Ottawa scales back drug price reforms that would have cost big pharma billions

Ottawa is dramatically scaling back regulatory changes to reduce the cost of drugs, five years after heralding them as a once-in-a-generation effort to cut costs and shave billions off industry profits.

The federal reprieve for pharmaceutical companies follows a series of court challenges, which the government either lost or remain outstanding.

However, Ottawa didn’t cite the legal battles in justifying the watered-down policy, but instead pointed to unspecified changes to the pharmaceutical landscape brought on by the pandemic.

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Updated regulations for the Patented Medicine Prices Review Board were first proposed in 2017 and finalized in 2019. At the time, Ottawa said the new regulations would cut drug prices by almost $8.8-billion over a decade. But after years of delaying their implementation, Prime Minister Justin Trudeau’s government decided to winnow down the changes and will now move ahead with ones that are expected to save consumers $2.9-billion over 10 years.

The move is unsurprising to health researchers who were following the repeated delays. But they say it marks a missed opportunity and leaves the problem of quickly climbing drug costs unresolved.

Some patient groups and the pharmaceutical lobby had fought against the proposed new regulations, raising concerns that lowering prices would stall access to new medicines. In the face of those arguments, the government had defended its original proposals, citing Canada’s unenviable record of having some of the highest drug prices in the world.

The review board was created more than three decades ago to prevent excessive pricing of patented medicines. In 2019, the government said the full suite of regulatory changes were needed to bolster outdated rules that left the board unable to do its job.

In February, the Quebec Court of Appeal ruled some elements of the 2019 regulations invalid and on Tuesday the government’s window to pursue an appeal at the Supreme Court of Canada closed. Instead of challenging the decision, the government cancelled the parts of the new regulations singled out by the court.

Ottawa will keep a plan to change which countries the review board uses to determine whether prices in Canada are excessive. That move expands the number of countries to 11 and drops those with the highest prices from the list: the United States and Switzerland.

The change comes into effect on July 1 and is expected to eat into industry profits by $2.9-billion over 10 years, according to a 2019 federal analysis.

However, the government is dropping changes that it said would have saved billions more. It is shelving its plan to add economic factors to the elements that the review board can consider when setting a price – which was estimated to cut almost $3.8-billion from the price of patented medicines over 10 years.

It’s also cancelling plans to force companies to disclose net prices (which include privately negotiated rebates), and will instead continue to rely on publicly listed prices. In 2019, the government said those public prices don’t reflect the true price tag and forcing that disclosure would save consumers more than $2-billion over 10 years.

The government has not yet released an updated analysis of the impact of the scaled-back regulations.

The final decision on the regulations was announced just as the Easter long weekend started. Health Minister Jean-Yves Duclos was not available for an interview on either Tuesday or Wednesday, his office said. In a statement Wednesday, spokesperson Marie-France Proulx said “a new context has emerged brought on by the COVID-19 pandemic.”

Ms. Proulx said the change in comparison countries will result in “significant savings” and that other government initiatives are under way to improve medicine accessibility and affordability, including creating a Canadian Drug Agency and a national strategy for rare diseases.

NDP MP and health critic Don Davies called the move “enormously disappointing” and a “$6-billion gift to Big Pharma.” The Conservative Party declined comment. It has previously spoken out against the 2019 regulations.

Mr. Davies said Ottawa should have pursued an appeal of the Quebec decision to the top court because it would have clarified jurisdiction over the issue. The federal government declined to explain Wednesday why it didn’t seek an appeal.

There are two other cases in federal courts, both launched by the pharmaceutical industry in response to the 2019 regulations. Pamela Fralick, the president of Innovative Medicines Canada, the lobby group for pharmaceutical companies, said it is still assessing the implications of the government’s announcement on the legal proceedings.

In a statement Wednesday, she said the group welcomed the partial cancellation of the new regulations but she questioned the decision to green light the new country list. When the original regulations were being considered, an industry-funded report found that going ahead with all of them would have cost companies $26.1-billion, rather than the $8.8-billion government estimate. Ottawa said an independent analysis of the two different costs found that the government’s assessment was “carefully done” and based on recent data.

The Canadian Organization for Rare Disorders welcomed the government’s regulatory walk-back, saying they would have deterred companies from bringing new medicines to Canada. That argument is backed by Dr. David Stewart at the University of Ottawa’s school of medicine but disputed by many others, including Jane Philpott, the dean of health sciences at Queen’s University, who said the argument lacks evidence.

Dr. Philpott was also federal health minister when the government first spearheaded the new regulations in 2017. In a Wednesday interview, she said that given the political and legal challenges the government was facing, it likely landed on “the best possible arrangement” in its decision to shelve some of the regulations.

She said the initial regulations ended up setting the stage for a “really antagonistic relationship” with the industry. However, now five years later, she said the problem of high drug prices remains unresolved and the government needs to find new tools to tackle the issue.

The government’s 2019 analysis said Canadians aren’t getting “value for money” for their drugs and it pointed out that spending on medicines as a share of total health care expenses grew to 16 per cent in 2019 from 8.5 per cent in 1977.

Dalhousie University’s Katherine Fierlbeck said the government’s changed approach will lead to winners and losers, and while the drugs might be available in the Canadian market, only those with “deep pockets” can afford them.

Steve Morgan, with the University of British Columbia, called the government’s new position disappointing but he said there’s still hope prices can be brought down if Ottawa moves ahead with pharmacare.

With reports from Rick Cash in Toronto

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