Canada Proposes to Amend Drug Pricing Regulations

For the first time in more than two decades, Canada’s government is looking to amend its drug pricing regulations to better protect Canadians from paying excessive prices for patented drugs.

The move comes as the US government is undergoing a similar review of ways to bring down the price of drugs in the US, though one major difference between the neighbors is that Canada’s government has a means by which it can control the price of medicines. The US Congress is also considering provisions that would allow cheaper Canadian medicines to be imported to reduce the US pharmaceuticals bill.

Canada says the amendments to the regulations are intended to reverse a recent trend in drug spending, whereby the country’s pharmaceuticals bill has increased from less than 10% of its total health expenditure to about 16% today.

Canada’s System and Proposal

Currently, the country’s Patented Medicine Prices Review Board (PMPRB) compares Canada’s prices with seven other countries, including the US, to determine if it is over-paying. But the proposal would no longer use the US or Switzerland as comparators and would add seven other countries: Australia, Belgium, Japan, Netherlands, Norway, South Korea and Spain.

The proposal also would use three new factors when determining whether a medicine is being or has been sold at an excessive price: A pharmacoeconomic evaluation for a medicine with a fixed cost per quality-adjusted life year (QALY) threshold in Canada, the size of the market for the drug in Canada and in other markets, and the gross domestic product of Canada.

"When the Regulations were first conceived 30 years ago, policy makers believed that patent protection and price were key drivers of pharmaceutical R&D investment. The choice was thus made to offer a comparable level of patent protection and pricing for drugs as exists in countries with a strong pharmaceutical industry presence, on the assumption that Canada would come to enjoy comparable levels of R&D. However, the percentage of R&D-to-sales by pharmaceutical patentees in Canada has been falling since the late 1990s and is at a historic low. By comparison, and despite Canada having among the highest patented drug prices, industry R&D investment relative to sales in the PMPRB7 countries is on average 22.8% versus 4.4% in Canada," the proposal says.

Other Changes

In addition to the changes to country comparators and introducing the three new factors to consider, a third proposed amendment would reduce the regulatory burden for generic drugmakers by only requiring the identity and price information of these drugs in the event of a pricing complaint or at the request of the PMPRB.

The current regulations also specify what information is to be provided to the PMPRB by patent holders relating to the prices of patented drugs sold in Canada and other countries, patentees’ revenues as well as R&D expenditures. The fourth amendment would require such patentees to also submit a cost utility analysis by approved indication of the medicine and the estimated uptake of the medicine in Canada.

A fifth amendment would require patentees to report to the PMPRB all indirect price reductions, given as a promotion or in the form of rebates, discounts, refunds, free goods, free services, gifts or any other benefit in Canada.

"Based on international best practices, the proposed amendments would provide the PMPRB with new regulatory tools and information to better protect Canadian consumers from excessive prices while reducing regulatory burden on patentees," the consultation says.

The government says Canada is paying higher prices for prescription drugs than most other developed countries, which can result in limited access to innovative medicines, place a financial burden on patients and mean fewer resources for other critical areas of the health care system.

The consultation is open for comment now and runs until 28 June 2017.

Protecting Canadians from Excessive Drug Prices: Consulting on Proposed Amendments to the Patented Medicines Regulations