This article originally appeared in the Financial Post.
By Nigel Rawson and John Adams, February 5, 2025
The Patented Medicine Prices Review Board (PMPRB), Canada’s federal gatekeeper under the Patent Act, sets maximum prices for new patented medicines.
Until recently, it did this by comparing a drug’s list price in Canada with that in seven other countries. In 2017, then-federal health minister Jane Philpott chose to try to use the Review Board to drastically reduce Canadian drug prices. In 2019, Ottawa amended its regulations so as: to replace higher-price with lower-price countries in the cross-country comparison; to assess the “value” of each new drug using health-technology assessments not intended for this purpose; and to require drug manufacturers to divulge information on confidential rebates negotiated with Canadian insurance plans.
In anticipation of an expanded role, the Review Board’s budget rose 73 per cent, from roughly $10.9 million a year in 2014-18 to $18.9 million in 2022, and its staff increased 18 per cent.
The regulatory changes were met with opposition and litigation. In 2021, Canada’s higher courts ruled against using “value” tests and reporting confidential discounts and decided that, without evidence of excessive pricing, the Review Board was “not empowered to control or lower prices.” In other words, these ideas were federal overreach. Only the change in countries in the international comparison remains.
Since 2022, Review Board members and senior staff who backed the changes have departed, new ones have been appointed, and the board has been redefining its role, subject to a slightly smaller 2024 budget of $17.1 million. It has held two rounds of consultations, which elicited many and diverse responses from the biopharmaceutical industry and patient groups, and late last year it released new draft guidelines for consultation.
The guidelines propose a two-step procedure. First, the board compares a drug’s Canadian price to both its price in 11 comparator countries and our own consumer price index. These evaluations can be performed when a drug is first sold in Canada, during the board’s annual review of prices or following a formal complaint.
If staff decide the price could be too high, an in-depth review will compare the medicine’s use with similar treatments available in Canada for similar medical conditions. If comparisons confirm the drug’s Canadian price may be too high, staff can recommend a formal hearing be held.
The board’s annual report for 2023 shows that its budget and staff are 56 per cent and 18 per cent, respectively, above their pre-2019 averages, while its budget will increase to $17.9 million by 2027. This is despite the courts having cut its anticipated workload.
Why does the board need an increase? It’s basically continuing the price comparisons it has done for the past 37 years. It shouldn’t need more funding.
But beyond that, why do we have a prices review board in the first place? No other country does — even though prices elsewhere are often lower than here, usually because of negotiations between insurers and drug developers. We should be able to achieve similar prices by negotiation.
The suspicion arises that the board develops new guidelines and related processes mainly to justify its increased budget and staffing — even though its role is almost obsolete. In most provinces the maximum price the Review Board sets is irrelevant: provincial plans negotiate with manufacturers and use restrictions on copayments to keep prices below the maximum. Only in Ontario and Newfoundland and Labrador, where a sizeable share of the population pays for medicines directly out of pocket, is the maximum price consequential.
Over the past nine years, the federal civil service has grown almost three times faster than the country’s population. The Review Board seems to have been part of this trend.
Government-erected barriers already mean Canadian patients have less access to new drugs than patients in other G7 countries do. At a time when provincial and territorial premiers are calling for accelerated access to new medicines, we don’t need further price controls on new drugs.
Nigel Rawson is a senior fellow with the Macdonald-Laurier Institute, as is John Adams, who is also co-founder and CEO of Canadian PKU and Allied Disorders Inc.
