This article is the third part of an 8-part series from the authors. The series, Waiting for new drugs for rare disorders in Canada, is an in-depth look at the disadvantages faced by Canadians with rare disorders in accessing needed, innovative drugs.
By Nigel Rawson and John Adams, July 26, 2023
In the previous article in our series, we discussed concerns related to the way health technology assessments (HTAs) of drugs for rare disorders are performed in Canada. We now examine issues related to the manner in which price negotiations for these medicines for government drug plans take place in Canada.
The price negotiation process is the second of the multiple barriers erected in this country over the last 20 years that developers must overcome to get new medicines to patients who need them.
Following positive regulatory and HTA recommendations, drug developers usually look to be invited into a collective bargaining process with all government drug plans, known as the pan-Canadian Pharmaceutical Alliance (pCPA). The pCPA is an alliance of provincial, territorial and federal governments collaborating on public drug plan initiatives “to increase and manage access to clinically effective and affordable drug treatments.”
The pCPA commenced business in 2010. Its objectives are to increase access to clinically relevant and cost-effective treatments; achieve consistent and lower drug costs; improve consistency in government funding decisions; and reduce duplication and optimize resource utilization.
Using recommendations from Canada’s HTA agencies – the Institut national d’excellence en santé et en services sociaux for Quebec and the Canadian Institute for Drugs and Technologies in Health (CADTH) for the rest of Canada – the pCPA determines whether it will start a negotiation for a drug.
HTAs from CADTH now regularly include a recommendation for a specific percentage price reduction to achieve a notional cost-effectiveness threshold of $50,000 per quality-adjusted life-year (we discussed the significant limitations of this measure in our previous article). The recommended price cuts for drugs for rare disorders are frequently over 50 percent – some as high as 90 percent or more. These recommendations set the stage for price negotiation with pCPA.
If a price agreement is reached with the pCPA, the result is a letter of intent that implies the drug will be listed in any subsequent agreement with government drug plans with an established price and listing criteria. Using the letter of intent’s terms, manufacturers negotiate individual product listing agreements with each participating government plan. Government plans can choose whether to participate in a negotiation and which ones do is confidential. All plans usually participate in a pCPA negotiation for new innovative medicines.
In Australia, when a medicine has a positive HTA recommendation and a price has been negotiated, it is reimbursed in all states and territories. This is not the case in Canada. Government drug plans are not mandated to reimburse a medicine that has been successfully negotiated with their own pCPA. Years can elapse before they decide to cover a drug.
Since all negotiations with the pCPA are confidential, we don’t know what pricing concessions drug developers make. Limited information available for the Ontario drug plan from an independent review by the Ontario Auditor General indicates that manufacturer rebates reduce prices by 35 percent or less.
Data from the pCPA’s website shows that completed price negotiations for 41 rare disorder drugs given marketing approval in Canada between 2015 and 2022 took an average of more than seven months. For 10 percent of the drugs, the time required was a year or more. The average time between Health Canada’s regulatory approval and completion of the pCPA negotiation for these drugs was 20 months and, for over a third, the delay was more than two years. These steps add an extensive and potentially harmful wait time for patients.
CADTH and the pCPA have been aligning their processes for several years so that they are now closely interconnected. The result has been that medicines receiving a negative HTA recommendation rarely have a price negotiation and are not listed in government drug plans, while medicines receiving a positive HTA recommendation generally have a successful price negotiation and many are listed, but certainly not all. Canadians relying on government drug plans must wait yet again as these plans decide whether to list the medicines.
Governments that run the public drug plans are in favour of this approach to drug access. That is, only drugs considered to have “value” by certain narrow definitions are recommended for reimbursement and listed as long as the developer is willing to negotiate an acceptable price.
Anti-pharmaceutical industry activists want significant reductions in prices of drugs for rare disorders and/or an expansion of already-existing rationing of these drugs. This would lead to drug developers deciding not launch innovative rare disorder drugs in Canada due to the threat to prices and sales in other larger markets with less punitive policies. Access to innovative medicines is at risk as long as policy-makers and their advisers see them primarily through the lens of high prices, instead of the benefits they can bring to patients, scientific innovation, the health care system and the economy.
Nigel Rawson is a Senior Fellow with the Macdonald-Laurier Institute, an Affiliate Scholar with the Canadian Health Policy Institute and a Senior Fellow with the Fraser Institute. John Adams is cofounder and CEO of Canadian PKU and Allied Disorders Inc., a Senior Fellow with 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.
