Next federal government will need to strike a new deal with Big Pharma

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Since being named Innovation Minister in January, François-Philippe Champagne has radically shifted the focus of his department’s efforts to spur research and development in Canada.

The superclusters strategy championed by former minister Navdeep Bains has taken a back seat to buttressing Canada’s life sciences sector. While April’s federal budget allocated a mere $60-million over two years to the formerly much-ballyhooed Innovation Superclusters Initiative, it laid out plans to invest $2.2-billion over seven years to boost the country’s life sciences and biomanufacturing capacity.

The pandemic obviously had a lot to do with the switch in emphasis. But the shift also reflects a recognition by Mr. Champagne that, after years of bad blood between the federal government and the drug industry, Ottawa needed to repair its fractured relationship with Big Pharma for economic reasons.

The Aug. 10 memorandum of understanding struck between Mr. Champagne and Moderna Inc., under which the Massachusetts-based pharmaceutical upstart has promised to build an mRNA vaccine manufacturing plant and create an R&D hub in Canada within two years, is a signature advance that – unlike the superclusters strategy – promises to generate concrete results.

Neither Ottawa nor Moderna has revealed how much taxpayer money is to be invested in the new facility, and the exact location has yet to be determined. But Mr. Champagne’s new collaborative approach certainly beats the adversarial one favoured by Health Minister Patty Hajdu, whose efforts to impose new prescription-drug price regulations had led to a Cold War between Big Pharma and Ottawa.

In late June, the government once again postponed the implementation of new price regulations first proposed by Health Canada in 2017 amid opposition from industry and patient advocacy groups. The new rules, aimed at empowering the Patented Medicine Prices Review Board (PMPRB) to force drug makers to cut prices, are now slated to come into effect on Jan. 1, though all bets are now off as to whether that will happen.

And not just because of the Sept. 20 federal election. A recent Federal Court of Appeal decision found that the PMPRB went beyond its mandate, as set out in the federal Patent Act, when it ordered Alexion Pharmaceuticals Inc. to forfeit “excess revenues” it made on sales of the rare-blood-disorder drug Soliris between 2009 and 2017.

“The Patent Act aims at a balance between incentivizing the research and development of patented medicines and their introduction into Canada through the grant of a monopoly and protecting against abuse of that monopoly,” Justice David Stratas wrote in a July 29 decision in which the two other judges hearing the case concurred. “General price control is no part of the exercise.”

The court sent the Alexion case back to the PMPRB, ordering the board to redetermine the matter “in an open-minded, non-tendentious way – to examine the evidence, interpret the legislation, fairly apply the legislation to the evidence and ensure that a reasoned explanation for its outcome can be discerned.”

The ruling amounted to a sharp repudiation of the PMPRB, which has displayed an anti-industry bias in recent years. Ottawa created the agency in 1987 to monitor multinational pharmaceutical companies, tracking their efforts to meet commitments to conduct more R&D in Canada in exchange for extended patent protection. But in recent years the board has interpreted its role as one of strict price control.

The proposed PMPRB rules would go even further in this regard by removing the United States and Switzerland (where prescription drug prices are the highest) from the basket of comparison countries the board uses to determine whether prices here are “excessive.” Drug companies have warned that the new drug-pricing rules would lead to less R&D and fewer new drug launches in this country.

The Federal Court of Appeal ruling also appears to buttress the industry’s case that the new rules run afoul of the PMPRB’s legislative mandate. To avoid losing in court again, Ottawa may need to overhaul the Patent Act to explicitly expand the board’s mandate – a move a re-elected Liberal government keen on making up with Big Pharma may be reluctant to undertake and one a Conservative government would almost certainly reject outright.

Ottawa’s decision to postpone the implementation of the new rules provides an opportunity for whichever party forms a government after the election to scrap them entirely.

A new C.D. Howe Institute study suggests an alternative approach, one that would involve enabling a proposed Canadian Drug Agency (promised by the Liberals in the 2019 federal budget) to negotiate bulk purchases of prescription medicines on behalf of public and private drug plans.

The pan-Canadian Pharmaceutical Alliance already negotiates purchases of new patented drugs from pharmaceutical companies on behalf of federal and provincial plans that cover seniors and recipients of social assistance. But the discounts negotiated on behalf of public plans by the pCPA, the C.D. Howe study says, means that “privately insured Canadians, and those without comprehensive insurance, implicitly are asked to pay a larger share of contribution to global R&D financing than those insured under government plans.”

Big Pharma has generally opposed allowing private insurers to join the pCPA. But it is a concession the industry should be willing to make in exchange for scrapping the proposed PMPRB rules or even abolishing the board outright.

Canada needs a New Deal with Big Pharma so this country is not left behind amid a global life sciences boom and forced to grovel before foreign pharmaceutical executives when another pandemic strikes. The next government in Ottawa must see to it.

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