Updates to National Pharmacare in Canada and its effect on Benefit Plans

Canada is currently the only country with a universal healthcare system that does not include some form of prescription drug coverage. This contributes to the fact that Canadians spend more per person on drugs than citizens in most other OECD countries. This is about to change – on February 29, 2024, the Minister of Health introduced Bill C-64, known as the Pharmacare Act.

This Bill outlines the foundational principles for the initial phase of national universal Pharmacare in Canada and

represents a significant step toward expanding publicly funded health care in Canada. The Bill aims to address the absence of universal drug coverage, aligning the healthcare system with peer nations.

The initial Bill describes the Government of Canada’s commitment to collaborating with provinces and territories to establish universal, single-payer coverage for a selection of contraception and diabetes medications.

Who will be covered?

The Act aims to enhance the accessibility and affordability of prescription drugs and related products for all Canadians. It seeks to foster collaboration with provinces, territories, Indigenous peoples, and other stakeholders to progress towards national universal Pharmacare.

According to Stats Canada, 79% of Canadians have some type of access to prescription drug insurance.

While large proportions of Canadians currently have some form of prescription drug insurance, the level of coverage can differ significantly. This is due to varying plan designs incorporating various cost-sharing mechanisms including the use of deductibles, co-payments, and out-of-pocket spending limits. Some plan designs also include limits or caps on an annual or lifetime basis. Drug plan costs can also vary significantly due to the nature of the underlying covered population. As a result, 26% of total retail pharmaceutical spending is paid out-of-pocket by Canadians.

The introduction of the National Pharmacare Bill aims to provide more equitable coverage for all Canadians.

What will be covered?

The aim of the national Pharmacare bill is the creation of a national formulary for essential prescription drugs and related products and the establishment of a framework for developing a national bulk purchasing strategy. The program would aim to cover essential drugs listed in an initial formulary representing about 50% of all prescriptions. Rather than implement the initial formulary all at once, the Government will take a phased-in approach to rolling out the program.

The initial phase of the Pharmacare plan will cover diabetes and birth control medications.

The proposed contraceptive coverage includes:

Oral Contraceptives (both monthly and morning after)
Intrauterine devices (IUDs), both copper and hormonal
Injections, implants, and rings

Off-the-shelf contraceptives, like condoms, will not be covered by this plan. This benefit will result in 9 million Canadians of reproductive age gaining improved access to contraception and reproductive autonomy, thus lowering the likelihood of unintended pregnancies and enhancing the capacity to plan for the future.

For diabetes, the proposed coverage includes:

Insulin (All types)
Metformin
Devices and supplies like glucose monitoring strips & Syringes

This benefit will provide improved access to 3.7 million Canadians living with diabetes, and potentially reduce the risk of serious life-changing health complications such as blindness or amputations. A notable exception to the list of covered drugs is GLP-1 inhibitors, such as Ozempic, which can also be prescribed for weight management purposes and recently has been a significant driver of plan costs.

These will be available free of charge at pharmacies to those with a valid prescription.

What does this mean for Benefit plans?

Expansion of national drug coverage does not mean the end of current privately sponsored drug plans. Instead, it will be an opportunity for plan sponsors to reassess their benefit design and provide enhancements to other benefit categories that have been lagging as plans struggled to contain their increasing drug spend.

Depending on the efficiency and timing of the initial phase of the national Pharmacare plan, benefit plans could expect a decrease in drug spend associated with the drugs included in the initial formulary. The decrease in drug plan cost will vary depending on plan design and jurisdiction. Once reductions in drug plan costs are realized, plan sponsors can start to consider either reducing the cost of providing benefits or channelling benefit dollars into benefit enhancements to meet the needs of their members.

What is next?

In addition to the initial phase, Bill C-64 also outlines the new Canadian Drug Agency’s work toward the development of a national formulary, developing a national bulk purchasing strategy, and supporting the publication of a pan-Canadian strategy regarding the appropriate use of prescription medications.

The implementation of a national Pharmacare plan can provide increased access to more healthcare services to all Canadians. Reducing the drug spending of privately sponsored plans will open up doors to enhance benefits for plan members in other categories like mental health and dental care.

In addition to this, if implemented effectively, the increased buying and bargaining power of the Canadian Government could mean better prices for drugs that people are currently using, effectively leading to a reduction in per capita spending on pharmaceuticals in general.

We endorse universal Pharmacare, recognizing healthcare as a basic right that should be accessible to all individuals. Though the specifics will require careful consideration, we are cautiously optimistic that a phased-in approach will allow for an orderly implementation of the program. We will diligently monitor the programs’s progress and provide updates as they become available.

Legislation: Bill C-64, An Act respecting Pharmacare (Pharmacare Act)

Backgrounder: Universal Access to Contraception
News Release: Government of Canada Introduces Legislation for First Phase of National Universal Pharmacare
Backgrounder: Universal Access to Diabetes Medications, and Diabetes Device Fund for Devices and Supplies