The redistributive effect of the move from age-based to income-based prescription drug coverage in British Columbia, Canada

Abstract

Objectives: To explore the redistributive impact of two different pharmaceutical financing policies (age-based versus income-based pharmacare) on the distribution of income in British Columbia (B.C.), Canada.

Methods: Using household-level data on all payments that are used to finance prescription drugs in B.C. (including taxation and private payments), we performed a redistributive analysis to indicate how much income inequality in the province changed as a result of payments made for prescription drugs. We also illustrated changes in vertical equity (different treatment according to ability-to-pay) and horizontal equity (equals, according to ability-to-pay, being treated equally) between the two years separately through a pre-post policy examination.

Results: We found that payments made to finance prescription drugs increased overall income inequality in the province. This negative impact was larger after the move to income-based pharmacare. Our results also show increasing horizontal inequity after the policy change, and suggest that the increased reliance on out-of-pocket payments was a major source of the negative impact on the B.C.'s overall income distribution. We also show that the consequences of the move to income-based pharmacare would have been less severe had the level of public financing not decreased substantially between the two years.

Conclusions: The increase in income inequality in B.C. following the policy change was an unintended consequence of the move to income-based pharmacare. This finding is worth consideration as countries and jurisdictions weigh pharmaceutical policy alternatives.