By Dr. Nigel Rawson
and Bacchus Barua
The Fraser Institute
In a speech in May, federal Health Minister Jane Philpott talked about rising prescription drug prices and announced the launch of consultations on proposed changes to the Patented Medicine Prices Review Board (PMPRB) designed “to protect Canadians from excessive drug prices.”
The proposed changes may be well-intentioned, but could delay access to medications in Canada or deter companies from launching new drugs. This would significantly impact the ability of healthcare providers to treat patients with new, innovative and potentially life-transforming medicines.
Many new drugs, in particular biologics and genetic therapies, are more expensive and more effective than the traditional “small-molecule” drugs that public and private insurers historically cover, which raises additional concerns about affordability. Consequently, insurers want pharmaceutical companies to demonstrate the value of their drugs before considering them for coverage. All stakeholders, including patients, would like to see drugs that are cost-effective. However, what’s sometimes forgotten is that the only thing worse than an expensive drug is an inaccessible one.
For 30 years, the PMPRB, an independent federal organization, has sought to strike a balance between ensuring Canadian prices for patented medicines are not excessive while recognizing the importance of pharmaceutical innovation by allowing companies to recoup the immense cost of researching, developing and testing new life-saving and life-improving treatments. The PMPRB does this by comparing the price that a company proposes to charge for a new drug in Canada with prices in seven comparator countries (France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States) and with the Canadian prices of similar, older drugs.
Now, the federal government wants to require pharmaceutical companies to submit pharmacoeconomic (cost-effectiveness) analyses of their drugs in the healthcare settings of Canada and other countries to the PMPRB to demonstrate the value of their products. Currently, companies submit these assessments, based on Canadian healthcare data and prices, to the Canadian Agency for Drugs and Technologies in Health (CADTH) for recommendations regarding reimbursement in public drug insurance plans. While CADTH does not set prices, it frequently recommends price reductions to improve the cost-effectiveness of a drug. Importantly, CADTH’s negative drug reimbursement recommendation rate is close to 50 percent, which could have serious consequences for patient access.
So even if the PMPRB simply used the analysis submitted to CADTH, it would be inappropriate for it to set a price based solely on a cost-effectiveness analysis of the public insurance market because CADTH’s analyses do not account for patient preferences (such as whether the drug is administered orally or intravenously) or wider societal issues related to lost productivity in its recommendations for which insurers of employment-based plans may be willing to pay a higher price. More generally, the requirement for manufacturers to submit cost-effectiveness analyses of their drugs from other countries to the PMPRB is duplicative work for companies and government, which will cost taxpayers more money and further restrict patient access to essential treatments.
Another proposed misstep is the modifications in the list of countries used for comparing drug prices. The changes include the addition of Japan and South Korea and the removal of the U.S. and Switzerland. While replacing high pharmaceutical-cost countries with lower-cost countries will artificially bring down the calculated “average,” it essentially brushes off all responsibility of ensuring that pharmaceutical companies will continue to invest in researching new and innovative drugs and asks the populations of high pharmaceutical-cost countries to subsidize our health system. Not only does this threaten research and development investment in the Canadian pharmaceutical industry, but it also risks a downward spiral in global research on new and innovative treatments and cures.
Ottawa wants to “protect” Canadians from high drug prices by changing PMPRB rules to increase “affordability, accessibility and appropriate use of prescription drugs.” But a requirement for more cost-effectiveness analyses or ever-increasing demands for huge price reductions will not reduce the lack of affordable drug access many patients face. They are more likely to produce delayed access, or eliminate access, as pharmaceutical manufacturers decide that Canadian marketing requirements are overly burdensome and instead launch their drugs in other countries with less red-tape.
Delay or denial of access to life-saving drugs is a potential death sentence, while a lack of access to drugs that can change a life of misery into good health is cruel punishment. Canadian patients need drug insurance schemes that provide access to the right drugs at the right time without cost constraints. More PMPRB bureaucracy that results in delay or denial of access will harm patients.
According to its annual report, “the PMPRB was created in 1987 as the consumer protection “pillar” of Bill C-22, legislation which also strengthened the patent rights of pharmaceutical manufacturers in order to spur investment in research and development (R&D) in Canada.” It’s troubling that while the PMPRB was created to help facilitate greater pharmaceutical R&D, the proposed changes are certain to undermine such investment and potentially reduce patient access to new life-saving treatments.
Dr. Nigel Rawson is a senior fellow and Bacchus Barua is a senior economist at the Fraser Institute.