Four reasons national pharmacare monopoly is a terrible idea — and the first is $15.3 billion in new taxes
By Michel Kelly-Gagnon
A government-run pharmacare monopoly across Canada — and the word monopoly is key here — is a terrible idea. There are at least four main reasons not to go down such a path.
It would inevitably raise the tax burden for the middle class. At the moment, various governments in Canada fund 43 per cent of total out-of-hospital prescription drug expenses, with private insurance plans (36 per cent) and out-of-pocket payments by individuals (21 per cent) accounting for the rest. The vast majority of public drug spending happens at the provincial and territorial level, with most provinces providing coverage for low-income households and seniors, and many also providing means-tested “catastrophic” drug plans.
The takeover of this mixed system by the federal government would increase the burden on Canadian taxpayers
The takeover of this mixed system by the federal government would increase the burden on Canadian taxpayers. According to the government’s own Advisory Council report, the net cost increase for taxpayers by the time this monopolistic government-run pharmacare program was fully implemented, in 2027, would be $15.3 billion. That’s an average of some $1,000 per household per year in additional taxes — assuming the government’s numbers are correct. With $15.3 billion of new taxes, there is simply no way that this new burden could be borne solely by “the rich,” no matter how you define them.
It would actually reduce access to drugs for many. A monopolistic drug insurance plan will almost certainly try to keep spending in check by rationing access to new drugs. This is how government controls health-care costs in general, and it stands to reason that it would do the same in the case of monopolistic pharmacare, reducing access for many. In Canada right now, the number of drugs typically reimbursed by employer-sponsored plans is between 10,000 and 12,000, compared to around 4,000 by most provincial government plans.
In the U.K., patients for many years went without drugs that were approved and recognized as effective and available across Europe
Foreign experience provides further reasons for caution. The United Kingdom is among the countries that pushed the supposed virtues of monopoly the furthest, and as a result, patients for many years went without drugs that were approved and recognized as effective and available across Europe. It is not unreasonable to suppose these restrictions played a role in the U.K.’s comparatively low cancer-survival rates, which are now improving but still lag behind those in peer countries.
In New Zealand, often held up as a model to emulate, of all medicines registered between 2009 and 2014, only 13 per cent were added to the list of products funded by the country’s public insurer. According to a 2015 study, 75 per cent of New Zealand general practitioners said they had wanted to prescribe an unfunded medicine in the previous six months but couldn’t.
It would impose a one-size-fits-all “solution” to a problem that affects relatively few people. While the current system serves most Canadians well, some people do fall through the cracks. According to the Commonwealth Fund’s 2016 Survey, 10 per cent of Canadians had not filled a prescription for medicine in the previous year or had skipped doses of medicine because of their (real or perceived) inability to pay.
But why not simply offer targeted help to this slice of the population? Why raze to the ground the current mixed system, run by the provinces and territories, which works well for nine in 10 Canadians? It’s the equivalent of tearing down the entire house rather than repairing a hole in the wall.
Socializing a larger portion of prescription drug spending through a monopolistic, one-size-fits-all insurance scheme would end up giving more power to federal bureaucrats to make decisions and trade-offs on behalf of the insured. Policies that restrict access to new drugs would be applied across the board and would penalize all Canadians.
Employers won’t get a good deal out of it, either. Some private-sector employers are supportive of this government-run monopolistic pharmacare plan. The simplistic calculation they make is that it would be a way for them to offload to taxpayers as a whole the costs of the private insurance plans they typically co-pay with their employees.
This analysis is mistaken on more than one level. To begin with, corporate taxes very likely would be increased as a result. The “health premium” that provinces like Ontario (and until recently Quebec) charge over and above corporate taxes per se would also likely go up. Perhaps even more importantly, employment contracts are negotiated on the basis of “total compensation.” Private insurance plans, of which drug coverage is a major component, are clearly part of that compensation. If employers no longer offer those plans, or if they are much less comprehensive due to the nationalization of drug coverage, there will be upward pressure on wages. Employees and union leaders won’t just leave several hundred million dollars of compensation on the table for management. To believe this would be naive in the extreme.
Improving access to drugs for the less fortunate is a worthwhile endeavour but a national government-run pharmacare monopoly is simply the wrong prescription.
Michel Kelly-Gagnon is president and CEO of the Montreal Economic Institute (iedm.org).