Falling between the Cracks: Canada's Seniors and Pharmacare Reform
by Christopher Murray


This study takes a critical look at the Canadian healthcare system, specifically at the publicly-funded provision of pharmaceuticals, known as Pharmacare. Particular attention is devoted to the Canadian population over 65 years of age, as this demographic is the most dependent on prescription medication. Due primarily to the epidemiological transition and the increases in life expectancy, many Canadians are reaching their old age to find themselves burdened with disease and in need of outpatient drug therapies. Additionally, despite the advent of Medicare in Canada in 1971, prescription pharmaceuticals are still not covered under the federal plan, and it has been up to the provinces to decide how to finance the escalating drug costs. The examples of the ways in which the Provincial Governments of Manitoba and Ontario have attempted to extend Medicare coverage to include the pharmaceutical costs of senior citizens will be examined, as these provinces took very different approaches. This case study is illustrative of the fact that the existing provincial Pharmacare plans are often highlighted as one of the main obstacles to a nationalized Pharmacare system. Finally, this paper will briefly explore how the cutbacks in healthcare spending since the 1990s have contributed to the exacerbation of the difficulties that seniors have in paying for their prescription medications. While the need for the creation of a nationalized Pharmacare plan has been discussed in the political arena at length, it unfortunately seems that the citizens of Canada, particularly its seniors, will have to continue to living without full coverage of their drug-related costs.

For decades, Canadian citizens have enjoyed nationwide Medicare, benefitting from access to publicly-funded hospital visits and physician consultations, among other essential services (Evans 2000:889). Despite this advantageous arrangement, private healthcare costs for the same citizens covered under the public plans have been steadily rising in recent years. As numerous studies have demonstrated, these rising costs are largely due to the increasing cost of outpatient pharmaceuticals. Far from being an equal burden, these drug costs are concentrated among certain vulnerable demographics, especially those over 65 years of age (hereafter referred to as senior citizens). This paper will examine the challenges facing Canada’s seniors when it comes to paying for their drug-related medical expenses, and how their plight fits into the wider context of past and projected attempts to provide universal drug coverage for all Canadians.

To begin with, a brief introduction to Canada’s elderly population, including their healthcare usage patterns, and to the Canadian healthcare system will be provided. This will be followed with an exploration of the recent trends in the costs of pharmaceuticals in Canada. It is hoped that this background will demonstrate the need for particular attention to the pharmaceutical needs and associated costs of the elderly, and provide sufficient context for the remainder of the study. Subsequently, attention will be turned to past attempts at the various provincial levels to address the lack of a comprehensive and universal drug-coverage plan (commonly referred to as “Pharmacare”), with specific attention to the public coverage of seniors’ drug costs. As will become evident, the erosion of prescription drug coverage for seniors, with its accompanying adverse financial and health impacts is an area of growing concern to all those affected, as well as to policy makers. Finally, after outlining the obstacles to a national Pharmacare program that have already been identified, the last section of this essay will attempt to identify the ways in which healthcare reform to make pharmaceuticals universally accessible can occur, without being detrimental to senior citizens.

Canada’s Elderly, Their Unique Healthcare Needs, and the Canadian Healthcare System

As with much of the so-called “developed-world”, the first epidemiologic transition (to borrow the framework of Barret et al.) and the concurrent demographic transition that began with industrialization in the mid-late 19th century have left Canada with an aging population, for whom chronic disease is much more of a burden than infectious disease (Barret et all 1998:247). Due to increases in social welfare programs and medical advances in the 20th century, the elderly population swelled under the umbrella of state support. Whereas senior citizens formed 9.7% of the total population in 1961 (Novak and Campbell 2001:3), by 2006 13.7% of Canadians were age 65 years or older (Statistics Canada 2007). This proportional increase shows no signs of slowing down, especially as the generation of “Baby Boomers” born following the Second World War begins to enter the senior age-bracket. As a social grouping, the elderly are often politically outspoken, and their needs are and will increasingly become the concern of social and health policy makers.

Despite representing a very heterogeneous segment of the population, senior citizens in general tend to share a set of financial and health-related concerns. The majority of seniors are retired, and financially dependent on pensions, family members, or government assistance. This present state of affairs is in stark contrast to that of the early 20th century, when seniors were often left to fend for themselves after retirement (be it elected, sickness-induced, or forced), and were forced to join the growing ranks of the poor and homeless (Hogan et al. 1997:1134). Nowadays, seniors are able to live meaningful lives, while making valuable contributions to society. However, on average they remain a financially vulnerable population. Along with financial limitations, the elderly are also more heavily burdened with disease than any other age segment of the population, and many studies have demonstrated that age is highly correlated with the quantity of healthcare sought and received, especially in the case of pharmaceutical usage (Metge et al. 1999:54). Along with the increased morbidity (and associated healthcare costs) that accompanies old age, it has been demonstrated that the medical costs incurred towards the very end of life are by far the highest (Emanuel and Emanuel 1994:540). However, an exploration of the nature of end of life care, including proposed cost-containment strategies, is unfortunately beyond the scope of this paper. What deserves mention is that these costs tend to be concentrated in services delivered in institutional settings, such as palliative care units, and therefore fall under the mandate of Medicare.

Given their unique needs, especially towards the end of their lives, it is unsurprising that seniors were the recipients of some of the first public programs in Canada that attempted to cover the costs of healthcare, and, for example, that they remain one of the few demographics to receive public coverage in the United States under the Medicare and Medicaid programs (Kane and Kane 1985:3). Thus, given their numbers and requirements, it is logical that in the debates over and attempted reforms of pharmaceutical coverage in Canada, particular attention must be paid to the elderly.
Canada’s current system of Medicare became nationwide in 1971 (Livingston 1998:279), and the system was further codified with the passage of the Canada Health Act in 1984 (Evans 2000:891). While hospital services (both acute and long-term), physician consultations, and pharmaceuticals provided in the inpatient setting are covered by the public plan, notably absent is the coverage of prescription pharmaceuticals that must be taken by patients outside of institutional settings (Anis et al 2001:316). In the early 1960s the Royal Commission on Health Care first proposed the need for national Pharmacare, but it has not yet been realised, despite repeated promises (including by the Liberal Party in its 1997 election platform) (Lexchin 2007:262). In light of the current debate surrounding Pharmacare reform, it may seem surprising that prescription pharmaceuticals were excluded from the national healthcare plan when it was first created. However, it must be remembered that at the time of Medicare’s creation, hospital and physician services were the most expensive (at times prohibitively so) to Canadians, and the cost of pharmaceuticals paled in comparison to the services that were selected to be covered (Livingston 1998:268). Finally, when studying healthcare in Canada, it is important to recognize that despite the existence of a one-payer system, there is a high degree of heterogeneity between the various provincial healthcare systems, and between the federal and provincial governments. This fact is particularly relevant to this paper, as the different approaches taken since the 1970s to provide prescription drug coverage to the elderly and other vulnerable groups taken by the provinces will be shown to be one of the main obstacles facing the creation of a national Pharmacare system. But first, the ramifications of the exclusion of prescription drugs from the public healthcare coverage plans on the costs of such treatments will be examined.

The Current Cost of Pharmaceuticals

While they represented a small piece of the total ‘pie’ of healthcare costs in the 1960s and 1970s, outpatient pharmaceutical costs have steadily risen over the last four decades. As a proportion of the total Canadian healthcare expenditures, prescription drug spending has more than doubled since Medicare’s early days, from 6% in 1975 to 14% in 2002 (Alan et al 2005:129). This amount has exceeded the percentage of total spending that is devoted to physicians’ services since the late 1990s (Lexchin 2007:264), although hospital care remains the single most expensive listed healthcare expenditure (Marchildon 2007:270). Recent estimates place prescription drug costs between $18 (Lexchin 2007:266) and $21 (Marchildon 2007:274) billion Canadian dollars in 2007, and the situation is so dire that 3% of Canadians are considered uninsured, because they spend more than 4.5% of their gross family incomes on prescription drugs (Lexchin 2007:262). As mentioned previously, these costs are to a large degree concentrated amongst the elderly population. For example, in Metge et al.’s study of pharmaceutical usage in Manitoba, over 75% of citizens age 65-79 were found to have at least one active prescription during 1996, and incurred drug-related costs that were 2.5 times as much as the provincial average for women, and 3.4 times that for men (1999:51). With the background of the problem of escalating drug costs for Canada’s elderly in mind, attention can be turned to a review of the past solutions that have been attempted. 

Past Attempts to Provide Prescription Drug Coverage for Seniors

With the burden of covering the costs of hospital care and physician consultations on individual patients relieved by the passage of Medicare after 1971, and with the commencement of financial support from federal government to the provincial governments for the costs of running their healthcare systems, resources could be diverted towards the coverage of prescription pharmaceuticals. Between 1970 and 1981 each of the ten provinces and two territories introduced prescription drug benefit programs (Hurley and Johnson 1991:473). By 1986, all of the provinces had introduced some form of system that provided necessary drugs to senior citizens at minimal or no cost (Morgan et al. 2003:50). Where coverage wasn’t complete, drug costs were expected to be supplemented, by a variety of means, including out-of-pocket payments by patients or through insurance schemes, to name a few methods. The design and scope of the plans that developed were up to the provinces, with the federal government maintaining its distance, and continuing its support of the provincial healthcare systems as long as they complied with the conditions stipulated under the Canada Health Act (Anis et al. 2001:316). While the federal government implemented programs to provide universal coverage to First Nations citizens (Marchildon 2007:272), it allowed the development of a myriad of different drug coverage programs to develop in the different provinces, leading to what Anis et al. have labelled as a “Dog’s Breakfast” of varied prescription drug coverage across Canada (2001:315).

The provincial plans differ in who is eligible for coverage, the extent of that coverage, the nature and amount of co-payments required to close the gaps in cost, the classification of disease and drug categories, and a host of other variables (Hurley and Johnson 1991:473). Each province has a different list of drugs that are covered under the public plans, called a “Provincial Formulary”, developed by local experts and until recently without consideration for the actions of the other provinces (Anis et al. 2001:316). Volumes could be devoted to a comparative breakdown of the provincial plans, but for illustrative purposes the examples of Ontario and Manitoba drug plans will be examined, as they represent the opposites of the spectrum of coverage. In Ontario, all senior residents (the provincial plans share the common feature of being available only to residents) are automatically entitled to generous coverage of their drug costs, and the functionality of this system is evidenced by the high rates of senior participation in the provincial plan (Morgan et al. 2003:50). The Manitoba government, on the other hand, provides public drug subsidies to all residents, regardless of age, who have high drug costs relative to income (Morgan et al. 2003:50). As a result, income-based deductibles lead to the cancellation of subsidies for many, and only one-third of Manitoba’s seniors receive such subsidies from the government (Morgan et al. 2003:50). These two examples highlight the lack of consensus between the provinces, but unequivocally demonstrate that there exists the political will to address the needs of those with high drug costs. In 2006, the provincial governments spent nearly $9 billion Canadian on prescription drug coverage programs (Marchildon 2007:274), representing at most half of the total Canadian expenditures on pharmaceuticals. One of the biggest challenges for the advocates of universal Pharmacare is not that nothing has been done to cover drug costs, but, as will be seen shortly, that the existing heterogeneity of coverage programs is impeding the implementation of such a plan.

National Pharmacare: A Dream that Cannot Come True?

As a result of the creation of a single-payer healthcare system, the Canadian government has been able to ensure that costs are carefully controlled, and has been able to avoid the astronomical rise in healthcare costs that can be observed in the neighbouring United States (Livingston 1998:267). By excluding pharmaceuticals from the national plan, however, the lack of regulation has allowed prescription drug expenditure to increase in ways decried by the opponents of American the free-market system (Hurley and Johnson 1991:473). As Greg Marchildon observed, between 1992 and 2006 Canadian private spending on healthcare increased 1.7 times faster than public spending (Marchildon 2007:272). The benefits of a national Pharmacare system are numerous and clear, chiefly being universal access to necessary medications, and the ability to regulate the usage patterns and contain costs on a national level (Marchildon 2007:277). However, the literature on the topic suggests that there are two main reasons for the failure of the federal government to develop such a system: The projected cost of the program, and the difficulty that would accompany consolidating such a system with the mish-mash of pre-existing ones already in place in each of the provinces and territories. On top of the need to integrate the provincial plans with a new federal one, the government would also have to determine how to incorporate the many private insurance plans that many Canadians rely on to cover their drug expenses (Marchildon 2007:279). Thus, despite the insistence of the provincial premiers that the federal government step in and create a national Pharmacare system, the situation remains unresolved, and as Anis states a “Climate of distrust and continuous financial haggling between levels of government” persists (2009:565). To return to the main focus of this study, it should now be clearer that the sheer magnitude of the challenge involved in creating a national Pharmacare system has often come to overshadow the needs of the vulnerable elderly, and their continued struggle to pay for their prescription medications.

Erosion of Drug Coverage Amongst Seniors

In addition to attempting to navigate the changing tides of reform attempts, Canadian seniors and their drug benefits have had to weather the ramifications of the cutbacks in healthcare spending that occurred across Canada in the 1990s. These cutbacks were reactionary measures against the observed rise in healthcare costs that had continued to occur since Medicare became nationwide, and were different in each of the provincial contexts (Chappel et al. 1997:114). Presently, two cost-cutting methods will be examined, along with the negative ramifications they have had for seniors. One of the strategies employed by the provinces was to shift the costs of services from the government to the users of the services, as was the case with public drug coverage plans and the senior citizens who benefitted from them. This was usually achieved by the introduction of co-payments, intended to supplement the coverage provided by the government (Hurley and Johnson 1991:474). For example, in 2004 the provincial government of Quebec decided to combat rising drug costs and the associated economic burden by expanding its drug coverage program without increasing government spending, thereby shifting the costs onto the users of the plan, primarily the elderly (Lexchin 2007:264). Under the new system, the deductibles and co-payments ranged from $200 to $925 per year: This resulted in a drop in essential drug usage of 15%, and a roughly corresponding increase in trips to physicians and hospitalizations (Lexchin 2007:264). Co-payments for those on welfare have since been eliminated, but the unfortunate experiences of Quebec’s especially vulnerable seniors served as a warning for the rest of Canada, and added yet more fuel to the arguments of those calling for national Pharmacare.
Another method employed to offset the skyrocketing expenditures on prescription drugs is to encourage the switch from brand-name drugs to lower-cost alternative ones, termed “Generic Substitution” (Morgan et al. 2003:55). Aside from contravening the desire patients have for the newest and therefore theoretically best pharmaceutical product, generic substitution has been shown to be a medically unviable option for some patients. Individuals may respond unfavourably to generic varietals of drugs, while others have difficulty in switching from a brand-name product to a generic one (Morgan et al. 2003:55). Most provinces who encourage generic substitution give subscribers to their drug plans the ability to opt for brand-name drugs instead of generic ones, but the patient then becomes responsibility for paying for the difference between the generic and brand name therapies (Morgan et al. 2003:55). Such co-payments, where required, are intended to affect product choice, but not alter the usage level of drug therapies. Despite this, studies have shown that users of drug reimbursement systems, especially demographics like the elderly who may have less access to information, respond to such changes in the system in ways that may be disadvantageous to their own health (Morgan et al. 2003:55).

In both of the above situations, the provincial governments have attempted to act within their jurisdictions to cap the rising costs of prescription pharmaceuticals, and senior citizens have suffered adverse consequences as a result. The efficiency and utility of such moves has been a frequent target of those calling for a National Pharmacare program. For example, Morgan et al. conclude:
“Whether the Canadian trend away from seniors’ drug benefits reflects a cost-evasion agenda or an attempt to use scarce public resources to provide more equitable, populationwide Pharmacare coverage is still open to debate. It is clear, however, that seniors’ drug benefit plans are under intense financial stress” (2003:47). This stress shows no signs of abating, and will undoubtedly continue to re-emerge whenever the healthcare system and its reform is discussed.   


Now, there is one final question that must be asked: Can Canada’s government institute a national Pharmacare program, while offsetting and not exasperating the current financial pressure resting on senior users of prescription drugs? This paper has attempted to provide an introduction to the struggle Canadian seniors currently face in paying for necessary medications, and how this struggle fits into the wider context of national Pharmacare reform. The elderly have been identified as the demographic that as a whole has the greatest need for prescription pharmaceuticals, yet they are often unable to pay for them. Many have been able to benefit from support provided by the provincial governments, but this support is dwindling, and risks been wiped-away all together by increasing costs and the lack of a comprehensive, federally-subsidized program. The question posed at the opening of this paragraph is a fundamental one, although it is unfortunately one that does not lend itself to an easy answer. It is hoped that progress in health and social policy research will continue to open new avenues of study and lead to the formulation of novel strategies, and that eventually the goal of universal Pharmacare will be achieved. However, given the current economic climate it is unlikely that the problems facing the elderly will be fixed in the immediately foreseeable future, and it remains to be seen what the health consequences of moving their interests to the back burner will be.


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