Consequences of over-regulating the prices of new drugs in Canada

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Article Brief

Author

Brett J Skinner, Ph.D.

Publication Date

March 27, 2018

Introduction

Canada’s federal government is in the end-stages of a process for implementing changes to the rules used by the Patented Medicine Prices Review Board (PMRPB) to regulate the prices of new medicines. Two of the stated purposes for the PMPRB regulatory changes are to significantly lower the cost of prescription drugs and to provide faster access to new drugs that are safe and effective. 

Objective

To examine whether the evidence supports the government’s assumption that it can preserve the availability of new medicines for Canadian patients while further depressing the prices of patented drugs.

Data and Method

Using data from the PMPRB and the Organisation for Economic Co-operation and Development (OECD), a multi-variable linear regression analysis was conducted to test the statistical relationship between the number of new drug launches (dependent variable) across 31 OECD countries and three independent variables: the market price level for patented drugs, the per capita GDP and the total market size (population) in each country.

Results

Market price level was the only one of the three independent variables that was a statistically significant predictor of the number of new drug launches (P < .05, at 95% CI). The analysis confirms that lower priced markets experienced fewer new drug launches, and vice versa, that higher priced markets tended to experience more new drug launches (Coefficient = .283).

Conclusions

The analysis strongly suggests that any regulatory change that further depresses prices runs the risk of reducing the availability of new medicines for Canadian patients. There is no evidence-based justification for expanding the scope or complexity of existing price regulations for patented drugs. Policy-makers should reject the PMPRB’s proposed regulatory changes. They are unnecessary and will almost certainly reduce access to new medicines for Canadian patients.

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