The provincial government has finally decided to cut back on one small area of health spending, by significantly increasing user fees for Pharmacare. Although many British Columbians are under the misapprehension that the Liberal government cut back health care spending, spending increased the day it took over from the NDP.

The new, means tested, “Fair Pharmacare” is fair to a fault. Even the richest British Columbian’s expenses will be capped at 4 percent of income, and the average senior will be capped at 1.25 percent of income. BC Pharmacare now looks much more like the relatively successful Manitoba Pharmacare, which imposed an income test in the mid 1990s.

Manitoba capped its beneficiaries’ pharmaceutical spending at 2 percent or 3 percent of income. Even when Manitoba’s results are adjusted downward for the fact that it had relatively slower growth in the population of seniors, Manitoba Pharmacare’s costs increased 12 percent less than BC’s, in inflation adjusted terms, from 1996 through 2001, and private pharmaceutical spending 20 percent less. However, there have not been any reported negative health outcomes from this relatively slow growth.

British Columbia’s adoption of a means test is long overdue. Until now, the province tried to manage drug costs by virtually fully subsidizing less expensive drugs in many classes, while restricting subsidies to newer, more expensive drugs through the Reference Drug Program. This applied to five categories covering cardiovascular diseases, arthritis, and heartburn. Except for cases where Pharmacare gave special permission for more expensive drugs, even the poorest patients had to pay the full difference between the higher and lower priced drugs. In the years 1996 through 2001, per capita prescription costs in BC Pharmacare rose 30 percent more than in provincial and territorial drug benefit plans in the rest of the country. As well, private pharmaceutical spending increased 18 percent faster in BC.

How did British Columbia get it wrong at the same time as Manitoba got it right? Manitoba’s approach allocated Pharmacare subsidies on the basis of need: those with lower incomes received larger benefits. However, everyone except welfare recipients had to pay a noticeable share of their prescription costs. On the other hand, Manitoba minimized interference with the drugs that patients used, leaving that to physicians and patients to decide.

British Columbia, on the other hand, gave many drugs to all seniors almost for free until the Liberals took power. The annual deductible was $200, which the Liberals raised to $275 (75 cents a day), in the beginning of 2002. Furthermore, until 2002, seniors only paid the dispensing fee (about $7) for their prescriptions, not the full cost, until they used up their deductibles. This meant that they bought many hundreds of dollars of drugs before hitting the $200 deductible.

Because this provided an extremely large subsidy to many who did not need it, Pharmacare reduced the benefit by restricting subsidies for more expensive cardiovascular, arthritis, and gastro-intestinal drugs, notwithstanding patients’ financial situation. Pharmacare rationalized this by erroneously stating that all drugs in a class were effectively the same, differing only in price.

Therefore, many patients had to spend more of their own money on the more expensive drugs. For the cardiovascular classes, private spending doubled or quadrupled. Nevertheless, the Reference Drug Program biased patients against more expensive drugs, and did nothing to manage overuse of less expensive ones.

Nor were the negative consequences only felt on the budget. Because some patients chose to switch to cheaper drugs, there was likely an increase in operations such as angioplasty and coronary artery bypass grafts. To date, research on the effects of the program has not examined this shift from pharmaceutical to other costs.

So, “Fair Pharmacare” is a fair first step, and should put BC Pharmacare on a more financially stable course. However, the government has more to do. It has yet to abolish the Reference Pricing Program, a program that has failed to contain costs and likely harmed patients’ health.

As well, the government has increased user fees only for prescription drugs, while failing to implement the same useful tool for managing other costs. The previous NDP government had budgeted $9.2 billion for health for the year ending March 2002. According to the recent budget, it will be $10.2 billion for the year ending March 2003, and spending will go up more thanks to new federal health transfers.

What’s good for Pharmacare is good for the rest of the health care system.The next step to sustainability is to expand means tested user fees to thedoctors’ offices and hospitals.