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, but that the increased expenditure 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. Twenty-three and a half percent of Canadian tax revenue is spent on health care2 , with drugs remaining the second-largest category of health spending at 15.7%.3

Canada is the only country with a universal health care program that does not include prescription drugs. In 2017, as many as one in four 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, influence adherence to prescribed drug regimens.4 The private and public sectors pay for drugs in Canada funding 63.9% and 36.1% 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 two 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 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 sample population borrowed funds to cover costs of $500 or less. The analysis also suggests that drug in-affordability impacts vulnerable people far beyond medication non-adherence. It affects 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 increasing 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

Economic growth and fiscal restraint has permitted overall health spending (as a share of GDP) to remain relatively steady since 2014. With little restraint in the form of drug expenditure being exercised, we can expect drug expenditure continue to grow as a share of health expenditure. 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 drugs.

A national pharmacare program is one of the more popular policy options. A mid-October article released by the Fraser Institute suggests that pharmacare is not the answer to this issue, the focus should instead be on helping individuals in need rather than implementing a new 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 could not take necessary medications, due to cost. Furthermore, Dr. Clement’s analysis conveyed that many individuals receiving the maximum governmental support through enrolment in publicly funded drug insurance or social assistance programs, still had high out-of-pocket drug costs.10

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

Commonly touted pitfalls of a national drug program include increased health expenditure (on the program), political barriers, and reduced stakeholder buy-in in a profit driven pharmaceutical market. However, if pharmacare were implemented, it has the potential to become a socially beneficial policy. A policy wherein the benefits exceed the cost of implementation.

Policy capacity is necessary when interpreting health and social policies that will impact high drug prices and drug in-affordability. Policy capacity11 is described by Dr. PG Forest et al. as an established combination of competency, experience, and resources used in problem resolution processes. Furthermore, it is pertinent to examine best practices, evidence, and existing policies from other countries 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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