Patented Medicines Expenditure in Canada 1990–2020: what does the evidence show?

Patented Medicines Expenditure in Canada 1990–2020

ATTRIBUTION
This legacy paper is corporately authored and edited based on proprietary template models and methods that are intended to facilitate regular updates. The design and content are a cumulative reflection of the diverse contributions collectively attributable to the CHPI affiliated researchers who may have variously participated in updating each edition. Data sources, methods and editorial presentation may evolve from previous editions.

CONTRIBUTORS
Brett Skinner, PhD, Canadian Health Policy Institute (CHPI)

ACKNOWLEDGMENTS
CHPI is grateful for the past contributions to the conceptual and analytical development of this paper by Mark Rovere, PhD Candidate, Canadian Health Policy Institute (CHPI).

EDITION
This is the 7TH edition of this paper to be published as a CHPI research series. It builds on the concepts and methods from the original paper: Skinner BJ (2012). Drugs and the public cost of healthcare in Canada, 1974-1975 to 2011-2012. Canadian Health Policy, November 27, 2012. Toronto: Canadian Health Policy Institute.

CITATION
Canadian Health Policy Institute (CHPI) (2022). Patented Medicines Expenditure in Canada 1990–2020. 7th Edition. Canadian Health Policy, JUN 2022. ISSN 2562-9492, https://doi.org/10.54194/CZXJ1621, canadianhealthpolicy.com.

EDITORIAL SUMMARY

Federal, provincial, and territorial governments claim to be committed to evidence-based policymaking. The reality is that government policies are often based on faulty evidence or unproven assumptions, which can lead to unnecessary, expensive and harmful policy choices.

Canadian pharmaceutical policy is built on the assumption that excessive prices for patented medicines are a major cause of the growth in national health expenditures (NHEX).

As a result, the country has constructed a multi-layered bureaucracy to control the cost of patented medicines. Currently several government agencies are involved in price regulation, health technology assessment, 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).

But the public discussion of pharmaceutical policy is afflicted by a perennial information deficit regarding the magnitude of spending on patented medicines. Policymakers, experts and media routinely misinterpret drugs expenditures reported by the Canadian Institute for Health Information (CIHI), to be mostly attributable to patented medicines. This is problematic because CIHI does not report patented medicines costs. Accurate data are available from the Patented Medicine Prices Review Board (PMPRB), and the numbers differ significantly from those reported by CIHI.

This study reconciles the data differences and explains the implications for Canada’s pharmaceutical policy logic. The analysis tests the empirical validity of the assumption that the prices of patented medicines are a major driver of national health expenditure growth. It uses publicly available data from government sources including CIHI, the PMPRB, and Statistics Canada. Patented medicines expenditures are examined in comparison to the rest of NHEX, and after accounting for changes in population, inflation, and economic growth. Estimates are provided before and after accounting for public sector rebates and exclude temporary expenditures on COVID-19 emergency response.

According to PMPRB, gross national sales of patented drugs were $17.5 billion in 2020 before accounting for public sector rebates, representing only 40% of the $44.0 billion combined total reported by CIHI for spending on retail and hospital drugs, and only 6.5% of the $271 billion total national health expenditures in 2020. From 1990 to 2020 gross sales of patented medicines have never exceeded 8% of NHEX.

After accounting for public sector rebates, national expenditure on patented medicines totaled $14.9 billion in 2020, representing only 33.8% of total drugs expenditures reported by CIHI, and 5.5% of total national health expenditures.

CHPI’s analysis shows that, when the correct data are examined in a proper economic context, national expenditures on patented medicines are objectively affordable and sustainable.

So then, why do policymakers myopically focus on controlling the prices of patented medicines instead of other types of healthcare expenditures? The information deficit is one explanation. Governments also probably find it technically easier to regulate pharmaceutical products than to improve efficiency in hospitals and physician care. Moreover, imposing an economic loss on pharmaceutical companies has less political costs for governments than targeting hospitals and health professionals. The focus on the prices of patent medicines is also partly explained by industrial nationalism. The innovative pharmaceuticals industry is comprised mainly of foreign multinational companies. Canadian policymakers view public expenditure on patented medicines as a cost burden for Canadian taxpayers and an income transfer to American and European pharmaceutical companies.

The disproportionate focus on price controls raises the risk of serious unintended consequences. Evidence suggests that excessive price controls are a disincentive to launch new drugs and to invest in research and development in markets. If governments want to ensure that Canadians have early access to new medicines, and want to attract foreign direct investment to Canada, the excessive focus on price controls is counterproductive.

Price controls are not costless. Administering the price control regime consumes significant public resources that could be saved or spent to improve access to under-funded therapies. A quick review of annual financial statements for three price control agencies shows the direct cost of price regulation and HTA was over $82 million in 2020, excluding the health and economic costs of delays to launching new drugs and listing them on public formularies.

The paper concludes with a discussion of an alternative approach to price regulation of patented medicines using Germany as a model for Canada. Germany’s approach to pharmaceutical pricing is based on structured negotiation instead of regulation and is designed to allow immediate interim public insurance coverage of new medicines following marketing authorization, with permanent insurance coverage pending the outcome of negotiations.

While it is important for governments to manage public finances responsibly, the incremental cost of providing insured access to patented drugs must be weighed against the benefits in a broader economic context. Pharmaceutical innovation improves patient health outcomes, reduces potential health system costs, and reduces indirect societal costs like economic productivity losses from untreated or under-treated illness. The impact of excessive price regulation on the availability of patented medicines jeopardizes the potential benefits to be gained from greater utilization of new drugs. Instead of focusing on controlling the prices of patented medicines, policymakers should be trying to capture the value of therapeutic innovation.

Patent term erosion and the availability of new medicines in Canada 2000-2022

Patent term erosion and the availability of new medicines in Canada 2000-2022

CONTRIBUTORS
Brett Skinner, PhD, Canadian Health Policy Institute (CHPI)

ATTRIBUTION
This legacy paper is corporately authored and edited based on proprietary template models and methods that are intended to facilitate regular updates. The design and content are a cumulative reflection of the diverse contributions collectively attributable to the CHPI affiliated researchers who may have variously participated in updating each edition. Data sources, methods and editorial presentation may evolve from previous editions.

EDITION
This is the first edition of this paper to be published as a CHPI research series. It builds on the concepts and methods from the original paper: Skinner BJ (2016). How long do new patented medicines have market exclusivity in Canada’s public drug plans? Canadian Health Policy, August 16, 2016.

CITATION
Canadian Health Policy Institute (CHPI) (2022). Patent term erosion and the availability of new medicines in Canada 2000-2022. Canadian Health Policy, MAY 2022. ISSN 2562-9492, https://doi.org/10.54194/JWIE7735, canadianhealthpolicy.com.

ABSTRACT
This study estimated how long new drugs are covered under federal and provincial public drug insurance plans while protected by an active patent. New drugs (or medicines) were defined as patented drug products designated as new active substances and authorized for marketing in Canada between 1 January 2000, and 15 April 2022. Results showed that for the new medicines that were eventually covered under public insurance plans, the number of years of public reimbursement eligibility while under an active patent averaged 6.7 years, implying the loss of 13.3 years of commercially viable time under patent protection. The erosion of patent protected time under public insurance coverage has significantly reduced the economic value of a pharmaceutical patent in Canada and has likely created disincentives for pharmaceutical companies to prioritize the introduction of new medicines in Canada. The impact of patent term erosion on the availability of new medicines has potentially significant implications for population health in Canada. Feasible policy remedies include regulatory harmonization, expedited insurance coverage, and full patent term restoration.

Waiting for new medicines in Canada, Europe and the United States 2016-2021

Waiting for new medicines in Canada, Europe and the United States 2016-2021

CONTRIBUTORS
Mark Rovere, PhD candidate, Canadian Health Policy Institute (CHPI)
Brett Skinner, PhD, Canadian Health Policy Institute (CHPI)

ATTRIBUTION
This paper is corporately authored and edited based on proprietary template models and methods that are intended to facilitate regular updates. The design and content are a cumulative reflection of the diverse contributions collectively attributable to the CHPI affiliated researchers who may have variously participated in updating each edition. Data sources, methods and editorial presentation may evolve from previous editions.

CITATION
Canadian Health Policy Institute (CHPI) (2022). Waiting for new medicines in Canada, Europe and the United States 2016-2021. Canadian Health Policy, APR 2022. ISSN 2562-9492 https://doi.org/10.54194/SPOS4023 canadianhealthpolicy.com.

INTRODUCTION

Pathway to Access a New Drug in Canada

It takes a long time to successfully develop a new drug that will prove safe and effective for use by patients. A 2016 estimate based on the United States experience found that the time between the start of clinical testing of a novel drug molecule, and submission of a new drug application for marketing authorization was 80.8 months or 6.7 years. However, the end of the research and development phase is just the beginning of the wait for access to new medicines caused by government policies affecting the geographic priority for new drug launches, regulatory approvals, and reimbursement processes.

Getting access to a successfully developed new drug under a public drug plan in Canada is a particularly complex and time-consuming bureaucratic process. Before a new drug can be sold in Canada, it must be authorized for marketing by the federal regulatory agency Health Canada, which reviews the clinical evidence to assess and certify the safety and therapeutic effectiveness of the product.

The prices of new medicines are also federally regulated by a quasi-judicial agency known as the Patented Medicine Prices Review Board (PMPRB). PMPRB reviews the clinical evidence to determine the applicability of price control guidelines and sets the ceiling price for new drugs using international, domestic, and therapeutic reference prices.

Further, new drugs are subject to health technology assessment (HTA) by the Canadian Agency for Drugs and Technology in Health (CADTH), which again reviews clinical evidence to assess the cost-effectiveness of the product and make recommendations regarding reimbursement on behalf of all federal and provincial public drug plans, except Quebec which utilizes its own HTA agency known as the Institut national d’excellence en santé et en services sociaux (INESSS).

Manufacturers of new drugs then enter price negotiation with the pan-Canadian Pharmaceutical Alliance (PCPA), which acts as a monopsony on behalf of every federal and provincial public drug plan. Under the direction of their respective Ministers of Health, public drug plans make the final decision about listing a new drug on the formulary, and the reimbursement price and conditions, within a budget allocated by the Minister.

This complex process determines the availability of new drugs, and how long Canadian patients must wait for insured access to new medicines. Despite its importance, policy makers have failed to scrutinize the impact of the process on access. Access to new medicines should be a higher priority for federal and provincial governments. A literature review published by CHPI in 2019, found 68 studies published in peer-reviewed academic journals from 1990 to 2018 affirming that greater use of innovative pharmaceuticals is empirically associated with improved patient and population health outcomes, reduced potential health system costs, and reduced societal costs like economic productivity losses from untreated or under-treated illness. There is a lot to be gained from improving access to new drugs.

Objective

Inter-jurisdictional comparisons of access to new medicines can provide insights about the impact of policies and regulations, the performance of regulatory agencies, and the adequacy of insurance. This study compares the regulatory and reimbursement experience of new medicines in Canada, the European Union, and the United States. It introduces a novel accrual-based analysis to account for drugs matching Health Canada approvals during the years 2016-2020 that were approved in previous years in Europe or the United States. The analysis comprehensively examines the total wait time for insured access to new medicines, measured from the first global application for marketing authorization to inclusion on a public drug plan formulary.

Access to new medicines in Canada 2016-2021: Federal-provincial v private drug plans

Access to new medicines in Canada 2016-2021: Federal-provincial public drug programs and private sector drug plans

CONTRIBUTORS
Mark Rovere, PhD candidate, Canadian Health Policy Institute (CHPI)
Brett Skinner, PhD, Canadian Health Policy Institute (CHPI)

ATTRIBUTION
This paper is corporately authored and edited based on proprietary template models and methods that are intended to facilitate regular updates. The design and content are a cumulative reflection of the diverse contributions collectively attributable to the CHPI affiliated researchers who may have variously participated in updating each edition. Data sources, methods and editorial presentation may evolve from previous editions.

CITATION
Canadian Health Policy Institute (CHPI) (2022). Access to new medicines in Canada 2016-2021 Federal-provincial public drug programs and private sector drug plans. Canadian Health Policy, APR 2022. ISSN 2562-9492 https://doi.org/10.54194/GCAP7754 canadianhealthpolicy.com.

Introduction

What good is your drug plan if it doesn’t cover new medicines?

Good drug insurance should provide financial protection from unexpected and unaffordable costs of accessing necessary medicines when you or your family experience serious health challenges. Most prescription drugs are priced low enough (relative to other household expenses) to be affordable as an out-of-pocket expense which does not require insurance.  Older versions of widely used drug products tend to be the most affordably priced. Newer products – often the latest treatment advances, first-in-class therapies, or targeted therapies for rare diseases – can be expensive and unaffordable without insurance. Therefore, it is important to measure the quality of benefits provided under your drug insurance plan according to how good the coverage is for new medicines.

Since 2013, CHPI has regularly compared the quality of the benefits in private versus public drug plans, according to the scope of coverage for new medicines. Our analysis raises awareness about differences in the insurance benefits provided to patients and informs policy discussions about how best to achieve socio-economically optimal drug insurance systems in Canada.

The research is important because the federal government has proposed replacing Canada’s private-public prescription drug insurance system with a single-payer national pharmacare program that would be modeled on existing public formularies. Public plans cover far fewer new drugs compared to private plans in Canada. Public plans also take much longer to cover new drugs compared to private plans. The limited scope of coverage in existing public drug plans is indicative of what Canadians can expect from national pharmacare. The results of this study forewarn that national pharmacare will reduce access to new medicines for Canadians currently covered under private plans.

Objective

The study compares the percentage of available new medicines listed on the formularies of public sector and private sector drug plans; estimates how long Canadians waited for insured access to the available new medicines; identifies causes of limited availability and excessive waits, and recommends practical policy options.

Pharmacy scope of practice and access to Opioid Agonist Therapies after COVID-19

Sarah Lussier-Hoskyn, MA Economics BPHA, affiliated researcher CHPI
Brett Skinner, PhD, CEO CHPI, Editor CHP Journal

Under the regulations contained in the federal Controlled Drugs and Substances Act (CDSA), prescribing, selling, distributing and other related activities involving drugs like opioids are only allowed for designated health professions. On March 19, 2020, Health Canada issued an exemption, temporarily expanding pharmacists’ scope of practice to include activities usually prohibited by the CDSA. The exemption was implemented partly to facilitate continuity of access to opioid agonist therapies (OAT) for people suffering from opioid use disorder (OUD) during the COVID-19 pandemic. This article discusses the implications of making the exemption permanent.

PREVIEW: January 27, 2022 | PUBLISHED: January 31, 2022

Comparing wait times for an Alzheimer’s treatment in Canada and other G7 countries

Soeren Mattke, MD DSc, University of Southern California, Los Angeles, USA
Mo Wang, MS, University of Southern California, Los Angeles, USA

The emerging disease-modifying Alzheimer’s treatments present a health system challenge because of the combination of a large prevalent patient pool and a complex diagnostic process. Analyses of system preparedness have projected Canada to have the longest and most protracted wait times for access among G7 countries. This policy analysis used comparative health system data and 17 semi-structured interviews with experts in Canada. The authors conclude that Canada faces a unique challenge to make a disease-modifying Alzheimer’s treatment accessible because of limited capacity for memory care.

PREVIEW: January 27, 2022 | PUBLISHED: January 31, 2022

Comparing COVID-19 Vaccine Procurement in Canada, the UK and Israel

Mayvis Rebeira, PhD, Affiliated Scholar, Canadian Health Policy Institute

This commentary article compares Canada’s vaccination procurement strategy with that of UK and Israel. Canada’s COVID-19 vaccine supply seemed unreliable in the early months of 2021 when both UK and Israel were able to procure a steady supply of vaccines for their population. As of the beginning of May 2021, Canada had only fully vaccinated (two doses administered) 3% of its population compared to Israel at 58% and UK at 23%. Canada eventually accelerated its vaccine distribution and by the end of August 2021, 66% of the population had been fully vaccinated.

PUBLISHED: September 23, 2021

CHP Journal price changes

Readers,

As you know, CHPI is funded by sales of articles and subscriptions to our readers. We have not raised prices for over 10 years. Increased operating costs require us to adjust our prices.

Effective July 11, 2022, article prices have returned to the pre-pandemic rate of $40.

Effective September 1, 2022, annual subscription prices will increase to $150.

Canadian Health Policy Journal is an independent platform for information and ideas that shape health policy thinking in Canada. Thank you for your continued interest in the Journal and support for the Institute.

CHPI celebrates 10 successful years and a new style for CHP Journal!

EDITOR'S DESK

A note to CHPI Members and CHP Readers from Brett Skinner, Founder, CEO and Editor

CHPI Members and CHP Readers,

Did you know that the Canadian Health Policy Institute will celebrate its 10th anniversary in 2022? The Institute was established in 2012, as Canada’s first private-sector, non-governmental research organization specializing in health policy. CHPI is an entrepreneurial academic venture with a social purpose. It was founded in response to the observation that there are persistent problems in Canada’s healthcare system and established policies have not proved to be adequate to meet these challenges. The goal was to identify systemic problems and develop alternative policy options that would improve patients’ access to the most advanced medical care at a sustainable cost for taxpayers.

The venture has been successful. Over the last decade, CHPI has become an important voice in the health policy community, earning a reputation for evidence-based research and advocacy.

The Institute’s profile has grown since 2012. Almost 23,000 people now follow CHPI across various social media platforms generating nearly 4,000,000 unique post views. More than 70 original opinion editorials by CHPI researchers have been published in print and digital newspapers and magazines across the country. CHPI research is frequently cited in academic publications and major media.

Our digital online journal Canadian Health Policy, is an increasingly popular platform for independent researchers to publish evidence and ideas that shape health policy. Since 2012, CHP has recorded nearly 160,000 unique readers and is approaching 500,000 document views. The Journal now attracts approximately 30,000 active readers annually: an audience comprised almost entirely of people with a professional, occupational, or academic interest in knowing how government policies impact the health of Canadians and the performance of the healthcare system.

Nearly 150 studies and articles have been published in CHP, from 67 authors including 34 PhDs, 21 MDs, 2 PharmDs, 1 DDS, and other experts, economists and analysts. Author affiliations include research institutes, patient organizations, universities, hospitals, and government health agencies.

We are marking our 10th anniversary by relaunching the Journal with a new look and improved functionality. We have also adopted a new standardized style for our downloadable publications. I invite you to browse through the Journal. If you are not yet a subscriber, you can read some of our Open Access articles free of charge.

The credit for CHPI’s success ultimately belongs to our affiliated researchers, advisors, and administrators. Their intelligent work has made CHPI an important source of evidence and innovative policy thinking.

Finally, I want to thank you, our readers, for your interest in Canadian Health Policy over the last 10 years. Your support makes it possible for us to generate and publish information and ideas for a better health system.

Looking forward to the future!

Sincerely,