In March 2018, the Liberal government produced a federal budget that included a proposal for a national pharmacare program, a coverage that has long been discussed since its first recommendation in the 1964 Royal Commission on Health Services. While Canada currently has universal healthcare coverage, it is the only Organization for Economic Co-operation and Development (OECD) country that does not yet have a universal plan covering prescription medicines. At the same time, drug prices in Canada are among the highest in the world, just behind the United States (US) and Switzerland. In total, $34 billion were spent on prescription drugs in Canada in 2017. A recent study led by University of British Columbia researchers identified that 5.5% of Canadians cannot afford one or more of their prescription drugs, and over 700,000 Canadians chose to save money normally spent on food to be able to pay for their prescriptions. How is it that in Canada, a country that takes pride in ensuring that its citizens have access to care, nearly 1 out of 12 people relying on prescription drugs cannot afford them?
Medicare without pharmacare
Canada’s universal healthcare, also known as medicare, covers basic healthcare needs, including hospital and physicians’ visits. It functions as an insurance plan, which means that care is delivered privately but paid for by the government using public money. However, services like dental, vision, medical devices, and medicines outside of hospitals are not covered. Thus, most Canadians rely on one or more of the 100,000 private insurance plans, often provided through their employer, to fill in the gaps. This contrasts with the National Health Services (NHS) in the United Kingdom (UK), for example, which provides both healthcare and pharmacare. The NHS simultaneously introduced both coverages after World War II whereas, in Canada, healthcare coverage was established incrementally based on the identified needs and financial burden of Canadians.
The first piece of modern Canadian medicare came in the form of hospital care coverage introduced in 1957, followed by general medical care nine years later. At the time, pharmaceutical coverage was not prioritized nor seen as urgent. During the early days of medicare, fewer drugs were on the market and spending was comparatively low. Provinces formed individual plans to fund medicines for vulnerable populations in response to the lack of a unified national program. In the following decades, pharmaceutical spending increased to surpass spending on physicians’ services. In the 1990s, the implementation of a national pharmacare program was discussed again; however, it was considered financially infeasible and logistically complicated due to the provinces’ own pharmacare systems. To date, provinces continue to cover certain prescription medicines based on identified needs of their residents. Quebec is currently the only province which mandates enrollment in a public drug plan if someone is not already enrolled in a private plan. More recently in Ontario, OHIP+ was introduced by the province’s Liberal government in 2018. OHIP+ is an extension of the Ontario Health Insurance Plan (OHIP) that covers over 4,400 prescription medicines for Ontario residents 24 years old or younger. With the recent change in the Ontario government, OHIP+ will remain, but coverage will not be extended to individuals already covered by a private plan. Federal legislation supporting a national pharmacare program would be essential in ensuring that coverage is not interrupted and continues to be
available for all Canadians.
Public funding of pharmaceuticals
Provinces and territories manage the delivery of healthcare to their residents; thus, they also have the power to determine which medicines are publicly funded. This process involves additional steps in negotiating prices and is largely undertaken by each province or territory individually. First, new pharmaceuticals need to be approved by Health Canada. Once this has been achieved, they are evaluated at the federal level by the Common Drug Review to determine eligibility for reimbursement by publicly funded pharmacare programs. Recommendations are passed on to the administrations of each pharmacare plan. The final decisions are made by the individual drug plans based on the plan’s budget, mandate, and identified priorities. As such, the negotiation of drug costs with pharmaceutical companies is handled by each province and territory based on the cost recommendation made by the Patented Medicines Pricing Review Board (PMPRB). Combining bargaining and joint purchasing power of the territories, provinces, and federal government may drive down the price of drugs purchased from pharmaceutical companies.
Currently, a system exists to harness negotiating and purchasing powers at the national level. An initiative of Canada’s premiers, the pan-Canadian Pharmaceutical Alliance (pCPA), aims to “increase access to drug treatment options”, “achieve lower drug costs and consistent pricing”, and “improve consistency of coverage criteria across Canada”. By using joint purchasing power, lower prices are negotiated for select brand name drugs, the medicines originally approved for use with either a current or expired patent. Efforts targeting generic drugs, which are drugs with the same active ingredient as an off-patent brand name drug, use both joint purchasing power and matching to the international market to decrease their costs to 18% or lower of corresponding brand name drugs. As of April 2016, 95 joint negotiations of brand name drug prices had been completed, and the costs of 18 generics lowered, resulting in an annual savings of $1.28 billion nationwide in 2017. Despite this success, the pCPA has only negotiated a very limited number of brand name and generic medicines compared to the entirety of medicines available on the Canadian market (roughly 12,000). A national pharmacare program may be better equipped at addressing cost negotiations on a larger scale.
The future of pharmacare
The national pharmacare program proposed in the 2018 budget is currently only an idea with an external advisory council spearheaded by Dr. Eric Hoskins, who oversaw the formation of the OHIP+ program as Ontario’s Health Minister, established to study and advise on how pharmacare may be implemented in a way that benefits all Canadians while still being affordable. Currently, no actual monetary budget has been defined, but a previous study of this proposal was estimated by the New Democratic Party (NDP) of Canada to cost up to $19.3 billion while saving Canadians $4.2 billion in out-of-pocket expenditures. Important questions remain to be addressed in determining how prescription medicines will be made more accessible and affordable to all Canadians. What form of coverage will be implemented? Who will be covered, and which medicines will be included? Over the next year, the council will not only extensively research but also consult with all stakeholders, including provincial, territorial, and Indigenous leaders, as well as Canadian residents.
BONUS: Why are Drugs so Expensive?
Canada’s drug prices are among the highest in the world. In part, this goes back to the Patent Act, which was passed in 1987 under the government of Brian Mulroney. Pharmaceutical companies were granted 20 years of patent protection on newly developed drugs, preventing competition. The hope was that in exchange, companies would be incentivized to invest more of their revenue in research and development (R&D) in Canada to a promised 10%. Concomitantly, in an effort to regulate pricing of patented drugs, the PMPRB was formed. Drug pricing as such was based on the median of seven countries, including France, Germany, Italy, and the US, where companies already invested 20% of their revenue in R&D. Prices suggested by the PMPRB are meant as maximum allowable costs, influencing the sale of drugs from pharmaceutical companies to hospitals, pharmacies, and wholesale; therefore, these recommendations do not directly influence the cost carried by the consumer. At the same time, the PMPRB evaluates whether marketed drugs exceed the aspired price, and whether pharmaceutical companies are fulfilling their investment promise. A lack of compliance results in financial repercussions paid to the federal government, and adjustment of the drug’s cost. Problems are evident with this system, particularly when taking into consideration that drug prices in the US are 250% higher than in Canada, thus skewing Canadian pricing, and that pharmaceutical R&D spending has not significantly changed from its 1987 percentage of roughly 5%. This pricing affects both public pharmacare plans, and private consumers who shoulder the burden of high prescription costs when left without additional insurance. Recent changes to patent regulation in Canada aims to support the PMPRB in lowering patent drug costs.
- Boothe, K. Pharmaceutical Programs and Social Policy Development: Comparing Canada, Australia and the UK. (2010)
- Canada Health Act http://laws-lois.justice.gc.ca/eng/acts/C-6/index.html
- Canada Healthcare System https://www.canada.ca/en/health-canada/services/canada-health-care-system.html#a2
- Common Drug Review https://www.cadth.ca/about-cadth/what-we-do/products-services/cdr
- Government of Canada. Towards Implementation of National Pharmacare Discussion Paper. (June 2018)
- Law, M. et al. The consequences of patient charges for prescription drugs in Canada: a cross-sectional survey. CMAJ Open (2018)
- Morgan, S.G. and Daw, J.R. Canadian Pharmacare: Looking back, looking forward. Health Policy (2012)
- NHS www.nhs.uk
- NDP Universal Pharmacare http://www.ndp.ca/news/universal-pharmacare
- Office of the Parliamentary Budget Officer. Federal Cost of a National Pharmacare Program. (2017)
- OHIP+ Program https://www.ontario.ca/page/learn-about-ohip-plus
- Patent Act http://laws-lois.justice.gc.ca/eng/acts/P-4/
- pCPA http://www.canadaspremiers.ca/pan-ca
- PMPRB http://www.pmprb-cepmb.gc.ca/view.asp?ccid=492
- PMPRB 2016 Annual Report http://www.pmprb-cepmb.gc.ca/view.asp?ccid=1334
- Procedure for the Common Drug Review (August 2014)
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