A universal prescription drug plan could chop more than $10 billion off Canada's annual health-care bill, according to a new policy study that its authors say "explodes the fallacy" that such a plan is unaffordable.

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A new study on Canada's pharmaceutical policies concludes that a universal drug plan could save up to $10.7 billion a year in total drug expenditures. ((Nati Harnik/Associated Press))

The report, released on Monday by the Canadian Centre for Policy Alternatives, concludes the existing patchwork of private and public plans in Canada is inequitable, inefficient and costly.

"Canada’s pharmaceutical policies are a total failure," the study's author, Marc-André Gagnon, told reporters on Monday in Ottawa.

The report also finds that Canada is either the third or fourth most expensive country for brand-name drugs every year — after the United States, Switzerland and Germany — because it deliberately inflates drug prices in order to attract pharmaceutical investment.

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Meanwhile, Canada has one of the highest annual growth of drug costs among industrialized countries — much higher than countries that have universal pharmacare programs, such as France, Australia and Sweden, said Gagnon, a professor of public policy at Carleton University.

"The cost of such policies far exceed the benefits to Canadians from having a domestic pharmaceutical industry," he said. 

The current system is also unfair, Gagnon said, because Canadians receive different coverage depending on what plan they're in and where they live.

Lower administrative costs

Universal pharmacare would lead to savings of nearly $3 billion a year if Canada keeps its current policy, Gagnon said.

But the savings could increase to $10.7 billion, or 43 per cent of annual drug costs, if Canada cut all privileges to the pharmaceutical industry for drug costs, according to the report.

Much of what Canadians spend on prescription drugs is eaten up by administration costs from hundreds of different private, public and company plans, according to the report.

A national drug plan would allow governments to buy drugs in bulk and be the sole administrator, which would mean billions of dollars in savings, agreed Dr. Michael Rachlis, a health policy analyst who teaches medicine at the University of Toronto.

"We reduce the administrative costs because private insurance is much more expensive to administer than public insurance, which is one of the reasons why U.S. health care costs are so much higher than ours," Rachlis said.

The report comes as provincial and territorial health ministers meet in St. John's, where rising health-care and drug costs are high on the agenda.

"Rising costs in health care are affecting every province, and any time that we can look at a program that will help contain those costs it's certainly worth looking at," Saskatchewan's Health Minister, Don McMorris, said in an interview from St. John's on Monday.

Timing right?

At the close of Monday's session in St. John's, Ontario Health Minister Deb Matthews said her province spends about $4 billion a year on drugs, and provinces collectively spend about $10 billion. The ministers think they can get better prices by working together, Matthews told reporters.

A national pharmacare program would require agreement from all provinces and territories.

The timing could be right for such a program, said Steve Morgan, a health economist with Centre for Health Service and Policy Research at the University of British Columbia.

For the first time in decades, drug prices are starting to fall as patents for "blockbuster" drugs like those used to control high blood pressure and cholesterol start to expire, Morgan said. The U.S. is already seeing a slight slowdown in spending, he said.

Meanwhile, the federal and provincial governments are looking for a new plan to replace the Canada Health Accord, which expires in 2014.

Morgan said universal pharmacare could signal a renewal that would benefit all Canadians. So far, the federal government has shown little interest.

The health ministers' meeting wraps up on Tuesday.