Public Release: 

Universal public drug plan could save money for Canada

New study finds cost benefits to covering drug costs for all Canadians

Canadian Medical Association Journal

Contrary to common public perception, Canadian taxpayers could save billions by the introduction of a universal public drug plan to provide prescriptions to all Canadians, according to new research published in CMAJ (Canadian Medical Association Journal). Canada is the only developed country with universal health insurance that does not also offer universal prescription drug coverage.

"A long-time barrier to the implementation of universal prescription drug coverage in Canada has been the perception that it would necessitate substantial tax increases," writes Dr. Steven Morgan, professor of health policy at the University of British Columbia School of Population and Public Health, Vancouver, BC, and coauthors. "Our analysis shows that this need not be the case."

The study modelled costs based on data describing $22 billion worth of retail prescription drug purchases in the fiscal year 2012/13. They created three scenarios for a universal public drug plan: a base scenario (expected outcome), and best- and worst-case scenarios.

Researchers found that most prescriptions are already paid for by taxpayers, with $9.7 billion spent directly on public drug plans and $2.4 billion spent on private drug plans for public sector employees. Private sector spending on private insurance plans currently accounts for $5.7 billion, and uninsured patients pay $4.5 billion out-of-pocket for prescriptions they fill.

If Canada could achieve the pricing found in several comparable countries as well as the rates of generic drug use seen in some provincial drug plans, a universal public drug plan would reduce total spending on prescription drugs in Canada by $7.3 billion per year, or 32%, write the authors.

These cost savings are attributed to decreased costs for generic- and brand-name drugs because of economies of scale in price negotiations and better product selection, taking into account a small increase in costs from increased use by people who were uninsured.

"Better access to medically necessary prescription drugs and improved quality of care go hand in hand with these significant cost savings," states Dr. Danielle Martin, vice-president of medical affairs and health systems solutions at Women's College Hospital and assistant professor at the University of Toronto, Toronto, Ontario. "In many of the scenarios that we modelled, universal pharmacare was cost neutral for governments. This goes against current thinking that a universal program will cost more."

As well, employers and unions that offer employee drug benefit plans could save $8.2 billion under a universal public drug plan, savings that would be beneficial in other ways.

Canada spends much more on medications than other countries with universal health insurance, but it attracts only small investments in drug research.

To attract investment, the authors write that Canada would be advised to increase public investment in health sciences, possibly by using a portion of the savings generated through a single-payer system for universal public coverage of prescription drugs.

Universal public coverage of prescription drugs can achieve access and equity goals while achieving considerable economies of scale that stem from better pricing and more cost-conscious product selection under a single-payer system, the authors conclude.

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Listen to an interview with Dr. Danielle Martin:

Post-embargo podcast: https://soundcloud.com/cmajpodcasts/drug-coverage

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