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
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.