Pangaea Express - Federal Costs of a National Pharmacare Program

October 16, 2017

The Parliamentary Budget Officer (PBO) provides independent analyses to Parliament “to estimate the financial cost of any proposal for matters over which Parliament has jurisdiction”. In 2016, the House of Commons Standing Committee on Health requested the PBO to provide a cost estimate of implementing a national Pharmacare program. The resulting Federal Cost of a National Pharmacare Program was published Sept 28, 2017 and provides a five-year projection of federal costs up to 2020-2021.

The framework for this analysis is based on the Quebec formulary, including eligibility requirements, co-payment levels, and eligibility for co-payment exemptions. Of the $28.5 billion in estimated pharmaceutical expenses in 2015-16, $24.6 billion would be eligible for a national Pharmacare program. These are costs currently incurred by governments ($11.9 billion), private insurance plans ($9.0 billion), and patients ($3.6 billion). The findings show a total spend of $20.4 billion if implemented in 2015-16 representing an estimated savings of $4.2 billion. By 2020-21 the net cost of Pharmacare would be estimated at $23.7 billion.

While the analysis does not factor in the savings from a single administrator of drug benefit claims vs the multiple administrators across the county, it does take into account the fact that previously uninsured individuals and those with better public (vs private) coverage will increase utilization. Other assumptions by which these calculations were based on include:

  • The lowest price currently obtained by public and private insurance plans in Canada, and an additional 25 per cent universal discount
  • Universal generic drug substitution
  • Public coverage of Quebec formulary drugs only, and not all drugs
  • Applying a $5 co-payment for each brand name prescription

While the chatter of a national Pharmacare program does indeed grow stronger every year with many more voices now adding to the noise, the new Health Minister, Ginette Petitpas Taylor, has not yet provided insight with respect to her views and commitment on this issue. The previous Minister, Jane Philpott had pushed back on this subject citing drug spend a provincial matter.

For more information, please contact Marla Weingarten, Consultant, The Pangaea Group