Having painted itself into a fiscal corner through “dramatic” tax cuts, the BC government is now claiming it cannot afford Pharmacare (the province’s public drug benefit plan). But cutting Pharmacare won’t save the government money, nor will it reduce drug costs. Rather, cutting Pharmacare will merely shift drug costs onto individuals and employers, and risks increasing hospital costs.
The Health Minister is correct that Pharmacare is an expensive program and its costs are one of the fastest rising components of the health care budget. Nevertheless, it probably saves British Columbia money. To understand this, we have to look at why Pharmacare costs are rising.
The complete explanation is complex. Research has identified a number of key factors–rising drug costs and longer patents (a gift from the Mulroney and ChrŽtien governments), over-prescribing, drug marketing to physicians, and direct-to-consumer drug advertising, among others. Sadly, the new Liberal government has shown little interest in tackling these critical issues.
Two other reasons for rising Pharmacare costs are an aging population, and the decision to shift from hospital-based care to outpatient and home treatment. In short, the plan for stemming the escalation of overall health care costs involved increased spending on the Pharmacare program.
Cutting Pharmacare thus risks increasing–not decreasing–overall health costs. The evidence from Quebec is telling. A study published in the January 24th 2001 edition of the Journal of the American Medical Association looked at what happened when that province raised the cost of prescriptions for those on social assistance and the elderly from a nominal two dollars to twenty-five percent of the total cost per prescription. The effect was that fewer patients took the drugs they were prescribed, resulting in increased adverse effects and more visits to expensive emergency rooms.
The largest group receiving benefits under Pharmacare is the elderly, who often require multiple prescriptions. While most British Columbians believe Pharmacare should pay for the drug costs of those in need, some question why we should pay for Jimmy Pattison’s prescriptions. The answer is that there are not many Jimmy Pattisons among the elderly. In fact, roughly seventy-five percent of senior couples have incomes below the provincial median family income of $52,000. Fifty percent have incomes at or below $33,000 and only ten percent have incomes above $76,000. If we attempt to exclude only those with “high” incomes, the cost of administering the screening program may be more than the savings on benefits. The Jimmy Pattisons of BC should pay more, but they should do so through a progressive income tax system.
The government is pleading poverty, claiming that BC’s public plan covers a larger share of drug costs than in any other province. That is true. But what they fail to mention is that overall per capita drug expenditures (public and private combined) are lower in BC than in any other province. In other words, Pharmacare is doing exactly what it was supposed to. The fact that we have chosen to pay for more drugs collectively is saving money. Governments can control costs through bulk purchasing. In contrast, if the share of expenditures borne by the public system decreases, Pharmacare will lose influence over drug prices.
The government still has time to change its mind, but it is unlikely to do so unless there is a public outcry. That may come if the public realizes that what many of us save in tax cuts will now be spent on increased out-of-pocket drug expenditures. It is worth remembering the value of universal programs paid for by a progressive tax system: public Pharmacare–like so many social programs–has proven to be both more efficient and more equitable.
Daniel Cohn, Ph.D. is an assistant professor of political science at Simon Fraser University who specializes in health policy, and a research associate with the BC Office of the Canadian Centre for Policy Alternatives.
