Innovative drugs need a new regulatory approach
Innovative drugs help people enjoy longer, healthier, more productive lives. They also allow our health-care systems to save money. The numbers are striking: If, after 1995, industrialized countries had had access to no new drugs to treat cardiovascular disease, related hospital stays would have cost 70 per cent more 10 years later.
However, the reimbursement of these drugs by Canada’s public plans can face considerable delays because of a very burdensome regulatory process. Far from resolving this problem, a new reform may lengthen this process.
Health Canada examines all new drugs in order to ensure their safety, effectiveness and quality. When the tests are conclusive, they are approved for sale. These drugs are not automatically reimbursed by provincial drug insurance plans, however.
Each new drug is scrutinized by the Patented Medicine Prices Review Board (PMPRB), a federal agency that conducts an economic evaluation in order to set a maximum price. Health technology assessment agencies then examine the advisability of reimbursing the drug. Once this evaluation has been carried out, the provinces together negotiate prices with the manufacturer through the pan-Canadian Pharmaceutical Alliance (pCPA). This single stage can take several months.
Finally, provincial governments make use of these studies and of the result of negotiations to choose which drugs they will include on their respective lists of reimbursed drugs.
In 2015-16, the economic assessment process added an average of 450 days, or about 15 months, between the moment when drugs are approved by Health Canada and the moment when they are reimbursed by public insurers, and sometimes a lot more. In the recent case of a breast cancer drug, registration on the list of drugs reimbursed by Régie de l’assurance maladie du Québec ( RAMQ) only happened 23 months after Health Canada’s approval.
The recent reform of the PMPRB aims to expand its role. In addition to modifying the way it calculates maximum prices, the organization will now be able to carry out the same kind of analysis as the health technology assessment agencies and duplicate their work.
Moreover, this extra complexity in the assessment process for new drugs will, in all likelihood, affect their availability. Drug manufacturers obviously want to recover their research and regulatory compliance costs, thus ensuring the development of the next generations of drugs. Anything that makes this process more burdensome or increases related costs runs the risk of encouraging them to introduce new drugs first in markets that are more profitable than Canada. This is indeed already the case in certain respects, as many new drugs are submitted to Health Canada long after having been submitted to the American and European authorities, which adds an extra delay of six months.
This obstacle course that new drugs are required to run in Canada is not an unavoidable feature. In Germany, for example, drugs are reimbursed from the moment they are approved by the health authorities. Economic evaluations start only one year after they go on sale. The government then decides if the drug should continue to be reimbursed, and at what price.
Spending on drugs is limited by a budget allocated to each doctor based on his or her specialty and on historical spending levels. The prices of drugs are therefore essentially governed by the fact that doctors will prescribe less of a drug if its price is too high and it gobbles up too much of their budget.
German hospitals, for their part, establish their own lists of drugs to prescribe, from the moment they are approved. They choose drugs based on budgets that are allocated to them for each patient. The German system therefore shows how regulation can leave substantial room for market-based principles, which the Canadian systems tend to replace with bureaucracy.
Instead of increasing the regulatory burden and running the risk of penalizing patients, Health Canada should be looking to increase and accelerate access by taking inspiration from the best practices of other countries, namely relying on prices that result from supply and demand and authorizing the reimbursement of new drugs as soon as they’re approved. When one is sick, each passing month can seem like an eternity; such a change could give Canadians access to new drugs at least 15 months earlier.
Mathieu Bédard is Economist at the Montreal Economic Institute. He is the author of “Innovative Drugs: A Bureaucratic Obstacle Course” and the views reflected in this op-ed are his own.
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