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Moving to Income-Based Drug Coverage is the Wrong Prescription for Alberta

03/27/2013 04:36 EDT | Updated 05/27/2013 05:12 EDT

The Alberta government has announced major pharmacare reforms: the province is planning

to move from a system where public drug coverage is available mainly for seniors to a system

where coverage will be restricted based upon income. Experience from other provinces suggests

that income-based pharmacare will not pan out well for Albertans.

In an upcoming paper with the C.D. Howe Institute, my colleagues and I review evidence on

pharmacare options available in Canada and abroad. One of the options we review is income-

based pharmacare, which the government of British Columbia adopted a decade ago. That

system, while successful in reducing public drug costs, has produced unforeseen consequences

that call into question the overall success of such reforms.

All good drug plans must ensure access to necessary medicines. At a recent national symposium,

experts from the pharmaceutical industry, government, patient groups, health professions and

academia ranked this as the number one goal for pharmacare in Canada.

The trouble with income-based pharmacare is that it doesn't deliver on this essential goal

because individuals must spend considerable sums on medicines before public benefits kick

in. Evidence shows that out-of-pocket charges prevent people from filling medicines that can

improve their health, which would keep people out of doctor's offices and hospitals - saving

money to the overall public healthcare system.

Studies of British Columbia's move to an income-based drug program found that seniors' access

to essential medicines fell and their use of other health care services increased. And contrary

to claims, no studies have shown income-based pharmacare improved non-seniors' access to

medicines in British Columbia.

Just like medicare policy more generally, pharmacare policy should also aim to protect citizens

against the financial consequences of an unforeseeable illness. This is where income-based

pharmacare falls short - ironically so given that these programs are pitched as a "fair" way to

provide drug benefits.

Income-based pharmacare is an "insurance" solution that is suitable for protecting people against

random, one-time losses, such as having ones' home burn down. But drugs are different than

most one-time healthcare interventions - most drug prescriptions are for repeated, long-time use,

where an ill patient requires ongoing treatment.

Data from British Columbia show that prescription drugs required by the sickest 20 percent

of the population account for 80 percent of all drug costs. Whether young or old, these people

typically require significant pharmaceutical treatments year after year, often until death. Asking

chronically ill people to pay a given percentage of their incomes toward their medicine needs

year after year is tantamount to taxing them for their poor health.

Because health generally deteriorates with age, most seniors live with chronic needs for

medicines. They can therefore expect to bear the financial burden of deductibles under an

income-based pharmacare program. Given that fewer employers are offering retirement health

benefits - because doing so with an aging workforce will put individual employers and their

workers under significant financial strain - retirees can't rely on employment-related insurance

to help defray drug costs.

The Alberta government has announced that an income-based universal plan will save $180

million annually by 2015. But is that really cost savings to Albertans or cost-shifting, meaning

that sick Albertans will still need to pay for those costs but instead do so privately?

While British Columbia's income-based pharmacare program dramatically reduced government

spending on prescription drugs, total prescription drug costs didn't fall. Instead, they grew more

rapidly than before. Patients, particularly the elderly, and the employers and workers who fund

private insurance plans had to pick up a larger and faster growing share of drug costs as a result.

Income-based pharmacare will not improve access to medicines. It will effectively tax the sick.

And it will take away incentive and opportunities to better manage this critically important

component of the healthcare system.

Albertans would be far better off if government expanded, and not contracted, public drug

benefits. Virtually every health care system that is comparable to Canada's shows that doing

so would not only improve access and financial protection but would also reduce system-level

expenditures dramatically.

But other countries' governments have arguably done better in making the case to the electorate

that they would be better off by expanding public health drug coverage. A very small increase

in income taxes today could fund a broader drug program that would improve access, which

would help reduce hospital visits from unfilled prescriptions. It would protect Albertans from

the unforeseen private costs should they fall ill. And, most importantly, it would result in lower

overall costs and especially lower costs to employers - and hence, higher wages - in the future.

For these reasons, Albertans should demand that pharmacare be expanded and made better rather

than be contracted and made worse.