By Richard Owens, Feb. 22, 2018
Do you know about the PMPRB? That is the Patented Medicines Price Review Board, for the uninitiated. It’s time to pay attention, because the PMPRB holds the power of life and death over us. It determines the prices at which patented pharmaceuticals will be sold in Canada — and this affects not only their affordability, but also their availability. The Trudeau government’s policy is to change the regulations that govern the PMPRB. This will delay, and probably greatly delay, the entry of many important drugs and drug therapies into Canada.
The new regulations are intended to reduce drug prices steeply by changing the countries the PMPRB uses as price comparators — by no longer comparing us to Switzerland and the U.S., where prices are high, and instead adding more countries where prices are low, such as Spain and New Zealand. It will also add an entirely new process, pharmacoeconomics, to the price-adjustment process. This means trying to get at the “value” of the drug — an enquiry for which the PMPRB is ill-suited, and which arguably is not permitted under the governing statute. It is also worth noting that a pharmacoeconomic enquiry could very well result in an increased price rather than a reduced one, and it would vastly complicate and delay PMPRB proceedings. Drug manufacturers might just increase prices initially, since they may be able to argue the higher price to be justified pharmacoeconomically.
Meanwhile, the fact is that we simply do not have a problem with drug affordability in this country. Drug prices are now 25-per-cent lower than the median drug prices in foreign markets. Prices for drugs have not increased by even the rate of inflation in recent years and have even declined in some years. Drug spending as a proportion of health-care costs has remained constant for 15 years.
We simply do not have a problem with drug affordability in this country.
The reasonably anticipated effects of these new regulations are not doubtful. Lower prices mean lower access. Consider New Zealand. In the name of “equality,” it has the strictest drug-price regulation in the OECD. As a direct consequence, there is an average nine-month delay in the introduction of new drugs into that country. Suppose you had cancer. What would a nine-month delay mean to you?
What will happen in the light of such delays in drug introduction? Will unlicensed practitioners smuggle bootleg supplies in from the U.S.? Will provincial health insurance plans have to bear the costs of sending people to the States? Or will the government’s answer simply be, “If you want it, go and get it. If you cannot, because of budget or illness, then just be happy to be equal in suffering with others in your position.”
So dire may be the impact that the regulations might be subject to a challenge using the Canadian Charter of Rights and Freedoms, under Section 7, guaranteeing the right to life and security of the person, which was used to successfully challenge the Quebec government’s health-care monopoly in the Supreme Court’s landmark Chaoulli decision in 2005.
So dire may be the impact that the regulations might be subject to a challenge using the Canadian Charter of Rights and Freedoms.
One wonders whether this new regulatory policy is intended to counteract the potentially enormous prices of emerging biological treatments, which can run to hundreds of thousands of dollars for a single instance. If so, this would be one of the worst reasons for such a policy. Manufacturers of intellectual-property-based goods are inclined to price discriminate in favour of poorer jurisdictions only if the available supply exceeds the needs of richer jurisdictions. Particularly with these new biologics that is unlikely to be the case. If we do not pay market price, it will be a long time before we see such drugs, if ever. Yet these treatments, expensive though they may be, may nonetheless also be very cost-effective because of their outstanding results.
Finally, the regulations are profoundly anti-innovative. The PMPRB is established under the Patent Act, a statute overseen by the Ministry of Innovation, Science and Economic Development (ISED). However, these proposed regulations are put forward by Health Canada. This is less surprising when one considers how very anti-innovation these regulations are. Drug-price regulation correlates strongly with declining investment in pharmaceutical R&D, and the stronger the regulation, the less the R&D expenditure. Canada’s record on R&D generally, and health specifically, is dreadful. We are the only country in the OECD, except for South Africa, to see recent year-over-year declines in R&D investment.
Consultation on these regulations is already wrapping up. Is ISED awake on this file at all? If not, let’s hope it wakes up soon. And let’s hope Canadians do too, or they’ll wake up later to find someone they love dying from the effects of this baleful policy.
Richard C. Owens is a Senior Munk Fellow at the Macdonald-Laurier Institute and an adjunct professor at the University of Toronto Faculty of Law.