This article originally appeared in the Financial Post.
By Nigel Rawson and John Adams, March 1, 2023
Journalist Kelly Crowe and others repeat the falsehood that Canada has some of the highest drug list prices in the world, ignoring the billions of dollars in discounts various Canadian purchasers receive. Ms. Crowe suggests withdrawal of proposed new regulations for the Patented Medicine Prices Review Board (PMPRB) was due to federal Minister of Health Jean-Yves Duclos capitulating to the biopharmaceutical industry.
Resigning from the Board last week, Matthew Herder made the same insinuation, adding the claim that, with R&D spending of just 3.4 per cent of sales in 2021, the industry has failed to meet its target of 10 per cent. But he and the PMPRB are fixated on a 35-year-old notion of R&D. Statistics Canada’s modernized measure shows the 2021 figure to be 8.8 per cent.
Let’s be clear. Since its establishment in 1987 the PMPRB’s role has been to prevent time-limited, patent monopolies granted for new medicines from being abused by “excessive” prices — not to decide whether drug prices in general are reasonable or appropriate.
For five years, the PMPRB has been trying to expand its powers to severely reduce the list prices of new drugs in Canada. Its plan has included: replacing higher-price countries in its international price comparison group with six lower-price countries; implementing new untested “pharmacoeconomic” tests to determine prices; and requiring drug developers to report details of the confidential rebates they negotiate with public and private insurers.
Case studies suggest the change in comparison countries would lead to a reduction in list prices of about 20 per cent. Pharmacoeconomic tests could reduce them by another 25 to 55 per cent. Manufacturers very likely would find such reductions unsustainable and not launch products here.
Court challenges led to rulings against using pharmacoeconomic tests and reporting confidential discounts as violating trade secrets. The courts also found that without evidence of excessive pricing the PMPRB is “not empowered to control or lower prices.” Of the three major thrusts of the Board’s strategy, only the change in the countries comprising the comparison group remains.
Withdrawal of two of the three major proposed changes was not a case of “acquiescing to biopharmaceutical industry coercion.” They were withdrawn because courts and the rule of law prevailed over an out-of-control bureaucracy abetted by academic, journalistic and partisan spin.
In recent years, the PMPRB has been trying to help itself to powers it does not lawfully have. In a unanimous decision in 2021, the Federal Court of Appeal quashed a PMPRB ruling against Alexion Pharmaceuticals, finding that the Board had broken the law. The judges were blunt in their criticism: “administrators cannot put themselves in a position where they are not accountable.”
As an independent, quasi-judicial tribunal the PMPRB should maintain public-service impartiality. But results of 2021 freedom of information requests showed that the regulator disdains the industry it regulates. A PMPRB communication plan calls for Board supporters to say the biopharmaceutical industry is “holding Canadian patients for ransom” and putting “profits first and patients a distant second” (with neither accusation supported by evidence). And a senior PMPRB director wrote in an email that the industry “has been sucking Canada for decades.” These statements contradict Herder’s praise of “the integrity and expertise of Board staff.”
When the PMPRB was established 35 years ago, Canadians had no other protection against excessive drug prices. But now that we have agencies to evaluate the cost-effectiveness of new medicines, as well as the bargaining power of all federal, provincial and territorial drug plans in negotiating prices, the PMPRB is no longer relevant. It only had to deal with a handful of complaints about patented medicines in the decade 2009-19.
Anti-biopharmaceutical industry activists and some in the NDP believe contact between industry and the federal government is inappropriate. But collaboration between the two is key if Canadians are not to miss out on access to new medicines. For too long, Canadian governments have been antagonistic to drug developers and erected barriers that have deterred them from bringing innovative products here.
The threat of the proposed PMPRB changes sharply reduced the number of new drugs submitted to Health Canada over the past six years, causing concern among Canadians with unmet health needs who want access to new medicines. Instead of trying to drive prices down with arbitrary regulation, the federal government should be working with the provinces and territories to accelerate access to medicines for Canadians who need them.
The PMPRB has outlived its usefulness. It’s now a problem, not a solution.
Nigel Rawson is an affiliate scholar with the Canadian Health Policy Institute and a senior fellow with the Macdonald-Laurier Institute, as is John Adams, co-founder and CEO of Canadian PKU and Allied Disorders Inc.