The current system for buying prescription drugs in Canada - a hybrid system of multiple public and private drug plans - is totally dysfunctional.
First, the diversity of drug plans means Canadians are covered for their drugs according to the province in which they live or work, and not necessarily according to their medical needs.
Second, Canadians with inadequate coverage, mostly self-employed or unemployed workers, are often unable to benefit from optimal treatments. More than three million Canadians admitted they had not filled a prescription in the last year because they could not afford to do so.
Another reason why the system is broken is Canadians pay way too much for their drugs. Canada is the world's second most expensive country for “detail” prices - which equals the money the drug company gets, the wholesaler markup, the pharmacy markup, dispensing fees plus taxes - of prescription drugs.
Canada also has the fastest rising drug costs among Organization for Economic Co-operation and Development (OECD) countries: more than 10 per cent per year. Countries with universal Pharmacare, such as France, the United Kingdom, Sweden, Australia and New Zealand, pay less for their drugs, and their costs increase at a much lower rate.
The main reason prescription drugs are so expensive in Canada is because of private insurers, which is totally inefficient, and the administration fees are much higher for private than for public plans (eight versus two per cent).
Insurance companies are normally paid on the basis of a percentage of spending, so they have no incentive to reduce costs.
Unlike private insurers, public plans have the ability and obligation to ensure a patient will get some bang for the buck. British Columbia is the best example of how to go about doing so.
Under the Therapeutics Initiative, which began as an academic project, BC pro-actively produces clinical guidelines and encourages a culture of evidence-based medicine among physicians. Because of this, not only do British Columbians have the best therapeutic choices and the best health outcomes in Canada, they also pay on average 8.2 per cent less per capita for their drugs.
Simply by eliminating the waste inherent in private insurance and by improving therapeutic choices, the implementation of universal Pharmacare could save Canadians $2.9 billion per year (around 12 per cent of total costs).
Another major reason why our drugs are so expensive is we have industrial policies that artificially inflate the prices of brand-name drugs. Canada is always aiming to be the world's fourth-most expensive country for its brand-name drugs as a way to support its pharmaceutical sector.
It is true that the pharmaceutical sector is responsible for around 50,000 jobs (direct and indirect) in Canada and that each job is paid an average of $80,000 a year. This means that Canadians benefit from around $4 billion in spin-offs from this sector.
The problem is that these policies are very costly and inequitable because the pharmaceutical industry is located almost entirely in Quebec, Ontario and B.C.
By implementing universal Pharmacare and also eliminating these policies, we could save $10.7 billion per year (around 43 per cent of total costs).
From an economist's point of view, this is nonsense.
Marc-Andre Gagnon is an assistant professor at Carleton University.