Essays

Essays January 2019

Recommendations for the Advisory Council on the Implementation of National Pharmacare

Chris Bonnett

Introduction

No standards exist for public or private drug insurance so coverage is literally all over the map. I wanted to propose practical and specific changes that could improve access to prescription medicines. No change is likely without intervention by the federal government.

The primary goal of national pharmacare (NP) ought to be universal access, i.e., all Canadians have coverage from either a public or private insurer. This is the problem it can solve. The practical realities of transition and implementation, including budget constraints and inter-governmental relations, indicate mixed funding is a more feasible approach. If mandatory national standards are developed to eliminate differential access that depends on where you live or work, then NP can also address quality of coverage, meaning formulary scope and out-of-pocket costs. For more background on national pharmacare, I recommend the Conference Board’s National Pharmacare Initiative.

Considering Single Payer

A public single payer model has merits. It is more likely to lower costs because governments can unilaterally determine the formulary, set a budget, fix cost-sharing for patients and limit administrative costs.

However, there are five critical – and I believe fatal – flaws to a single payer drug plan. These are:

  1. Increased cost to governments,
  2. Uncertain costs to employers and individuals,
  3. Feasibility of implementation,
  4. Acceptance of reduced coverage by 20 to 25 million individuals covered today by employer-sponsored and collectively-bargained plans, and
  5. Absence of real-world cost modelling exercises to validate massive savings estimated by the Parliamentary Budget Officer and promoted in earlier academic work. One example: while NP would immediately expand access to drug insurance, drug price reductions on hundreds of existing drugs with material sales revenue would take years to renegotiate.

Cost control should not be the main purpose of national pharmacare. The pCPA, PMPRB, CADTH and INESSS are already addressing that particular problem, although perhaps NP could encourage better integration, collection of real-world evidence, and more timely listing of effective new drugs.

Why now and how?

National pharmacare has yet to launch despite six proposals in my lifetime. I don’t want that to happen again. Beyond risks to patients, failure would reinforce a sense that governments cannot act in the national interest until there’s a crisis. Today’s problems will not solve themselves. The launch of new, ultra-high cost cell- and gene-based therapies simply compound existing affordability and sustainability issues brought on by demographics, high-cost specialty drugs, complex, high-cost patients...and complacency.

It is the federal government’s time to lead and incent provinces to see beyond their own borders. My doctoral research participants were very clear – they believe only the federal government ought to play this role.

A More Feasible Model

National pharmacare must overcome important access, equity and quality problems. Building on features proposed by Blomqvist and Busby (CD Howe Institute, 2015) and many other sources, apractical, made-for-Canada social insurance model should include:

  1. Universal access through a mixed-funding model. Administratively, this will cost more than a fully public plan but it offers choice and a competitive influence that should spark public and private payers and mitigate that complacency bias. NP must evolve over time.
  2. Mandatory national standards, perhaps phased in, that apply to an evidence-based, comprehensive formulary: the Quebec formulary is reasonable. Moderate patient cost-sharing would expand the funding pool and promote cost-awareness. Appropriate exemptions and subsidies for lower-income Canadians would eliminate or minimize their out-of-pocket costs.
  3. Perpetual federal government funding of:
    1. Annual drug costs exceeding $100,000 per patient. This captures drugs for rare disorders and the most complex of patients.
    2. A consistent level of personal financial protection from catastrophic drug costs, defined as 3% to 5% of net family income
    3. Provinces and territories to ensure their formularies achieve the national standard.
  4. The Parliamentary Budget Officer (PBO) has again concluded the federal government has the fiscal room to fund this, relieving less financially capable provinces and employers.
  5. More visible and accountable governance to ensure better oversight in an evolving world of new products and increasing public expectations. An approach similar to the German Federal Joint Committee could be implemented federally and in each jurisdiction. Governance would include timely, annual reporting to the public.
  6. Employers should cover all their full- and part-time employees and family members, regardless of age or health, with the same national standard formulary. The formulary should be comprehensive but leave enough room for optional private insurance. Current tax deductibility rules should be maintained because private drug insurance meets a national interest, including a demand for choice and consumer-focused “omni-channel” pharmacy and health management technology that provinces cannot match.
  7. An individual mandate would provide the necessary risk-spread. Those not attached to an employer would have public coverage, including the self-employed, casual workers and perhaps those working for very small businesses, i.e., having fewer than 5 or 10 employees. As with generic drug prices, all patients should benefit from lower prices on innovative drugs negotiated by the pCPA.
  8. Private drug insurance would be regulated to ensure the public interest is met. To start, this could be at a minimal level, similar to what already exists in Quebec. Risk-sharing would become national and include all plans, with annual reporting perhaps through the pCPA.

Some of these goals can be phased in: hospital and physician insurance each took about three years for all provinces to adopt in the 1950s and 1960s respectively. Then as now, public pressure for better coverage would bring all Canadians into the tent. The federal government would provide funding only when provinces and territories meet the standards.

Calculating a Cost

The cost is of course tied to plan design. While total cost should not be higher than now, it would be distributed differently. In aggregate, patients would pay less out-of-pocket. The federal government’s costs would increase but within its long-term fiscal capacity. Employers shouldn’t pay more overall.

If the Advisory Council chooses to release its short-listed costing models, then other parties will be able to provide informed commentary or investigate unanticipated concerns. The outcome will be more rigourous work, understood and supported by the parties that will play an important role in implementing this in the real world.

Conclusion

For national pharmacare to happen, the Advisory Council and each political party must see a clear path forward as we approach next October’s federal election. There is considerable goodwill and agreement among stakeholders and other issues can be managed. However, NP is far from certain. There are many important problems in the health system, and more across government. Sustained political leadership and public engagement is required. A collaborative approach is now essential.

There is no perfect model, and indeed neither is what I propose. However, it is principled and progressive, feasible to implement, addresses the main concerns of stakeholders, and it will end today’s patchwork of inequitable and often inadequate drug coverage.

About the Author

Chris Bonnett, MHSc, PhD (Cand.)

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