The legislation, which aims to create the beginnings of a national public insurance plan for pharmaceuticals, starts with contraceptives and diabetes medication.CHRISTINNE MUSCHI/Reuters
Industries that make, sell and insure drugs say the federal pharmacare bill will deliver a major dose of uncertainty to their sectors if it passes in the coming weeks.
The legislation aims to create the beginnings of a national public insurance plan for pharmaceuticals that starts with contraceptives and diabetes medication.
Bill C-64 passed the House of Commons this summer and is now in its legislative home stretch as a Senate committee calls industry witnesses this week, with final votes expected to come later this fall.
Canadians spent $41-billion on prescription drugs in 2023, according to the Canadian Institute for Health Information. Of that, about $18-billion was covered by public insurance plans, $15-billion by private plans and $8-billion was paid out of pocket.
The relatively short pharmacare bill – with both English- and French-language versions of its text together taking up less than six pages – leaves much of the system to be devised after it passes. Ottawa would have to negotiate funding and lists of qualifying drugs with provincial governments and sign separate, likely differing deals, while a committee of experts would have a year to deliver a report recommending options for the “operation and financing of national, universal, single-payer pharmacare.” Such a report would likely land after the next federal election.
Health Minister Mark Holland has described the initial focus on contraception and diabetes as a pilot project. “This is something we are putting in the world to demonstrate how it’s going to function, how it’s going to work,” he told senators on the social affairs, science and technology committee last Wednesday.
But the lack of clarity threatens to disturb the complicated economic balance of manufacturing, retailing and insuring that underpins the sector.
“It just introduces so much risk and uncertainty,” Stephen Frank, president of the Canadian Life and Health Insurance Association (CLHIA), said in an interview.
One of the biggest issues is how a new public option would affect existing coverage. Mr. Holland said Canadians would “have a choice between using private insurance and using a single-payer, universal model.”
Michael Law, a Canada Research Chair in access to medicines at the University of British Columbia, said nothing in the bill would force Canadians to file claims through public insurance instead of private ones. But it would create strong incentives for sponsors of benefit plans to pare back coverage of diabetes and contraceptive medication to save money.
“Once these bilateral plans become the norm, I think employers will likely demand – and rightfully so – that these drugs be taken off what they cover so they can alleviate themselves of that expenditure,” Dr. Law said.
That would be a financial hit for insurers who earn administrative fees from processing claims. But it could also mean fewer drugs are covered. Dr. Law said countries with single-payer pharmacare, such as New Zealand, tend to spend less on prescription drugs, in part because they maintain shorter lists of drugs they cover and are more cautious about adding new medications. Private plans tend to cover a wider range of drugs to offer plan sponsors and their employees more options.
Glenn Thibeault, executive director of government affairs, advocacy and policy at Diabetes Canada, said the medication he takes to manage his Type 2 diabetes is currently covered by his private insurance and is not on an initial list of diabetes medication released by the government in February. But he wondered what would happen if a private plan dropped coverage of all diabetes medication, and people like him take a drug that is not on the public list either. “Now I’m paying out of pocket, which is the exact opposite of what’s intended,” he said.
Ottawa does anticipate private plans could drop coverage in these categories. Matthew Kronberg, a spokesperson for Mr. Holland, said in an e-mail that “private plans that currently offer coverage for the range of specified diabetes and contraception identified in Bill C-64 will likely transition their beneficiaries to the relevant provincial or territorial drug plan for this coverage.”
The amount of the effect is so far hard to gauge. B.C. began offering public coverage of contraceptives last year, but the CLHIA said it was too early to measure the effect.
Parliamentary Budget Officer Yves Giroux told the senators the same last week, though noted “there is certainly an incentive for this to happen.” His office estimated the first phase of pharmacare would cost Ottawa $1.9-billion over five years, but the number would rise if patients with private coverage switched to public.
In a separate analysis last year, the PBO estimated that full single-payer pharmacare would cost the government at least $11-billion more a year than it is currently spending.
The Liberal government’s other recent expansion into public insurance – dental care – took a different tack, using a “fill the gaps” model that requires Canadians to attest they do not have private insurance before they can tap public funds.
The decision to go with a “universal” model for pharmacare stems from the pact that the Liberals signed with the New Democrats in 2022 to prop up their minority government.
NDP health critic Peter Julian said in a statement that the NDP “used our power in Ottawa to force the Liberals to deliver a single-payer universal pharmacare system through the Supply and Confidence Agreement.” He said single-payer was the best way to extend coverage to an estimated eight million Canadians who lack it, and pointed to the 2019 advisory council chaired by former Ontario health minister Eric Hoskins that recommended such a system.
While the private health insurance industry has pushed back on the bill, so have pharmacies and drugmakers.
For retailers, the main sticking point is that public plans reimburse less in dispensing fees than private ones. The Neighbourhood Pharmacy Association of Canada estimated that community pharmacies would collect a total of $43-million less in annual revenue if Canada switched to a universal public plan.
One of the most active retailers lobbying on this file is Loblaw Cos. Ltd. Representatives of the company and Shoppers Drug Mart (owned by Loblaw) have met with federal officials at least 22 times to discuss health issues since the supply-and-confidence agreement was signed, according to the lobbyist registry. Loblaw spokesperson Aly Vitunski said the company supported a “mixed payer” approach to pharmacare.
Jim Keon, president of the Canadian Generic Pharmaceutical Association and Biosimilars Canada, said his members don’t have a strong view on the design of the federal plan, but do need clarity on what drugs will ultimately be listed so they know what to manufacture. And they wanted more information on a “bulk purchasing strategy” that is mentioned in the bill, but not explained, such as whether it would be focused on just a handful of products.
“There’s a lot to be understood about all this,” he said.