Sustainable pharmacare requires a business-like approach

Out of control spending on Ontario's drug plan could undermine efforts to provide coverage across Canada

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By Colleen M. Flood
Director
and Bryan Thomas
Senior Research Fellow
Centre for Health Law Policy and Ethics
University of Ottawa

Ontario’s proposed pharmacare plan for those aged 25 and under is a welcome start that hopefully leads to universal drug coverage for all Ontarians.

The case for universal coverage is overwhelming.

It’s scandalous that in 2017, many Canadians die for lack of affordable access to basic drugs like insulin.  Increasingly, even those of us with private health insurance coverage face limits on what we can claim, so that when we need it the most, our insurance doesn’t protect us. Even those covered by other publicly-funded drug programs, such as the elderly, face increasing co-payments in many provinces.

Colleen Flood

A well-designed pharmacare scheme can deliver huge savings by leveraging the bargaining power of an entire population. Canadians pay some of the highest drug prices in the world under our patchwork drug coverage – employment-based private insurance for the majority of Canadians, combined with public coverage for seniors and low-income people.

New Zealand has tasked an agency at arms-length from government, PHARMAC, with purchasing drugs for its entire population. The savings are staggering. An annual prescription for the common blood pressure drug Amlodipine costs New Zealanders about $10 a year, as compared to about $130 for patients in Canada.

The aggregate savings are significant, with New Zealand spending only US$297 per capita on drugs annually, to Canada’s $771, according to the most recent Organization for Economic Co-operation and Development data. With prescription drug costs now nearly matching spending on physicians in Canada, this is a low-hanging fruit for achieving significant cost savings for our strained health-care budgets.

Bryan Thomas

But if, in implementing its recently-announced plan, the Ontario government permits spending to gallop out of control, this will undermine efforts to provide coverage to all those in Ontario and across Canada. Out-of-control spending on drugs could mean there are precious fewer dollars to spend on other important things, like reducing wait times or providing long-term care beds.

The key to success is to adopt a business-like, hard-nosed approach to price negotiations with drug companies, similar to that in New Zealand. We first need to move responsibility for buying drugs away from the Ontario Ministry of Health to an arms-length agency. Such an agency would not be swayed as much by short-term politics, requests and petitions by drug companies.

It’s also important that the legislation setting up this agency require it to work within a fixed budget. The budget should be allocated to it each year by the government after calibrating the money it has for different demands within health care. If it doesn’t operate within a fixed budget, our public buyer cannot credibly threaten to walk away from drug companies’ demands for inflated prices, which would be to the detriment of us all.

A fixed budget each year will improve decision-making about which drugs to fund. It would also necessarily require an assessment about the relative benefits of one drug over another in improving overall health. Such an assessment of the evidence would benefit us all.

The public plan must cover the most important and cost-effective drugs for the entire population.

The architects of Canadian medicare stressed from the beginning that public health insurance must grow to include pharmaceuticals. Over the intervening half-century, drugs have come to represent a much larger component of health-care spending, yet little progress has been made towards universal coverage.

If history is any guide, it will be the provinces that break this stasis.

We celebrate Ontario’s move to meaningfully deal with inequitable gaps in access to pharmaceuticals. But a hard-headed business approach is required to make it work.

Colleen M. Flood is professor and director of the University of Ottawa, Centre for Health Law Policy and Ethics. Bryan Thomas is an adjunct professor and senior research fellow at the University of Ottawa Centre for Health Law, Policy and Ethics.

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