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Government monopoly would reduce the quality of prescription drug coverage

Montreal, Wednesday, June 5, 2013 – The obsession with reducing public spending on prescription drugs, which takes the form of constantly falling price caps, bulk purchasing strategies and reimbursement restrictions, entails numerous unintended consequences, especially for the health of Canadians. These are the findings of a new study from the Montreal Economic Institute (MEI).

“We can't blame governments for wanting to control their budgets, but constantly shrinking expenditures on prescription drugs involves risks that cannot be ignored. It has been shown that it lengthens delays in getting access to new treatments, significantly increases the likelihood of shortages and slows innovation,” points out Yanick Labrie, economist and author of the Research Paper published today.

The governments of Great Britain and New Zealand are often cited as examples for their success in controlling prescription drug spending. These countries do indeed spend less, but they also have to make do with less.

A study published in 2012 places Canada's public plan at the bottom of the list in terms of reimbursement for cancer drugs, while England and New Zealand fare even worse, with scores of 38% and 25% respectively. And England has lower cancer survival rates than other developed countries, a tragic state of affairs likely due in part to drug price reduction policies.

For each dollar spent on drugs, overall health care spending is reduced by a total of between $2.06 and $2.65. More recent patented drugs lead to even greater savings, by reducing the need for surgeries, for instance. Mr. Labrie argues that the health budget must be considered as a whole, instead of focusing our attention exclusively on drug expenditures.

The author also cautions against the inherent dangers of creating a pan-Canadian drug insurance plan, a system that would only exacerbate our current problems. “Our system is not perfect, but the presence of multiple private and public insurers, which cover over 98% of the population, offers people choice in securing appropriate coverage and provides quicker access to new drugs. Socializing a larger proportion of drug spending through the creation of a pan-Canadian plan would expose Canadians to the decisions of a single organization that would decide whether or not to reimburse a given treatment, which would result in lower quality coverage,” concludes Mr. Labrie.

The Research Paper entitled Wrong Prescription: The Unintended Consequences of Pharmaceutical Cost Containment Policies in Canada was prepared by Yanick Labrie, economist and health policy analyst at the MEI. This work is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its publications and conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Ariane Gauthier, senior advisor, communications, Montreal Economic Institute / Tel.: 514 273-0969 ext. 2231 / Cell: 514 603-8746 / Email: agauthier@iedm.org

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