.

If Canada is, like most other Western countries, going to embrace pharmacare, it's going to have to be a national program, not a federal one.

The PBO has done its homework well – providing a wealth of data on the financial merits of pharmacare.

But parliamentarians have failed, once again, to advance the implementation of medicare, by ordering up an analysis that is a political non-starter.

Yet, all is not lost. There are about 4.2 billion reasons to get back to the drawing board.

Video: First Nations ink health agreement with Ontario, Ottawa (The Canadian Press)
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About the Author
Public health reporter

André Picard is a health reporter and columnist at The Globe and Mail, where he has been a staff writer since 1987. He is also the author of three bestselling books.André has received much acclaim for his writing. More

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