The Fraser Institute

The Fraser Institute

March 15, 2005 07:01 ET

Centralizing government control of prescription drugs not the answer to improving patient choice and access

VANCOUVER, March 15 - Provinces whose Pharmacare plans try to
contain costs by micro-managing the medicines that beneficiaries use
short-change both patients and taxpayers, according to Canadian Pharmacare:
Performance, Incentives, and Insurance, released today by The Fraser
This finding should cause provincial governments to re-think approaches
such as the Common Drug Review, whereby a government-appointed committee makes
national recommendations on the benefits of individual drugs.
Provincial drug-benefit plans now account for almost half of the
country's prescription spending and provinces vary widely in how they provide
this coverage. This new study discusses the differences between provincial
drug plans with respect to breadth of coverage and cost sharing between
patients and taxpayers, and introduces two new measurements to describe how
provincial Pharmacare plans perform as insurers and how generous they are to
their beneficiaries.
Success on both the new performance indexes in this study, and in
managing spending, are associated with policies such as cost-sharing with
beneficiaries (through co-payments and deductibles) and limiting benefits via
income-testing. However, government-run drug benefit plans should not be
interfering in deciding which medicines are best for patients.
"The government should be subsidizing the patient, not the producer,"
said John R. Graham, co-author of the paper and an Adjunct Scholar at The
Fraser Institute. "If there are people who can't afford to eat, the best
policy is to give those people money to buy groceries, not for the government
to promise to feed everybody at nominal cost, and then ration out bread and
water to the whole population. Unfortunately, that's the way many provinces
have approached prescription benefits."
The first measure in this new study is the Prescription Choice Index. The
index assesses how quickly provinces accept new medicines for coverage by
their public drug-benefit plans. It addresses the question of how patients
might rank different provinces' programs, if they were able to choose easily
between them. Quebec, Alberta, and Saskatchewan lead by this measurement, with
the Atlantic Provinces faring the worst.
The second measure in the study is the Prescription Insurance Index,
which gauges how well provincial Pharmacare plans function as insurers, which
offer protection against catastrophic disease rather than relatively
predictable illness.
This is an important index because provincial Pharmacare plans operate
differently from the government monopoly for supplying "insurance" for
physicians' and hospitals' services, which covers costs from the first dollar.
Provincial drug-benefit plans have patients pay some costs, thus giving them
some control of how the money is spent.
Saskatchewan, Alberta, and Quebec lead this index as well, with Prince
Edward Island, Ontario, and Newfoundland lagging. When the two indexes are
combined, Quebec likely performs best overall, with the Atlantic provinces
performing the worst.
The study also compares these results with how much each provincial drug
benefit plan spends per resident, on an age-adjusted basis. Again, Quebec
likely performs best on "value for money" according to these criteria, whereas
Saskatchewan and Alberta purchase their performance at a high cost to
"Ontario spends a lot but buys little, according to our measurements. On
the other hand, New Brunswick and Prince Edward Island spend little on
Pharmacare and receive little in return," noted Graham.

Established in 1974, The Fraser Institute is an independent public policy
organization with offices in Vancouver, Calgary, and Toronto. The media
release and study (in PDF) are available at

Contact Information

  • John R. Graham
    Adjunct Scholar
    The Fraser Institute
    Tel: (604) 733-5646