Thank you very much for the invitation to speak before this committee again.
Rather than provide a full introduction, I'll simply mention that since I last spoke before this committee in April 2016, I've published a further 22 peer-reviewed research papers on issues concerning the accessibility, affordability, and appropriateness of prescription drugs used in Canada and comparable countries.
I'm very pleased to report that my economic analyses of universal pharmacare in Canada have won two article-of-the-year awards, one from the Canadian Institutes of Health Research and one from the Canadian Medical Association Journal.
I'll frame my remarks based on important research published since the last time I testified at this committee. The first publication I want to speak about is not mine, but rather that of the parliamentary budget officer.
I believe the estimate of the PBO provides this committee with a reasonably solid analysis of what I would call a worst-case scenario of a universal pharmacare program that nevertheless remains an attractive option from an ethical and economic point of view.
The PBO estimated that Canadians are currently forgoing approximately 50 million prescriptions for medicines that might be covered under a universal public pharmacare program because of the out-of-pocket costs they face, either because they're uninsured or because they face cost-sharing rules under the insurance plans they have. The PBO estimated that universal pharmacare could help Canadians to afford those prescriptions and the health benefits that would be associated with their use. Although Canadians would be filling 50 million more prescriptions under a universal pharmacare system, the PBO estimated that a universal public drug plan would save Canadians $4 billion per year.
To be perfectly clear, the PBO used a number of assumptions that likely overstated the public cost of a universal pharmacare plan for Canada. It may be good strategy from a government budgeting point of view to assume the worst-case scenario and then work to bring in the program well under budget, but it is a conservative estimate because of the assumptions embedded in the modelling they did.
Some of the assumptions, such as the idea that the program would underwrite the costs of all medicines on the Quebec formulary, were at the request of this committee. Other assumptions, such as the decision not to look abroad to find out what single-payer systems pay for medicines, were likely the result of time constraints by the analytic team. Overall, however, the PBO estimates are about the same as the worst-case scenario in my economic models published in 2015.
Given the alignment of the PBO modelling with independent academic modelling on this topic, the question can now be put to rest. Canada can afford a universal public pharmacare system because it will improve access to medicines while simultaneously saving us billions of dollars per year. Anyone who says otherwise is either misinformed or trying to misinform others.
Next I would like to share some findings from comparative policy research I have been doing with my colleagues at Harvard University. This work concerns how the structures of drug coverage and pricing policies affect access to medicines and overall costs to society.
The first thing we have shown in that work is that coverage matters. Countries that provide universal coverage of medicines at little or no direct cost to patients achieve better outcomes in terms of access to needed treatments. Using international survey data from 2015 and 2016, we have found that Canadians are between two times and five times more likely to report skipping prescriptions because of cost than citizens in nine comparable countries with universal drug coverage. This is because millions of Canadians are either uninsured or have insurance that causes them to face rather blunt cost-sharing terms, such as deductibles and co-insurance, which have been proven to reduce access to necessary medicines.
Despite the rhetoric of drug manufacturers and the think tanks they might hire, this committee should not be fooled by claims that there is a lack of access to innovative medicines in countries with universal pharmacare models. All comparable high-income countries with universal pharmacare provide access to medicines of proven safety, effectiveness, and value for money within their health care systems. What these countries do not do is provide drug manufacturers with access to markets at prices that cannot be justified by quality scientific data concerning comparative cost-effectiveness. That is why industry stakeholders do not like universal pharmacare systems that are well integrated into the broader system of health care financing.
Related to this, the second finding from our comparative policy research that I'd like to share is that the way medicines are financed profoundly affects cost controls. In a recent paper, we showed that single-payer systems for prescription drug financing achieve better outcomes in terms of cost control than multi-payer systems do. On average, the single-payer systems in Australia, New Zealand, Norway, Sweden, and the United Kingdom cost 20% less per capita than the multi-payer systems in Switzerland, Germany, France, and the Netherlands.
Unfortunately for Canadians, we found that Canada's fragmented system of financing results in the highest prices and the lowest incentive for cost-conscious coverage and prescribing decisions amongst all of these comparable countries.
If Canada were to integrate medicines into our single-payer medicare system in ways that are comparable to Australia, New Zealand, Norway, Sweden, or the United Kingdom, we could save at least $7 billion per year while dramatically improving access to medicines.
This brings me to the final relevant finding from our work on the structure of financing of medicines, which is that none of the comparable countries with single-payer systems for health care use a separate private system for financing prescription drugs. All comparable countries integrate their medicines within their broader insurance systems, and in doing so, they provide system managers both with the incentives and the moral authority to carefully consider the costs and benefits of medicines versus other forms of care for the populations they serve. This is one reason that other countries are able to effectively manage pharmaceutical costs while retaining public support for the tough but necessary decisions they must make concerning which medicines will be covered and which will not.
The last area of research I wish to highlight concerns our obligation to provide universal pharmacare and the importance of the federal role in doing so. Canada has ratified United Nations declarations that establish the right to health care, including the right to access essential medicines without financial barriers as a fundamental human right. Member states of the UN have an obligation to uphold fundamental rights for all of their citizens, which means the federal government has specific responsibility to do so in Canada.
Despite the complexities of our federation, Canada has successfully achieved national standards for universal public insurance for medical care and hospital services, doing so in the 1950s and 1960s. It did so through a system of cost-sharing that ensured that all provinces both could and would provide for their residents. Frankly, Canada must do the same for prescription drugs, or at the very least for essential medicines.
Just as in previous chapters of Canadian medicare, the federal government will need to help make this happen. Some provinces cannot go it alone on pharmacare because of resource constraints. Other provinces cannot go it alone because of the intense regional pressures that stakeholders place on governments that wish to bring pharmaceuticals into medicare and thereby rein in the excessive cost of medicines in our current system. Governments are stronger when they act together, and I think in the Canadian context this requires a federal partnership with the provinces and territories.
The question may then turn to where to start. Earlier this year, with Dr. Nav Persaud and other colleagues at the University of Toronto, I published a paper showing that the establishment of universal public coverage of a limited basket of essential medicines is one place to start as governments work towards more comprehensive universal pharmacare. In that analysis, we showed how covering a list of just over 100 medicines could fulfill about three-quarters of Canadians' pharmaceutical needs.
Though more comprehensive public coverage would remain the goal for a national pharmacare program, starting with the essential medicines means that we would not need to replace existing private and public drug plans at the outset. While the other plans are being phased out, the essential medicines program could establish the Canadian process for publicly covering however many drugs made sense, given its initial budget.
Rather than the historical approach of defining which Canadians would be covered for virtually every medicine, this approach would determine which medicines would be covered for every Canadian. This would help fulfill Canadians' right to health, since the obligation of a nation is not to provide any medicine for any purpose at any price; the obligation of a nation is to ensure universal access to medicines that safely and effectively meet legitimate health needs and to do so at a cost that can be justified and sustained, given the competing health needs of our population and the competing means of addressing those needs with available budgets.
If the federal government provided, for instance, $3 billion per year, it could fund as much as 50% of the cost of a reasonably comprehensive essential medicine list that could be provided to all Canadians within a year. Within that time frame, the list of medicines could be determined by an expert advisory committee, a tendering process could be established and implemented for the roughly 100 medicines that would make the cut, and provinces would certainly be brought along by the savings to their budgets and the benefits to their residents.
Despite being limited to a small number of drugs, such a program would likely save Canadian households and Canadian businesses approximately $6 billion, generating a net savings to Canada of $3 billion.
As the program grows, it could be expanded to one as comprehensive as the pharmacare model for which the PBO estimated the cost. If based on best procurement practices in the pharmaceutical sector, that program would certainly result in net savings that would exceed the PBO's estimate of $4 billion per year.
I'll conclude by noting that there are clear and compelling options for an equitable and sustainable system of universal pharmacare in Canada. I'm very grateful to be invited back again to provide evidence you require as you decide which of these options is best for Canadians.
Thank you.