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In Canada in 2015, there were 45 new drugs in the $20,000-$49,999 segment and 20 launched in the over $50,000 category.

Getty Images/iStockphoto

Matt George remembers vividly how it felt to receive his first infusion of Soliris, a drug that is among the most expensive in the world.

Six years ago, he walked into a clinic in Burlington, Ont., worried the treatment would hurt or fail to ease the symptoms of a rare blood disease that, on bad days, left him so fatigued he could not get out of bed to go to the bathroom without help.

"Within 10 minutes of that infusion starting, I could start to feel the relief in my body," Mr. George said. "I felt like someone pulled a plastic bag off my face. I could taste the air again. I could breathe again. The fatigue lifted off of me like someone lifted a car off my chest."

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Mr. George, now a 36-year-old construction manager, has paroxysmal nocturnal hemoglobinuria (PNH), a chronic and life-threatening condition in which a genetic defect causes the destruction of red blood cells, leaving the few hundred Canadians who suffer from it anemic and vulnerable to infections and blood clots.

Paid for by his partner's workplace insurance, the 35-minute infusions of Soliris that Mr. George has undergone every 14 days since that first appointment in 2011 have restored his quality of life in a way he considers priceless. But the medicine does have a price, one so steep – more than $500,000 a year in some cases – that Ottawa's drug-pricing regulator has accused Alexion Pharmaceuticals, the Connecticut-based company that makes Soliris, of charging an "excessive" price for it in Canada.

On Monday, the Patented Medicine Prices Review Board (PMPRB), a little-known, quasi-judicial body created 30 years ago as part of an overhaul of the Patent Act, is scheduled to begin a rare public proceeding against Alexion.

It's the first time in a decade that a new case of alleged excessive drug pricing has reached the board's public hearing stage. (Companies usually reach voluntary agreements with the board akin to out-of-court settlements.)

It's also the first time that provincial drug plans and the private insurance industry have both intervened in a case of alleged excessive pricing, a move that underscores a widespread anxiety about the rise of ultraexpensive specialty drugs such as Soliris.

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The trends are enough to make any taxpayer or insurance-company bean-counter queasy. In 2005, one new drug arrived on the Canadian market that cost between $20,000 and $49,999 per patient per year and two debuted at more than $50,000 per patient per year. In 2015, there were 45 new drugs in the $20,000-$49,999 segment and 20 launched in the over $50,000 category.

Significantly fewer patients take these high-cost drugs than those who take the old blockbusters such as statins and ACE inhibitors, but treating those patients has a profound effect on the bottom line. For instance, public spending on prescription drugs in Canada rose by 9.2 per cent in 2015, a figure that may not seem like cause for alarm until you realize that two-thirds of that increase can be attributed solely to revolutionary Hepatitis C drugs that cost about $50,000 a patient.

"It's okay to have one or two of these drugs enter the market. They're affordable on a one-off basis. But if you get dozens or even hundreds, in the aggregate they're quite unaffordable," said Doug Clark, the executive director of the PMPRB. "Globally, spending on specialty drugs is supposed to quadruple in the next three years. This is where the fight is going to be."

The shift in the drug-pricing landscape is so seismic that it contributed to the PMPRB admitting in a frank discussion paper last summer that it is struggling to fulfill its original mandate.

"It's a profound policy document from a regulatory body," said Steve Morgan, a health economist who teaches in the department of population and public health at the University of British Columbia. "It essentially says the regulations of the PMPRB are not working."

The PMPRB 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. The board was supposed to act as a check against drug makers using their beefed-up monopolies to hike prices.

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Instead, "the impact of the policy over time has been the opposite of what was intended," the PMPRB wrote in the discussion document. Drug prices in Canada have ballooned, with spending on patented drugs as a share of GDP rising 184 per cent since 2000, outpacing the seven other well-off countries that the board uses as measuring sticks. Research and development investment, meanwhile, has dropped to 5 per cent of sales.

The PMPRB is now reviewing its own guidelines, and Health Minister Jane Philpott has said publicly that she supports changing the overarching regulations to help lower prices.

Landing smack in the middle of all this is the Soliris case. The PMPRB alleges that, beginning in 2012, Alexion started selling Soliris at the highest price among the seven countries against which the board benchmarks prices, even the United States, which generally has the highest drug prices in the world.

The board asked Alexion to lower the price and pay back the excess revenue. Alexion refused, saying it has not raised the price since 2009, when Soliris debuted in Canada at a price the PMPRB deemed acceptable for a breakthrough medication with no competitors.

The only thing that has changed since is the foreign exchange rate, says John Haslam, the general manager of Alexion Pharmaceuticals in Canada.

"This hearing really could have a serious effect for all Canadians who require innovative medicines," he said. "The PMPRB, essentially, in this case is seeking to penalize us for something that's beyond our control … This is really about a fair and predictable regulatory environment and that's essential for companies like Alexion who deliver these breakthrough therapies for Canadian patients with rare and devastating diseases."

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Alexion has been dogged in its opposition to the PMPRB. In 2015, the company sued the regulator in federal court, arguing it had no constitutional right to limit drug prices. The court dismissed Alexion's claim last June.

Meanwhile, last February, the Pan-Canadian Pharmaceutical Alliance (pCPA), which negotiates group discounts on behalf of the provincial and territorial public drug plans, broke off talks with Alexion that were aimed at agreeing on a price for Soliris when used for a different rare disease called atypical hemolytic uremic syndrome (aHUS) that affects fewer than 200 Canadians.

In a news release announcing the end of the negotiations, Suzanne McGurn, the executive director of the pCPA, called the failure to reach an agreement "not common." As of the end of 2015, the pCPA had completed 89 negotiations, 86 of which led to the listing of a drug on provincial formularies, the catalogue of drugs that provinces cover for patients who qualify, often seniors or patients on social assistance.

Mr. Haslam of Alexion said the two sides couldn't agree on the criteria for coverage for aHUS patients. Some provinces have decided to cover Soliris for aHUS patients through their exceptional access programs nonetheless.

Ontario, for instance, spent as much as $4.2-million in 2015-16 on Soliris for 30 aHUS patients, an average of $140,000 per patient per year. The province spent as much as $17.3-million the same year on Soliris for PNH patients – although the real price the province paid after receiving increasingly common secret rebates from Alexion is probably lower.

The rise of rebates negotiated behind closed doors is yet another reason the PMPRB is reviewing its guidelines. The board is still pursuing complaints of excessive pricing based on list prices that likely have little resemblance to actual prices. That applies to Soliris, too.

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Dates for the Soliris hearing are scheduled later this month and in February and March. The board is expected to rule later this year.

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