A Lack of Action on Canada’s Drug Pricing could Translate to a Decrease in Health and an Increase in Spending

How can Canada achieve resilience in drug spending trends?

The recently released 2018 forecast of National Health Expenditure Trends and Drug Spending in Canada shows that drug spending has not only remained in the top three health expenditure categories, the growth has surpassed spending on hospitals and physicians.¹ The mounting cost of drugs has led to an expenditure increase of 3.2% from 2017 to 2018. 23.5% of tax revenue in Canada is spent on health care² and the second largest category of health spending continues to be drugs (15.7%).³

Canada remains the only country with a universal health care program that does not include prescription drugs. In 2017, as many as 1 in 4 Canadians secured the benefits of a public drug program³, however, Canadian studies have documented a correlation between prescription drug costs, combined with a lack of insurance and socioeconomic status that influence adherence to prescribed drug regimens.4 The private and public sectors pay for drugs in Canada funding 63.9 and 36.1 percent respectively.¹ Despite multiple payers, Canadians still bear the burden of these costs.

Canada, Pharmacare, Health policy, PG Forest, drug expenditure, social policy, Ontario, Alberta

The “New NAFTA” (United States Mexico Canada Agreement) has created another barrier in the reduction of drug prices. Currently, over 30% of drug spending in Canada is from a mere ten drug classes. One of most expensive classes of drugs are biologics, currently consisting of over 20% of 2017 drug spending in Canada.¹ The new agreement adds 2 years of data protection to drug patents. This means less competition and a longer wait for less expensive generics to enter the drug market.

When Canadians bear the burden of drug costs, they run the risk of disease complications due to their inability to afford their necessary medication. 1 in 10 Canadians state they cannot afford their medications and 1 in 4 Canadians do not take their prescribed medications, due to costs.5

A study released on November 19, 2018 by Dr. Michael Law et al analyzed the consequences of borrowing money for out-of-pocket drug costs.6 Law et al concluded that money is being borrowed for both expensive and inexpensive drugs. Low socioeconomic status (SES) Canadians are disproportionately affected by drug prices. Over half of the population analyzed by Law borrowed funds to cover costs of $500 or less. The analysis also suggests that drug inaffordability impacts vulnerable people far beyond medication non-adherence it effects their quality of life.

Canadians can’t afford their medications5 and medication expenditure is rising at a striking 3% per year.³ When Canadians cannot afford to take their prescribed medications, it leads to medication non-adherence issues.4 Furthermore, those who cannot afford prescribed medications are less able to manage their chronic health problems effectively, leading to more physician visits and increased pressure on the healthcare system.7

Unnecessary health spending in Canada occurs when Canadians don’t take the drugs they need. The cost of hospitalizations and emergency rooms visits due to non-adherence of prescribed medications is far greater than the cost of drugs.8

Although economic growth and fiscal restraint has permitted overall health spending as a share of GDP to remain relatively steady since 2014, little restraint in the form of drug expenditure has been exercised. Canada’s Patented Medicine Prices Review Board sets the prices on patented drugs in Canada to prevent “excessive” costs, however, Canadians pay some of the highest prices in the world for generic drugs.

A national pharmacare program is a widely talked about policy option. A mid-October article released by the Fraser Institute suggests that Pharmacare is not the answer to this policy issue and instead the focus should be on those that need help rather than a national program for everyone.9 In a 2016 study evaluating publicly funded drug insurance plans, Dr. Fiona Clement et al concluded that about 4% of western Canadians couldn’t take necessary medications due to cost. Furthermore, Dr. Clement’s analysis conveyed that many individuals receiving the maximum governmental support through the enrollment in publicly funded drug insurance programs or social assistance still had high out-of-pocket drug costs.1

Pharmacare isn’t the only policy option, but it might be the only option that isn’t fragmented between provinces and can improve equity.

It has the ability use a single body for improved purchasing power of drugs to reduce drug spending and reduce the use of unnecessary or ineffective drugs. On November 28, 2018 UK’s National Health Service (NHS) released a do not prescribe list to promote and improve the use of clinically effective and cost-effective medications (and items). In a national drug coverage program Canada could move to do the same promoting not only health equity, but also clinical efficacy, and cost effectiveness.

The commonly touted pitfalls of a national drug program are increased health expenditure until, and if, the policy becomes socially beneficial, as well as political barriers, and reduced stakeholder buy-in in a profit driven pharmaceutical market.

Policy capacity is necessary when interpreting and recommending changes to health and social policies, including policies that will impact high drug prices and drug inaffordability.¹¹ Furthermore, it is pertinent that best practices, evidence, and existing policies from other countries are analyzed to improve this burgeoning public health issue.

Emma J. Train RD MPP

Registered Dietitian, Master of Public Policy
Kingston, Ontario

  1. Canadian Institute for Health Information. National Health Expenditure Trends, 1975 to 2018. Ottawa, ON: CIHI; 2018.
  2. Milagros Palacios and Bacchus Barua, The Price of Public Health Care Insurance, 2018, Fraser Institute.
  3. Canadian Institute for Health Information. Prescribed Drug Spending in Canada, 2018: A Focus on Public Drug Programs. Ottawa, ON: CIHI; 2018.
  4. “A Backgrounder on Poverty in Canada,” Government of Canada, 26.
  5. M. Gagnon, “The Economic Case for Universal Pharmacare: Costs and Benefits of Publicly Funded Drug Coverage for all Canadians,” Canadian Centre for Policy Alternatives. (Ottawa, On: 2010).
  6. Kolhatkar, Ashra, Lucy Cheng, Steven G. Morgan, Laurie J. Goldsmith, Irfan A. Dhalla, Anne M. Holbrook, and Michael R. Law. 2018. “Patterns of Borrowing to Finance out-of-Pocket Prescription Drug Costs in Canada: A Descriptive Analysis.” CMAJ Open 6, 4.
  7. Prescriptions for a healthy and prosperous Canada: Submission to the Standing Committee on Finance for the Pre-Budget Consultations 2017. Canadian Pharmacists Association, 2017, 3.
  8. Cutler RL, Fernandez-Llimos F, Frommer M, et al, Economic impact of medication non-adherence by disease groups: a systematic review, BMJ Open 2018, 8 &Iuga, Aurel O. and McGuire, Maura J. “Adherence and Health Care Costs.” Risk Management and Healthcare Policy 7 (2014): 35–44. https://doi.org/10.2147/RMHP.S19801
  9. Bacchus Barua, Before implementing national pharmacare, look at what provinces already offer, Fraser Institute (via Hamilton Spectator), October 23, 2018.
  10. Canadian Publicly Funded Prescription Drug Plans, Fiona M. Clement; Lesley J.J. Soril; Herbert Emery et al, O’Brien Institute for Public Health, School of Public Policy, University of Calgary, February 1, 2016.
  11. Forest, Pierre-Gerlier, Jean-Louis Denis, Lawrence D Brown, and David Helms. “Health Reform Requires Policy Capacity.” International Journal of Health Policy and Management 4, no. 5 (2015): 265–66. doi:10.15171/ijhpm.2015.85.

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