Thank you, Mr. Chair.
Thank you for your invitation to participate in this discussion today on prescription drugs. My name is Ken Fraser, and I'm president of the Fraser Group, a firm that provides technical and market research about employee benefits and group insurance.
For clarity, we are not associated with the Fraser Institute.
Today I will provide the committee with some research findings regarding the financing of prescription drugs through public and private drug insurance programs. My colleagues--including Dr. Richard Shillington, who is with us in the audience today--and I have been studying the issues of insurance coverage and the distribution of financial costs since 1996. Hopefully the following observations from our research will be useful for the committee.
Canada does not have a comprehensive national program or policy infrastructure around insuring the cost of pharmaceutical therapies. Despite this, a substantial system of drug insurance has evolved that does in fact provide the great majority of Canadians with reasonable financial security with respect to drug expenses.
There are, however, significant regional variations and disparities in this system of coverage. The most significant gap lies in Atlantic Canada. We estimate that approximately 25% of the population there would suffer financial hardship should they need expensive medications. In the case of truly catastrophic health needs, these Canadians would probably face the loss of their homes and be destitute. We have had such cases reported in the media.
Most of the regional variations are due to differences in publicly financed social insurance drug programs. Private drug plans, mostly sponsored by employers and labour unions, cover approximately 58% of the population, with minor provincial variations.
Drug expenses represent a significant financial exposure for all Canadian families. It's not uncommon for a family's drug expenses to exceed $10,000 or $20,000. Although it is rare, we have seen expenses exceed $250,000.
Many social programs and the federal tax system use a threshold of 3% or 4% as a measure of financial stress with respect to medical care costs. Using this threshold of 3%, four million Canadians require drugs that cost in excess of 3% of their family income. This includes 51% of those who are over age 65 and 8% of those who are younger than age 65. These numbers are before any reimbursement from drug plans. This group of individuals, with high drug expense needs relative to income, account for 66% of all drug spending outside of hospitals.
If we define the catastrophic drug expense to be the portion of the drug expense that is in excess of 3% of income, then 42% of all drug spending would be categorized as catastrophic. Our research shows that 89% of Canadians are protected from catastrophic drug expense by public and private insurance programs. Another 9% of the population has substantial but incomplete coverage. This leaves 2% of the population with no coverage whatsoever. They would be exposed to financial ruin in the face of severe drug expenses.
In conclusion, I would ask that the committee understand that access to the health benefits that can be derived from prescription drugs rests in large part on access to the financial mechanism of public and private drug insurance programs, particularly for those individuals with high needs relative to income. Maintaining and improving this system of drug insurance is a necessary part of ensuring that all Canadians--no matter where they live, or the level of their income, or the status of their health--have access to appropriate and timely medical treatment.
Thank you.