The objective of this preliminary report is to summarize PDCI’s assessment of the national pharmacare cost estimate study (Morgan et al) and identify some alternative mechanisms by which drug coverage in Canada can fulfill the spirit of the Canada Health Act plus the objectives of equity and sustainability. The final report (expected end of February 2016) will outline and cost some alternative approaches.
Executive Summary:
- The 2015 national pharmacare cost estimate study (Morgan et al) overstates potential savings attainable from the proposed program – actual costs to governments and taxpayers are likely closer to $6.6 billion rather than $1 billion
- The study relied on average drug prices in the United Kingdom as a proxy for potential savings achievable from monopsony power however it does so using an exchange rate from a time when the British Pound was at historic lows compared to the Canadian dollar
- The study assumes that unions representing government employees will exchange their private drug plan for an inferior public plan without any collectively bargained offset or quid. This is unlikely.
- Methodological and data concerns lessen confidence in the study’s results, including:
- Limitations of the data relied upon, including heterogeneity of underlying data sources and changes occurring since reference period
- Impractical assumptions about the level of generic price reductions achievable
- No accounting for the impact of confidential listing agreements (already estimated to provide annual savings of approximately $500 million)
- The study does not consider other qualitative consequences that loss of private drug plan coverage will have on Canadians including
- The significant reduction in the number of drugs covered
- The longer time to reimbursement for drugs that are eventually covered
- The impact on the ability of pharmacists to serve patients
- Reduced attractiveness of the Canadian market to manufacturers of innovative medicines
- Job losses in the private drug insurance industry
- Extensive restructuring and consolidation of prescription drug coverage under one nationally administered public drug program is not necessary to achieve the objectives of universal coverage, equity and sustainability.
- Alternatives approaches, building on existing drug plan coverage can achieve these goals without significantly reducing the quality of drug coverage for the majority of Canadians