"Canadians are not getting the value for money on prescription medicine spending or the outcomes they deserve."
That is the opening statement in a new "impact analysis" prepared by Health Canada.
Considering that the language of bureaucracy is usually mealy-mouthed at best, them's fightin' words.
In fact, the federal government has introduced new regulations that, if implemented, will result in the biggest shake-up in prescription drug pricing in 30 years.
In 1987, when patent laws were reformed and pharmaceutical companies were granted 20-year patents on drugs, the Patented Medicine Prices Review Board (PMPRB) was created as a ballast, to "protect consumers from excessive prices from patented medicines."
It did so by setting Canadian drug prices at the median price of seven other countries – the U.S., the U.K., France, Italy, Sweden, Germany and Switzerland – or the highest price in the same therapeutic class.
Allowing relatively high drug prices was supposed to spur investment: At the time, Big Pharma promised to invest at least 10 per cent of its revenues in research and development.
Flash forward to 2017, and Canada has the third-highest drug prices among the 35 countries of the Organisation for Economic Co-operation and Development (OECD), after only the U.S. and Mexico.
Yet pharma investment in R&D sits at 4.2 per cent in Canada, compared to 22.8 per cent in the comparator countries, according to the PMPRB. (However, industry argues that the PMPRB formula is flawed and the correct figure for Canada is 9.97 per cent.)
The proposed regulations would see the U.S. and Switzerland (two of the countries with the highest drug prices) removed from the list of comparator countries, and replaced with Australia, Belgium, Japan, the Netherlands, Norway, South Korea and Spain, which all have lower prices.
The practical result would be estimated savings of $12.7-billion over 10 years, according to the analysis. When you consider that Canada spends about $25-billion annually on brand-name prescription drugs, the savings are modest. Not to mention that while the PMPRB sets the list price (maximum price) for drugs, they tend to be sold at a discount to large purchasers like public drug plans.
Another aspect of the reform is transparency on the actual prices paid, and that is welcome. But there should be consistency in public policies.
Another initiative, the Pan-Canadian Pharmaceutical Alliance, is designed to bring down prices by having governments do joint bulk buying. The pCPA has negotiated prices for 175 drugs so far, with estimated savings of $1.2-billion, but there is no transparency in that process at all.
It's nice to see government finally take some interest in the prescription drug file after three decades of sitting on its hands. But industry will not take the gnawing away at its revenues lying down. There could be job losses in an industry that employs about 30,000 people. Access to drugs, especially new drugs, could be more difficult.
These are not threats. They are realities of a global market. And we have to be clear that we're willing to pay that price too.
There are those who will dismiss industry concerns, point out they have broken promises and say all that matters is bringing down prices.
The reason that big pharmaceutical companies invest in countries is not solely based on drug prices. The countries with the highest rates of R&D investment from pharma companies have, among other things, generous tax breaks, innovation hubs and high rates of public funding for scientific research.
Canada spends a paltry 1.5 per cent of its health dollars ($3.6-billion) on research. So there is no small amount of hypocrisy in complaining that industry spends only 4.2 per cent.
A promise to bring down drug prices makes for a good sound bite, but what's more important is getting value for money. That's why countries are moving away from international price comparisons and embracing concepts like value-based pricing – where drugs are reimbursed based on how well they work.
This requires active and transparent negotiation with industry, not just imposing new formulas.
The new PMPRB regulations allow for this approach but details are scant. Yet as we move from mass-marketed drugs to targeted therapies, this is the future.
Fair drug prices are not necessarily cheap drug prices. The analysis we really need from government is not how we can generate savings within a flawed system, but how we can build a drug-pricing regime that gives us value for money.