Federal government estimates don’t reflect true costs of national pharmacare

According to a new report from the Parliamentary Budget Officer (PBO), the price tag for the Trudeau government’s national pharmacare program is already expected to exceed the government’s original estimate. And the program will likely continue to grow more expensive.

In mid-April, the government reported the “first phase” of national pharmacare would cost $1.5 billion over five years, starting in 2024/25. For this first phase, which would “expand and enhance” existing public coverage of contraception and diabetes medications, the federal government must negotiate with each province and territory regarding the implementation of national coverage.

Yet just one month after the federal government released its cost estimate, the PBO now reports that this phase of national pharmacare will cost $1.9 billion over five years. In other words, before Ottawa has negotiated any deals with the provinces, the expected costs of national pharmacare have already increased by approximately $400 million.

It should come as no surprise. Since February, when the government and the federal NDP struck their pharmacare deal, the government has failed to acknowledge the program’s true costs. By borrowing to fund national pharmacare, the government can temporarily conceal the direct cost to Canadians, but Canadians inevitably must pay for this spending through higher taxes—something polling on national pharmacare suggests is a deal-breaker for many.

It’s also important to remember this is the first phase of national pharmacare, and the Trudeau government likely plans to further expand coverage to a list of “essential prescription drugs and related products.” Consequently, according to previous PBO estimates, costs of the fully-implemented program may reach $13.4 billion in annual federal and provincial spending by 2027/28.

Crucially, the cost estimates by both the federal government and the PBO fail to account for how Canadians and insurance organizations might respond to national pharmacare.

For example, in their most recent estimates they assume that nobody already covered by some type of drug insurance plan (this was 81 per cent of Canadians in 2019) will switch to the new national plan, or that no public or private insurers will adjust or renegotiate their plans. For Canadians previously insured privately but switch to the national plan, pharmacare will shift some portion of the costs currently borne by private providers onto the federal government. This will further increase the program’s price tag, which again is ultimately paid by taxpayers.

As the Trudeau government continues to implement national pharmacare, Canadians should be aware that current cost estimates don’t accurately reflect the true costs of the program. A larger-than-expected bill for Canadians is more than likely.