Justin Trudeau has promised, if re-elected, to introduce a national pharmacare program. But some cautionary notes must be sounded.
The recent announcement was light on details but Trudeau cited his government’s advisory council on national pharmacare. In June, the council released its final report recommending Ottawa provide universal coverage for pharmaceuticals through a national formulary – an essential drug list. It would be fully funded by government, with only minor co-payments from patients.
Unfortunately, members of the advisory council, chaired by Dr. Eric Hoskins, seemingly ignored the experiences of other countries.
Government-funded pharmacare programs in the United Kingdom, Australia and New Zealand (often cited as models for Canada to emulate) should serve as a cautionary tale. Depending on which of the report’s 60 recommendations are adopted, several potential issues should worry Canadians.
Reduced access to new drugs
Pharmaceutical companies will likely delay or even withhold certain drugs if the price offered through the government program isn’t satisfactory.
For example, relative to 20 comparable Organization for Economic Co-operation and Development (OECD) countries, New Zealand ranks last for access to innovative medicines. Of all the drugs approved in New Zealand from January 2009 to December 2016, barely 16 percent were added to the public drug formulary.
In the U.K., between 2012 and 2014, 22 new cancer drugs were rejected by the British National Health Service, comprising 61 percent of cancer treatments analyzed over that period.
Reduced pharmaceutical innovation
A national pharmacare program in Canada could halt pharmaceutical innovation, both domestically and internationally.
And it will likely require pharmaceutical companies to cut their prices, essentially institutionalizing price controls through the program. Historically, as the revenues available to finance research and development are reduced, innovation suffers.
Canadians can expect to pay higher taxes to fund national pharmacare.
The advisory council report estimates that public spending will increase by $4.1 billion to cover essential medicines in 2022, increasing further to approximately $15.3 billion by 2027.
Potentially worse health outcomes
Compared to Canada’s, New Zealand’s benefit listing and overall rates for histamine h2-receptor antagonists (which can detect stomach conditions) and recently approved oncology and rare disease drugs were much lower. The resulting health consequences are striking.
Again, relative to Canada, mortality rates for acute myocardial infarction, cerebrovascular disease, chronic obstructive pulmonary disease, musculoskeletal conditions and peptic ulcer in 2011 were more than 30 percent higher in New Zealand.
In the U.K., limited access to certain drugs has contributed to lower survival rates for various cancers, compared to other developed countries. According to a 2015 report, the U.K. scores among the worst of all developed countries for survival rates for the 10 types of cancers listed. In the case of liver and lung cancer, the five-year survival rate is half that observed in Canada.
By contrast, consider the positive lessons to be learned from how Switzerland and the Netherlands ensured universal drug insurance coverage.
Neither country has pursued a government-run insurance scheme. Instead, both provide universal pharmaceutical coverage as a fundamental component of universal health insurance coverage, which is provided through private insurance companies in a competitive (albeit regulated) market.
Both countries also require cost-sharing (including for prescription drugs) through both per-service charges and insurance deductibles.
Studies by the OECD and the Commonwealth Fund find that Canada’s spending on healthcare (as a portion of gross domestic product) was on par with the Netherlands, but the Netherlands has more medical graduates, higher immunization rates, longer life expectancy, lower infant mortality rates, significantly shorter wait times and greater satisfaction with the system.
Switzerland’s spending on healthcare (as a portion of GDP) was 13 percent higher than Canada’s in 2015. For this level of spending, Switzerland has more medical graduates, nursing graduates, acute care beds per capita and dramatically greater satisfaction with the healthcare system.
If the next government – whoever it may be – pushes for national pharmacare, it should heed the lessons from other developed countries.
Canada must cautiously approach any policy change that puts patients, innovation and innovative industries at risk. We should learn from those who took this leap before us.
There are better ways to get this done and policy-makers owe it to Canadians to let the evidence inform the policy.
Kristina Acri is a senior fellow at the Fraser Institute and associate professor of economics at Colorado College.