Ottawa’s war on the pharmaceutical industry is leaving Canada behind

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When federal Health Minister Jean-Yves Duclos announced in April that the Trudeau government was dropping key aspects of its proposed plan to cut the cost of patented drugs, it looked like a truce had finally prevailed in the five-year long war between the pharmaceutical industry and the regulatory body that sets maximum prices for brand-name drugs in Canada.

It did not take long, however, for hostilities to resume after the Patented Medicine Prices Review Board (PMPRB) tabled draft regulations in October setting out new criteria the agency intends to use to determine whether to open an investigation into “excessive pricing.”

The move has put the industry back on the warpath. It is calling on Mr. Duclos to scrap the new guidelines, which are set to take effect on Jan. 1, even though the PMPRB itself is in disarray. The body’s chairperson left more than a year ago, without being replaced. The agency’s vice-chairperson (who had been serving as acting chairperson in recent months) in turn resigned last week, leaving two empty seats on the regulatory body’s five-seat board of directors.

The Dec. 5 departure of acting chair Mélanie Bourassa Forcier came only two weeks after she said she was looking “forward to finally turning the page on the multiyear effort to modernize our regulatory framework.” That effort set off the battle between the industry and PMPRB that threatens to delay the availability of new drugs in Canada and depress investment in drug research here, even as Ottawa seeks to boost Canada’s biomanufacturing capacity to prepare the country for future pandemics.

The reform effort began in 2017, when then Liberal health minister Jane Philpott tabled proposed new PMPRB regulations aimed at reducing patented medicine prices, in part to lay the groundwork for a national pharmacare program. But little consideration was given to the potential unintended consequences of the new regulations. And major sections of the reform plan were struck down last year by the Quebec Court of Appeal, which concluded the proposed changes exceeded Ottawa’s authority.

Mr. Duclos climbed down in April by announcing that he was withdrawing the parts of the reform plan the court had invalidated. That left just one aspect of the initial plan intact. It involved changing the list of reference countries the PMPRB uses to determine whether patented drug prices here are excessive, adding several lower-cost countries to the list and removing the United States and Switzerland, the two countries where brand-name drug prices are the highest.

The draft guidelines tabled in October were widely seen as an attempt by the PMPRB to achieve by the back door what the court had determined it could not do by the front door, that is, to broadly regulate drug prices. Under the Constitution, the provinces alone have the authority to regulate prices by virtue of their jurisdiction over property and civil matters. Ottawa oversees patents, but its authority over pricing is limited to cases where a patent holder abuses its monopoly power.

Industry lobby group Innovative Medicines Canada says the criteria PMPRB proposes to use to determine whether to launch an investigation into excessive pricing of a particular patented drug “appear arbitrary, are not tied to an excessive-price standard and will increase uncertainty” for patent holders. It warns the new guidelines would “likely result in a less predictable, more litigious and administratively onerous system. It is also foreseeable that future access to new medicines for Canadian patients will be significantly delayed.”

And for what?

Despite impressions to the contrary, Canada is not a global outlier on patented drug prices. The PMPRB cites Organization for Economic Co-operation and Development rankings placing Canada in third place behind only the U.S. and Switzerland with respect to list prices for patented drugs. But the real discrepancy is between the U.S. and everyone else. On a purchasing power parity (PPP) basis, drug prices in Canada are broadly similar to those in most developed countries.

What’s more, organizations such as the pan-Canadian Pharmaceutical Alliance, which negotiates discounts from list drug prices (for brand-name drugs and generics) on behalf of provincial and federal public drug plans, have helped slow drug-price inflation in recent years. PMPRB data based on list prices do not include those discounts.

Over all, according to PMPRB’s latest annual report, patented drug prices rose by only 0.4 per cent in Canada last year. Inflation rose at more than eight times that level. Sales of patented medicines actually declined by 1.7 per cent to $17.4-billion in 2021. Sales have risen at an average of 2.2 per cent over the past five years.

To be sure, a small number of new drugs, mostly aimed at treating rare diseases and certain cancers, come with eye-popping price tags. Policy makers need to ensure these drugs are available in Canada and accessible to those who need them, regardless of means. The PMPRB’s continuing war on the drug industry is only making that harder.