National Pharmacare Program Will Moderately Increase Federal Deficit

The Liberal government is likely to propose the implementation of a universal public pharmacare program ahead of the upcoming fall federal election.

· Under the proposal made by an independent advisory council, an initial list of essential drugs would be covered starting in 2022. That list would be significantly extended by 2027.

· The federal government would transfer (pay) the provinces for the incremental costs associated with the implementation of pharmacare. Therefore, it would have a net neutral impact for all provinces

· In dollar terms, all else equal, this would moderately increase the federal government’s deficit over time. As a share of GDP, the federal deficit would remain unchanged from its FY 2017-18 level at 0.9% (see chart).

· Large discrepancies in currently available provincial pharmacare programs imply different incremental costs from one province to another. Therefore, to level the playing field in terms of pharmacare coverage for all Canadians, provinces have to receive “unequal” federal transfers. The jurisdictions already covering a larger share of the hypothetical pharmacare program will receive proportionally less than the others (see chart).

· To avoid a contentious issue, the federal government could decide to cover a bigger share of pharmacare costs, shifting some of the growing health care costs burden from provinces to Ottawa.

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