Regional Reports
Significant Change Coming to Patented Medicine Pricing in Canada
Judith Glennie
Global Forum
Canada Regional Editor
hat’s the issue? As noted in the September 2017 Global Forum, the Federal Minister of Health and the Patented Medicine Prices Review Board (PMPRB) have been examining potential changes to the regulations that govern how the PMPRB assesses patented drug prices.
Details of proposed changes to the Patented Medicines Regulations were made public via the Canada Gazette Part I (CGI) in late 2017, with the comment period closing in mid-February 2018 and a proposed coming-into-force date of January 1, 2019. The potential implications of these changes for the Canadian pharmaceutical policy environment—and beyond—may prove to be profound.
Proposed Changes
Health Canada posits that the current PMPRB regulatory framework falls short of its mandate to protect Canadian consumers “from excessive prices for patented medicines.” The changes outlined in Table 1 are expected to provide the PMPRB with more relevant and effective regulatory tools to achieve the mandate.
Table 1. Proposed Changes to the Patented Medicines Regulations
Proposed Change
Details
1. Changes to Reference Countries
- Addition of: Australia, Belgium, Japan, Netherlands, Norway, South Korea, and Spain
- Removal of: United States, Switzerland
- Summary of proposed comparator countries: Australia, Belgium, France, Germany, Italy, Japan, Netherlands, Norway, South Korea, Spain, Sweden, and United Kingdom.
2. Additional Economics-Based Price Review Factors
Additional price review factors to take into account in determining whether the price of a patented medicine in excessive
- Pharmacoeconomic value of the medicine in Canada.
- Size of the market for sale of medicine in Canada and other countries.
- GDP & GDP per capita in Canada.
3. Reporting Requirements
Related to additional economics-based price review factors
- Information regarding pharmacoeconomic value
- Information respecting market size.
4. Reduced Reporting Requirements
For patented generic, veterinary, and over-the-counter drugs
- Absent a specific PMPRB request, the reporting requirements would not apply to such products.
5. Reporting of Third Party Price Rebates
- Prices and revenue information reported by patentees must net all price or other adjustments including discounts, rebates, and free goods and services made by the patentee or “any party that directly or indirectly purchases or reimburses for the purchase of the medicines.”
- Includes confidential pricing agreements with provinces, etc.
Table 1. Proposed Changes to the Patented Medicines Regulations
Proposed Change
1. Changes to Reference Countries
Details
- Addition of: Australia, Belgium, Japan, Netherlands, Norway, South Korea, and Spain
- Removal of: United States, Switzerland
- Summary of proposed comparator countries: Australia, Belgium, France, Germany, Italy, Japan, Netherlands, Norway, South Korea, Spain, Sweden, and United Kingdom.
Proposed Change
2. Additional Economics-Based Price Review Factors
Additional price review factors to take into account in determining whether the price of a patented medicine in excessive
Details
- Pharmacoeconomic value of the medicine in Canada.
- Size of the market for sale of medicine in Canada and other countries.
- GDP & GDP per capita in Canada.
Proposed Change
3. Reporting Requirements
Related to additional economics-based price review factors
Details
- Information regarding pharmacoeconomic value
- Information respecting market size.
Proposed Change
4. Reduced Reporting Requirements
For patented generic, veterinary, and over-the-counter drugs
Details
- Absent a specific PMPRB request, the reporting requirements would not apply to such products.
Proposed Change
5. Reporting of Third Party Price Rebates
Details
- Prices and revenue information reported by patentees must net all price or other adjustments including discounts, rebates, and free goods and services made by the patentee or “any party that directly or indirectly purchases or reimburses for the purchase of the medicines.”
- Includes confidential pricing agreements with provinces, etc.
In conjunction with these proposed regulatory changes, the PMPRB released a Guidelines Scoping Paper that is undergoing its own consultation process. It outlines a potential new framework for specific price tests and mechanisms for determining non-excessive prices based on these regulatory changes. Table 2 outlines the components of this new framework.
Table 2. Components of the Draft PMPRB Guidelines Framework
1)
Interim International Price Reference Test
Introductory price test based on new PMPRB12 basket of reference countries; products with Canadian prices exceeding the median would be considered potentially excessive.
2)
Screening
Classification of drugs as either high or low priority based on their anticipated impact on Canadian consumers.
3)
High Priority Drugs
Assess the cost per quality-adjusted life-year (QALY) against explicit threshold and expected impact on payers within first three to five years.
4)
Medium and Low Priority Drugs
PMPRB could employ revised Therapeutic Class Comparison requiring each successive entrant to reduce price from preceding entrant.
5)
Re-benching
Periodic re-benching to ensure previous price ceilings or determinations of excessive pricing.
Specifics for each component are very vague at this point, and the PMPRB intends to work out the details for the new framework via consultations. The PMPRB begins its outreach efforts on the framework in January 2018, with a first draft of detailed revised Guidelines expected in the spring of 2018. It is clear from the information available to date, however, that the new regulations and guidelines will have a significant impact on pharmaceutical pricing levels in Canada.
Potential Impact?
There are many potential implications to the proposed changes to the Regulations and the PMPRB Guidelines, with the ultimate goal of driving Canadian prices down compared to international benchmarks. Given that Canada tends to be a reference country for other jurisdictions’ pricing, this also has the potential to affect product pricing beyond Canada.
Overall, Health Canada estimates that these changes will result in savings of Can$12.6 billion net over ten years due to reduced prices for patented medicines. Lost revenues to industry are estimated to be $8.6 billion over ten years, and the additional costs to industry, including administrative and compliance costs, are estimated to be $9,000/year in total ($90K). These changes will require significant enhancement to the PMPRB’s current skillset, so an additional government cost of approximately $8.8M/year to increase the PMPRB’s resources for compliance and enforcement activities is anticipated.
Unfortunately, Health Canada rather naively assumes that these amendments will not generate any adverse impacts on industry employment or investment in the Canadian economy. According to a recent report, Innovative Medicines Canada member companies continue to make significant contributions to the country’s economy, generating $19 billion in economic activity, investing $1.2 billion annually (9.97% of revenues) into research and development (R&D), and supporting 30,000 high-value jobs. Health Canada’s own estimates suggest that these amendments will significantly impact the Canadian innovative pharmaceutical sector.
While it is true that the linkages between patent protection, price, and pharmaceutical R&D have changed in Canada since the original PMPRB regulatory framework was created, it is also true that the pharmaceutical policy environment has changed significantly on a global basis. Unfortunately, none of Health Canada’s and/or PMPRB’s proposals concretely reflect how other jurisdictions are balancing innovation and health system costs, let alone how Canada could integrate those practices into its own policies.
Supplemental Resources
For instance, the government claims that these amendments would align Canadian prices with those in countries that, despite having lower prices, receive higher medicine industry investment. The Canadian government’s focus on prices, with no proposals or actions related to R&D, reveals an unfortunate absence of considering the innovation side of this balance. Of particular irony is the fact that, in parallel to Health Canada/PMPRB consultations, Industry Canada (another federal government department) has produced six Economic Strategy tables (including one in health/bio-sciences) to create a new vision for Canada’s economy as a global leader in innovation. Its health objective is for “Canada to be a global leader in health/bio-sciences innovation through long-term sustainable growth driven by the collaboration of health/bio-sciences companies and partners.” There is a clear disconnect between these two government bodies, as they work in opposite directions in driving innovation in Canada.
Summary
Many of the proposed regulatory changes appear to take the PMPRB away from its core mandate, create duplication of effort, and potentially encourage decision-making based on flawed data. It is important to seriously consider stakeholder input to generate more coherent reforms that do not undermine innovation in the Canadian and/or global pharmaceutical system. In the meantime, pharmaceutical policy experts will keep a close eye on these developments.
References available upon request.
Editor’s Note: Dr. Glennie is a former Federal Cabinet-appointee to the Patented Medicine Prices Review Board and served as a member of the Board from 1995 to 1999.