Pharmacare will save us a s***load on downstream health care costs (Part 2 of 2)

Four points about what pharmacare will cost – and what it will save – that some Liberal officials don’t seem to understand

3. Pharmacare will save us a s***load on downstream health care costs

The most immediate benefit from public pharmacare would come from lower downstream costs that our current public-private patchwork of drug plans imposes on the health care system. “Removing the cost barriers Canadians face when they have prescriptions to fill will make it easier for them to maintain their health or get better, reducing the need for them to visit their doctors or be admitted to hospital,” the Advisory Council wrote. Pharmacare will give much needed breathing room to overburdened ERs across the country.

Previous studies showed that there are hundreds of thousands of avoidable hospital and ER visits caused by “cost-related non-adherence,” i.e. people who can’t afford to take their medications as prescribed. One study cited by the Advisory Council looked at just three conditions (diabetes, cardiovascular disease, and chronic respiratory conditions) and found that giving people their medicines for free would save health care systems over $1.2 billion.

How much would we save by giving people access to a wider array of essential medicines (commonly prescribed drugs for conditions ranging from diabetes and high blood pressure to depression and schizophrenia, which account for about half of all prescriptions filled), as the Advisory Council proposed as the first step towards establishing a comprehensive public pharmacare system? Presumably, the savings would be even greater, but no one had yet calculated the system-wide savings.

A recent study by Dr. Nav Persaud and a team of researchers is the first to put a number on the system-wide costs of “cost-related non-adherence” when it comes to essential medicines: $1,488 per patient per year. Extended to the whole of Canada, a rough estimate of the total savings for public health care systems would be $4.17 billion per year. Working from the same list of essential medicines as Dr. Persaud, the Hoskins report calculated the cost of providing public, universal coverage for essential medicines at only $3.5 billion. Pharmacare, in other words, would more than pay for itself almost immediately. “This study adds to at least a hill, maybe a mountain, of existing evidence that providing people with free access to medicines makes sense,” commented Dr. Persaud when the study was released.

4. We don’t need to raise taxes a s***load to pay for pharmacare

Expanding the list of medications to create a comprehensive public pharmacare program, according to the Advisory Council’s estimates, would require $15 billion in new public spending by 2027. But this would be more than offset by billions in savings elsewhere. Businesses, governments, and workers would save billions that they are currently spending on insurance premiums for private drug plans. People taking medications would see their pharmacy bills eliminated (for lower-income people) or drastically reduced (for everyone else).

The fiscal issues raised by pharmacare are less, “how do we pay for this?” and more “how do we fairly distribute the significant (s***load of) savings this will generate?” For example, do we allow employers to reap the lion’s share of the savings, or should a tax be imposed to recoup some of those drug insurance costs they will be relieved of?

The Advisory Council recommended that the federal government pay for its share of pharmacare out of general revenue and negotiate cost-sharing agreements with the provinces, but decided it was beyond its mandate to recommend specific tax measures or design federal-provincial funding formulas.

Would it be hard for the federal government to raise extra revenue, if needed, to pay for pharmacare? Only the most die-hard, anti-tax zealots would argue so. A modest wealth tax on Canadians with assets above $2 million could easily finance pharmacare and a host of other social programs, as CCPA BC’s Alex Hemingway has shown.

Toby Sanger and David Macdonald examined a variety of modest tax measures that could be used to finance pharmacare in a 2019 analysis and found that whatever amount people would need to pay in federal taxes would be more than offset by reductions in insurance premiums and out-of-pocket costs. Only households making more than $199,000 per year would pay more under most scenarios. Like the Hoskins report would later conclude, Sanger and Macdonald found that virtually everyone else would be better off financially with pharmacare:

In almost all of the scenarios, middle class households see the largest annual net benefits — in the $400 to $500 range — while lower income households end up between $300 and $400 better off on average than they were without pharmacare. These savings are possible at the household level even while employers are saving between $1 billion and $3 billion a year depending on the tax measures introduced.

In an analysis for the Canadian Health Coalition, Keith Newman contends that imposing new taxes to pay for pharmacare makes little sense when the budgetary impact of the program is so modest and if a recession is looming on the horizon (as it is today). Whatever path is taken, one thing is clear: pharmacare’s total cost to the federal and provincial governments, however it is financed, will be much less than what people are currently paying.

There’s nothing shocking about this result. Virtually every other country with a developed public health care system covers prescription drugs, and does so without imposing impossibly heavy tax increases or running up unsustainable deficits. It should therefore be up to pharmacare sceptics to explain why Canada can’t do what everyone else (except for the U.S.) does. “How do these countries manage to afford national drug insurance without bankrupting themselves,” Dr. Joel Lexchin observes, “is a question that opponents never address.”

Instead, they cycle through a predictable series of scare tactics. “You’ll lose your coverage!” “You’ll have to pay more taxes!” “It will run up the deficit!” The idea that pharmacare will be inordinately expensive is one of those “zombie ideas” (in Dr. Lexchin’s words) that perpetually returns to haunt debates over pharmacare. And like zombies, no matter how many times allegations of pharmacare’s “excessive” price tag are killed, they come back from the dead – reanimated by the powerful interests that stand to lose the most from pharmacare, i.e. pharmaceutical and insurance companies and their political and think tank allies.

(Read Part 1 of this blog series, which addresses points 1 and 2, namely “We pay a s***load more for prescription drugs than countries with pharmacare” and “Done right, pharmacare will save us a s***load through lower drug prices”)

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