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Justin Trudeau Hasn’t Delivered On His Pledge to Establish Public Pharmacare

Canada’s public health system is often seen as a model for the US. When it comes to pharmacare, however, Canada imitates its neighbor’s lousy practices, and Justin Trudeau has broken his pledge to establish a public prescription system that would be more just and more efficient.

Justin Trudeau has not kept his election promise to institute universal pharmacare in Canada. (Flickr)

Justin Trudeau’s Liberal government has not kept its election promise to institute universal pharmacare. In Canada, health care coverage still ends the moment one receives a prescription to fill. One in five Canadians report that they are unable to take their medication as prescribed due to out-of-pocket costs, whether they have insurance or not.

The New Democratic Party recently brought forward the Canada Pharmacare Act (Bill C-213) in a largely symbolic attempt to test the Trudeau government’s commitment. The bill’s failure was disappointing and spoke volumes about the Liberal Party, but it came as no great surprise.

Publicly funded, universal health care systems are undeniably superior to their private counterparts — not just from an ethical standpoint, but also in terms of basic efficiency. A well-run universal health care system can also contribute to a society’s wider sense of solidarity and public trust. The refusal of vested political and economic interests to recognize the advantages of universal health care is akin to maintaining that the Earth is flat.

Unjust and Inefficient

Most people in Canada get their prescription medication through a jerry-rigged system of employment-based private benefit plans. Trudeau’s own National Advisory Council has urged his government to develop national standards for prescription drug insurance that would extend universal public coverage to all.

By excluding prescription medication from its system, Canada stands apart from every other country in the Organisation for Economic Co-operation and Development (OECD) that has a form of universal health care. Compared to these countries, Canada has unusually low levels of pharmaceutical research and development, higher drug prices, and much lower levels of drug coverage.

As insurers of last resort, Canada’s provinces offer varying degrees of coverage to those who can prove they are sufficiently disabled, vulnerable, or destitute to warrant aid. Many of these plans still incorporate premiums, deductibles, and co-payments that can be prohibitively expensive and leave too many people underinsured.

The great social insurance programs established in the United States and Canada during the twentieth century were highly effective in protecting individuals against unexpected economic shocks and enjoyed wide public support. Although they had shortcomings, programs such as unemployment benefits, disability insurance, and old age pensions demonstrated the effectiveness of comprehensive welfare policies. They established a strong belief in the idea that contributions to the public good are of universal benefit.

Analysts often look at social policies purely in terms of their material effects and outcomes, but we also need to consider their influence on public attitudes. The way that government officials design a policy can either enhance or diminish social solidarity and belief in the competence of government to carry out important duties.

Confronted with right-wing fables that elevate “personal responsibility” above the public good, we can lose our ability to grasp what collective power makes possible. Cooperation enables us to achieve far more security and prosperity than is possible through entirely private efforts. After all, even the most responsible individuals can still get cancer.

A registered nurse with the Florida Department of Health cares for a nursing home resident in Northeast Florida. (Sgt. Michael Baltz / Flickr)

Privatized health care often results in more red tape than its public equivalent. In the absence of socialized medicine, individuals have to navigate complex administrative systems that are either means tested or prohibitively narrow in scope.

Because employers have little incentive to pick up the broken pieces left by our frayed social safety nets, risk is something people are increasingly left to manage on their own. The sorry state of Canada’s pharmaceutical insurance system exposes the kind of inefficiencies that are inherent to such an individualized approach.

There is already a clear moral case for universal pharmacare: in a truly equitable society, no one should lose their access to necessary medicine because of cost. But we can also demonstrate the advantages of pharmacare in terms of efficiency gains and the benefits that come from socializing individual risk.

Many people think of welfare state programs as redistributive remedies that address preexisting forms of inequality. But these programs are, first and foremost, insurance schemes — that is, risk-pooling arrangements. We should really see them as pre-distributive mechanisms to protect individuals against risk by spreading it across all of society.

The Law of Large Numbers

Insurance schemes, whether private or public, rely heavily on the law of large numbers. Mathematicians often explain this law by using the example of a simple coin toss experiment.

If you were to flip a coin ten times, you would probably wind up with an odd ratio between heads and tails — perhaps six heads and four tails. But if you were to flip the coin a thousand times, the result would be much closer to a fifty-fifty average. The more you increase the sample size, the closer you get to determining your average chance of landing either heads or tails.

When we apply it to insurance, the law of large numbers offers some important insights for advocates of universal health and drug coverage. Firstly, larger sample sizes are more “representative” of the sample. For example, larger drug insurance policies allow the insurer to collect more precise information about rates of disease, trends in prescribing, and drug use. A centralized system can fill critical data gaps in health care systems, allowing for the planning, coordination, and delivery of more efficient care.

Secondly, centralized information systems have greater predictive power in analyzing the likelihood of adverse outcomes and the average cost of claims. Extreme, “outlier” cases can significantly distort estimates in smaller insurance pools. Larger groups can better account for variability. In the case of pharmaceutical coverage, larger insurance groups can arrive at more accurate estimates of risk probability and the average cost of claims.

These factors also influence the overall risk profile of an insurance policy. Because larger groups cover a more diverse mix of individuals with varying levels of health risk, a handful of extreme cases are less likely to present distorted estimates. This, in turn, also makes larger insurance policies more financially sustainable than smaller ones.

If the largest risk-pool is the most efficient one, it is worth asking: What entity is best equipped to insure everyone? Non-state actors are simply incapable of operating at the scale required to properly leverage the advantages made possible by the law of large numbers. A publicly run pharmacare plan can remedy inefficiencies in health care systems in three important areas: administrative costs, the price of pharmaceuticals, and issues of access.

Money Down the Drain

Any drug plan has significant fixed costs associated with beneficiary enrollment, price negotiation, claims administration, revenue collection, and financial management. The outlay required by private firms to make shareholder payments adds tremendous expense and perverse incentives to operational costs.

In Canada, a unified system would eliminate unnecessary costs and the unnecessarily duplicative work needed to run more than a hundred thousand private plans and dozens of public ones. According to the World Health Organization, this could cut anywhere between $1 and $2 billion dollars from current spending.

The unwieldy networks of private insurance plans lose billions of dollars every year to overpriced medication. Countries with universal schemes like the UK and New Zealand have greater leverage with which to negotiate lower prices from pharmaceutical companies. Because they are the sole buyer for an entire market, they can also save money through bulk purchasing.

The rising cost of prescription medicine has placed new financial pressures on employers who, in turn, have sought to pass these costs off to employees through lower coverage and higher co-pays, or by cutting back certain benefits entirely. At the same time, labor market trends in part-time employment — particularly for women, younger people, and people of color — have left more and more working people with no coverage at all.

Free-market cheerleaders often argue that lower drug prices would limit essential drugs currently covered by private plans, hamper the market for research and development, and reduce the incentive for companies to produce innovative “life-saving” medicines. Yet ample research disproves this fearmongering rhetoric. Multiple studies have debunked the frankly risible claim that the private sector has invented most of the drugs on the market.

A pharmacy technician grabs a bottle of drugs off a shelf. (George Frey / Getty Images)

In truth, pharma giants often leach off research and development that is conducted in publicly funded labs and universities. They also frequently engage in “evergreening”: the practice of fine-tweaking existing drugs for the sole purpose of extending patents to squeeze out more profit. One study found 78 percent of drugs associated with new patents between 2005 and 2015 to be only slight modifications of existing drugs that were devoid of any novel medical benefits.

The political influence of the pharmaceutical lobby will, of course, made it harder to pass universal pharmacare legislation. But winning Medicare in Canada wasn’t easy either. Countries with comparable political systems and levels of wealth, like the UK and New Zealand, show that pharmacare programs are not only viable, but also far more efficient when it comes to cost and access.

Prevention Is the Cure

Universal insurance schemes like pharmacare socialize risk in advance of potential disaster by pre-distributing the resources that are needed to cope with the uncertainty of the future. By drawing from a system into which people contribute over the whole of their lives, universal pharmacare is better positioned to ensure lifelong care than private companies. It also preemptively safeguards against the downstream social costs that are created by a lack of coverage.

Canada’s current system cedes tremendous power to employers as gatekeepers to prescription medication and benefactors of our well-being. Access to vital services like eye care, psychotherapy, and dental care are also linked to employment as things stand. They should be universally accessible too.

The struggle for universal pharmacare is a fight for our safety, financial security, and freedom. Centralized public ownership over a unified insurance scheme is not only the most egalitarian way to organize against uncertainty. It is also the most efficient.