Advisory Council on Pharmacare Releases Final Report: Universal, Single-payer, Public Pharmacare

June 19, 2019

“Pharmacare for all: that’s our prescription”

Last week, the Advisory Council on the Implementation of National Pharmacare released its final report and recommendations to the federal government. The Council has definitively recommended that the federal government work with provincial and territorial governments, and stakeholders, to establish universal, single-payer, public pharmacare in Canada.

The Council proposes that the federal government enact new legislation in 2022 that meets the five fundamental principles of the Canada Health Act: universal, comprehensive, accessible, portable, and public. Essentially, the recommended legislation would enshrine pharmacare for all into law, alongside universal medicare.

The report recommends that federal, provincial, and territorial governments begin negotiating the terms of pharmacare at the end of 2019 and draft legislation from 2020-2022. If legislation is passed, the plan would be implemented incrementally, with full implementation targeted for 2027.

The National Institute on Ageing (NIA) applauds the work of the Advisory Council on the Implementation of National Pharmacare. Our National Seniors Strategy heavily advocates for access to medically necessary medications without financial barriers, and this plan brings us one step closer to that vision. Nevertheless, the government still has to adopt the recommendation. And upon adoption, details of plan design, costing, and governmental coordination will take time to shape and implement.

Why we need pharmacare

In Canada, we have over 100 government-run drug insurance programs and over 100,000 private drug plans.

Research from the National Seniors Strategy (NSS) shows that the vast majority of prescription medications that publicly funded programs cover are purchased from pharmaceutical manufacturers at the provincial or territorial levels. In negotiating for a smaller population, the current evidence shows that publicly funded programs pay significantly higher prices for the medications they cover than other jurisdictions around the world that negotiate at the national level. In principle, national coordination, negotiation, and procurement should drive down the cost of drugs.  While provinces and territories are starting to purchase certain prescription medications at a national level, research evidence suggests that if we implement a more systematic way to buy all of our medications, provinces and territories could save billions of dollars on the cost of drugs. CMAJ estimates universal public drug coverage would reduce total spending by $7.3 billion (worst case scenario $4.2 billion, best-case scenario $9.4 billion).

It is estimated that Canadians spent $34 billion on prescription medications in 2018. Data from the Government of Canada highlights that expenditures on prescription drugs are higher than total physician remuneration in Canada. Canada has the third-highest drug prices among OECD countries, just behind the United States and Switzerland, paying approximately 22 percent above the OECD average.

The Advisory Council’s report highlights that one in five Canadians struggle to fill their prescription medications, three million do not fill their prescriptions due to costs, and one million cut spending on food and heat to afford medication, echoing the finding of the NIA’s National Seniors Strategy, which calls for an evidence-based approach to providing better, more cost effective drugs to Canadians.  

Even Canadians with insurance struggle with co-payment and deductible costs. The report finds that of the 3 million people who cannot afford prescription drugs, 38 per cent had private insurance coverage and 21 per cent had public coverage.

This supports evidence presented in the NSS that the existence of co-payments in prescription medication coverage plans has consistently been found to lead to a decreased utilization of prescribed medications; whereas the reduction or elimination of co-pays and deductibles has consistently resulted in increased adherence.

How will pharmacare be implemented?

The first step in the Advisory Council’s plan is the creation of a Canadian Drug Agency (funding for the agency was announced in the 2019 federal budget).  The agency will be responsible for establishing a formulary of drugs that will be covered publicly. The Advisory Council recommends establishing an initial list of drugs that will be covered and available beginning in January 1, 2022. Over the next five years, more drugs would be added to the list as negotiations with manufacturers progress. The final deadline for full implementation is January 1, 2027. Questions remain about the initial and ultimate formulary. Currently, each province controls its own list of funded drugs, with some jurisdictions providing a more generous list of funded drugs than others. One concern is that the national formulary may be restricted in the early years, reducing access to medically necessary drugs. As the federal government considers its move forward, it will need to be mindful of balancing a robust list of drugs with affordability.

The report also proposes that the government of Canada create a new, dedicated fiscal transfer – separate from the Canada Health Transfer - that will operate over a long period of time, will be fair across the country, and on terms predictable and acceptable to the provinces and territories. Provinces and territories have the ability to opt-in to the program. This means that the federal government will have to work to establish terms that are agreeable to all of the provinces and territories, and establish consensus across the country to ensure everyone opts in. All changes to the legislation and the fiscal transfer require a two-thirds majority.

What is the timeline?

Full timeline for the implementation of pharmacare.

This timeline, beginning in 2019 and extending to 2027, illustrates the phased approach of pharmacare. There are four arrows representing the different aspects of pharmacare that will evolve over time.

  • The blue arrow represents the delivery of national pharmacare. Between the end of 2019 and mid-2020, the federal and provincial/territorial governments will negotiate various aspects of pharmacare. Then, from mid-2020 to 2022, legislation will be drafted. Legislation would be introduced in 2022.

  • From 2022 onwards, provinces and territories will deliver national pharmacare based on the results of the negotiations and legislation.

  • The purple arrow shows development of the Canadian Drug Agency (CDA). From 2019 to 2022, there will be a Canadian drug agency transition office. From 2022 onwards, the CDA will be fully established.

  • The green arrow shows formulary development and growth. From 2020 to 2022, a national formulary would be developed. In 2022, an essential medicines list will be established. From 2022 to 2027, the national formulary would grow. In 2027, a comprehensive national formulary would be completed.

  • The yellow arrow shows a national strategy for expensive drugs for rare diseases, starting in 2022 onwards.

How much will it cost me?

Under the Advisory Council’s plan, drugs deemed essential medicines would come with a co-pay cost of $2, while co-pays for all other drugs would cost $5, to a maximum of $100 per year per person or household. People receiving social assistance, government disability benefits, or the Federal Guaranteed Income Supplement – low income seniors, for example - would be exempt from co-payments.

With the proposed cap on out-of-pocket spending, it is estimated that Canadian families will save $350 per year on average. Business owners who provide drug benefit plans would save approximately $750 per employee per year.

Projected cost

The Advisory Council estimates that the program will cost provinces an additional $3.5 billion in 2022 and the annual incremental cost goes up to $15.3 billion in 2027 upon full implementation. This cost is in addition to the current Canada Health Transfer. However, the Advisory Council recommends that it be issued as a separate fiscal transfer.

The Advisory Council estimates that in 2022, total prescription drug spending is projected to decline from approximately $37.2 billion under the current system to about $36.9 billion under a national pharmacare plan, representing a $300 million reduction. In 2027, total prescription drug spending under national pharmacare is projected to be lower by approximately $4.8 billion relative to the current system, declining from an estimated $51.6 billion to approximately $46.8 billion.

Appropriate prescribing and use of drugs

The Advisory Council also recommends the development of a national strategy on appropriate prescribing and use of drugs. As outlined in the NSS, nearly 40% of older Canadians are currently taking one inappropriate medication, with an additional 12% taking multiple inappropriate medications. Ensuring that Canadians are prescribed appropriate medications is important for the promotion of health and independence and represents an important way to control unnecessary health care costs. A national strategy developed by the Canadian drug agency can support prescribers and help patients to better understand the medication choices available to them through prescribing guidelines, targeted education, and public awareness campaigns.

What does this mean for older Canadians?

Currently, all provinces and territories offer some kind of coverage to adults 65 and older. Despite having access to publicly funded prescription medication coverage programs, minimum income requirements, deductibles, co-payments, and prescription medications covered vary by province. In some regions, low-income older adults are still required to pay a co-payment or deductible for their prescription medications. This matters as there is widespread consensus from the existing policy research evidence that an individual’s access to prescription medications is directly influenced by factors related to their ability to pay, such as income and out-of-pocket costs like co-payments and deductibles.

Coverage across Canada for those 65+

British Columbia: You pay full prescription cost until you reach your deductible (based on income). BC Pharmacare program then covers 75% of your prescription medication costs.

Alberta: You pay 30% of prescription drug cost to a maximum of $25 per prescription.

Saskatchewan: You pay up to $25 per prescription for drugs listed on the provincial drug formulary. 

Manitoba: An income-based system where you pay a minimum deductible of $100.

Ontario:  Over a certain income threshold, you pay a $100 deductible and up to $6.11 dispensing fee per prescription. Under the income threshold, you pay $2 for each prescription and no deductible.   

Quebec: You pay an annual premium between $0 -$616 based on net family income. You do not pay if you are receiving 94% to 100% of the Guaranteed Income Supplement (GIS).

New Brunswick: If you are receiving the GIS, you pay a co-payment of $9.05 for each prescription, up to a maximum of $500 per year. If you are not receiving GIS, you have two options: you can either enroll in New Brunswick’s Drug Plan and pay a premium and a 30% co-payment up to a maximum per prescription based on income levels, or enrol [MA1] in the Medavie Blue Cross Seniors Prescription Drug Program and pay a monthly premium of $115 and A $15 co-pay per prescription.

Nova Scotia: You pay a premium each year to a maximum of $424 based on income. If you are below a certain income threshold or receiving the Guaranteed Income Supplement (GIS), there is no premium.

Newfoundland: You only pay a $6 dispensing fee, and there is no cost for prescription drugs.

Prince Edward Island: You are required to pay the first $8.25 for the cost of the prescription plus $7.69 of the dispensing fee.

Yukon: The Yukon Health Insurance Plan pays the total cost of the lowest priced generics of all prescription drugs on the Yukon drug formulary list, including the dispensing fee.

Northwest Territories: If you are age 60 or over, you receive 100 per cent coverage for eligible prescription drugs.

Nunavut: The full cost of prescription drugs is covered under a public benefits plan for seniors.

(Source: An Evidence Informed National Seniors Strategy for Canada)

Even with the best efforts of our provinces and territories, true pharmacare has not yet been fully realized for all older adults across Canada. Current co-pays, deductibles, and premiums limit access to essential medications.

Under the proposed plan, these deductibles and co-pays will be significantly reduced in some cases to $2 for essential drugs and $5 for more complex drugs to a maximum of $100 per year. There are no deductibles. This is significantly lower than all provinces and one of the three territories currently offer.

The Advisory Council’s report also includes a recommendation that national pharmacare should provide provinces and territories flexibility to provide coverage beyond the national pharmacare standards. This means provinces and territories will have the ability to cover the $2 and $5 co-pays for older adults should they choose to do so. In cases where provinces choose to do this, it would completely eliminate any financial barrier to accessing prescription medications for older adults as is currently the approach in Nunavut and the Northwest Territories.

Outstanding questions: How will non-essential drugs be treated? 

The national formulary would aim for a comprehensive, evidence-based list of drugs that would be covered under national pharmacare. The Canadian Drug Agency, an arm’s length agency, would be responsible for developing and maintaining the formulary based on the best available evidence. The Advisory Council suggests starting with two lists for creating the essential drugs list: the World Health Organization’s Model List of Essential medications which includes 450 drugs and the CLEAN Meds list developed at St. Michael’s Hospital in Toronto consisting of 136 drugs. Once this is in place, they suggest building a more comprehensive list. Many questions remain around what drugs would be covered. Since the announcement, there has been reaction and concern around losing access to drugs that may not be covered on a national formulary. The Canadian Life and Health Insurance Association argues that under the proposed plan, their ability to privately provide drugs not covered on the formulary will be impacted.

What does the upcoming election mean for this plan?

The implementation plan presented by the Advisory Council has a start date of late 2019, this is directly after the upcoming federal election. It is fair to say that pharmacare will be a hot button issue during the election campaign with parties either committing to the Advisory Council’s plan or presenting plans of their own.

The National Institute on Ageing is a Ryerson University think tank focused on the realities of Canada’s ageing population. We are Canada’s only think tank dedicated to policy solutions at the intersections of healthcare, financial security, and social well-being. Through our work, our mission is to enhance successful ageing across the life course and to make Canada the best place grow up and grow old.

By Arianne Persaud, Communications and Public Affairs Manager, National Institute on Ageing | Email: Follow us on Twitter and sign up for our mailing list.

Allan McKee