By Nigel Rawson and John Adams, May 2, 2022
On April 14, 2022, Health Minister Jean-Yves Duclos announced the federal government’s decision to cancel most of its plan for the Patented Medicine Prices Review Board (PMPRB) to regulate significantly lower prices for new medicines in Canada – a mess created five years ago by then Health Minister Jane Philpott. Our courts were called upon to sort out the mess and ensure an out-of-control regulator respects the rule of law.
The PMPRB is the federal tribunal whose role is to prevent time-limited drug patents from being abused. It has been doing this for decades by comparing list prices for medicines in Canada with those in seven other countries: France, Germany, Italy, Switzerland, Sweden, the United Kingdom and the United States. Changes in the PMPRB’s regulations will still replace Switzerland and the United States – countries with higher drug prices – with six countries with lower list prices: Australia, Belgium, Japan, Netherlands, Norway and Spain.
Other aspects of the new regulations are being dropped , including: (1) health technology assessments (HTAs) to set prices, not by negotiation, but by regulation (a use for which HTAs are not intended), (2) further possible price reductions based on Canada’s per capita gross domestic product and the magnitude of the drug’s sales in Canada, and (3) the forced divulgence by manufacturers of confidential information about rebates negotiated with their customers (insurers in this case) to the government regulator. The latter point would have raised an issue potentially for every regulated business across Canada. Discounts negotiated with customers are generally seen as trade secrets.
The original plan would have reduced drug prices to unsustainable levels, making Canada a much less attractive market for new medicines. Drug developers would have delayed launching important new medicines in Canada or not launching here at all, resulting in the denial of timely or any access to new ground-breaking therapies for an increasing number of patients with unmet or poorly met health needs. This has begun to occur already and has been getting worse, perhaps in no small part due to the PMPRB’s misadventure over the last five years.
Legal challenges in the Quebec Court of Appeal and the Federal Court of Appeal led to six senior judges rebuking the false claims of the PMPRB, its supporters and the federal Cabinet. Judges in Quebec struck down the use of HTAs and the other economic factors to set prices and the requirement to reveal business secrets.
The many pages of appeal court judgments can be summarized in two main points. First, price controls on drugs are a provincial, not federal, jurisdiction under Canadian law. Therefore, the PMPRB can police against patent abuse but cannot do price controls. This is not because provinces are responsible for health services but because civil and property rights are generally provincial matters. Second, governments cannot generally compel an enterprise to disclose its business secrets to government officialdom.
The Federal Court of Appeal found that the PMPRB had abused its existing powers. The Supreme Court of Canada saw no merit in reviewing the unanimous decision of this Appeal Court and thankfully the federal Cabinet came to its senses, choosing not to risk another rejection from the Supreme Court over the Quebec decision.
We can conclude that the PMPRB, Health Canada and the federal Cabinet received bad legal and policy advice in recent years. One of us (John Adams) has reviewed the lengthy set of emails between PMPRB and Health Canada officials that, starting in 2015, set this foolishness in motion. Not once in those emails did any senior officials ask themselves the key question: is what we are proposing staying inside the lanes of legitimate federal authority or are we abusing federal powers?
They concocted a Kool-Aid policy and then wasted five years of government, industry and patient time and effort. Where is the accountability for the taxpayers’ money squandered because they did not ask the key question? Will the Cabinet sub-committee on litigation management call for an accounting?
Academic and political anti-biopharmaceutical industry activists bemoan the federal government’s decision to scale back the changes, seeing it as caving in to “Big Pharma.” However, their position is based on wilful ignorance of Canadian law. The truth is that Minister Duclos’ announcement heralds a victory for the rule of law over purveyors of policy spin and federal over-reach. The critics should take time to read the recent court decisions. Other commentators have dubbed the PMPRB a “rogue regulator.” The Appeal Courts agreed with that kind of criticism, putting the PMPRB in its proper place.
Supporters of the original changes, including Jane Philpott, claim evidence is lacking that significantly reducing prices would impact access to medicines. This claim is nonsense – just like their legal fiction. Analyses from Canada and elsewhere of the impact of price regulation leading to delayed drug access have repeatedly demonstrated the relationship since the early 2000s.
Further evidence can be seen in the number of new medicines launched in the 25 countries with the largest pharmaceutical sales between 2000 and 2019. After adjusting for the two-year time lag, due to new drug applications being submitted later in Canada than in larger markets, the number of new launches globally was consistent with those in Canada until 2019 when the number fell to just 13 out of the 31 launched globally in 2017. Of 37 medicines launched globally in 2018, only 16 were launched in Canada. Canada and its patients and their doctors have been falling behind.
Some may argue that medicines that aren’t launched in Canada are not needed by Canadians. But this would also be untrue and harmful to patients. Consider drugs for infectious diseases. More than a quarter of infections in Canada fail to clear up when patients are treated with standard antibiotics due to their over-use producing antimicrobial resistance. Canadian physicians need access to new antibiotics to cope with this resistance. However, only two of 18 novel antibiotics approved and launched in 14 high-income countries over the past 10 years have been brought to Canada – the fewest of any of the countries. During the same period, 17, 11 and 10 of the antibiotics were marketed in the United States, the United Kingdom and Sweden, respectively.
Anti-industry activists claim that limiting revisions to a change in the countries in the PMPRB’s international comparison will not prevent “price gouging.” A slogan is not evidence. Where is the evidence? The prices of medicines have increased worldwide. Many new medicines are novel developments based on increasing knowledge about the human genome and biochemical pathways and can provide therapeutic benefits for disorders previously untreatable – several of these are rare disorders. Moving a serious or lethal disease from untreatable to treatable is a major advance. The development of rare disorder drugs is just as expensive as the cost of developing a new drug for a common disease, but there are many fewer potential consumers. Consequently, the price per patient is going to be high, but the number of patients is small.
The changes in the PMPRB’s international price comparison could be acceptable to some drug developers. Others may consider the risk of a reduced price by regulation, not by negotiation, together with Canada’s obstacles – for example, shorter patent life, narrowly-focused HTAs, the further likelihood of a price reduction in the drug plans’ negotiation process and the fact that coverage by government plans is not guaranteed – as too great to bother launching their drugs here. If the reduced price by government regulation in Canada has the potential to negatively impact a drug’s price in other countries, a decision not to bring the drug to Canada is even more likely.
The federal government’s decision to limit the PMPRB revision to the change in its international price comparison may be seen by some as a “victory” for the pharmaceutical industry. It isn’t. A victory would be the federal and provincial governments throwing out the Kool-Aid and changing their decades-old antipathy to the industry to one of collaboration, in which patent life for pharmaceuticals is extended to the international standard and Canada pays its fair share towards the development of pharmaceuticals and stops freeloading on the United States or anyone else.
The scale back in the PMPRB rules is also not a victory for patients if drug developers continue to regard Canada as a less attractive country for research, clinical trials and to launch new medicines. People around the world need faster access to new life-changing and life-saving medicines. Canadians need their politicians to encourage access to these medicines, not create impediments to access.
We hope governments in Canada, led by Ottawa, will seize the opportunity the courts have provided to rethink and reset policies, processes and relationships so that Canadians get rapid access to new drugs and vaccines without the current delays. The success or failure for patients of national pharmacare and a national strategy for drugs for rare disorders hinge on the results of this reset.
Nigel Rawson is an independent researcher and a Senior Fellow at the Macdonald-Laurier Institute. John Adams is cofounder and CEO of Canadian PKU and Allied Disorders Inc., a Senior Fellow at the Macdonald-Laurier Institute and volunteer board chair of Best Medicines Coalition. The views expressed are the authors’ own and do not necessarily represent those of organizations with which they collaborate.
