Pharmacare is the wrong solution at the wrong time

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Appeared in the National Post

Last week, to great fanfare and much media attention across the country, the Canadian Medical Association Journal announced the publication of a new study trumpeting the great benefits Canada would accrue by going ahead with national government funded pharmaceutical drug coverage. Dubbed “Pharmacare” by its proponents, the study’s authors claimed that such a plan would save Canadians approximately $7 billion per year in drug costs, with little to no tax increases, and would greatly improve the health of Canadians, by providing drugs to the 10% of us that currently cannot afford to pay for prescribed medications.

On the surface of it, such claims sound like a win-win situation – more coverage for less money, with better health outcomes. But on closer inspection, the CMAJ study makes some highly dangerous assumptions, and ignores the potential of Pharmacare to expose Canadians to a financial sinkhole that could further push our already strained health care system towards collapse.

The study’s authors falsely make the claim that Canada is the only industrialized country with a universal health care system that does not provide national drug coverage to its citizens. However, in actuality, Canada is the only country in the industrialized world with universal health care that does not have a second, private tier of health care, and one of only three nations in the industrialized world that does not require its citizens to pay some form of user fee for medical services. The nations cited in the CMAJ article as examples Canada should copy all have extensive private health care systems, and all achieve significantly better health outcomes than do we, usually at lower cost. This is significant in that public drug coverage is affordable to the governments in many of these countries due to the savings achieved by shifting part of the burden of paying for health care to the private sector. So, unless the CMAJ authors are interested in discussing Pharmacare within the setting of a fundamental rethink of our health care system, including private care and user fees, the entire premise of their argument – comparing us to our international peers - is misleading and inappropriate.

Additionally, the cost savings the CMAJ study claims are highly suspect. The authors state that Canadians would save $8 billion annually by eliminating out of pocket and private insurance expenses currently paid for prescription drugs, and that doing so would only require $1 billion in extra government spending. The magical transformation of $8 billion of private spending into $1 billion of public spending would be brought about through better bulk pricing, more use of generic drugs and smarter, formulary based prescription choices. While bulk pricing is an idea worth exploring, the study’s pricing assumptions are based on us achieving costs similar to those achieved by Europeans, a dubious claim given the example to date of Canada’s only public drug plan, in Quebec, which at a cost of $1,065 per capita in 2014, achieved the second highest level of drug expenditures in this country. Similarly, savings proposed by switching more patients to generic drugs, or by ensuring physicians comply with a formulary of recommended drugs may quickly disappear, as newer, vastly more expensive brand name drugs are demanded by our population. For instance, Sovaldi, a brand new drug that cures over 90% of hepatitis C cases, costs approximately $650 per pill, or about $55,000 for a required 12-week course. The extreme costs of many such newer therapies were completely excluded from the CMAJ analysis.

Also, the study authors based all of their cost assumptions for future pharmaceutical use on historic levels of demand. This is a highly incorrect methodology that completely misses the impact on drug demand that will occur when the price of prescriptions approaches zero. Any first year economics student can tell you that, for any good, as price approaches zero, demand skyrockets. Our health care system, with its zero dollar pricing for patients, has shown just such growth in demand.  Shortly before the Canada Health Act of 1984 mandated free health care for Canadians, health expenditures totaled 7% of our GDP.  In 2012, the most recent year for which data is available, health expenses were almost 11% of our GDP – a 50% increase in the percentage of our economy devoted to medical care. This has definitely been mimicked in the case of Quebec’s drug plan, where total costs have risen by 10.7% per year since 1998, despite a population growth of only 14% between 1991 and 2011, an astounding level of growth that would throw off the cost predictions of the CMAJ analysis by many billions of dollars.

Meanwhile, our health care system teeters on the verge of collapse. Health spending consumes approximately 40% of all provincial budgets across the nation, and this threatens to only increase as our population ages and sickens.  In the hospitals where I work, we often struggle to find the funds for basic repairs – to fix leaks in our roof, or to replace broken otoscopes that I require to look inside the ears of sick children. The Ontario government recently unilaterally imposed a 2.65% pay cut on the province’s doctors, citing a complete lack of funds to pay previous wage levels.

Such levels of expenditure would be forgivable if our health care system was a world leader, but despite all of the money we are pouring into it, it is broken. In June, 2014, Canada’s health care system ranked 2nd worst in the industrialized world in a study by the Washington, DC based Commonwealth Fund, beaten by every nation except the United States on metrics such as wait times, efficiency, and health outcomes.

So, when our national health care system is broke and underperforming, and when even the CMAJ authors admit in their own overly optimistic “worst-case” scenario that Pharmacare might require $5 billion in additional government funding off the bat - money that our governments simply do not have - now is not the time to introduce an untested new national program of unpredictable cost. As a famous Irish proverb once said, “It's no use carrying an umbrella if your shoes are leaking.”  A good umbrella Pharmacare may be, but when it comes to health care in Canada, we should have only one priority – fixing the leaks in the shoes we already own.

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