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Advisory Council’s final report recommends universal, single-payer pharmacare

In June 2019, the Advisory Council on the Implementation of National Pharmacare (the Advisory Council) issued its final report recommending universal public, single-payer pharmacare for all Canadians, with a phased implementation between 2022 and 2027.

Background

The Advisory Council was announced in the 2018 Federal Budget to consider three key questions regarding the implementation of national pharmacare: who will be covered and under what circumstances, what drugs will be covered, and how it will be funded. The Advisory Council released a discussion paper in June 2018 as well as an interim report in March 2019 (see the April 2019 News & Views for more information on the interim report).

Proposed pharmacare model

The Advisory Council recommends the federal government work with provincial and territorial governments to establish a public prescription drug plan to facilitate equal coverage. An initial drug formulary would be established for “essential medicines” by 2022 and then expanded to a “fully comprehensive” formulary by 2027. Out-of-pocket costs for Canadians would be capped at $100 per year for households with copayments of $2 to $5 per prescription.

The Advisory Council does not make any specific recommendations on how to raise revenue to pay for national pharmacare, but acknowledged that this would be a significant challenge. It estimates that an additional $15 billion in public funding would be required in 2027 to pay for the new model. The report recommends “long-term, adequate and predictable” federal funding to provinces and territories, to be financed through general revenue. The report does not recommend a specific tax or levy on employers or employees.

The Advisory Council suggests that universal national pharmacare would lower total drug spending by $5 billion annually from $52 billion in total drug spending estimated for 20271. On an overall basis, it estimates that Canadian households would save an average of $350 per year.

Impact on employer drug plans

Private employer-sponsored plans have been managing prescription drug costs rising at a rate well above inflation for years and prescription drugs typically represent a significant proportion of the overall benefit plan cost. Newer types of drugs such as biologics and other high cost drugs represent a significant risk to private drug plans, and the Advisory Council notes that private drug plans may be attempting to shift costs for high cost drugs to currently available public drug plans.

National pharmacare would represent a shift in spending from private plan sponsors to the public plan. The Advisory Council estimates annual savings of $750 per employee for business owners. Depending on the drugs included on the formulary and coverage for rare diseases, national pharmacare could also mitigate the risk to employers associated with rising drug costs. As there would still be some out of pocket costs from copayments as well as drugs not included in the formulary, the final report also recommends that private insurers be allowed to provide coverage for copayments and/or drugs not covered on the national formulary.

Unanswered questions

The final report is likely to raise the profile of this issue in the upcoming federal election as political parties determine their policy platforms. A number of unanswered issues remain that will affect the perception and viability of national pharmacare including:

  • the drugs that will be included on the formulary
  • how newly approved drugs will be evaluated and potentially added to the formulary going forward;
  • the existing variance in provincial and territorial prescription drug coverage;
  • the success of a coordinated approach to prescription drug price negotiation in driving down prices;
  • acceptance and coordination amongst provincial and territorial governments;
  • the simplicity and efficiency of government administration of a national pharmacare plan;
  • the public’s perception of national pharmacare in comparison to currently available drug plans;
  • how to sustainably raise revenue to fund national pharmacare.

Comment

The dialogue surrounding national pharmacare is an opportunity for private plan sponsors to review their prescription drug coverage. The 2019 Sanofi Canada health-care survey found that 22% of plan sponsors and 42% of plan members were unaware of the possibility of a national pharmacare program. The same survey found that only 26% of plan sponsors regularly receive reports to help understand their drug plan and where dollars are being spent. While some private plans have modernized their prescription drug coverage to meet the needs of plan members and balance rising costs to plan sponsors, many other plans still include outdated provisions that represent a lost opportunity. Progressive organizations are increasingly focusing on prevention of health problems and overall employee wellbeing to meet the needs of the growing younger and diverse workforce. A Morneau Shepell consultant can assist organizations in optimizing their plan and overall programs for employees.


1  The Advisory Council estimates total drug spending of $28 billion in 2017 net of rebates.


News & Views - July 2019 (PDF)