Canada has the key to lowering drug prices. Here’s why it won’t be used any time soon

January 4, 2019
By Kelly Crowe
November 24, 2018

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There’s a battle being fought in the backrooms of Ottawa and the outcome could determine how much Canadians will pay for new drugs.

The federal government has developed a series of regulations that would lower Canada’s patented drug prices, which are among the highest in the world. Canada is second only to the U.S. in per capita drug costs.

But the new rules were like a gauntlet thrown down in the path of the pharmaceutical industry which has been lobbying federal government officials ever since.

“Drug companies understand very well what’s at stake and they’re massively mobilizing to make sure nothing happens,” said Marc-André Gagnon, a pharmaceutical policy researcher at Carleton University.

The dispute is over a policy document called “Protecting Canadians from Excessive Drug Prices” — a series of amendments to the Patent Medicine Regulations that former Health Minister Jane Philpott announced on May 16, 2017.

“Canadians are paying too much for prescription drugs,” Philpott said at the time. “These measures will go a long way towards helping Canadians afford the medicines they need to live healthy, productive lives.”

Bringing Canada’s drug prices down sounded like a reasonable idea. And the plan would work according to the industry’s own calculations.

The president of Janssen Canada, Chris Halyk, estimated “an average reduction in prices of approximately 20%,” in a submission letter sent to the Health Minister in February.

But if drug prices go down, so do industry revenues, falling by up to $26 billion over ten years according to one industry report.

That’s one reason why the industry’s resistance has been so intense. And it’s wielding a big stick, threatening that companies could hold back the launch of new drugs in Canada if the amendments are approved.

In Janssen Canada’s letter to the Health Minister, Halyk wrote “…the level of price reductions that are being proposed could result in it being not financially viable to launch some medicines in Canada.”

The pharmaceutical industry is also warning that it might reduce research and development in Canada, putting jobs at stake.

“[The regulations] will have negative economic implications, leading to reduced research and development (R&D) investments, less innovation in Canada and fewer jobs in our life sciences sector,” wrote AstraZeneca Canada’s president Jamie Freedman in a letter to Health Canada.

(A recent analysis found that the pharmaceutical industry has not been keeping up with previous R&D commitments.)

Because of the industry uproar, the staff at the Patented Medicine Prices Review Board (PMPRB) decided to start detailed consultations with stakeholders last June, inviting several industry representatives to sit on the steering committee to assist in developing an implementation roadmap.

But so far those discussions are not going well — a fact revealed by the frustrated bureaucrat who’s leading the group.

In a newsletter last month, Douglas Clark, executive director of the PMPRB, reported that “progress on the issues under discussion has been slower than anticipated owing to the complexity of the subject matter and conflicting views of participants on the merits of the underlying policy.”

In other words, the industry representatives are reluctant to talk about ways to implement the very rules that they are fighting against.

“It’s been a frustrating process,” said Clark who is trying to get industry input on the nuts and bolts of putting the new rules into effect.

“It’s a bit like pulling teeth to engage the industry on these changes where their position is they’re opposed to the underlying policy.”

Innovative Medicines Canada represents more than 45 pharmaceutical companies. It has two seats at the steering committee table, but can’t comment on the discussions.

“The PMPRB’s terms of reference for the committee impose strict confidentiality on its members and deliberations,” said Innovative Medicines Canada’s spokesperson Sarah Dion-Marquis in an email.

There are several other industry representatives at the table, along with representatives from provincial agencies and the private insurance industry. There are also two patient organizations — the Canadian Organization for Rare Disorders (CORD) and Myeloma Canada.

After several meetings Clark said the steering committee has split into two factions.

“You’ve got public and private payers on one side and industry and patient groups on the other and views can be quite polarized,” he said, adding that the patient groups are aligned with industry on most of the issues.

“There’s not a lot of daylight between their two positions,” said Clark.

Both patient groups have made submissions to Health Canada calling for the entire process to be halted.

Health Canada officials are also in the room, taking notes on the industry objections. And industry lobbyists are also speaking directly to federal officials on Parliament Hill.

Since last March, Innovative Medicines Canada and several other pharmaceutical companies have registered more than 50 communications with officials in the Prime Minister’s Office (PMO) and the office of the Minister of Health.

“Our government engages regularly with health sector stakeholders, including the pharmaceutical industry, to discuss issues of [importance] to Canadians, including the price of prescriptions, national pharmacare, innovation, and drug shortages,” said Matt Pascuzzo, PMO press secretary, in an email.

In June, Innovative Medicines Canada’s president, Pamela Fralick, also met face-to-face with Health Minister Ginette Petitpas Taylor. BIOTECanada, a biotechnology trade association, was also there.

“The PMPRB was raised at this meeting, along with several other topics,” said Dion-Marquis.

What are the proposed new rules that have sparked so much controversy?

Right now when deciding how much a new drug should cost in Canada, the PMPRB compares the Canadian price to the average of seven countries including the U.S. which has the highest drug prices in the world.

The amendments would change those comparator countries by dropping the U.S. and adding other countries with lower drug prices including Australia.

The new regulations would also force companies to reveal to the PMPRB the true price they’re charging, after confidential price negotiations with provinces.

And there would be a new formula to assess the value of new drugs, using a pharmacoeconomic measurement called a “quality-adjusted life year” (QALY).

The industry has issues with each of those changes, insisting that there will be severe consequences to both drug access and to industry jobs.

“As our industry, and many other stakeholders, have stated publicly on many occasions, we are deeply concerned the proposed PMPRB regulatory changes will delay and potentially limit patients’ access to new, life-saving medicines and vaccines, and will further put at risk thousands of jobs in Canada’s vital life science sector,” said Dion-Marquis in an email.

So who’s winning the back room drug price war?

The new rules were supposed to come into effect on January 1st — just over 5 weeks from today.

But the federal government has quietly abandoned that plan. And so far it has not announced a new implementation date.

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