National pharmacare plan could save businesses billions

Unclear how Trudeau would pay for program that would cover prescription drug costs

anita huberman - cc
Surrey Board of Trade CEO Anita Huberman stands in front of a large photo of Surrey | Chung Chow

The federal election that have left the Liberals with a minority government and the NDP holding the balance of power could result in the government creating a national pharmacare program that could save businesses $14 billion annually.

The Liberals and NDP each promised to implement a national plan that would cover the cost of approved prescription drugs for Canadians regardless of income. That would eliminate much of the cost of health-care plans that business owners pay to cover employees.

It is unclear how long the minority Liberal government will survive, but with its coffers relatively empty, the NDP is unlikely to want to fight another election any time soon.

The Liberals, therefore, are likely to move ahead with their plan and start negotiations with provinces. Health care is a provincial jurisdiction, but unanimity among provinces is not required for the federal government to act. However, Ottawa will likely make opting into a pharmacare program extremely advantageous for provinces.

Negotiations cannot come soon enough for business advocates such as Surrey Board of Trade CEO Anita Huberman.

She told Business in Vancouver that her organization sent a survey six years ago to its approximately 6,000 members. About a quarter of business owners returned the surveys, and Huberman said the response was “unanimous” support for a national program.

The most compelling reason to support the plan is that it is cost effective, she said.

“Our buying power will ensure that we arrive at the best deal possible for Canadians.”

The current pharmacare system includes more than 100 provincial programs and thousands of private drug-coverage plans. Each negotiates separately for the best price on medications.

If buying were consolidated, Huberman said, the resulting bulk purchases should yield the best possible prices.

University of British Columbia Faculty of Medicine Prof. Steve Morgan, who has extensively studied pharmacare, agreed with Huberman and suggested that buying pharmaceuticals in bulk could save Canadians $4 billion per year.

He expects the Liberals will proceed with the plan the party promised during the election. It would provide an initial $3.5 billion investment in the 2021-22 fiscal year. Subsequent annual investments would ramp up to $15.3 billion by the 2026-27 fiscal year.

The NDP, in contrast, promised what Morgan described as a “really big-bang kind of change,” where the party would provide approximately $10 billion in the 2020-21 fiscal year so the program could be fully implemented in 2021.

Neither party provided funding details for their plans.

Morgan, who advised the previous Liberal government’s advisory council on national pharmacare, recommended that, instead of earmarking a new or increased tax to finance the plan, tax hikes be broadly based and apply to businesses and individuals.

“We suggested a blended increase in personal and corporate income taxes, which are small incremental increases on both households and businesses,” he said. “That shares what you would expect to be the net gain of the savings [by bulk-buying pharmaceuticals]. A little bit will be saved by employers, and obviously a fair amount is saved by households.”

Not everyone is onside with creating a national pharmacare plan.

Canadian Health Policy Institute CEO Brett Skinner said he doubts that bulk buying pharmaceuticals will yield savings because current public pharmacare plans in Canada (such as B.C.’s Fair Pharmacare program) already get better prices on drugs because private-sector plans exist.

“They wouldn’t be able to negotiate deeper discounts than they can already obtain,” he told BIV.

Skinner added that higher prices paid by private plans help enable public plans to mandate a 25% discount on the regulated list price for all new drugs.

Without that compensation from private plans, drug companies might not launch some drugs in Canada if a public plan required that those drugs get the same 25% discount.

Skinner also fears that a single public plan would cover far fewer drugs and be slower to cover new drugs than private plans.

His research found that of the 491 new drugs that Health Canada approved between 2009 and 2018, 87% (427) were covered by at least one private plan, while only 47% (229 drugs) were covered by at least one public plan, as of May 30.

Skinner found that the average wait for a first formulary listing for new drugs was 152 days for private plans and 473 for public plans.

“We’re talking about a major difference in access,” he said. “Private plans cover 12,000 or more drugs. Public plans carry less than one-third of that.”

Skinner favoured the Conservatives’ pharmacare plan promised during the election: to fill in gaps and provide more funding to provincial plans to expand coverage.

Provincial plans tend to cover drug costs for low-income residents who spend more than 3% of their annual income, or $390, on medications. Skinner said the sliding scale then tops out with the programs covering annual drug costs in excess of $1,224, or up to 0.4% of income, for those in higher income brackets.

“[Creating a national pharmacare program] is completely unfeasible when you consider the disruption to the 23.2 million Canadians who currently have drug benefits – to ask them to accept inferior coverage that will be offered under a universal, mandatory public plan.”•

gkorstrom@biv.com

@GlenKorstrom