New drug regulations will hurt all Canadians

In December 2017, the federal government proposed amendments to the regulations governing the Patented Medicine Prices Review Board (PMPRB), the federal organization that has set ceiling prices for new medicines for the past 30 years. The revisions are intended to make prescription medicines more affordable. The final regulations, shared last week in the dead of summer, are virtually the same as those originally proposed, despite strong concerns about their negative effects having been expressed by patients, the pharmaceutical industry and others.

The amendments, due to come into effect in July 2020, include three significant changes. The first is on the roster of countries whose drug prices are compared with the proposed Canadian price in the PMPRB’s international comparison. Seven lower-price countries are replacing two with higher prices. The effect of the switch will be to reduce the maximum prices for new medicines in Canada to around the median of prices charged in over 30 OECD countries.

The second change is that the PMPRB will be required to assess the “value” of each new drug using

cost-effectiveness analyses already reviewed by the Canadian Agency for Drugs and Technologies in Health (CADTH) when it makes its reimbursement recommendations to Canada’s public drug insurance plans (except those in Quebec). CADTH doesn’t set prices but frequently recommends big reductions — 50 to 80 per cent, sometimes over 95 per cent — to achieve cost-effectiveness.

The third major change is a requirement for pharmaceutical manufacturers to divulge information to the PMPRB on confidential rebates and other commercial terms negotiated with Canadian insurance plans.

The federal government says its amendments will not impact the way pharmaceutical companies view Canada as a place to do business. It is either burying its collective head in the sand or deliberately misleading Canadians.

A well-defined relationship exists between the market prices of medicines and manufacturers’ investments in a country. Pharmaceutical R&D investment in Canada is about $30 per capita. In the U.S., where drug prices are considerably higher, it is more than C$360 per capita. In New Zealand, where prices are tightly controlled, pharmaceutical investment was under C$10 per capita in 2011 and may be less today after several leading pharmaceutical companies ceased or severely restricted R&D in response to new, more rigid price controls.

The governments of Ontario and Quebec, where 84 per cent of the pharmaceutical investment is spent in Canada and 87 per cent of the industry’s employees are based, understand the risks to investment and jobs posed by the regulation amendments and have warned Ottawa.

Market price restrictions also negatively impact new drug launches. An analysis of the relationship between the number of new drug launches in each of 31 OECD countries and the associated price level for patented drugs, per capita gross domestic product and total population in each country demonstrated that price was the only variable that was a statistically significant predictor of the number of new drug launches.

Greater access to newer medicines has been shown in numerous studies to improve patient health by preventing premature death and/or significantly improving patients’ quality of life. But patients cannot benefit if pharmaceutical companies do not seek regulatory approval for their medicines because they view Canada’s market conditions unfavourably.

This already occurs in Canada — about 20 per cent of new therapeutic drugs approved in the U.S. do not come here — and it undoubtedly impacts New Zealand: only 54 per cent of new drugs approved in the U.S. receive regulatory approval there.

Pharmaceutical companies might be able to adjust to a change in the PMPRB’s international price comparison leading to around a 20 per cent reduction in new drug prices, but any requirement for much greater reductions, say 40 to 80 per cent, would render most business models unsustainable. And if business-sensitive information regarding confidential rebates and other commercial terms negotiated with payers does not remain confidential, companies’ prices and sales in other countries will be jeopardized, thus further reducing Canada’s market appeal.

A company’s sustainability depends on its ability to keep its profitability attractive to investors, who want long-term predictability in the company’s capacity to generate and commercialize its innovative products. The federal government’s amendments to the PMPRB may make medicines more affordable for some patients, but they will certainly reduce Canada’s attractiveness as a jurisdiction in which manufacturers seek regulatory and reimbursement approval for new beneficial drugs, and that will hurt all Canadians.