This article originally appeared in the National Post.
By Richard Owens, May 23, 2023
The federal agency that controls wholesale drug prices is facing fresh controversy over the public resignation of one of its board members and critical insider testimony before the House of Commons health committee over ministerial interference.The Patented Medicine Prices Review Board (PMPRB) is tasked under the Patent Act with controlling drug prices that it determines to be “excessive.” Prof. Matthew Herder of Dalhousie University resigned from its board in February, alleging ministerial interference.
According to Herder, Health Minister Jean-Yves Duclos had suggested a halt to public consultations on new PMPRB pricing guidelines. Herder also argued that the federal government’s unwillingness to appeal a court finding that most of the new guidelines were unconstitutional demonstrated a lack of commitment to the PMPRB.
Douglas Clark, the former acting executive director of the PMPRB who also recently resigned, told a House of Commons committee earlier this month that the government “is quite intent on attracting investment in domestic manufacturing capacity in the event of a future pandemic. I think it’s also pretty clear that the PMPRB reforms are the fly in the ointment in those efforts. The imperative of smoothing out relations with the industry trumped any consideration of whether the guidelines were sound policy or had merit.”
Let’s hope this is true. The new guidelines put forward by the PMPRB, and advanced by the government before its feet got cold, were immensely ill-conceived and harmful. According to a recent news report, pharmaceutical companies resisted the reforms. Quelle surprise! It’s long past time we created a friendly environment for life sciences investment.
Given how hostile this government has been reputed to be toward the pharmaceutical industry, and the consequences that hostility had on the pandemic, it is a rich irony indeed to see Duclos accused now of excessive favour.
New regulations and guidelines for the PMRPB required federal backing and legislation. The Patent Act authorizes the minister of health to instruct and communicate with the PMPRB. So why shouldn’t the minister intervene to ensure consistency with government objectives?
To be sure, meddling in an individual pricing adjudication would be inappropriate, given the board’s quasi-judicial nature, but this is not the case here. Moreover, earlier PMPRB consultations have been widely criticized as deficient because they omitted patient groups that were at odds with the new guidelines — which also might have influenced the minister.
While Herder also cites the government’s failure to appeal court findings of the unconstitutionality of most of the PMPRB’s new regulations and guidelines, this comes across as sour grapes. The legal reasoning behind these decisions is sound. Indeed, there is a serious risk that if appealed further, the PMPRB itself may be found to be unconstitutional, as it impedes on a provincial area of jurisdiction. Courts in Quebec and Ontario have already made findings of unconstitutionality; further appeals would likely be throwing good money after bad.
The PMPRB is an outdated agency that’s fixated on price over value, and has little regard for issues of supply and investment. Those who bemoan high drug prices never want to mention the shocking extent to which drugs are unavailable to Canadians because of price controls.
Compared to the United States, where almost all new drugs are available to consumers, Canada has only about 66 per cent of patented drugs registered and available. According to a recent study by the Canadian Health Policy Institute, “On average in Canada only 11% of new cancer drugs approved for marketing from 2016 to 2020 in at least one of three jurisdictions (EU, US, CA) were listed on a public formulary as of December 2021. The corresponding percentage for the European Union was 73% and for the United States 90%.”
In his resignation letter, Herder tried to bolster the PMPRB’s mandate by stating that Canada’s drug prices are the third-highest in the world — but it is equally true to say that Canada’s drug prices are amongst the lowest in the world, because there is not a huge difference between prices in Canada and those in most other countries. Prices cluster in a relatively small range.
Whether Canada is third or 20th makes little difference — especially compared to the massive difference with the U.S. American prices are 3.5 times what they are in Canada, precisely because wealthy countries that can afford to pay fair prices for pharmaceuticals nonetheless rely on American consumers to subsidize them. Someone must pay the price of innovation.
Herder also made the point that the industry has not invested a loosely promised 10 per cent of revenues in R&D in Canada, according to PMPRB data, although industry has done better on R&D than PMPRB figures suggest.
But why would industry invest here? It has a long list of complaints in addition to price confiscation: weak patent policy, lack of an orphan drug strategy, a short data protection period, the infamous “promise doctrine” and a slow pace of drug approval. Anyone with a rudimentary understanding of incentives would grasp why Canada hasn’t benefited nearly as much as we should from investment by pharmaceutical companies.
Herder and Clark exhibit a classic bureaucratic mindset, assuming that the PMPRB and its mission, in its present form, is unassailable. But bad policies can and should change. Evaluating and modifying those policies are the minister’s job. The PMPRB was created as an expedient to allow the passage of certain intellectual property law reforms. It’s not well-founded or essential. Indeed, we’d all be better off if it were retired altogether.
Let’s hope the rest of the PMPRB follows Herder and Clark out the door. Last one out, please turn off the lights.
Lawyer Richard Owens is a Munk senior fellow at the Macdonald-Laurier Institute.