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The medication and treatments Kaitlyn Costanzo, 6, uses is laid out on the kitchen counter in her home in Milton on May 19, 2017. Kaitlyn Costanzo was diagnosed with Cystic Fibrosis. (Marta Iwanek For the Globe and Mail)
The medication and treatments Kaitlyn Costanzo, 6, uses is laid out on the kitchen counter in her home in Milton on May 19, 2017. Kaitlyn Costanzo was diagnosed with Cystic Fibrosis. (Marta Iwanek For the Globe and Mail)

Will Ottawa’s new plan lower Canada's high drug prices? Add to ...

From the time Shannon Costanzo learned her eldest child, Kaitlyn, had cystic fibrosis, she has been “fundraising her butt off,” hoping to contribute to a treatment for a lung disease that kills many of its sufferers before they turn 30.

Ms. Costanzo’s efforts are starting to feel a little hollow now that Kaitlyn’s doctors have recommended the first-grader try a new medication that targets the genetic cause of her illness, but which her family cannot afford.

The drug, Orkambi, has a sticker price just shy of a quarter-million dollars a year.

“We had to turn it down and say no because of the price tag,” Ms. Costanzo said from her home in Milton, Ont. “There’s that feeling of helplessness: I may lose her because I don’t have enough money to save her.”

Orkambi is an extreme – and complex – example of a problem that federal Health Minister Jane Philpott is promising to take on. Canada spends more per capita on prescription drugs than any country except the United States, in large part because Canadians pay the third-highest drug prices among the developed nations of the Organization for Economic Cooperation and Development.

“This is a long time overdue,” Dr. Philpott said. “We have seen a continued escalation of not only the cost of individual pharmaceuticals, but the overall amount that Canadians are paying both through public and private payers.”

Dr. Philpott this week unveiled plans for the first overhaul in 30 years of the Patented Medicine Prices Review Board, a little-known regulator that has already conceded it is struggling under its mouldy rules to keep prices in check. In an interview with The Globe and Mail, she also hinted that the government will beef up the federal-provincial-territorial alliance that negotiates discounts on drug prices and, more significantly, eventually consider a national list of essential medicines that would be covered for every Canadian, regardless of age or income.

Drug-policy experts say the latter idea, which Dr. Philpott cautioned is a long way off, would let Canada use that national purchasing power to drive harder bargains with drug companies. But unless or until Ottawa and the provincial and territorial governments agree to that, Canada is stuck with a patchwork of private and government drug plans that leave it at a significant price disadvantage compared to countries with some version of national pharmacare.

Against that backdrop, Dr. Philpott is starting with something her government can change now: The regulations governing the Patented Medicine Prices Review Board. The review board was created in 1987, when the federal government agreed to strengthen patent protection for new drugs in exchange for pharmaceutical companies investing the equivalent of 10 per cent of sales in research and development in Canada. However, such investment has actually dropped to a low of 4.4 per cent.

The price-review board was supposed to act as a check against drug makers using their longer patent-protection periods to charge excessive prices. The board can order companies to drop their prices if it deems them to be too high and to pay back the difference to the government.

“Excessive” was defined narrowly as higher than the median price charged for a brand-name medicine in seven other countries: France, Germany, Italy, Sweden, Switzerland, Britain and the United States, which has the highest drug prices in the world.

Health Canada released a proposal this week for changing the regulations that would drop the United States and Switzerland, another jurisdiction with high prices, from the list and add seven new comparator countries where prices tend to be lower.

Changing the list of benchmark countries is a good start, but won’t succeed on its own, according to Steve Morgan, a health economist at the University of British Columbia. “If we think we’re going to rely on international price comparisons alone for keeping prices low in Canada,” he said, “we’re fooling ourselves.”

In the murky world of international pharmaceutical pricing, the list price is more like the sticker price at a dealership than it is a true price. Like car buyers, large payers such as private insurers and governments negotiate discounts off the list price. The price-review board compares list prices in Canada to those in other countries; as long as pharmaceutical companies inflate their list prices everywhere, Canada’s drug-price caps will remain high.

Health Canada is considering forcing drug makers to provide their discounted Canadian prices in confidence to the price-review board, but it’s unclear what effect that would have if the board can’t get its hands on the real prices in the 12 comparator countries because they are part of confidential deals.

That’s why the department is looking at other ways to define excessive prices, including taking into consideration Canada’s gross domestic product, the size of the market for each drug, and the possibility of measuring the drugs’ value for money.

The Canadian Agency for Drugs and Technology in Health (CADTH), which is funded by governments, evaluates new medicines that way, then advises the provinces and territories on whether to cover them.

In the case of Orkambi, CADTH recommended against public funding, saying there was not enough evidence of a significant clinical benefit, especially when the twice-a-day tablet regime costs $248,988 a year.

As a result, the pan-Canadian Pharmaceutical Alliance, which negotiates group discounts on behalf of Canada’s public drug plans, is refusing to engage in talks with Vertex, the drug’s Boston-based maker.

John Wallenburg, the chief scientific officer for Cystic Fibrosis Canada, a charitable advocacy organization, said CADTH’s review underestimated the potential benefits of Orkambi.

Dr. Wallenburg, whose daughter died of cystic fibrosis, said research showed Orkambi helped increase lung capacity and reduce hospitalizations in one in four patients, but it was impossible to predict who would benefit until patients tried it. (Cystic Fibrosis Canada receives money from the pharmaceutical industry, including from Vertex, but a spokesman said industry funding accounts for less than 2 per cent of the organization’s gross revenue and does not “unduly influence” its positions.)

Shannon Costanzo wonders if Kaitlyn might be one of the fortunate patients for whom Orkambi works. Right now, she cannot find out because her husband’s workplace insurance covers a maximum of $20,000 a year for her daughter.

Could the proposed changes at the price review board reduce the cost of Orkambi? It’s hard to say.

“Hopefully, using countries that are getting lower prices for these medications will help to set the price ceilings at a more reasonable place,” said Nav Persaud, a staff physician and associate scientist at St. Michael’s Hospital in Toronto. “One question, though, is why aren’t we getting the best prices?”

Vertex declined to divulge the price it lists for Orkambi in other countries, but a report from Britain’s equivalent of CADTH put the annual list price there at about $185,000 – lower than in Canada, but still well out of reach for the Costanzo family.

“Who comes up with that price tag and can go to bed at night and sleep?” Ms. Costanzo said. “It just blows my mind.”

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Also on The Globe and Mail

‘No reason for panic’ on rapidly aging population: Philpott (The Canadian Press)

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