This article is the fifth 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, August 9, 2023
Earlier articles in our series have considered steps that are generally completed in sequence. In this article, we discuss the quasi-judicial tribunal known as the Patented Medicine Prices Review Board (PMPRB). The PMPRB’s role is not to set drug prices nor to decide whether prices are reasonable or appropriate, but to prevent time-limited, patent monopolies granted for new medicines from being abused by excessive prices.
The PMPRB’s jurisdiction officially begins after a new patented medicine is sold for the first time in Canada. So, its work can start soon after regulatory approval from Health Canada or much later after health technology assessment and price negotiation processes have been completed and patients can receive benefit.
Before first sale, most drug developers have a target Canadian list price in mind based on factors including investments in research and development and costs of regulatory compliance, manufacturing, distributing, sales promotion, and any patient support program. Developers assess whether their list price will be PMPRB-compliant and, if not, must decide whether to decrease the price to achieve compliance, keep the price and risk PMPRB action against the company, let its patent lapse to avoid PMPRB jurisdiction, delay launching in Canada, or not launch here. Delaying launching means a further wait for patients; not launching denies access entirely.
The PMPRB has performed its role since 1987 using a test in which a company’s intended Canadian list price for a new patented medicine is compared with list prices (not actual prices paid by government and private insurers after negotiated rebates) in seven countries: France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States. Using advice from a clinical advisory committee, new medicines are categorized into breakthrough, or substantial, moderate or slight/no improvement over existing therapies. The ceiling list price for breakthrough medicines is the median of list prices in the comparator countries; progressively lower ceiling prices are set for less innovative medicines.
However, the PMPRB has been trying to expand its powers to severely reduce list prices of new drugs in Canada, especially costly rare disorder drugs. The original plan included replacing higher price countries (United States and Switzerland) in the international comparison test with six lower price countries; implementing new untested pharmacoeconomic tests to determine prices; and requiring drug developers to report details of confidential rebates negotiated with public and private insurers.
Case studies demonstrated the change in countries would likely lead to a reduction in list prices of about 20 percent. The novel pharmacoeconomic tests could reduce them by another 25 to 55 percent. The PMPRB would have been converted from a patent abuse watchdog into a price setter, and prices of new medicines in Canada could have been drastically reduced to levels potentially unsustainable for drug developers.
The PMPRB’s plan met much opposition from patients, drug developers and others. Challenges in Federal and Quebec courts led to rulings against using pharmacoeconomic tests and reporting confidential discounts as unconstitutional and violating trade secrets. The courts found that the PMPRB is “not empowered to control or lower prices” without evidence of excessive pricing. The change in countries in the price comparison test is all that remains. Despite claims that the withdrawal of the other proposed changes was due to the federal Minister of Health capitulating to the biopharmaceutical industry, they were withdrawn because courts and the rule of law prevailed over an out-of-control PMPRB bureaucracy aided and abetted by certain academic, journalist and partisan spins.
Regulations forcing drastic price reductions lead to delayed drug access. Extensive published work has repeatedly demonstrated this relationship. Just the threat of the PMPRB changes significantly reduced the number of new drugs submitted to Health Canada in recent years. Since rare disorder drugs would likely be particularly impacted, the proposed changes caused much concern among Canadians with unmet rare disorder health needs.
When the PMPRB was established, Canadians had no other protection against excessive drug prices. Now we have agencies to evaluate the cost-effectiveness of new medicines and the collective bargaining tool of all federal, provincial and territorial drug plans to negotiate prices, the PMPRB is no longer as relevant. It has outlived its usefulness. In fact, the PMPRB is now a problem for Canadians needed to access new medicines.
Other countries have better access for patients and lower net prices as a result of negotiations. It is time to admit that Canada’s unique approach to drug price regulation has failed and become mostly irrelevant.
Instead of trying to drive prices down by arbitrary means leading to further delays for Canadians with rare disorders, the federal government should be working positively with all provinces and territories and the biopharmaceutical industry to accelerate access to medicines for those who need them.
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.