The Nasty Side Effects of a National Drug Plan

A conference was held a few weeks ago in Ottawa to discuss yet again the adoption of a pan-Canadian government-run drug insurance plan that would cover prescription drug costs for the entire population.

Supporters of such a plan maintain that it would be better able to contain drug costs than the mixed public private system managed by the provinces that we currently have. To bolster their case, they emphasize that such a plan would give the public insurer greater negotiating power with pharmaceutical companies, which would allow it to obtain significant concessions in terms of drug prices.

But far from generating substantial economies, such a program would instead risk increasing the burden currently weighing down public finances. An analysis carried out in 2002 estimated that public spending on prescription drugs would go up by more than $8 billion a year with the adoption of a national drug insurance plan financed and managed exclusively by government, a 147 per cent increase.

Such a plan would not only entail extra costs for taxpayers, but would do nothing to change governments' current propensity to restrict and delay access to new drugs. Foreign experience can teach us much about the dangers of adopting a monopolistic drug insurance system in Canada.

The United Kingdom is probably the country that has pushed this line of thinking the furthest. Since the 1990s, one cost containment policy after another has been adopted, and patients are still suffering the repercussions. For example, U.K. patients for many years had to do without drugs that were approved and recognized as effective and available all across Europe. This is still the case for a number of cancer drugs like Nexavar (liver cancer), Avastin (intestinal cancer) and Torisel (kidney cancer) which have all proven their effectiveness.

In New Zealand, another country where the public insurer occupies a prominent place, patients' access to innovative drugs is just as restricted as it is in the United Kingdom, if not more so. Several reports have been published demonstrating the negative health consequences of the cost containment policies adopted in that country over the past few decades.

Private insurers in Canada offer a clearly more generous coverage of prescription drugs than the public insurance plans. As a recent analysis showed, 81% of new drugs approved by Health Canada between 2004 and 2011 are covered by at least one private plan in Canada, whereas only 47% are covered by at least one public plan. Moreover, new drugs are made available to patients much more rapidly. Between 2004 and 2011, patients covered by private plans waited an average of 127 days before having access to new drugs approved by Health Canada, versus 467 days for patients covered by public plans.

Private insurance also confers advantages that go well beyond the generosity of coverage.

Private insurance plans generally offer more choice and flexibility than public plans, and services that are better adapted to the needs of their customers.

Obviously, private insurers also put in place strategies aiming to optimize spending on drugs. For instance, many have initiatives to raise client awareness, especially regarding the true costs of drugs, ways to become well-informed consumers, and the importance of properly adhering to one's prescription. These awareness-raising strategies do not necessarily entail additional expenses insofar as they lead to improved adherence to treatments and possibly to reductions of other expenses elsewhere in the health care system.

Private companies can also adopt measures that are more similar to those put in place by governments, like the substitution of generic drugs once they become available. However, these strategies are not adopted by all companies in a uniform manner for everyone. Contrary to the public insurer that has a captive clientele, private insurers must take client preferences into account when making drug coverage decisions, not only in terms of cost but also in terms of the quality of services rendered. The failure to do so would imply a massive exodus of customers to competitors.

On the other hand, socializing a larger part of drug spending through a national drug insurance plan would give more power to government and its bureaucrats to make decisions and negotiate on behalf of the insured. Policies to restrict spending would be applied across the board and would penalize all Canadians in the same way. Many of them would therefore have to settle for lower-quality drug insurance coverage than they currently enjoy. It is in nobody's interest to have such a system in place in Canada.

Yanick Labrie est économiste à l'Institut économique de Montréal. Il signe ce texte à titre personnel.