The new drug-price reform: Not what the doctor ordered

A highly-contested drug-price reform is set to come into effect in Canada in January 2022. Critics of the major overhaul, including patient groups, doctors, and academics, are hopeful that the new federal cabinet will take their concerns to heart and rather than stifle pharmaceutical innovation, will encourage it in a way that’s beneficial to patients.

The reform in question is of the Patent Medicines Price Review Board (PMPRB), the federal agency whose purpose is to prevent excessive pricing and the abuse of drug patents. One of the ways in which the Board fulfills this purpose is by establishing a price ceiling according to specific guidelines. It is these guidelines that are changing under the new regime. Most of the concern stems from the introduction of “experimental” economic factors such as pharmaco-economic value, size of the market, and GDP per capita into the evaluation of the price of a patented drug.

The Board’s current assessment already adds as much as three years of additional delay between the time Health Canada approves a drug and the moment it is refunded by provincial insurance plans. These additional factors will undoubtedly add complexity to an already slow process, and make Canada an international outlier in its approval process. This in turn can discourage investment, the launch of clinical trials, and new drug releases. As such, these reforms are likely to compromise the availability of new drugs, to the great detriment of patients. Indeed, multiplying the number of regulatory steps makes the approval process more burdensome and could push companies to introduce their drugs in countries with a more responsive framework first. Meanwhile, ailing patients in Canada are deprived of potentially life-saving medicine.

If this added complexity wasn’t enough to ruffle critics’ feathers, the PMPRB does not even always respect its mandate when determining whether a newly patented drug is excessively priced. The court case involving the Federal Court of Appeal (FCA) and SOLIRIS, a breakthrough drug which treats patients with an ultra-rare blood disease, is just one example of such divergence.

When the PMPRB concluded that SOLIRIS’s sale price was excessive, the case was brought to the FCA, where it heavily criticized the Board for its lack of transparency and for departing from its guidelines. The FCA found that the PMPRB had “misunderstood its mandate, which is directed at controlling patent abuse, not reasonable pricing, price-regulation or consumer protection at large.”

Indeed, SOLIRIS’s highest acceptable price upon market introduction should have been the median price of the seven comparator countries listed in the Patented Medicines Regulations. Instead, the Board decided to institute, for the first time, a benchmark of the lowest international price.

This arbitrary divergence causes additional headaches for drug manufacturers who must already jump through multiple, time-consuming hoops before being able to sell their drug on the Canadian market. Such regulatory unpredictability, coupled with the additional economic factors to be taken into account in our country, could discourage drug companies from applying for approval here at all. To the extent that this happens, some suffering patients will never get the best treatment for what ails them.

Drug manufacturers have already proposed alternative solutions that would strike a balance between affordability objectives, incentivizing the development of patented medicines, and timely access to innovative treatments for all Canadians. Specifically, they’ve recommended simply omitting the new economic factors from the new regime, as excessive pricing can be prevented through other regulatory tools.

With the implementation of the PMPRB’s new regime fast approaching, time is running out for the Liberal government’s newly appointed cabinet to reconsider, given the dire consequences of this reform. The well-being of patients who rely on the innovation and development of the Canadian pharmaceutical industry should move them to act quickly.

Krystle Wittevrongel is a Public Policy Analyst at the MEI and Maria Lily Shaw is an Economist at the MEI. The views reflected in this opinion piece are their own.