Marc-André Gagnon dispels misconceptions about the benefits of private health insurance plans and argues in favour of a universal model for pharmacare.

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In its last budget, the Federal Government announced the creation of an Advisory Council for the Implementation of National Pharmacare. The debate is now about what a national drug plan should look like. Should we implement a universal pharmacare plan – a public drug plan that would cover all Canadians in the same way? Or, should we preserve the current patchwork of public-private drug coverage and simply fill in the gaps to cover Canadians who are not able to afford their prescription drugs?

Most health policy experts, as well as the Standing Committee on Health of the House of Commons, support the idea of universal pharmacare because it would be more equitable and efficient than the alternative model. Drug companies, private insurers, pharmacy chains and some patient groups favor a “fill the gaps” approach because they want to preserve existing private plans that offer easier and faster access to expensive medicines.

The fear that a universal pharmacare plan would ration drugs, and impede drug access for some patients, misunderstands the reality of drug coverage, pricing and access.

Image description: black and white image of open pill bottle on its side with pills pouring out.

First, most private health insurers no longer offer “more generous” drug coverage. In Canada, around two-thirds of private drug plans are managed by one of the big three insurance companies: Sunlife, Great West Life and Manulife. These companies normally offer fully insured plans to smaller employers and “administration services only” plans to larger employers.

The fully insured plans offered by these companies were recently modified to mimic public plans. For example, in 2015 Manulife announced their DrugWatch program, which requires that new drugs receive approval by the Canadian Agency for Drugs and Technology of Health, before they can be considered for reimbursement. The Canadian agency analyzes cost-effectiveness for public drug plans. In 2017, Great West Life and Sunlife began similar default programs, namely SMART and Drug Risk Management that evaluate new expensive drugs before reimbursement. Private plans are thus reducing their coverage because of high cost drugs. Meanwhile, the fragmentation that private plans cause in Canadian coverage inhibits our collective capacity to reduce drug prices through cost-effectiveness and rational use of medicines.

Second, “more generous” private health insurance plans reduce access to drugs by allowing the inflation of drug costs. To be approved by Health Canada, a new drug simply needs to show that it is better than a placebo, and not necessarily better than existing drugs. By accepting to pay for any drug at any price, like most administration services only plans do, there is no incentive for drug companies to produce real therapeutic innovation. Instead, drug companies can create commercial success out of huge marketing campaigns for expensive but therapeutically insignificant products. In the latest annual report of the Patented Medicines Price Review Board, it was shown that 91% of the new patented drugs that entered the Canadian market did not represent a significant therapeutic improvement as compared with existing products.

In fact, because it is easier to get new and expensive products reimbursed in the North American market, even when they do not provide additional therapeutic value, we end up with significant issues of predatory pricing. For example, the blood-cancer drug Imbruvica was shown to be effective at a lower dosage, which allowed some patients to consume fewer tablets. The drug companies Janssen and Pharmacyclics responded by announcing that they would discontinue the old tablets and introduce one day regimen tablets at three times the price. With this change, potential savings for some patients were transformed into massive additional spending.

Earlier this year, another drug company, Horizon Pharma, changed the coating of a drug for cystinosis, a rare but deadly genetic disease that destroys the kidneys. The new coating provides slower release, so patients only have to take the drug twice a day instead of four times a day. The older life-saving drug, Cystagon, cost $10,000/year and was available through special access programs. The new drug made of the same active ingredients but with a different coating, Procysbi, was recently introduced in the Canadian market and can cost more than $300,000/year. Patients are compelled to take the more expensive version of the active ingredients because the distribution of Cystagon was discontinued in Canada.

Canadians cannot protect themselves against these predatory pricing strategies if they cannot build institutional capacities that allow them to obtain value for money through negotiations based on the cost-effectiveness of drugs. A fully public and universal pharmacare plan can go a long way toward achieving better access for expensive drugs by refusing to pay for any drug at any price, and by using our collective bargaining capacity to obtain value for money. As such, it can provide much better access to the drugs Canadians need, in a sustainable way.

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Marc-André Gagnon, PhD is Professor in the School of Public Policy and Administration at Carleton University. @MA_Gagnon

Correction: The original blog post included a paragraph that misdescribed price of Procysbi and the distribution of Cystagon.  This has been corrected.