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Ontario Must Think Like A Business To Keep Youth Pharmacare Costs Down

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The Ontario Liberals have just announced a pharmacare plan targeted at youths aged 25 and under which will provide full coverage for a wide range of prescription drugs. This is welcome news, to be sure. One hopes that the youth plan will be the first step towards public drug coverage for Ontarians of all ages.

The policy case for universal pharmacare is overwhelming.

pharmacist drug
(Photo: Stevecoleimages via Getty Images)

It is scandalous that in 2017 many Canadians die for lack of affordable access to basic drugs like insulin. Increasingly, even those of us with private health insurance coverage are facing limits on what we can claim, so that our insurance does not protect us when we need it the most. Even those covered by other publicly funded drug programs, such as the elderly, are facing increasing co-payments in many provinces.

A well-designed pharmacare scheme can deliver huge savings by leveraging the bargaining power of an entire population. Canadians pay some of the highest drug prices in the world under our existing patchwork scheme of drug coverage -- employment-based private insurance for the majority of Canadians, combined with public coverage for seniors and low-income people.

As a point of comparison, New Zealand has tasked an agency at arm's length from government, PHARMAC, with purchasing drugs for its entire population. The cost savings are staggering. An annual prescription for the common blood-pressure drug Amlodipine costs New Zealanders about $10 a year, as compared to about $130 for patients in Canada.

Such an agency would not be swayed as much by short-term politics, not to mention requests and petitions by drug companies.

The aggregate savings are significant, with New Zealand spending only US$297 per capita on drugs annually, to Canada's CA$771, according to the most recent OECD data. With prescription drug costs now nearly matching spending on physicians in Canada, this is a low-hanging fruit for achieving significant cost savings for our strained health-care budgets.

But if, in implementing its recently announced plan, the Ontario government permits spending to gallop out of control, this will undermine efforts to examine coverage to all those in Ontario and across Canada. Out-of-control spending on drugs could mean there are precious fewer dollars to spend on other important things, like reducing wait times or long-term care beds.

The key to success here is to adopt a business-like, hard-nosed approach to price negotiations with drug companies, similar to that seen in New Zealand. To achieve this, we first need to move responsibility for buying drugs away from the Ontario Ministry of Health to an arm's-length agency. Such an agency would not be swayed as much by short-term politics, not to mention requests and petitions by drug companies.

It is also important that the legislation setting up this agency require it to work within a fixed budget. The budget should be allocated to it each year by the government after calibrating the money it has for different demands within health care. If it doesn't operate within a fixed budget, our public buyer cannot credibly threaten to walk away from drug companies' demands for inflated prices, which would be to the detriment of us all.

A fixed budget each year will improve decision-making about which drugs to fund or not fund. It would also necessarily require an assessment about the relative benefits of one drug over another in improving our overall health. Such an assessment of the evidence would benefit us all.

People will, of course, complain that this means all drugs are not covered. But there would be nothing to prevent those who wish to buy drugs not included in the public plan to do so -- as is currently the case -- either with private health insurance or out-of-pocket payments.

The public plan must cover the most important and cost-effective drugs for the entire population.

We must ensure that policies enacted today carry forward to the longer-term goal.

Drug companies may complain that their industry will lose out if government drives a hard bargain on prices. But if drug companies need subsidies to exist, then this should be considered on the same footing with other industries (e.g., car, aircraft, farming) who seek public assistance. Hidden subsidies should not happen in the form of excessive prices levied on Ontarians when they are sick.

The architects of Canadian medicare stressed from the beginning that public health insurance must grow to include pharmaceuticals. Over the intervening half-century, drugs have come to represent a much larger component of health-care spending, yet little progress has been made towards universal coverage.

If history is any guide, it will be the provinces that break this stasis.

We celebrate Ontario's move to meaningfully deal with inequitable gaps in access to pharmaceuticals. But we must ensure that policies enacted today carry forward to the longer-term goal of equitable and cost-effective health care for all. A hard-headed business approach is now required.

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