Leading Edge / Summer 2015
Is It Time for a Universal Drug Plan?

Canadians could save billions through a nationwide plan to cover prescription drugs for all citizens


Photo: iStock
 

Most Canadians have come to think  very highly of their universal health-care system since it was established nationwide almost 50 years ago. But for all its benefits, it doesn’t cover every health-related cost: medications outside hospital, for example, are exempt. Why? The commonly cited reason is that they would be too costly to include. But a study involving U of T researchers suggests a nationwide “pharmacare” program could save Canadians billions of dollars, without costing governments much more, if anything.

“In many of the scenarios that we modelled, universal pharmacare was cost-saving or cost-neutral for governments. This goes against current thinking that a universal program will cost a lot more,” says Dr. Danielle Martin, one of the authors of the study, published in the Canadian Medical Association Journal.

Canada is the only developed country with universal health insurance that does not also offer universal prescription drug coverage, explains Martin, a professor in the depart- ment of family and community medicine and vice-president of medical affairs and health systems solutions at Women’s College Hospital.

The study, led by University of British Columbia researcher Steve Morgan and co-authored by Martin, modelled costs based on data describing $22.3 billion worth of retail prescription drug purchases in the fiscal year 2012-13. The researchers created three scenarios for a universal public drug plan: best- and worst-case, and a “base” scenario, which is the expected outcome.

They found that most prescriptions are already paid for by government, through tax revenues, with $9.7 billion spent directly on public drug plans and $2.4 billion spent on private drug plans for public-sector employees. Private-sector spending on private insurance plans currently accounts for $5.7 billion, and uninsured patients pay $4.5 billion out-of-pocket for prescriptions they fill.

If Canada could negotiate lower prices for drugs (comparable to the prices researchers found in several peer countries) and raise the rate of generic drug use to that seen in some provincial drug plans, a universal public drug plan would reduce total spending on prescription drugs in Canada by $7.3 billion per year, or 32 per cent, according to the study.

These cost savings would be due to economies of scale in drug price negotiations and better product selection, taking into account a small increase in costs from greater use by people who were uninsured. These savings, the authors said, would be beneficial in a multitude of ways. For instance, Canadian governments could spend more on health sciences and on research into new drugs, an area in which the country currently invests little. “Better access to medically necessary prescription drugs and improved quality of care go hand in hand with these significant cost savings,” says Martin.

Drug costs are rising quickly, but these costs are being driven up mostly by high prices for new classes of drugs, such as biologics (drugs synthesized from biological sources) and cancer therapies. Martin notes that a nationwide, universal pharmacare program would position Canada to negotiate better prices in the future for these expensive treatments.

“While we shouldn’t sugar-coat the pressures that will be put on any payer for drugs in the future, if more and more expensive drugs come on to the market,” she says, “there’s no doubt that the best way to be ready and to respond is going to be under a single-payer program.”


Reader Comments

# 1
Posted by B.L. van Ginkel on June 20th, 2015 @ 6:04 pm

It would be useful to end this story with a proposed solution.

# 2
Posted by Larry Cimino BA1973 on June 23rd, 2015 @ 9:51 pm

There are many more ways that a universal drug plan might save money beyond demanding use of older generic drugs and relying on “economies of scale.” In most cases, pharmaceutical therapy is the most cost effective way to treat a medical disorder – especially when the drugs are taken as prescribed and for the appropriate duration.

You should not be comparing discounted generic drugs to branded drugs in this scenario, but rather to the health-system-wide interventions for which drug therapy is often a low-cost alternative – even when employing newer and costlier drug therapies. Limiting access to the most appropriate drug choices has proven repeatedly to be a bad economic decision because it increases health expenditures in other areas. And limiting the appropriate usage of innovative pharmacotherapy could cripple the research drug industry that has continued to deliver better treatments and cures for many dreadful diseases.

As our population ages, we look forward to the promises of better treatments for cancer, dementia, cardiovascular disease and many other diseases that affect the quality of life in those later years. By looking at the inputs across the entire health system, access to pharmaceutical care is a no-brainer, not only for reducing health-care spending but, more importantly, for improving health outcomes for all Canadians.

# 3
Posted by Betty Navratil on June 25th, 2015 @ 11:31 am

This universal drug plan for Canadians is a good idea (even though not all Canadians need to use it).

# 4
Posted by Scott Anderson on July 3rd, 2015 @ 11:32 am

I wonder if the studies quoted here included an amount to cover the pent-up demand that would be released by a universal, tax-funded system. This would include all the times when an uncovered patient says “no” to a doctor’s “we could try this”; the times when a patient doesn’t ask for a drug that they would have to pay for; and the times when a doctor chooses a less expensive alternative.

Marc Grushcow
BASc 1970
Toronto

# 5
Posted by Scott Anderson on July 3rd, 2015 @ 11:45 am

Thanks for your questions regarding our study on the economics of universal pharmacare in Canada.

We did assume an increase in demand for medications, and based our models on the increased demand that was seen in Quebec when that province moved to universal coverage. That increase in demand is taken into account in our calculations around the total cost of a universal plan.

In addition to the potential reasons you cite for an increase in demand, probably the biggest reason for increased demand is that people who previously had no drug coverage and could not afford to take their medicines would do so.

It is rare that Canadian physicians prescribe less expensive medications if those medications would be inappropriate for the treatment of the patient (not that it never happens); in instances where the less expensive medication would be as good or better than the more expensive alternative, it should be the less expensive option that would be covered under a universal public plan. In other words, one of the big potential benefits of universal public pharmacare is that the formulary, or list of drugs covered, would be based on best evidence. The options covered would be those that are both effective and cost effective – not an “everything for everyone” approach.

I hope that helps to answer your question.

Danielle Martin, MD, CCFP, MPP
Vice President, Medical Affairs and Health System Solutions
Women’s College Hospital

# 6
Posted by AjuahNkohkwo PharmD2003 on September 29th, 2015 @ 9:26 pm

l look forward meeting you to congratulate you for this marvelous idea. It could change the life of many Canadians.

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