Universal Drug Plan Cost Estimate and Implementation Overview
Explore the cost estimate and implementation details of a national universal drug plan presented to the Centre for the Study of Living Standards. The presentation covers the creation of a Canadian drug agency, development of a national formulary, and a strategy for high-cost drugs. Learn about the scope of the pharmacare plan and its implications for drug spending in Canada.
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Presentation Transcript
Cost Estimate of a Single-Payer Universal Drug Plan Presentation to the Centre for the Study of Living Standards May 22, 2024
Context Budget 2018: the Government announced the creation of the Advisory Council on the Implementation of National Pharmacare Budget 2019: Government s intention to move forward on three foundational elements of National Pharmacare: creation of a Canadian drug agency development of a national formulary national strategy for high-cost drugs for rare diseases Creation of a national universal pharmacare program by the end of 2023 March 2024 is a condition of the House of Commons supply- and-confidence agreement between the Liberals and the NDP June 6, 2025 3
Previous PBO work September 2017: estimate of the net cost of implementing a Pharmacare program as per a request from the House of Commons Standing Committee on Health (HESA) 2019: 3 election proposal costings on the net cost of introducing a universal drug plan 2021: election proposal costing on the net cost of a universal drug plan (request from the NDP) October 2023: updated cost estimate of a single-payer universal drug plan June 6, 2025 4
Drug Spending in Canada by primary payer in 2021-2022 $4.9 14% 100 80 60 $16.9 46% 40 $14.7 40% 20 0 MB PE NS BC AB ON QC NB NL SK Out-of-Pocket Private Public June 6, 2025 6
Share of Drug Prescriptions and spending by Drug Category Spending Prescriptions 80 60 40 20 0 June 6, 2025 7
The Scope of Pharmacare Based on parameters provided by the House of Commons standing Committee on Health in September 2016 Single-payer Universal Replace existing public and private drug plans Use the RAMQ formulary Require no copayment except for brand-name drugs (5$) Some exemptions June 6, 2025 9
Model Assumptions Assumption Formulary Behavioural Response None Price discount due to formulary commonality Confidential rebates Baseline Pharmacare Quebec Medications List (RAMQ) 13.5% Lowest observed price None For public payer only: 20% for brand name drugs 25% for new to Canadian market drugs only Current trends towards greater generic substitution will continue for all types of plans until they reach 7% Substitution with the lowest priced generic covered by the provincial drug plan for public payer Substitution with the provincial lowest priced generic for private payer and out-of-pocket coverage Biosimilars will occupy 40% of the market share in their respective group after 10 years being on the market For all drugs on the formulary: 20% for brand name drugs 25% for new to Canadian market drugs only Generic substitution rate will converge to 7% over four years Substitution with the lowest priced generic on the formulary Generic substitution Biologic and biosimilar consumption June 6, 2025 11
Projection Methodology Prescription cost drivers: Volume of drugs used Price of prescription drugs Population growth Shifts between lower- and higher-cost drugs (drug-mix) Decreasing use of Direct-acting antivirals COVID-19 related drugs Dispensing fees Markups Behavioural impact June 6, 2025 13
Results Incremental cost to public payer(s) (billions $) 2024-2025 2025-2026 2027-2028 2026-2027 Fiscal Year Total Drug Expenditure under Pharmacare 33.2 35.0 36.8 38.9 Public Plans Drug Expenditures -18.4 -19.4 -20.4 -21.6 Direct Federal Drug Expenditures -3.3 -3.4 -3.5 -3.6 Pharmacare Co-Payment Revenues -0.3 -0.3 -0.3 -0.3 Incremental Cost to the Public Sector 11.2 11.9 12.6 13.4 June 6, 2025 15
Results Cost by Province (billions $), 2024-2025 Province BC AB SK MB ON QC NB NS PE NL Total Public Plans 1,200 1,500 640 520 7,670 5,920 350 380 50 170 18,400 Pharmacare 2,860 3,050 920 910 12,560 10,510 880 920 130 480 33,220 Net cost 1,660 1,550 280 400 4,880 4,590 530 550 90 300 14,830 June 6, 2025 16
Results Economy-wide potential cost savings (billions $) 41.1 38.9 38.8 36.8 40 36.6 35.0 34.6 33.2 30 20 10 - 2024-25 2025-26 2026-27 2027-28 Total Expenditure on RAMQ drugs (Baseline) Total Expenditure on RAMQ drugs under Pharmacare June 6, 2025 17
Model Assumptions Assumption Formulary Baseline Pharmacare Drugs that were accepted by the catastrophic programs of British Columbia, Ontario, Newfoundland and Labrador and Prince Edward Island between April 1, 2016, and March 31, 2020 Behavioural Response None None Price discount due to formulary commonality None Lowest observed price Confidential rebates For public payer only: 20% for brand name drugs 25% for new to Canadian market drugs only For all drugs on the formulary: 20% for brand name drugs 25% for new to Canadian market drugs only Generic substitution None None Biologic and biosimilar consumption Biosimilars will occupy 40% of the market share in their respective group after 10 years being on the market June 6, 2025 19
Results Incremental cost to public payer(s) (billions $) 2024-2025 2025-2026 2027-2028 2026-2027 Fiscal Year Total Drug Expenditure under Pharmacare 23.0 24.3 25.7 27.1 Public Plans Drug Expenditures -18.4 -19.4 -20.4 -21.6 Direct Federal Drug Expenditures -0.2 -0.2 -0.2 -0.2 Pharmacare Co-Payment Revenues -2.6 -2.8 -3.1 -3.4 Incremental Cost to the Public Sector 1.8 1.9 2.0 2.0 June 6, 2025 20
Results Economy-wide potential cost savings (billions $) 40 30.7 28.9 27.2 30 27.1 25.7 25.6 24.3 23.0 20 10 - 2024-25 2025-26 2026-27 2027-28 Total Expenditure on Catastrophic Drugs Total Expenditure on Catastrophic Drugs under Pharmacare June 6, 2025 21
Model Assumptions Assumption Formulary Baseline Pharmacare The adapted for Canadian population World Health Organization s Model List of Essential Medicines created by researchers at St. Michael s hospital in Toronto None None Behavioural Response Price discount due to formulary commonality Confidential rebates 13.5% Lowest observed price For public payer only: 20% for brand name drugs 25% for new to Canadian market drugs only Current trends towards greater generic substitution will continue for all types of plans until they reach 7% Substitution with the lowest priced generic covered by the provincial drug plan for public payer Substitution with the provincial lowest priced generic for private payer and out-of-pocket coverage Biosimilars will occupy 40% of the market share in their respective group after 10 years being on the market For all drugs on the formulary: 20% for brand name drugs 25% for new to Canadian market drugs only Generic substitution rate will converge to 7% over four years Substitution with the lowest priced generic on the formulary Generic substitution June 6, 2025 Biologic and biosimilar consumption 23
Results Incremental cost to public payer(s) (billions $) 2024-2025 2025-2026 2027-2028 2026-2027 Fiscal Year Total Drug Expenditure under Pharmacare 9.4 9.8 10.2 10.7 Public Plans Drug Expenditures -18.4 -19.4 -20.4 -21.6 Direct Federal Drug Expenditures -0.9 -1.0 -1.1 -1.1 Pharmacare Co-Payment Revenues -0.1 -0.1 -0.1 -0.1 Incremental Cost to the Public Sector -10.0 -10.7 -11.4 -12.1 June 6, 2025 24
Results Economy-wide potential cost savings (billions $) 20 15 10.7 10.4 10.2 9.9 9.8 9.4 9.4 9.0 10 5 - 2024-25 2025-26 2026-27 2027-28 Total Expenditure on Essential Drugs Total Expenditure on Essential Drugs under Pharmacare June 6, 2025 25
Bill C-64 An Act respecting pharmacare
Bill C-64 On February 29, 2024, Minister of Health tabled Bill C-64 An Act respecting pharmacare The Bill proposes: Universal coverage for a range of contraceptives and diabetes medications as the first phase of national universal pharmacare Expand and enhance , rather than replace, existing coverage June 6, 2025 27
PBO Pharmacare costings Assumption 2023 Report 2024 Costing Update Bill C-64 14% (because no co-pay) None (will not replace existing plans) Formulary Behavioural Response Price discount due to formulary commonality Confidential rebates Quebec Medications List (RAMQ) 13.5% Lowest observed price For all drugs on the formulary: 20% for brand name drugs 25% for new to Canadian market drugs only None Generic substitution Generic substitution rate will converge to 7% over four years Substitution with the lowest priced generic on the formulary None (little scope) Biologic and biosimilar consumption Biosimilars will occupy 40% of the market share in their respective group after 10 years being on the market None (little scope) Replaces public and private drug coverage? Yes No, expand and enhance , rather than replace, existing coverage Source: Office of the Parliamentary Budget Officer. June 6, 2025 28
Detailed 5-Year Cost ($ millions) Fiscal year Cost ($ million) Cost recovery due to public drug plans coverage (a) Cost recovery due to private drug plans coverage (b) Total cost recovery (a + b) Total cost after recovery 2024-2025 1,010 -240 2025-2026 1,070 -250 2026-2027 1,140 -270 2027-2028 1,210 -280 2028-2029 1,280 -300 Total 5,700 -1,340 -440 -470 -490 -520 -560 -2,480 -680 -720 -760 -810 -860 -3,820 340 360 380 400 420 1,890 Source: Office of the Parliamentary Budget Officer. June 6, 2025 29
Beneficiaries In 2024-25, we estimate: 75,500 will benefit from diabetes drug coverage from Bill C-64 530,500 will benefit from contraceptives coverage from Bill C-64 Those who have public or private coverage may also benefit from this program (co-pay, deductible) June 6, 2025 30
Public Plans Coverage Rates Average coverage rates by jurisdiction in 2021-22 for drugs listed on Bill C-64 formulary Jurisdiction BC AB SK MB ON QC NB PE NS NL Average coverage rate 32% 74% 27% 20% 92% NA 92% 60% 77% 82% Source: PBO using data from CIHI. June 6, 2025 31
Appendix A: Cost growth factors COVID-19Dispensing Volume Price Population Drug-mix DAA Markups fees 3% 5% 1% 1% 0% 1% 3% 3% 6% 1% BC AB SK MB ON QC NB NS PE NL Non- public 1% 1% 1% 2% 0% 1% 2% 1% 1% 1% -1% -2% -1% -1% -1% -1% -1% -2% -2% -1% 3% 2% 3% 0% 2% 2% 2% 2% 3% 0% 3% 4% 5% 6% 6% 5% 6% 5% 5% 3% -2% -1% 0% -1% 0% -1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 1% -2% 3% 5% 0% 0% 6% 3% June 6, 2025 34
Appendix B: Percent of Brand-name Drug Dispensed When Generic Is Available, Private and Out-of-Pocket Payer June 6, 2025 35
Appendix B: Percent of Brand-name Drug Dispensed When Generic Is Available, Public Payer June 6, 2025 36
Overlap with RAMQ Province BC AB SK MB ON QC NB NS PE NL Number of Drugs 83% 90% 82% 84% 84% 100% 89% 86% 89% 87% Expenditure 89% 87% 83% 82% 90% 93% 87% 87% 83% 86% June 6, 2025 37
Results Cost by Province (millions $), 2024-2025 Public PlansCatastrophic Additional Drugs 373 467 157 126 2,187 2,410 113 122 13 58 6,026 Province Net cost Drug Plan 1,893 2,275 661 672 9,255 6,413 671 692 103 358 22,992 BC AB SK MB ON QC NB NS PE NL Total 1,200 1,502 636 517 7,673 5,922 352 375 46 173 18,397 694 773 25 155 1,581 491 319 316 57 184 4,595 June 6, 2025 38
Results Cost by Province (millions $), 2024-2025 Additional Drugs 782 1,080 483 387 6,169 4,529 262 264 34 118 14,107 Province Public Plans Pharmacare Net cost BC AB SK MB ON QC NB NS PE NL Total 1,200 1,502 636 517 7,673 5,922 352 375 46 173 18,397 1,061 955 310 315 3,113 2,854 263 296 46 167 9,383 -138 -547 -326 -202 -4,560 -3,068 -89 -80 1 -6 -9,014 June 6, 2025 39
