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 | CHP | 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 | CHP | 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.

PMPRB’s Selective Use of Undefined Data Is Intended to Further its Misleading Narrative

Nigel Rawson | CHP | 15 November 2021


– Background – 

The Patented Medicine Prices Review Board (PMPRB) is the federal tribunal whose role for the last 34 years has been to prevent time-limited patent monopolies for new medicines from charging “excessive” prices. In June 2016, it published a discussion document on proposed changes to its regulations, although the PMPRB leadership’s desire for revised regulations was apparent in their 2015-18 strategic plan.

Despite many criticisms to the planned changes from not only the biopharmaceutical industry but also patients, advocacy groups, physicians and other health professionals, the PMPRB and the federal government brushed them off and moved forward with the new rules. The implementation of the new regulations has been postponed three times – allegedly due to issues caused by the COVID-19 pandemic but more likely the result of evidence that the changes are ill-considered and broad-based stakeholder concern as well as several legal challenges – and is currently expected to occur in January 2022.

Throughout the past five years, the PMPRB and the federal government have maintained that the regulation changes will have little impact on the way the biopharmaceutical industry views Canada as a potential market for its products. They suggest that manufacturers will continue to perform research and development in Canada and to see Canada as a premier country in which to launch innovative drugs. This blinkered view ignores the fact that antagonistic policies in the form of rigid health technology assessments and non-transparent price negotiation processes have already reduced the industry’s interest in pursuing research, development and manufacturing in Canada. It also ignores data which have demonstrated that even the threat of the new regulations is deterring manufacturers’ interest in Canada.

– Previous Analyses –

In particular, the PMPRB has repeatedly suggested that the biopharmaceutical industry has not reduced its interest in performing research in Canada using data on newly approved clinical trials. However, the PMPRB’s analyses have failed to evaluate numbers of newly approved clinical trials by development phase.

Clinical trials of a new medicine in humans fall into three main phases designed to assess whether the medicine is safe, whether it works, and whether it is truly beneficial in real patients. Trials in the third phase are the most labour intensive and costly. They are also the most impactful on patients because they are testing medicines in patients (not healthy volunteers) with the condition for which the drug is indicated and, as such, are of direct interest to patients, particularly those with unmet health needs. Late-phase trials are commonly sponsored by manufacturers and, when performed in Canada, tend to indicate that the medicine will eventually be launched in this country. In contrast, trials sponsored by academic institutions are often earlier phase studies designed to answer esoteric scientific questions that are frequently of little direct interest or benefit to patients.

In February 2021, I demonstrated that the number of late development phase clinical trials of therapeutic and preventative medicines recorded in Health Canada’s publicly-available clinical trials database as being newly approved in the first half of each year between 2015 and 2019 was consistent (average: 135; range: 130 to 139). However, the number decreased in the first half of 2020 to 100 trials, 26% below the average over the preceding five years. A similar situation occurred in trials of oncology and non-oncology medicines, although the decrease was more apparent in non-oncology medicines. The reason for only analyzing new clinical trials approved in the first half of each year was the backlog of five to six months in the recording of trials in the database that had been previously identified by the PMPRB.

The PMPRB responded in a February 16 Twitter post suggesting that the number of late-phase trials approved in the second half of 2020 was consistent with the number in the first half. An implication of these results was that the backlog in recording trials had been eliminated in the month between the data extraction for my February 2021 article and the PMPRB’s Twitter post. However, unlike my work, the data reported by the PMPRB covered all late-phase trials regardless of whether sponsored by a biopharmaceutical company or an academic institution and, thus, failed to provide insight into any changes in the number of manufacturer-sponsored trials.

Since the recording backlog had been eliminated, I repeated my analysis using data from Health Canada’s database for each whole year between 2015 and 2020 in March 2021. Only a modest decrease of 7% occurred in the overall number of manufacturer-sponsored trials. However, between 2015 and 2020, the number of late-phase trials decreased by 23% (the decreases in oncology and non-oncology medicine trials were 15% and 25%, respectively).

Trials of COVID-19 therapies and vaccines increased the numbers in 2020. When these trials were excluded, the decrease in all manufacturer-sponsored trials between 2015 and 2020 was 12% and the reduction in late-phase trials of non-oncology medicines was 31%.

– PMPRB Latest Data –

At the 2021 Canadian Agency for Drugs and Technologies in Health (CADTH) symposium, the PMPRB presented a poster about pharmaceutical research and development investment and the number of clinical trials in Canada. This included a figure of the total number of clinical trials approved in each half year between January 2016 and June 2021 and the percentage that were manufacturer-sponsored in each time period. With these data, the PMPRB claimed that, despite a steep reduction in the number of newly approved clinical trials in the first half of 2020, the number in the second half of the year “recovered to average levels.” The implication the PMPRB wants to convey is that the threat of the new regulations is not causing a decrease in the number of new clinical trials approved in Canada.

The first point to observe in the PMPRB’s data is that the numbers of newly approved clinical trials reported are larger than the numbers recorded in the publicly-available Health Canada database for every half-year but one (Figure 1). Where these data originate is not defined; they don’t come from the first two references provided in the PMPRB’s poster but likely come from the third reference, GlobalData, a data analytics company based in the United Kingdom.

Figure 1: Newly approved clinical trials reported by the PMPRB and Health Canada by half-year

The second point is that the number of clinical trials in 2015, which is higher than the numbers in most of the later years, is excluded. Finally, the PMPRB again fails to unpack its data to examine trends in the clinical trials by development phase.

When manufacturer-sponsored trials recorded in Health Canada’s database are categorized by trial development phase (Figure 2), no trend is apparent in early-phase trials but the number of late-phase trials decreased from 168 in the second half of 2015 to 116 in the first half of 2021 – a reduction of 31%, 33% if COVID-19 late-phase trials are excluded. A similar trend was seen in the trials of non-oncology medicines with a reduction of 37% in the number of manufacturer-sponsored late-phase trials between 2015 and 2021 (45% if COVID-19 trials are excluded).

Figure 2: Newly approved clinical trials reported by Health Canada by half year and development phase

– Conclusion –

The PMPRB has used data from Health Canada’s clinical trials database in previous analyses. The data used in its CADTH symposium poster are inconsistent with information from Health Canada’s database. The PMPRB has also used GlobalData previously to suggest that not all approved clinical trials in Canada are recorded by Health Canada, although by 2019 the numbers of trials in Health Canada’s database were reasonably close to the number according to GlobalData. The question arises as to why Health Canada, the regulatory authority responsible for approving clinical trials, is not aware of all clinical trials in this country.

Whichever data source the PMPRB uses, it should provide a detailed analysis categorizing newly approved trials by sponsor type and development phase and accounting for other factors such as COVID-19 research. Simply providing overall data on newly approved trials seems designed to further the PMPRB’s misleading narrative that manufacturers are not responding negatively to its planned regulation revisions.

Information obtained from Health Canada’s publicly available database demonstrates that the PMPRB’s claim that the number of newly approved clinical trials has “recovered to average levels” is untrue with regard to manufacturer-sponsored trials. Late-phase manufacturer-sponsored trials are the costliest and the most labour intensive. They are also the ones most impactful on patients because they are testing medicines in patients with the condition for which the drug is indicated, medicines have undergone many safety assessments by this stage, and performing a late-phase trial in Canada frequently suggests that the developer will eventually launch the medicine in this country. A reduction in such trials is an indicator that the attractiveness of Canada as a country in which to launch new medicines has decreased.

Politically-instituted barriers against innovative medicines have a human toll

Nigel Rawson and Beth Vanstone | CHP Opinions | 9 Sept 2021

Photo: Beth and Madi.

In an article in the Hamilton Spectator, we wrote that patients access to innovative medicines should be an election issue. Canadians have heard little to nothing from any political party in the campaign about how they will improve access to innovative medicines that can provide effective therapy for previously untreatable diseases but whose cost is frequently beyond the average Canadian’s ability to pay.

Some politicians and academics believe that a national pharmacare program relying on federal regulations to drastically reduce drug prices will resolve patient access issues. It won’t.

Beth’s daughter, Madi, has cystic fibrosis. Her urgent need, and that of many CF sufferers, for access to Trikafta is being ignored by politicians and their officials while CADTH considers its final recommendation for the drug (its draft recommendation restricts Trikafta’s use to only a few CF sufferers) and the national price negotiator eventually accepts the drug for negotiation. CF sufferers will die as these cumbersome processes grind on.

We wanted to include Madi’s own comments in our Spectator article, but it was not possible. However, it is crucial that politicians, bureaucrats and the public understand the human toll of devastating diseases like CF, so let’s hear from Madi.

I have cystic fibrosis. It is a terminal disease that mainly attacks the lungs, but affects the entire body. When I was diagnosed, my parents were told I would be lucky to make it to 25 years old. At the age of 10, my health started declining rapidly, so we started preparing for the worst. As hard as it is to admit, I gave up. I was tired of fighting just to be alive.

But just as time was running out, a medication called Kalydeco saved my life. Kalydeco has given me 9 years of life that I couldn’t be more thankful for. I have got to experience the world, graduate high school and start college, fall in and out of love, meet the most incredible people and make the best memories. I’ve got to live.

Unfortunately, as I’ve got older, my disease has been making a slow comeback. This past year in particular has been a struggle. I feel myself slipping back, and it’s awful. Recently my lung function dropped to 53 percent – the lowest it’s been since I was 5 years old. My doctors have recently expressed that it’s crucial I switch to a new medication called Trikafta before my condition worsens. This medication corrects both defective genes in my body (Kalydeco only corrects one), but isn’t funded for all Canadian CF patients that could benefit.

Gaining access to Trikafta is a huge fight for Canadians. Families and patients have been working non-stop to get this medication to those who need it. As I have been struggling silently, I’ve been watching the CF community come together and fight for what is right.

I just want to thank everyone who has contributed to this fight for Trikafta. You are all absolutely amazing and I can’t thank you enough for the work you have been doing to save not only my life but my friends’ lives. To my fellow CF’ers fighting, you ROCK. It’s exhausting fighting for your life and fighting the government at the same time. You are all amazing!

We are close to gaining Trikafta. I can’t wait to celebrate with all of you when this fight is finally over. I promise to do what I can to help finish this once and for all. Stay strong and keep fighting!

Unless you have ice in your veins, it is impossible to read Madi’s words without being moved, firstly, by her strength to keep fighting both CF and the system and, secondly, by the suffering caused by a disease that could be helped by access to an innovative medicine.

The suffering is not confined to the patient but extends to their family and friends. Her mother describes the impact and the gruelling fight against both CF and governments eloquently.

Fighting chronic illness is a life-changing experience not only for the patient but the entire family. The daily challenges of appointments, therapies and hospitalizations, along with investing time and energy into supporting efforts to raise money and participate in research to improve treatments and search for cures, is more than many patients and families can endure.

To invest personal resources in an effort for better outcomes for patients and then have to battle the government to access these life-changing, life-saving medications is inhumane. We have spent Madi’s entire life doing therapy, attending clinics, and enduring hospitalizations trying to save her.

The first CF modulator (Kalydeco) was the culmination of decades of fundraising and research, and it represented hope for CF patients. We had no idea that it would unlock the door to an unforeseen battle with our own government. We have been advocating for nearly a decade now, over half of Madi’s life, to access these medications. During the past decade, we have only seen changes that make the process nearly impossible for Canadian patients trying to access these medications.

As we watch countries around the world create solutions to make these innovative medications available for patients, Canada has thrown up additional roadblocks to ultimately prevent access to the majority of these medicines. As a parent and advocate, I can only see a future where, rather than being able to celebrate innovation and the benefits to patients, we will forever be embroiled in a battle for new and improved therapies.

It shouldn’t be this hard. Canada needs to invest resources in finding a fast and effective pathway to these medications.

When politicians and academics suggest that national pharmacare will improve access, you should realize that they haven’t a clue about the real toll of their obstacles to drug access on human health. A pharmacare program covering only a small number of medicines for common disorders, with a vague promise to phase in other medications over an unspecified number of years subject to regulations forcing severely reduced drug prices to make the program affordable, is not going to help individuals like Madi – it’s just false hope.

Patients whose health could be improved by innovative medicines will continue to suffer and die prematurely if Canada’s hostile attitude towards drug developers is maintained. Canadians need a federal government that adopts a collaborative relationship with the biopharmaceutical industry to ensure patients have access to new therapeutic advances now – and into the future.

Nigel Rawson is an independent researcher and an affiliate scholar with the Canadian Health Policy Institute. Beth Vanstone is a long-time advocate for Canadians with cystic fibrosis and a director with CF Get Loud. The views expressed are the authors’ own and do not necessarily represent those of organizations with which they collaborate.