New review rules—the impact on drug access in Canada

This is the third installment of a three-part blog series examining issues around the time required to review and approve new medicines in Canada. Read Part 1.

In this article, we discuss the changes to the regulations of the Patented Medicine Prices Review Board (PMPRB) and their implications for drug regulatory decision-making are discussed. The implementation of the regulations has been postponed three times and is now planned for Jan.1, 2022.

The PMPRB is a quasi-judicial federal tribunal that has regulated prices of patented medicines for the last 34 years. It was established as part of amendments to the Patent Act strengthening intellectual property rights for new medicines and has a mandate to prevent pharmaceutical patentees from charging excessive prices. Most Canadians have little awareness of the PMPRB (including many of the parliamentarians to whom the board reports.

Currently, once a new patented medicine has its first sale, the PMPRB assesses the price that a pharmaceutical manufacturer intends to charge for its product in Canada against the medicine’s price in seven comparator countries (France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States). The price ceiling depends on prices in these countries and the PMPRB’s assessment of the value of the medicine.

In 2017, the Trudeau government announced plans to reduce prices of new medicines by introducing new PMPRB regulations. Under these regulations, the U.S. and Switzerland, which have relatively higher public drug prices, will be replaced in the international price comparison with the lower-price countries of Australia, Belgium, Japan, the Netherlands, Norway and Spain to lower the ceiling price.

The modification in comparator countries would be a simple albeit short-sighted change. However, the new regulations add greater complexity to a pharmaceutical policy environment in Canada that’s already burdened with barriers that manufacturers must overcome to make their medicines accessible to a majority of Canadian patients.

In certain circumstances, the PMPRB will use health technology assessment (HTA) recommendations made by the Canadian Agency for Drugs and Technologies in Health, which are frequently based on an outdated and ridiculously low threshold and—most importantly—not intended for price regulation, to assess whether the manufacturer’s price is excessive. If the price in relation to the HTA recommendation is assessed as being too high, the manufacturer will be required to lower the price even more. Other tests based on the value of the medicine’s market size may also be employed and could lead to further price reductions.

The biopharmaceutical industry, physicians and patient groups have expressed serious concerns that the new regulations will require price cuts which are unsustainable for manufacturers. This will reduce investment in research, development and manufacturing (when COVID-19 has shown the need for more, not less), and delay launches of innovative medicines in Canada.

Evidence from independent case studies indicates that the concerns are not illusory. In one study, the maximum allowable price for a new medicine for a rare disorder under the new regulations was estimated to require a price reduction of up to 84 per cent, while another estimated price reductions of up to 68 per cent. Research from reputable universities in the U.K. and the U.S. has shown that pharmaceutical companies delay launching new products in small markets where regulated prices are low relative to per-capita income. Thus, extreme price reductions will likely lead to manufacturers deciding not to launch new medicines in Canada, which will mean access will be denied to Canadian patients, or to launch them in other countries first, which will result in much delayed access.

Delaying timely access to innovative medicines not only has a negative impact on individual patients but also has a societal cost. New medicines that treat the condition, keep patients out of hospital and reduce the need for costly, often ineffectual treatment of symptoms can produce significant cost-reductions or even cost-savings for the health-care system. Such benefits are frequently unacknowledged within the government health care system due to their siloed nature of the mandates, structures and budgets.

The new regulations are unlikely to extend the time required by Health Canada to review and approve new medicines which, as discussed in the previous blog posts, have been consistent with those in the U.S. and Europe in recent years. However, they will increase the delay in access as drug developers see Canada’s attractiveness as a country in which to do business decrease and place Canada below other, more collaborative countries on their priority lists of countries in which to launch new medicines. This will delay Canadian patient access to innovative medicines and, in some cases, will lead to access denial.

When the PMPRB was created in 1987, inflation was high and prices were increasing substantially. This included the prices of new medicines. The PMPRB was the only organization that Canada had to control the prices of new medicines. However, the PMPRB’s role has become obsolete as layers of bureaucracy have been added to the pharmaceutical policy environment to control prices.

Canada now has two HTA agencies recommending which drugs should be covered by government drug plans (the Institut national d'excellence en santé et en services sociaux and the Canadian Agency for Drugs and Technology in Health); yet another (the National Advisory Committee on Immunization) recommends which vaccines should be included in government immunization programs. In addition, the federal, provincial and territorial governments established the pan-Canadian Pharmaceutical Alliance to negotiate prices for all government drug plans, while vaccine prices are negotiated by Public Services and Procurement Canada, a federal government agency, on behalf of all public health programs.

In practise, prices paid by government drug programs are lower than the maximums allowed by the PMPRB. For example, rebated prices averaging 36 per cent lower than PMPRB ceiling prices have been received by the Ontario public drug plan according to the province’s auditor general.

Moreover, despite the PMPRB’s claims to the contrary, patented medicine prices are not causing a sustainability crisis for the health care system. Using the PMPRB’s own data, the gross national sales of patented drugs at manufacturers’ list prices in Canada in 2019 were $17.2 billion, which accounts for only 6.5 per cent of the $265.5 billion reported by the Canadian Institute for Health Information for national health spending—virtually the same as in 2009. This percentage would be even lower after confidential manufacturers’ rebates were applied.

The purpose of the PMPRB is redundant. The HTA agencies and price negotiation organizations are sufficient. We do not need the PMPRB, especially when it creates a huge obstacle to bringing innovative medicines to Canadians with unmet health needs.