National drug plan idea filled with false assumptions

A national drug plan may simply end up subsidizing the drug consumption of people who don’t need subsidies

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VANCOUVER, B.C. Aug. 5, 2015/ Troy Media/ – Calls for a government-operated national drug insurance program have been getting louder over the past few months, culminating most recently with premiers from across the country signing a “prescription” for national drug coverage.

While there may indeed be legitimate concerns regarding the affordability of prescription drugs for certain groups, the notion that a national government-run drug plan is the obvious solution is misguided.

Such calls are typically predicated on two false premises.

The first is that low-income individuals and vulnerable groups do not have coverage for prescription drugs. While there isn’t a uniform national drug plan for such groups, there are several individually tailored provincial plans. In fact, a recent review of provincial drug programs reveals that low-income and other vulnerable Canadians already have comprehensive prescription drug insurance coverage.

While the levels of coverage vary by province, lower-income Canadians have access to at least catastrophic insurance for prescription drugs (limiting out-of-pocket costs to a small percentage of income), while those on social assistance have coverage at very low or zero cost.

In provinces where data indicates that certain groups of vulnerable Canadians may be slipping through the cracks, premiers should focus on identifying and supporting those individuals. This would be more productive than passing the buck and calling for a national plan that subsidizes everyone, including those who don’t need financial support.

The second misconception is that Canada runs the only universal health-care system that does not also offer coverage for pharmaceuticals. While several countries with universal health-care systems do indeed provide coverage for pharmaceuticals through government-run programs (such as the United Kingdom and Australia), many others (such as Switzerland and the Netherlands) provide universal access for all health-care services (including pharmaceuticals) through private insurers.

These countries require individuals to pay community-rated premiums, deductibles, and co-payments. Low-income citizens and those exposed to high drug costs receive premium discounts, cost-sharing exemptions, and access to other public safety nets.

Therefore, while it’s true that other universal health-care systems provide coverage for pharmaceuticals, not all of them provide such coverage through national government-run insurance plans. Further, as mentioned previously, provincial governments in Canada already offer coverage for pharmaceuticals – but target such coverage toward individuals who need it most.

Finally, there is the tacit promise that a government-operated national drug insurance program will expand access to pharmaceuticals for all Canadians – without hitting their wallets. But research has shown that government drug plans in Canada generally reimburse fewer and older drugs in comparison to private plans. If that’s any indication of what a national drug plan may look like, middle- and higher-income Canadians would likely be worse off in terms of choice.

The touted cost-savings to government from a national drug plan are based on optimistic assumptions about better bulk purchasing agreements and generic substitution, which may not hold true.

Without specifically identifying what a so-called national drug program will cover and cost, proponents are essentially asking for a blank cheque for an undefined product. Importantly, if lower-income Canadians are already covered by provincial plans, and middle- and higher-income Canadians can access private plans (or pay out of pocket), it begs the question: Who really benefits from the establishment of such a program?

It’s entirely possible that we may simply end up paying more money for fewer choices to primarily subsidize the drug consumption of people who don’t need subsidies.

Bacchus Barua is a senior economist in the Fraser Institute’s Centre for Health Policy Studies.

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