Purpose:
Compared to other nations Canadians are vastly overpaying for their drugs and many citizens are unable to afford critical medicine. The purpose of this briefing note is to outline the current state of the pharmaceutical industry in Canada and provide recommendations that would enhance the accessibility and affordability of pharmaceuticals.
Background:
In the 1960s, when universal single-payer healthcare was introduced in Canada, pharmaceuticals played a small role in the healthcare process and consequentially conversations about universal drug coverage were dismissed. However, in the late 1970s, technological advancements in the pharmaceutical industry meant that medication use and prices skyrocketed, making medication an integral part of care. As a response, throughout the 1970s and 1980s, provincial governments began offering limited drug coverage to vulnerable population groups but none were universal or linked to universal healthcare, except for a brief attempt in Saskatchewan. In the meantime, the lack of universal public pharmacare across Canada created a market for private drug coverage. Often provided through employers, private insurance companies also offer drug coverage on an individual basis. This patchwork structure of pharmaceutical coverage poses challenges for accessibility and affordability, which have been exacerbated in recent years with increasing medication demand and prices.
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Since 1985, drug spending has climbed from $2.6 billion to $33.7 billion in 2018 and approximately 1 in 5 Canadians struggle to afford to pay for their medications. Almost 1 million Canadians are forced to cut spending on food and heating to pay for medication and 3 million Canadians forgo necessary medication due to affordability issues. As of 2019 Canadians pay the third most per capita for pharmaceuticals in the world, only behind the US and Switzerland. There are a few reasons for the exorbitant prices but mainly it is due to the lack of unified bargaining. Between 2012 and 2017 Canadians wasted $15 billion on pharmaceuticals. Having reasonable access to pharmaceuticals is a key part of the healthcare process and since 1960 there have been five separate commissions calling for drastic changes to the Canadian structure of drug coverage. Currently, Canada is the only nation that offers universal healthcare but not supplementary universal drug coverage.
Options:
Option 1: Catastrophic Drug Coverage
This model reimburses individuals whose drug costs exceed a certain percentage of their income. Individuals would pay for a portion of their medication, up to a limit set by the government. This system is used by most provinces that offer a partially public program.
Advantages: It is similar to the current structure in many provinces so it would not require a massive initial overhaul. Additionally, it is a progressive model because citizens with lower incomes receive coverage for a greater portion of their pharmaceutical costs. This is also a lower-cost approach to drug coverage than the other two options.
Disadvantages: Determining the deductibles and the cut-off percentages is a complex formula and patients would have to go through multiple levels of bureaucracy to ensure optimal coverage. This model is not used by any other nations and there is not a pathway for success that Canada could follow. Additionally, this model does not fully ameliorate the burden on employers and perpetuates a tiered system that disadvantages individuals without private insurance. It also does not allow for a fully unified bargaining process.
Option 2: Statutory, Multi-Payer Model
Citizens are mandated to purchase an insurance plan that meets price and coverage standards set by the government. This system is currently used in Quebec where residents either receive coverage from a private plan, usually provided by employers, or a public plan which they are required to purchase.
Advantages: Private insurance companies would not be driven out of business and would continue to provide different options for consumers. Additionally, regulations set by the government ensure moderately reasonable prices and a standard offering of drugs.
Disadvantages: This system does not allow for collective bargaining of drug prices, limiting the cost-effectiveness of both the private and public plans. Similar to the model above it also potentially creates a two-tiered system in which citizens who cannot afford a private plan are forced to purchase an inferior structure of coverage and it does not ameliorate the burden on employers.
Option 3: Universal, Single-Payer Model
Working in tandem with the current system of universal healthcare, this model relies on government funding and agencies to provide completely publicly funded pharmaceuticals. Price bargaining is executed by a singular agency that also categorizes drugs by price and effectiveness.
Advantages: Having a singular agency bargaining for the entire country and a unified structure of drug delivery would vastly decrease drug prices. By 2027 Canadians will have saved approximately $5 billion on pharmaceuticals, even taking into account potential costs. Working in tandem with universal healthcare also ensures a simple system with minimal bureaucratic confusion. This model would also alleviate the burden on employers struggling to cover employees thus encouraging economic growth.
Disadvantages: The most expensive of all the systems listed, a universal, single-payer system would cost an initial $6 billion just for implementation. There would also be a yearly expense of nearly $12.3 billion.
Recommendation: Option 3
Based on the options provided, the federal government should choose option 3: the universal, single-payer model. While the most expensive, this option provides the most thorough and efficient delivery of pharmaceuticals. It has the fewest complicating barriers for patients and it alleviates the burden on employers. Politically, this is also the most viable option as well. The current New Democratic Party potentially holds the balance of power and they have stated that implementing a universal single-payer plan is their number one priority. To maintain the confidence of the House, it is advisable to work with the NDP to pass the legislation required to initiate the creation of a pharmacare system that works in tandem with universal healthcare.
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