The issue of pharmacare in Canada has been debated for decades.
Canada is the only high-income country with universal health-care coverage that does not have a program for universal drug coverage.
In Canada, drugs dispensed during a hospital stay are covered. But outside of hospitals, individuals must pay out of pocket, or rely on workplace or non-universal provincial drug plans.
In this fourth article in our health-care series, we explore what Canada can learn from Australia’s universal pharmacare model, known as the Pharmaceutical Benefits Scheme. Australia ranks at the top of the Commonwealth Fund’s ranking of 10 leading health-care systems.
“What Canada can learn from Australia is the benefits of having universal [drug] coverage,” said Dr. Joel Lexchin, a professor at York University in Toronto.
“People will get the drugs that they need and [realize the] value of having [single-purchaser] buying power,” added Lexchin, who formerly practiced as an emergency physician in Australia while studying the Pharmaceutical Benefits Scheme.
Patchy coverage
In Canada, the federal and provincial governments do cover some medications. But the path toward pharmacare has been slow and piecemeal.
It was not supposed to be this way.
When Ottawa introduced Medicare in the 1960s, the Royal Commission on Health Services recommended that universal health care eventually include prescription drugs. But that expansion never came.
Colleen Flood, dean of the Faculty of Law at Queen’s University and a leading scholar in health law and policy, says the decision to delay pharmacare proved consequential.
“[There is a] lack of willpower and a lot of political opposition to [pharmacare] by different groups” she said.
“[And there is] not enough mobilization by the public who don’t really understand how much they’re losing with the current arrangements,” she added, noting the cost of prescription drugs goes “up and up and up every year.”
Over time, the provinces stepped in.
“Since the federal government lost interest in things, the provinces started to build their own systems of coverage for various groups, typically people on social assistance and people 65 and over,” said Lexchin, who was a former drug policy adviser to the Ontario government and the Ontario Medical Association.
These systems have all evolved in different ways, leaving a fragmented model where each jurisdiction has its own plan and list of covered medications. Ottawa, meanwhile, now provides limited coverage to five groups: First Nations and Inuit people, members of the Canadian Armed Forces, veterans, federal inmates and some refugee claimants.
Even under these plans, patients often share costs through premiums, deductibles or co-pays. Alberta caps co-pays for seniors at $25 per prescription, for example, while B.C. uses income-based cost sharing with no fixed cap on prescriptions.
Private insurance also plays a major role. OECD data show that in 2023, more than one-third of Canadians’ pharmaceutical spending was covered by private insurers.
Lexchin says this has its own problems.
“[Y]ou have people without any public or private coverage who have to pay the full cost,” he said.
About 10 to 15 per cent of Canadians lack drug coverage. People who are self-employed, not poor enough for social assistance, and not elderly enough for senior drug plans often “fall through the cracks,” said Flood.
“There’s an inverse relationship between income and overall health,” said Lexchin, “The wealthier you are, the healthier you are, the less you need drugs,” added Lexchin.
The Liberal government under Justin Trudeau committed to expanding pharmacare. But its expansion was ultimately limited to agreements with just three provinces and one territory, and only funds coverage for certain contraception and diabetes medications.
“How ironic … that Canada is the home to Banting, who invented insulin, and yet we have such poor access to prescription drugs, to insulin, and so on, for people living with diabetes,” said Flood.
Australian pharmacare
In the Commonwealth Fund’s ranking of 10 leading health-care systems, Australia ranks first for equity, meaning the country has the smallest gaps in access and care between low- and high-income residents.
Universal pharmacare helps explain this performance.
“The country’s Pharmaceutical Benefits Scheme … regulates and subsidizes medication costs to keep them affordable,” says the report.
Mark Cormack, a professor and health‑system policy expert at the Australian National University, says once a drug is listed on the Pharmaceutical Benefits Scheme, patients pay a capped co-payment per prescription.
“For those on benefits, pensioners, unemployed, their co-payment is about $2 to $3 per prescription,” said Cormack, who has represented Australia at the OECD and World Health Organization.
“For general patients, it’s capped at about $25 per prescription, even for expensive drugs.”
He adds that costs are also capped at an annual threshold. Once patients reach that cap, additional prescriptions for the rest of the year are free.
“For [certain eligible individuals], the annual cap is about $277, and for general patients it’s about $1,748,” he said.
The Australian government helps keep drug costs down by being the sole purchaser of drugs.
“There’s one purchaser of drugs in Australia and that’s the Australian government,” said Cormack. “The United States absolutely hate it, and we love that they hate it, because it means that we can get pretty low prices for innovative drugs, and we force generic substitution over time.”
Lexchin says an absence of comparable leverage in Canada hurts Canadians.
“Here in Canada, the federal government only pays for drugs for five relatively small groups … the provinces pay for everybody else,” he said.
Lexchin notes that Canada has some of the highest drug costs in the OECD, particularly for brand name drugs, which account for most spending.
“Brand name drugs in Australia are … 30 per cent lower in price than brand name drugs in Canada,” he said.
However, the pharmaceutical industry argues that stronger price controls and centralized purchasing could come with trade-offs, including limiting access to new or innovative drugs.
“[Innovative Medicines Canada] does not support a single-payer model that would reduce treatment choices, slow access to new medicines, and cost billions without improving access to innovative medicines,” wrote Innovative Medicines Canada, the main lobby group representing brand-name pharmaceutical companies in Canada, in a January pre-budget consultation brief.
Cormack says there can be delays in accessing new drugs under Australia’s system, but that this is by design.
New medicines must undergo rigorous, independent assessments to ensure they are both clinically effective and cost-effective before being publicly subsidized.
“Until these processes are successfully concluded, a new innovative drug will be restricted in its access to government subsidy — and rightly so,” he said.
He argues the system ultimately strikes the right balance between access and affordability.
“The [Pharmaceutical Benefits Scheme] has an enviable history of providing affordable access to the best clinically efficacious and most cost-effective medicines … [and] has proven to be fiscally and socially sustainable.”
In March, Mark Butler, Australia’s minister for health and ageing, highlighted the broader impact of such a system. “When medicines help Australians avoid hospitalizations or reduce complications or return to work sooner, their impact extends far beyond the health system,” he said in a speech at a health-care summit.
“Medicines policy is therefore not just health policy, it’s also economic policy.”
A national scheme
Flood notes that Ottawa cannot unilaterally impose pharmacare on the provinces. But it could create a voluntary national scheme, with carveouts for provinces that choose not to participate.
She has proposed an arm’s‑length, federal–provincial agency to negotiate with drug companies on behalf of participating provinces.
“[The federal government] should move more rapidly now to develop a list of essential medicines that are going to be covered for all Canadians, wherever they live,” she said.
“[Then] they could set up [the equivalent of] a Canadian Blood Services Agency to negotiate [drug] prices on behalf of Canada.”
The Canadian Blood Services Agency manages blood and plasma across provinces while operating independently of any single government. Flood says a comparable agency for drugs would maintain a national formulary, negotiate prices and ensure consistent access to essential drugs.
Without change, Lexchin warns, the consequences are clear: more Canadians will go without necessary medications, leading to worse health outcomes and higher costs elsewhere in the system.
“You don’t get your drugs because you can’t afford them,” he said. “That leads to more doctor visits, more emergency visits, more hospitalizations … and overall, higher health-care costs.”
Alberta co-pays for seniors has now risen to $35 per prescription, leaving us with $10 less cash for every prescription in that category.