How to Combat COVID-19 with Universal National Public Pharmacare While Saving Billions

The crisis is at our doorstep. COVID-19 has been declared a pandemic by the World Health Organization. Panic is rampant. Toilet paper is the new currency. The movies were right.

Thankfully, Canada’s governing Liberals initially offered a $1 billion dollar stimulus package to help us deal with increased health care needs during the outbreak.

Wow! Wait.

That’s $27 per Canadian. What in the heck!

In the meantime, after a sudden spike in cases, Denmark quickly and decisively shuttered schools and set up a fund of about $30 billion for 5.6 million people. That’s almost $5000 per person! And, the kind of decisive action I expect from MY government.

Now, to be fair, the government HAS set up an additional $10 billion business line-of-credit and offered vague promises of a “significant fiscal package” some time in the undefined not-so-distant future.

But, huh? How? What? Why?

If the Liberals wants to hit reset, if they wish to ensure a lasting legacy, if they want to be that focused decisive government I long for in a crisis, there is a start; a way forward.

Canada remains the ONLY single-payer health care system in the world that excludes universal drug coverage. The federal Liberals could side-step the teeth-gnashing around Pharmacare, pay for all prescription drugs outright, and immediately free up funds for provinces in the trenches of COVID-19.

… and save the economy billions while doing so.

Before you whip yourself into a lather, please read on.

Provincial Health Care Crises … Yes, Plural!

Each province faces multiple ever-mounting health care pressures, and with COVID-19 it just got worse. It could get much, much worse…and fast.

COVID-19 will expose the pitfall of chronic health care underfunding as our health care system is already at capacity and primed for failure. If we have an outbreak similar to Italy, we can likely neither contain nor treat it.

Did I say “if?”

While provinces quibble over minuscule Canada Health Transfer escalator increases of about $20 per person, they need a significant cash infusion. And now.

The Federal Government Share

Canadian Medicare was introduced in the late 1950s, with the federal government paying fully 50 percent of new spending on hospital care. An explosion of hospital builds locked brick-and-mortar medicine into our national psyche, making it almost impossible to adapt health care to evolving needs.

Over the decades that 50 percent has slowly withered with the federal government now paying only about 20 percent of public health care costs. The provinces, in a show of uncharacteristic unity, dug in their heels insisting there be no discussion of pharmacare until the annual escalator for the Canada Health Transfer increases from 3.3 to 5.2 percent annually.

As it turns out, the provinces are really, really cheap dates.

That extra amount is barely enough to STUDY the long-term care bed shortage — let alone fix it. The amount that would accrue to Nova Scotia for example would only be about $20 million. That’s not even enough for one decent long term care facility. Then we still have the doctor shortage, crumbling infrastructure, etc., etc.

Oh, and…COVID-19.

Feds to the Rescue

This is where the federal government can make a real difference. Taking on the entire cost of drugs would immediately take provincial complaints about cost-sharing off-the-table. Federal spending would jump to just under 40 percent in a very cost-effective sector, immediately free-up much needed health funds to the provinces, all while ensuring that everyone who needs prescription drugs would be treated the same, no matter who they are, where they live, or how rich or poor they are.

…and it would cost the economy less.

Provinces could quickly reallocate about $15 billion per year (the amount they spend on drugs directly) to first tackle COVID-19, and once this is reined in, their own specific health care issues. That can fix a lot of problems. Almost immediately. And it would be ongoing funding as the savings would accrue annually.

Bypassing acrimonious multilateral negotiations at a time of health care crisis? Win-win-win. Good for the federal Liberals, good for the provinces, and good for patients.

So, as such, the feds could implement this without much rigmarole. And good thing, since parliament and many provincial legislatures are currently suspended. It could be quickly implemented with the details sorted out as we go along. Not the best way to role out a major policy change. But, crazy times, no?

If you want to complain about the federal-provincial distribution of powers, just reread the 1867 Constitution Act. The only health responsibility originally ceded to the provinces was hospitals. Yes, their role has been interpreted to cover delivery more broadly since, but let’s not get all bent out of shape — paying for meds is not delivering them.

Costs: The Reality

As an economy, we measure how much we pay in prescription drug costs in total. In Canada last year we spent in the range of $35 billion.

In total.

That drug bill is made up of three basic streams: what we pay through public funds, what we pay for private insurance premiums, and what we pay out-of-pocket. These streams make up total cost. It all comes from the very same place, whether it’s public funding or private money: you and I.

Taxes, private spending. All from the same place.

Fear-mongering about increased taxation without looking at corresponding decreases in private outflow is pure flimflammery.

What will happen to total prescription drug cost if the feds did take on the whole she-bang? Well, not a whole-heck-of-a-lot. At least initially, they’ll be about the same. Total cost will go up marginally with some people — currently poorly managed — finally able to easily access care they need. This will, in turn, positively effect health and, ultimately, the economy.

Yes, the amount covered by the public purse will, indeed, go up. But private spending will go down, much, much more.

…and it would save our economy billions.

Yet shifting the payment to the federal coffers is not the real story. It’s what happens with everything else that truly matters.

Reducing Public Administration

In addition to passing the cost of drugs directly to the feds, provinces can eliminate unnecessary systems by rationalizing duplicative administrations. So, the 1000 or so public drug systems in Canada? Gone.

Provinces would also be able to rationalize related programs. No more means-testing for income assistance to determine eligibility for drug coverage. No more systems for cost-sharing that don’t actually cover the cost of running them. No more co-payments to reduce “abuse” that doesn’t really exist.

Most importantly, if you have a genuine provincial health card, you’d be eligible. Simple.

Reducing Private Waste

There’s an estimated 100,000 private drug plans in Canada. That’s a ton of administrative waste and one of the reasons private drug insurance is fourteen times more expensive to administer than public programs. You can dig into the Canadian Institute for Health Information data files on this for yourself here.

Private drug plans have “whistled past the graveyard” for decades hoping Canadians didn’t notice they offer no real value-added. Sure, they appear very busy. Administering processes that they themselves created. Busy collecting premiums. Busy managing benefits. Busy assessing and adjusting risk. Busy managing business first and patients second.

Busy, busy, busy. Busy denying coverage.

Ultimately that’s what private insurance is all about. Saying no. As often as possible. No to people with pre-existing conditions. No to drugs that aren’t included in a benefits package. No to anything they can get away with. After all, the more they say no, the higher their profit.

All this busy work is completely negated with national universal public pharmacare. We, as Canadians, save all that squandered expense.

What Private Insurance Gets Right

Insurance companies do have ONE thing right though. Larger groups are able to spread the cost of drugs more broadly. Which begs the question, isn’t the largest group possible in Canada, ummm, Canada?

More Money in Canadians’ Pockets

Private drug insurance premiums which — let’s be honest — are just a form of private taxation, would evaporate. That means more money for other priorities. Like say, education or addressing climate change or…COVID-19.

As private health insurance companies rejigger their plans, premiums will go down. And drastically as prescription drugs are the largest cost component of extended health plans. Canadians will have a share of savings from money currently spent privately. How much depends on the type of plan you have and who pays for it. For me, I pay the whole cost of my extended health plan for my family. About $3500 per year.

Heck, politicians can even sell it as a middle-class tax cut.

Even Corporate Canada Saves Money

It’s great for the corporate sector, at least the ones that do offer benefits, as they would see their employee benefit costs go down. Up to $750 per employee by one estimate. No more negotiating annual drug benefit agreements with insurers who hold all the cards. No more finding ways of dropping high-cost drugs to meet a budget target. No more increasing co-payments for the same reason. And no more firing people with high drug costs to keep premiums down.

Hey, maybe they’d even see fit to throw some more money into wages. I know, I know. But, hey, I can hope.

Supporting the Changing Economy

With a surging gig economy and general job insecurity, it would mean that people can maintain drug regimes and their health, without worrying about getting or holding a job with benefits. Which is good thing since, according to Finance Minister Bill Morneau, these jobs will be increasingly difficult to find anyway.

Imagine not having to worry about getting a job with benefits just to make sure you can get the insulin you need to stay alive.

Job Impact

There will be short-term job effects for those who work in government administration and private insurance. But there’s a reason that we don’t have a lot of people shoeing horses anymore. Things change. We may not shoe horses so much, but we do change a lot of tires. Like any economic shift the jobs don’t disappear, they change.

Many of these same people could move into managing other aspects of government. Or the promised Canada Drug Agency, as they will have a lot to do. Things that should be done, but currently aren’t.

In its presentation to the Parliamentary Standing Committee on Health, the insurance industry pretty much admitted the impact of national universal public pharmacare on their business and employment would be negligible, if anything at all.

So, can we please stop shoeing private insurance horses and start changing public coverage tires?

Negotiating Better Prices

With one unified system, Canada will suddenly — and finally — be able to bring the full power of monopsony (or single-buyer) to the table. That’s just one of the reasons New Zealand pays one-tenth of the price charged in Canada for the high-blood pressure drug amlodipine (a generic version made in Canada, by-the-way), despite having a population eight times smaller than Canada.

Imagine if we could get those kind of prices for all generics.

No more negotiating small discounts for generics based on overblown brand-name prices, like we currently do to our detriment. We can insist that generic producers bid for our business, just like New Zealand. And start to mitigate the 2000 or so drug shortages that we seem to consistently have.

All in the Same Boat

Yes, universality means that even the rich would be covered. But, why waste administration resources creating islands of people based on ability to pay? That just seems silly. Especially when it means that we can negotiate the best prices for all Canadians.

That’s how universality works.

Now, if we can close some of the taxation loopholes the wealthy use to skip out on paying their fair share **cough, cough.** When everyone has skin in the game you can bet the system will work better — for all.

Now with Less Mortality

Look. It’s really very simple. If people with asthma can access their meds, they don’t go to the hospital as much, they can work more steadily, contribute, pay taxes. People with diabetes die when they have a hard time getting insulin.

So, universal national public pharmacare reduces both mortality AND morbidity.

In case you miss the point, this is a very, very good thing.

Estimates of What Universal Pharmacare Will Save

There have been scholarly articles that have done a great job estimating overall cost savings from a pharmacare to be between $4.2 and $9.4 billion per year. Admittedly, these estimates don’t account for the impact of improved health and include very conservative assumptions.

Another way of understanding potential savings is to compare Canada to similar countries that include drugs in their public systems. In the most recent World Health Organization ranking of health systems, Canada and Finland virtually tied. Finland has a single national system that includes drugs and a liberal formulary, so we can assume their costs are similar to what we could get in Canada with a universal drug plan. With drug prices on par with Finland, we would save $15 billion every year. If we were able to get costs like those in Denmark, which ranked lower than Canada in the ranking, we would save $25 billion each year!

And this does not account for any potential health effects on the system.

What Should it Cover?

Clearly, there will be limits to what should be covered. Homeopathy is an obvious one to exclude. Low-value medications, brand-name use versus generics, prescribed over-the-counter medications, supplements, or medical cannabis, not so obvious.

For a national universal pharmacare program to be accepted by the public it will be critically important to keep everyone happy.

This means a generous open formulary — at least initially. Those who have access to all the latest drugs through private plans will raise hell if they’re forced off current regimes or told they will not have the access they currently enjoy (to be fair, most people aren’t all that aware of how their insurance works or what it covers). Grandfathering would have to be accepted; people stable on their current drugs should be left alone, especially people on medications that take significant effort to “dial-in” appropriate levels — like seizure or psychotropic drugs. The potential impact of this was glaringly obvious with the heavy-handed approach Ontario took when introducing expanded coverage for all under-25s. A roll-out characterized by pandemonium for those previously stable and forced through a new round of reassessment, blood work and anxiety.

Ultimately, there will be two types of people in the system. Those already in treatment and those who will enter treatment after the introduction of Pharmacare.

Those already in treatment should have the option to stay on their current treatment. But, it’s also prudent to provide cost-differential information and ask Canadians on high-cost brand-name versions of drugs to consider switching to a lower cost generic — if one exists and if they are willing. The proviso here is that should they find that the generic version does not keep their condition stable, they have the option to go back to the previous regime — no questions asked.

Those just entering treatment would start with low-cost proven generic options. But that does not mean that they will necessarily stay on generics. Occasionally, generic versions of drugs truly aren’t as good as the brand-name. I’ve seen it with asthma medications. The drug component itself was perfectly fine, but either the non-medicinal additive had an horrible taste that discouraged compliance, or the device itself was flawed.

User Fees

Look, I’m biased, user fees are stupid. And I waste a lot of money on them for drugs I need to stabilize my severe asthma. They’re based on seriously bad misinformation and poor societal assumptions. They don’t save the economy any money, as they simply rob Peter to pay Paul. And they don’t reduce abuse. Except for a few drug classes, most people don’t take medication if they don’t have to. User fees only keep people from getting the treatment they need, nothing more than an unfair tax on the sick.

Seriously, only the sick pay them. Think about it.

That being said, I CAN think of one application that would be valuable. And that’s to combat the red herring of consumer choice. Industry spends a lot of money to try and convince us that there is a lot of “choice” in drugs. But, if you look at my condition as an example, asthma treatment has not really changed much in at least 50 years. Despite this my doctor still gets anxious about all the new meds to treat it.

So, where there is no discernible difference between brand-name over generic, an argument can be made for user fees. Those opting for the brand-name instead of a generic, despite evidence to the contrary, should pay the difference between the two. If the drugs are truly interchangeable and people insist on the brand-name, that’s on them and they should pay. Maybe they opt for insurance. Sure. Whatever floats their boat.

I can envision two outcomes of this approach.

First, brand-name producers will reduce prices as most Canadians are pretty savvy and will opt for the version with no direct cost. To maintain market share, they’ll have to reduce prices to a point that Canadians don’t feel the pain of paying for a label.

Second, the market for generics will improve as even more Canadians will opt for generics. Basic supply and demand.

Dealing with High-Cost Drugs for Rare Diseases

People with rare diseases are — quite rightly — concerned about access to new treatments coming to market. And access, they should have. But, currently, access is largely limited to Canadians who have good private plans, either because they belong to a large employment group to spread the cost, or because the group has high enough income to absorb the cost.

But, shouldn’t all Canadians have the same access, not just those who can afford it?

At a recent consultation about the changes to the Patented Medicines Prices Review Board one attendee remarked excitedly about new treatments for a serious rare disease. I’m paraphrasing, but the argument was something like, “I know it’s expensive, but so few people have this condition, can’t we as Canadians afford it?”

Yes and no. Yes, we’re a very well-off country, so we should be able to pay for these. Just not based on the way our system works now.

According to the Patented Medicines Prices Review Board, less than 1 percent of the Canadian population accounts for 42 percent of patented medicine sales. Most of this disproportion is due to eye-popping prices of new drugs for “orphan” diseases and cancer.

To put it into context, the new drug for cystic fibrosis, Trikafta, currently lists for about $400,000 per year (putting aside the rebated versus list price debate). To treat everyone this drug targets would cost about $1.5 billion per year. That’s about 5 percent of our current total drug spend. What about all the other rare diseases? Cystic fibrosis is just one of about 7000 rare diseases. And what about Canadians with regular old run-of-the-mill diseases?

How on earth does ANY country afford this? And deal with chronic and acute health care crises at the same time.

Well. They tender to keep the cost of generics as low as possible. They study the cost-effectiveness of new drugs to determine their worth. They compare prices. They negotiate better prices for new worthwhile drugs. They keep administrative costs low.

All of this can create more fiscal room that allows us to improve access to drugs that work for all. We can do this.

…and save our economy billions every year.

Universal National Public Pharmacare is the Right Policy at the Right Time

Raisa Deber, noted Canadian health policy expert once told me that if we can’t afford public health care, we sure as hell can’t afford private. Private funding in our system unnecessarily siphons off huge amounts of funds into profits, high administration cost and unnecessary care.

Full pharmacare would free up resources that would allow provinces to immediately take steps to deal with COVID-19 and, following that, set up a system to ensure that we are never again caught so flat-footed. Once the immediate crisis is over, provinces can use these annual savings to focus on other issues we struggle with daily: our lack of primary care, the need for long-term care beds, and mental health support. Clearly there’s a lot of work to do and the money saved will be wasted no longer.

It also means we are in a much better position to ensure all Canadians have access to treatments that work — including those with rare diseases. Just imagine how many new drugs $15 or $25 billion would pay for each year.

There are many reasons that Denmark is able to tackle COVID-19 so decisively. Most obviously? They keep their drug costs low and cover drugs publicly. We are not yet in such a strong position.

The best time to have included drugs in our health care system was 50 years ago.

The second best time is now.


connect