Ottawa’s approach to drug-price reform can be summed up in four words: Delay, delay, delay, delay. The federal government has put off instituting new rules designed to help lower the high costs of pharmaceuticals four times in as many years.
And there is very real fear in the health care industry that Ottawa’s reforms are now on life support. The delays have so frustrated the federal regulator – the Patented Medicine Prices Review Board – that a board member and the executive director quit in recent weeks.
But Health Minister Jean-Yves Duclos must not abandon plans to bring drug pricing under control.
The saga began in 2017 when the government first promised to update the rules that regulate pricing for patented medicines. Canada pays the third-highest prices in the world, behind the U.S. and Switzerland, and nearly 20 per cent more than the average of other developed countries.
The reforms included a change to which countries Canada compared its prices, giving the regulator access to drugmakers’ confidential data and expanding the criteria by which it can judge a drug’s economic costs and benefits.
The rules were set to come into effect July 1, 2020. They were at first postponed because of the onset of COVID-19. But more delays followed, in part because the pharmaceutical industry fought the federal government every inch of the way.
Ottawa has only meekly fought back. When a Quebec court struck down parts of the reform last year, it did not appeal, instead unveiling a gutted package with the change to comparator countries the only piece that survived intact.
The amount that Canadians are projected to benefit has likewise been scaled back. In 2019, the Liberals promised Canadians would save $13-billion over a decade; last year that promise was reduced to $2.9-billion.
The pharmaceutical industry has argued that any hits to their revenue would mean less investment in innovation and delays in bringing new drugs to the Canadian market.
But it’s hardly as though the industry had invested heavily in research and development before. When the current regime was introduced in 1987, the industry promised to spend 10 per cent of Canadian sales on research. It hasn’t done so in 20 years; in 2021, the figure was just 3.4 per cent.
And the industry’s main lobby group, Innovative Medicines Canada, did itself no favours in 2020 when it suggested that drugmakers might withhold or delay COVID-19 vaccines from Canada if the new rules were implemented.
Mr. Duclos has said little about the December decision that the PMPRB pause work on any new rules indefinitely.
If it is political courage he lacks, he need only look south of the border. Pushing back on pharmaceutical pricing is becoming a rare source of bipartisan agreement.
From 2019 to 2021, when the Democrats controlled the U.S. House of Representatives, a House committee investigated the issue and found companies often repeatedly hiked the prices of popular drugs, sometimes by 10 per cent or more in multiple years. They also collected internal documents that showed, for example, that executive compensation was tied to specific drug revenue targets.
After the Republicans won the House in the midterms, they have kept at it. A committee is now investigating the lucrative rebates that drugmakers pay to the three companies that control most pharmaceutical purchasing for insurance plans. The U.S. Federal Trade Commission recently estimated that those payments could be artificially inflating drug prices, citing insulin’s tripling of price over nine years.
These investigations, along with other moves by the Biden administration, are starting to have an effect. Under pressure, U.S. pharma giant Eli Lilly announced last week it would reduce the price of its most commonly used insulin products by 70 per cent and would expand a program that caps out-of-pocket insulin costs to US$35 per month.
There is another way Canada should follow the U.S.: using far more unpatented drugs, known as generics. According to U.S. data, generics are used to fill more than 90 per cent of prescriptions; in Canada, that figure is 74 per cent.
Generic drugs cost a fraction of patented drugs and can result in major savings. According to PMPRB, the average price of generics has plummeted 59 per cent since 2007.
The Liberals have drained some ambition from their promises to lower drug costs, but reform is not dead yet. Mr. Duclos still has time to save it.