National pharmacare will reduce drug access for almost 26 million Canadians

Existing public plans cover fewer drugs than private plans do and take twice as long to get them covered after Health Canada approves them.

Brett J Skinner | Financial Post | 02 MAY 2024

The recent federal budget provided $1.5 billion over five years to support the launch of a national pharmacare plan. The money will fund universal prescription drug benefits for contraceptives and diabetes medications and is intended to be the first step toward comprehensive, federally funded, single-payer programs that will eventually replace existing public and private drug plans.

By taking this action, the Liberal-NDP coalition in Ottawa shows an astounding lack of concern for how national pharmacare will disrupt prescription drug benefits for privately insured Canadians.

According to the Canadian Life and Health Insurance Association, 25.5 million Canadians — 64 per cent of us — have prescription drug coverage under private plans. In addition, provincial and federal governments provide drug benefits for select target populations defined by age, income, disease or their Indigenous status. People who fall between the cracks of private and public plans are protected by publicly funded safety-net programs for out-of-pocket prescription drug expenses that every jurisdiction in Canada offers.

In sum, Canadians are already universally insured against catastrophic expenses — though only for the drugs approved by these various plans. The list of drugs covered is different in private and public programs. Private plans are generally more comprehensive. Telus Health reports that over 80 per cent of private drug plans have open formulary lists, meaning they generally include all drugs authorized for marketing by Health Canada.

Controlling drug costs doesn’t require pharmacare.

Brett J Skinner | Financial Post | 27 MAR 2024

Drug prices are not out of control. They’re lower in Canada than in nine of 13 other countries we normally compare ourselves with.

By Brett Skinner, PhD, and CEO of Canadian Health Policy Institute (CHPI).

The federal government recently announced it would work with the provinces to fund universal prescription drug benefits for contraceptives and diabetes medications. It is the first step toward a national pharmacare program that will replace existing public and private drug plans.

The government’s political partner, NDP leader Jagmeet Singh, claimed a single-payer system is needed to control the cost of new drugs, or “patented” medicines, and that a pharmacare monopsony — i.e., a single buyer — could negotiate lower prices through “bulk buying.”

Bulk buying is a non-starter because it would require government to directly purchase, store and distribute products. What drug plans do is simply reimburse pharmacies for the prescription expense claims of eligible beneficiaries.

To achieve savings from scale, a single payer would exploit its monopsony on public reimbursement to extract rebates from manufacturers. It would squeeze pharmaceutical companies by exercising the only leverage available to it: either delaying purchases or not buying at all, which would of course have the effect of delaying or denying Canadians’ access to new medicines.

A 2017 report from Ontario’s Auditor General found the province’s drug plan negotiated rebates averaging 36 per cent off list prices. Pharmacare advocates are betting a single national payer can get deeper discounts without jeopardizing the availability of new medicines in Canada. It’s a risky gamble: research confirms that excessive price regulation or abusive monopsony bargaining can destroy the commercial viability of new drugs.

Whether a single Canadian payer would have substantially more bargaining power is an open question. So far as public reimbursement goes every province is already a monopsonist in its own territory. On top of this, the Pan-Canadian Pharmaceutical Alliance (PCPA) acts like a national monopsonist because it collectively negotiates the reimbursement prices for federal, provincial and territorial drug plans.

PCPA is just one piece of a national bureaucracy devoted entirely to controlling the cost of patented medicines. The Patented Medicine Prices Review Board (PMPRB) has regulated prices since 1987, and the Canadian Agency for Drugs and Technology in Health (CADTH) has conducted health technology assessments since 1989. Plus, a federal super bureaucracy is in the works (the Canada Drug Agency).

Maybe the most convincing reason national pharmacare is unlikely to produce significant savings on patented drug costs is that prices and expenditures on such drugs are not out of control. Prices here are moderate compared to other countries. The 2022 annual report of the prices review board compared foreign and Canadian prices for matched products using “purchasing power parity” — i.e., controlling for currency differences. It found that average prices were higher in seven of the 11 other reference countries it looked at — on average by 22.3 per cent. And the board no longer uses the U. S. and Switzerland for its comparisons, deeming them “high cost” jurisdictions. If they had been included, Canada would have ranked 10th out of 14 current and former high-income comparison countries.

The direct cost of patented drugs is much less than commonly believed. The Canadian Institute for Health Information (CIHI) reported national (public and private) spending on drugs totaling $49.4 billion in 2022. That includes both retail and hospital spending for non-patented drugs, non-prescribed drugs, pharmacist fees, public drug plan administration and even R&D spending by pharmaceutical companies. And it excludes rebates negotiated between manufacturers and public drug plans.

Detailed data from the prices review board annual report show gross national sales of all patented drugs at manufacturers’ list prices were $18.4 billion in 2022 — only 37.2 per cent of the CIHI’s global total. And after accounting for rebates, expenditure totaled $15.6 billion — just 31.5 per cent of total drug spending.

That $15.6 billion is only 4.7 per cent of overall national health expenditure, which was $334.4 billion in 2022. Moreover, the public component of that drug spending was just $5 billion — or 1.5 per cent of total health care spending.

Just one more number: Of the $239.9 billion in total public health expenditure, that $5 billion accounted for just 2.1 per cent. Out of every dollar our governments spend on health care, prescription drugs account for two cents.

If anything, given the impressive benefits of pharmaceutical innovation, new medicines should probably account for a bigger share of health expenditures. Pharmaceuticals are often the most efficient and sometimes the only treatment available. Doctors and hospitals could not deliver modern medical care without them.

Patented medicines embody the latest therapeutic advances. But producing them is expensive, time-consuming, and slow. Imposing excessive cost controls on them is seriously counterproductive.

The current government seems unlikely to rethink its pharmacare policy. But there are ways to close drug coverage gaps without disrupting existing public or private drug plans and at a fraction of the cost estimated for national pharmacare. A government-in-waiting should take a serious look at them.

Evidence contradicts Ottawa’s cost control rationale for single-payer pharmacare.

Brett J Skinner | CHP Opinions | 18 MAR 2024

Evidence contradicts Ottawa’s cost control rationale for single-payer pharmacare 

By Brett Skinner, PhD, and CEO of Canadian Health Policy Institute (CHPI).

Supported by the NDP, Justin Trudeau’s Liberal government recently announced it would work with the provinces to implement universal prescription drug benefits for contraceptives and diabetes medications. NDP leader Jagmeet Singh told media the initiative should be a precursor to a national single payer pharmacare program, which he argued was necessary to control the cost of patented medicines.

Canada currently spends over $110 million per year on a national bureaucracy to control prices for patented medicines. Several agencies are engaged in price regulation (Patented Medicine Prices Review Board or PMPRB), health technology assessment (Canadian Agency for Drugs and Technology in Health), national reimbursement negotiations (Pan-Canadian Pharmaceutical Alliance or PCPA), and centralized vaccine procurement (Public Health Agency of Canada). Plus, there are initiatives underway for a federal super bureaucracy (Canada Drug Agency).

Provincial and federal drug plans are single payers for public reimbursement in their jurisdiction. The PCPA acts like a national monopsony. It is very likely that public payers already obtain the lowest possible prices at which our market would still be supplied.

A 2017 report from Ontario’s Auditor General, found the province’s drug plan negotiated rebates averaging 36 percent off list prices for patented drugs. Pharmacare advocates are betting a single payer can demand deeper discounts without jeopardizing the availability of new medicines in Canada.

It’s a gamble, because research confirms excessive price regulation or abusive monopsony bargaining can destroy the commercial viability of introducing new drugs to markets, reducing access to the latest therapeutic advancements.

Single payer pharmacare is unlikely to produce extra savings because patented drug costs are not out of control. In a recent study I examined prices and expenditures for patented medicines using the most recent data from the Canadian Institute for Health Information (CIHI) and PMPRB.

According to the PMPRB, bilateral foreign-to-Canadian comparisons of patented medicines using matched products at purchasing power parity, showed average prices were higher in seven of the 11 other reference countries in 2022. The average price ratio across the seven countries was 22.3 percent higher than Canada. The PMPRB no longer reports prices from the United States and Switzerland because they are deemed to be high-cost jurisdictions, but they would likely exceed Canada too.

Direct spending on patented drugs is less than commonly believed. CIHI reported national (public and private; retail and hospital) spending on drugs totaled $49.4 billion in 2022. But the numbers include costs for patented and non-patented drugs, prescribed and non-prescribed drugs, pharmacist fees, public drug plan administration, and even R&D spending by pharmaceutical companies. CIHI data exclude rebates.

Precise data from the PMPRB, show gross national sales of all patented drugs at manufacturers list prices were $18.4 billion in 2022, which is only 37 percent of the total drugs and related expenditures reported by CIHI.

After accounting for rebates, net national expenditure on patented medicines totaled $15.6 billion, or only 4.7 percent of $334.4 billion in overall national health expenditure in 2022.

In the same year, net public (provincial and federal drug plans, workers compensation boards, and mandatory social insurance and health premiums) spending on patented medicines was $5 billion, or only 2.1 percent of $240 billion in total public health expenditure.

The evidence shows that there is no cause for alarm about the cost of patented medicines in Canada. Governments seeking savings should look closer at the 95.3 percent ($319 billion) of health spending not attributable to patented medicines prices.

Considering the net health and economic benefits associated with pharmaceutical innovation, we should probably be spending more to improve access to new drugs. Patented medicines represent the most scientifically advanced therapies – often the most efficient, and sometimes the only means for treating disease.

Using a single payer for cost control also raises moral questions. A universal single payer would exploit its national monopsony on public drug reimbursement to extract rebates from manufacturers; essentially delaying or denying our access to new medicines until pharmaceutical companies agree to reduce prices. Is it ethical to leverage a price negotiation by withholding access to new therapies?

Government hostility to biopharmaceutical industry reduces access to innovative drugs

Nigel Rawson and John Adams | Hill Times | Nov 15, 2023

If the Liberals cave to the NDP’s demands to create single-payer universal pharmacare in order to maintain the supply-and-confidence agreement, the already poor relationship between Canadian governments and the biopharmaceutical industry will be further damaged especially if only so-called “essential” drugs are covered, and not innovative emerging therapies.

Government hostility to the industry is demonstrated by the barriers that drug developers must overcome to get new medicines listed in government drug plans. This includes a lack of federal incentives to submit medicines to Health Canada, protracted health technology assessments (HTAs) that lack accountability and transparency, and slow collective price negotiations. Neither HTAs nor price negotiations provide for independent adjudication of differing views by arbitration or the courts. Even when drugs successfully pass these barriers, government drug plan gatekeepers make the situation worse by slow-walking drugs onto formularies. Patients too often must wait for access to innovative therapies until every ‘t’ is crossed and ‘i’ is dotted at each step—putting process before patients. Other jurisdictions do much better.

As a consequence, developers bring new medicines to Canada later than in the United States and the European Union. Some aren’t launched here at all. The result is that Canadians who need new drugs either have their access long delayed, or denied. This includes medicines for diseases like canceramyotrophic lateral sclerosis, and sickle cell disease—where patients don’t have time to wait. Universal pharmacare covering only inexpensive “essential” drugs will not help Canadians with these diseases.

Canada’s health system is built on an antiquated model concentrated on hospital care. Sixty years ago, if you had a heart attack, stroke, or a similar health episode, you were most likely admitted to hospital and often not expected to recover. Today, medicines can prevent or delay risk factors that can lead to major health events.

Our health care administration is still run in compartmentalized budget silos relating to different services instead of being managed as one system focused on patient care and outcomes. Effective drugs reduce the need for in-patient, emergency room, and physician care, but too often governments only look at cost, and ignore the broader benefits drugs can bring—not only to the health and wellbeing of patients and their families, but also to other parts of the health care system, society at large, and the economy.

In line with its hostile mindset about new drugs, the federal government tried over the past six years to introduce regulations that would force drastic decreases in drug prices. This reduced the attractiveness of our biopharmaceutical marketing environment to an even lower level. Canada continues to slip in the global launch sequence as drug developers decide when and where to launch new treatments.

If Canadians are not to endure further wait times and denials of access to innovative medicines, our governments need to change their antipathy towards the biopharmaceutical industry. Other countries have recognized the need to collaborate with the industry rather than try to force regulatory changes.

In Australia, the government has entered into an agreement with drug manufacturer associations “to gain access to breakthrough new medicines as early as possible and to deliver robust and uninterrupted supply of the millions of medicine doses that Australians use and need every day.” The government will provide stability and certainty for investment in new medicines and around HTA processes. In return, the industry has committed to an improved pricing system for the Australian drug plan that will generate savings to be invested in new drug listings.

In South Korea, a commission chaired by the prime minister is being established to foster the bio-health industry by providing systematic support and the latest technologies. The objective is to overcome bureaucratic compartmentalization obstructions that result in fragmented government policies (sound familiar?). All government organizations are to work together on policies and plans aimed at providing support throughout the development and commercialization of health products.

Australia and South Korea, as well as European countries, stand in sharp contrast to the guerilla warfare underway across Canada against the biopharmaceutical industry. Instead of our governments being world leaders in fragmented responsibilities and siloed budget accountability, they need to unite the silos and collaborate with the industry to bring facilities and jobs to Canada, and to allow Canadians the same timely and comprehensive access to innovative medicines that patients in other comparable countries have.

A sketch in the Halloween episode of CBC’s “This Hour has 22 Minutes” ended with the punchline “there’s nothing scarier than Canadian health care.” But there is. It’s the attitude of governments towards the biopharmaceutical industry and their desire for rock bottom drug prices. Universal government-run pharmacare covering only cheap, so-called “essential” drugs would be minimal health care. Manufacturers would be even less motivated to bring innovative medicines to Canada, resulting in increased denials of access for Canadians with unmet health needs. No one wants that.

Nigel Rawson, affiliate scholar with the Canadian Health Policy Institute, is also a senior fellow at the Macdonald-Laurier Institute, as is John Adams, CEO of Canadian PKU and Allied Disorders Inc. and volunteer board chair of Best Medicines Coalition.

Pharmacare won’t help Canadians with rare disorders

Nigel Rawson and John Adams | Financial Post | Nov 07, 2023

Canadians with rare disorders will be even worse off if NDP’s parliamentary blackmail works

Last month the federal NDP convention in Hamilton voted unanimously to force the Liberals to introduce a single-payer universal pharmacare program or see the current “confidence-and-supply” deal canceled. Will universal government-run pharmacare benefit Canadians with rare disorders? We fear not.

Canadians with such disorders are already disadvantaged compared with sufferers in other countries. Fewer specialized drugs are launched in Canada than in the United States and Europe. Those that are get approval for marketing about a year, on average, after they do there.

That’s not because Health Canada takes longer to review new medicines. The process takes about the same time in the three places. Rather, delayed approval is likely due to manufacturers submitting later to Health Canada because federal, provincial and territorial hostility towards the industry has made our biopharmaceutical market less attractive.

Approval doesn’t mean government drug plans will pay for a drug, however. Further government-created barriers impact all Canadians, but particularly those with rare disorders who want access to novel drugs for their unmet or poorly met health needs. As a consequence, what gets listed in government drug plans varies widely, leading to a postal code lottery.

In a set of articles published over the summer by the Macdonald-Laurier Institute, we discuss the several obstacles patients and their families face as they try to gain access to new or expensive innovative therapies. They include: the lack of federal incentives for developers to submit new medicines to Health Canada; health technology assessment that is neither accountable, independent nor transparent and makes recommendations about which drugs to cover in public drug plans to governments; and price negotiations between government drug plans and manufacturers.

Even when drug developers clear these government-created barriers, public drug plans are under no obligation to add the approved medicines to their benefit lists. Too often governments focus only on drug costs and ignore the broader benefits effective drugs can bring, not only to the health and well-being of patients and their families, but also to other parts of the health system, to the economy and to society at large. If a new drug reduces doctor or emergency visits or hospitalizations or helps a person get back to work, those benefits typically are ignored by our drug assessment system.

The federal government made matters worse over the past six years by planning to drastically reduce drug prices by regulatory order, not negotiation. This caused considerable uncertainty among developers, resulting in even fewer new drugs being submitted for marketing approval here than in the U.S. and EU.

Proponents plainly want a lowest-common-denominator government-run public plan that would crowd out private plans, which over two-thirds of Canadians currently rely on for drug access.

Despite the federal government committing $1.5 billion over three years to “increase access to, and affordability of, effective drugs for rare diseases to improve the health of patients across Canada,” its initiative is not comprehensive. So far, Canada has neither a government-endorsed national rare disorder strategy nor an Orphan Drug Act providing incentives to developers to launch orphan medicines in Canada. Most other developed countries have both.

Patients’ organizations have stepped in where governments have failed to act and proposed a Canadian strategy that would include incentives and funding to encourage developers to launch drugs in this country and cut through the barriers we have described to provide timely access to the many innovative treatments on the research horizon. For example, access to breakthrough drugs could be allowed as soon as Health Canada says they are safe and effective, even as other administrative boxes are checked and prices negotiated. Other countries use this approach.

Canadians afflicted with any of the 11,000 or so known rare disorders have significant unmet needs. Fewer than five per cent have any treatment beyond symptom relief or palliative care. The last thing these people need is for governments to ration innovative drugs even more than they already do or to force even deeper price cuts from drug developers in order to pay for universal pharmacare that covers only basic medicines.

Canadians with rare disorders almost certainly will be even worse off if the NDP’s parliamentary blackmail works.

Nigel Rawson, affiliate scholar with the Canadian Health Policy Institute, is also a senior fellow at the Macdonald-Laurier Institute, as is John Adams, CEO of Canadian PKU and Allied Disorders Inc. and volunteer board chair of Best Medicines Coalition.

Canada has in fact achieved universal drug insurance coverage

Brett Skinner | Toronto Star | 12 AUG 2023

Pharmacare advocates have some explaining to do.

Evidence suggests a national government-run drug insurance program is not necessary, and will be bad for patients, and costly for taxpayers.

Frustrated advocates of national pharmacare are apparently in denial that the facts don’t support their rationale for the program.

On July 31, 2023 the Toronto Star published an opinion by Steve Morgan and Nav Persaud, in which the authors accuse drug manufacturers, and independent researchers of spreading lies about the extent of prescription drug insurance coverage in Canada, the impact of national pharmacare on patient access to medicines, and the costs and benefits of a targeted approach to ‘filling the gaps’ in insurance coverage.

Labelling pharmacare opponents as liars is not a scientific approach to policy debate. Morgan and Persaud are entitled to their own opinions, but not to their own facts. The core issue is whether the rationale for a national pharmacare program is supported by the evidence.

Morgan and Persaud argue that a national pharmacare program is necessary because millions of Canadians are not covered under any prescription drug plan. The authors reference a Statistics Canada survey which found that a significant percentage of respondents reported uninsured drug expenses and/or cost-related reasons for not taking their prescribed medications.

In the endnotes, Statistics Canada warned against misinterpreting the survey responses as evidence of insurance coverage status because respondents “may have prescription insurance, but have deductibles that are higher than the cost of their prescription(s). Others may be eligible for prescription insurance under a public plan but have not enrolled.”

The note should have been the lead headline because in practical terms, Canada has achieved universal drug insurance coverage. About 65% of Canadians have prescription drug coverage under employer–sponsored private drug plans. Seniors and people receiving income assistance qualify for public drug benefits or are otherwise eligible for deductible-based coverage. People who fall in the gaps between private and public insurance are protected because every jurisdiction in Canada has publicly funded safety-net programs for out-of-pocket prescription drug expenses exceeding income-adjusted deductibles.

People in the lowest income deciles are eligible for public safety-net coverage at zero or very low costs. People in the highest income deciles are covered when prescription drug costs exceed 3% to 7% of family income depending on the jurisdiction. Typically, private drug plans use deductibles and copayments and end up insuring about 80 percent of prescription costs.

Average out-of-pocket costs are affordable. Statistics Canada data indicate that in every income decile, more is spent by households on tobacco and alcohol than is spent out-of-pocket on prescription drugs.

The real insurance gap is caused by formulary exclusions. Not all drugs are covered under existing drug benefit plans and programs. If a patient’s prescribed medication is not listed on the formulary, then they are exposed to 100% of the cost as an out-of-pocket expense.

National pharmacare will reduce access to new medicines for nearly 25 million privately insured Canadians. Public plans cover far fewer new drugs compared to private plans in Canada and take much longer to do so.

Of the 182 new medicines authorized for marketing by Health Canada from 2016-2020, public drug plans covered only 43 (24%) by the end of 2021, compared to 116 (64%) in private drug plans. On average, the wait to access new medicines under a public drug plan was 724 days compared to 227 days under private sector drug plans.

The limited scope of coverage in existing public drug plans is indicative of what Canadians can expect from national pharmacare because it would be modeled on existing public formularies.

Morgan and Persaud argue that employers who now sponsor prescription drug plans will save money because those expenses will be covered under national pharmacare. They failed to mention that drug expenses currently paid for by private sector businesses will be shifted onto taxpayers.

The new tax burden would be significant. According to the Canadian Institute for Health Information, private spending on prescription drugs totalled almost $28 billion in 2022. The federal budget is already in deficit. Transferring private sector drug expenses to public budgets will create more pressure to reduce benefits under pharmacare.

Pharmacare advocates should stop the intellectual bullying and explain why Canadians would want a national prescription drug insurance monopoly, managed by the federal government that reduces access to new medicines and increases the tax burden.

Brett Skinner, PhD, is the CEO of the Canadian Health Policy Institute.

Lower drug prices are a good thing. Canada’s approach to achieving them was not.

Nigel Rawson | Globe and Mail | 17 MAR 2023

The drug prices review board was once a solution. It’s now a problem: Anti-drug company activists are repeating ill-informed myths about controlling drug prices in Canada

Nigel Rawson and John Adams | Financial Post | 01 MAR 2023

Anti-drug company activists came out of the woodwork last week repeating ill-informed myths about controlling drug prices in Canada that are based on bad data, analysis and legal advice.

Journalist Kelly Crowe and others repeat the falsehood that Canada has some of the highest drug list prices in the world, ignoring the billions of dollars in discounts various Canadian purchasers receive. Ms. Crowe suggests withdrawal of proposed new regulations for the Patented Medicine Prices Review Board (PMPRB) was due to federal Minister of Health Jean-Yves Duclos capitulating to the biopharmaceutical industry.

Resigning from the Board last week, Matthew Herder made the same insinuation, adding the claim that, with R&D spending of just 3.4 per cent of sales in 2021, the industry has failed to meet its target of 10 per cent. But he and the PMPRB are fixated on a 35-year-old notion of R&D. Statistics Canada’s modernized measure shows the 2021 figure to be 8.8 per cent.

Let’s be clear. Since its establishment in 1987 the PMPRB’s role has been to prevent time-limited, patent monopolies granted for new medicines from being abused by “excessive” prices — not to decide whether drug prices in general are reasonable or appropriate.

For five years, the PMPRB has been trying to expand its powers to severely reduce the list prices of new drugs in Canada. Its plan has included: replacing higher-price countries in its international price comparison group with six lower-price countries; implementing new untested “pharmacoeconomic” tests to determine prices; and requiring drug developers to report details of the confidential rebates they negotiate with public and private insurers.

Case studies suggest the change in comparison countries would lead to a reduction in list prices of about 20 per cent. Pharmacoeconomic tests could reduce them by another 25 to 55 per cent. Manufacturers very likely would find such reductions unsustainable and not launch products here.

Court challenges led to rulings against using pharmacoeconomic tests and reporting confidential discounts as violating trade secrets. The courts also found that without evidence of excessive pricing the PMPRB is “not empowered to control or lower prices.” Of the three major thrusts of the Board’s strategy, only the change in the countries comprising the comparison group remains.

Withdrawal of two of the three major proposed changes was not a case of “acquiescing to biopharmaceutical industry coercion.” They were withdrawn because courts and the rule of law prevailed over an out-of-control bureaucracy abetted by academic, journalistic and partisan spin.

In recent years, the PMPRB has been trying to help itself to powers it does not lawfully have. In a unanimous decision in 2021, the Federal Court of Appeal quashed a PMPRB ruling against Alexion Pharmaceuticals, finding that the Board had broken the law. The judges were blunt in their criticism: “administrators cannot put themselves in a position where they are not accountable.”

As an independent, quasi-judicial tribunal the PMPRB should maintain public-service impartiality. But results of 2021 freedom of information requests showed that the regulator disdains the industry it regulates. A PMPRB communication plan calls for Board supporters to say the biopharmaceutical industry is “holding Canadian patients for ransom” and putting “profits first and patients a distant second” (with neither accusation supported by evidence). And a senior PMPRB director wrote in an email that the industry “has been sucking Canada for decades.” These statements contradict Herder’s praise of “the integrity and expertise of Board staff.”

When the PMPRB was established 35 years ago, Canadians had no other protection against excessive drug prices. But now that we have agencies to evaluate the cost-effectiveness of new medicines, as well as the bargaining power of all federal, provincial and territorial drug plans in negotiating prices, the PMPRB is no longer relevant. It only had to deal with a handful of complaints about patented medicines in the decade 2009-19.

Anti-biopharmaceutical industry activists and some in the NDP believe contact between industry and the federal government is inappropriate. But collaboration between the two is key if Canadians are not to miss out on access to new medicines. For too long, Canadian governments have been antagonistic to drug developers and erected barriers that have deterred them from bringing innovative products here.

The threat of the proposed PMPRB changes sharply reduced the number of new drugs submitted to Health Canada over the past six years, causing concern among Canadians with unmet health needs who want access to new medicines. Instead of trying to drive prices down with arbitrary regulation, the federal government should be working with the provinces and territories to accelerate access to medicines for Canadians who need them.

The PMPRB has outlived its usefulness. It’s now a problem, not a solution.

Nigel Rawson is an affiliate scholar with the Canadian Health Policy Institute and a senior fellow with the Macdonald-Laurier Institute, as is John Adams, co-founder and CEO of Canadian PKU and Allied Disorders Inc.

Uncertainty about PMPRB price regulations will deter new drug launches in Canada

Nigel Rawson and Brett Skinner | Hill Times | 7 SEP 2022


Uncertainty about PMPRB price regulations will deter new drug launches in Canada

Nigel Rawson and Brett Skinner

In April, the federal minister of health announced that the government would not proceed with two of three major pieces in its new regulatory guidelines for the Patented Medicine Prices Review Board (PMPRB) after successive court rulings quashed changes that would have introduced complex “pharmaco-economic” calculations and required drug companies to disclose confidentially negotiated rebates.

On July 1st, the government implemented the one surviving amendment which involved changing the group of reference countries used to set price ceilings for innovative medicines in Canada from seven to 11 by removing two countries with high drug prices and adding six with lower prices.

A recently published paper examined how this change will impact access to new drugs in Canada. Researchers considered the perspective of a global pharmaceutical executive in Europe or the United States deciding whether it’s sensible from a business perspective to launch an innovative medicine in Canada in the next 12 to 18 months. The analysis was based on a hypothetical rare disease medicine, which would have satisfied the PMPRB’s criteria for being classified as a breakthrough drug because it was “the first one sold in Canada that treats effectively a particular illness or addresses effectively a particular indication.” Under the PMPRB regulations, the maximum list price allowed for a breakthrough drug is the median of list prices in the reference countries. The case study showed how a drug’s list price could be less than the median of the list prices in the seven former countries used in the reference test when first sold in Canada and, therefore, PMPRB-compliant. However, the same list price would exceed the median of prices in the new set of 11 reference countries by at least 12.8%, which would require an equivalent price cut.

This may not seem a large percentage, but it could be sufficient to deter a manufacturer from launching a new medicine in Canada. When considering whether to launch a new medicine on Canada, pharmaceutical executives face a set of complex and difficult questions. Two fundamental ones are: will the PMPRB use its external reference pricing test with the new countries in the same way as it has in the past (the PMPRB has significant latitude in creating its new guidelines), and will the company’s target list price be PMPRB-compliant under the new rules?

Another issue for global executives to consider is whether the changes in Canada will impact their company’s business in other countries, especially those that use Canada as a comparator in their own reference pricing tests. Several of these countries have much larger populations than Canada and, consequently, are important potential markets for new medicines that manufacturers will not want jeopardized.

If executives are considering the launch of a rare disorder drug, they will have to take account of the likelihood that prices of these medicines will be particularly reined in under the new rules. The cancellation of most of the proposed PMPRB revisions does not mean that the federal government has abandoned its objective of reducing medicine prices in Canada.

With so much unknown, pharmaceutical executives’ decisions seem highly likely to be wait-and-see. If companies commonly make this decision, launches of new medicines in Canada will, at best, be delayed and, at worst, not happen.

Canada’s attractiveness as a marketplace for new medicines has already diminished as a result of uncertainty about the PMPRB changes; the uncertainty will persist while new guidelines are drafted. Further delays in access or complete denials of access to innovative drugs will hurt even more Canadians with unmet or poorly met health needs that could be helped by these medicines.

Nigel Rawson is an affiliate scholar with the Canadian Health Policy Institute and a Senior Fellow with the Macdonald-Laurier Institute. Brett Skinner is CEO of the Canadian Health Policy Institute. 

A version of this article appeared in the Hill Times.

New patented medicines regulations reflect the general evidence deficiency in Canadian pharmaceutical policy

Brett Skinner | Financial Post, Hill Times  | 6 JUL 2022


New drug price controls are not evidence-based

Brett Skinner

The Liberal party’s 2015 federal election platform promised that its health policy decisions would be evidence-based. But Canada Day amendments to this country’s patented medicines regulations are based on faulty evidence and unproven assumptions and may lead to expensive and harmful policy outcomes.

On July 1, the federal government changed the group of reference countries used by the Patented Medicine Prices Review Board (PMPRB) to set price ceilings for innovative drugs. This was just one of several changes the government had wanted to make to the regulations — all designed to reduce maximum allowable prices by half. In April, however, after successful court challenges, the minister of health announced the government would not proceed with amendments that would have introduced complex “pharmaco-economic” calculations and required drug companies to disclose confidentially negotiated rebates.

The court challenges should not have been necessary. The changes were bad policy from the beginning. The government and the PMPRB should have heeded the large body of evidence showing that price controls are a disincentive to invest in R&D or launch new drugs and would therefore reduce or delay the availability of innovative medicines.

Policymakers tend to see the price but not the value of innovative medicines, and this has resulted in a huge bureaucracy built to control the cost of patented drugs. Several agencies already are involved in price regulation, health technology assessment (HTA), monopsony bargaining, formulary gatekeeping and centralized procurement, plus there are proposals for a new national drug agency, a single national formulary, and national public drug insurance (pharmacare).

Governments argue this bureaucracy is necessary because Canadian prices for patented medicines are too high and growing too quickly. These assumptions are not based on fact.

Policymakers routinely misinterpret drug expenditures reported by the Canadian Institute for Health information (CIHI) to be mostly attributable to patented medicines. In truth, the CIHI numbers also include non-patented drugs and ancillary costs like pharmacy dispensing fees, public drug plan administration, and even R&D spending by pharmaceutical companies.

The PMPRB is the only public data source that isolates the direct cost of patented medicines at the manufacturer’s list price, the component of expenditures affected by price regulation. But neither the CIHI nor the PMPRB accounts for the rebates negotiated between manufacturers and public drug plans, which Ontario’s Auditor General reported were 36 per cent off the list prices of patented medicines on average in 2016-17.

Using data from the same supplier used by the PMPRB, I compared manufacturers’ list prices for the 100 top-selling patented medicines in Canada to prices for equivalent products in the 11 countries specified by the new regulations, plus former reference countries Switzerland and the United States, for 2018-20.

For drugs with equivalent patent protection status, Canada consistently ranked in the middle (6th or 7th) of the 14 countries. In another recent study, I found that after accounting for rebates, national expenditure on patented medicines totaled $14.9 billion, representing only 33.8 per cent of the $44 billion in retail and hospital spending on drugs reported by CIHI.

Net of rebates, patented drugs represented only 5.5 per cent of $271 billion in national health expenditures in 2020. From 1990 to 2020, moreover, gross spending on patented medicines never exceeded 8.0 per cent of national health expenditure or one per cent of GDP. They were the same share of GDP in 2020 — 0.8 per cent — as in 2003.

When the correct data are examined in the appropriate economic context, national expenditures on patented medicines are objectively affordable and sustainable. Moreover, cost needs to be weighed against benefit. Pharmaceutical innovation improves patient health and reduces both health system costs and indirect societal costs such as losses in economic productivity from untreated or under-treated illness. The public resources consumed by price control, estimated at over $82 million in 2020, could be better spent improving access to under-funded therapies.

Germany offers an interesting alternative to Canada’s price control regime: free market pricing and structured negotiation. If we applied it here, the federal price regulations would be eliminated, manufacturers would freely price products, and public payers would immediately cover new drugs pending negotiations. Bargaining could be informed, but not determined, by reference prices and HTA and would be time-limited, progressing to non-binding arbitration if agreement failed. Arbiters would be selected by mutual agreement. The formulary listing would expire if either party rejected the arbiter’s price and revenues earned under the interim price would be rebated according to the arbiter’s price. This would expedite insured access to new drugs while leaving the bargaining leverage of the payer and seller ultimately intact.

Brett Skinner is CEO of the Canadian Health Policy Institute.

Versions of this article appeared in the Financial Post and the Hill Times.