Income-Based Drug Coverage in British Columbia: The Impact on the Distribution of Financial Burden

Abstract

In May 2003, the government of British Columbia adopted an income-based pharmacare program, replacing the previous age-based program. Stated policy goals included improving the distribution of pharmaceutical payments across incomes. This analysis assesses the policy's effect on the distribution across incomes of both private payments and public subsidy for prescription drugs. This analysis focuses on how the 2003 policy change affected the extent to which higher-income households pay a larger share of private drug expenditures and/or receive a smaller share of available public subsidies. Demographic information and drug spending data were extracted from BC PharmaNet and the BC PharmaCare Program for the years 2001-2004. These data were then graphed to assess (using concentration curves) changes in the progressivity of private and public pharmaceutical financing. Overall, the move to Fair PharmaCare resulted in larger but slightly less regressive private payments and smaller but slightly more progressive public subsidies. Because total drug spending increased while the total subsidy available decreased, average private household spending as a proportion of household income increased across virtually all age and income levels. The PharmaCare Program redistributed public subsidies in a manner that was more progressive than previous programs; this reduced the regressivity of private pharmaceutical payments. However, total public subsidy decreased, and private spending increased by a commensurate amount. This makes the program's overall financial impact on BC households somewhat ambiguous. Income-based pharmacare could improve financial equity unambiguously if public shares of drug spending are expanded.