Important Changes Coming to the Pricing of Patented Medicines In Canada

written by Bradley van Paridon - Feb 20, 2018

Photo Credit: by CanadianPharmacyWorld
Photo Credit: by CanadianPharmacyWorld

Canada’s Department of Health, on December 2nd 2017, proposed new amendments to the Patented Medicines Prices Review Board (PMPRB), the regulatory body in charge of monitoring the prices of patented drugs. The proposed changes will not only affect the prices of patented drugs, but, may also affect the availability of new drugs to Canadian patients.

The role of the PMPRB, according to the Health Canada website is to act as “an independent quasi-judicial tribunal” that “limits the prices set by patentees for all patented medicines, new and existing, sold in Canada, under prescription or over the counter, to ensure they are not excessive.” The Board functions to regulate prices and reporting on pharmaceutical trends and pharmaceutical company Research & Development spending.

In short, the Board exists to protect consumers from price gouging by pharmaceutical companies who hold exclusive patents on new medicines. Drug patents work in the same way patents on technologies and other products work. When new drugs are created the company files for a patent, which, when granted, gives them a monopoly on producing and selling that drug, or its active ingredient, for a period of 20 years. These patented drugs are what we often refer to as “brand name drugs”. Once a patent expires, or in some cases is successfully challenged in court, any drug manufacturer can produce the so called “generic” version.

Generic drugs, contrary to some popularly held beliefs, are just as potent as brand name drugs. This is because generic drugs contain the same, no-longer-patented, active ingredient and undergo testing to determine bioequivalence –meaning two drugs act the exact same way on the body and contain the same dosage of active ingredients. Generic drugs are only cheaper because (1) the companies producing them do not have to recoup the huge costs of researching and developing the drug, and (2) there are often many brands of generic drug available and, therefore, competition in the market.

According to the executive summary of the proposed PMPRB changes, issued by Health Canada, the Board “uses a regulatory framework that currently falls short of its mandate to protect Canadian consumers from excessive prices for patented medicines.” They also state that prices for patented drugs in Canada are among some of the highest in the world and their cost/benefit analysis of the proposed amendments would “produce an estimated net benefit to Canadians of $12.6 billion” over 10 years due to reduced drug costs. The same analysis estimates that the costs to industry would amount to “$8.6 billion present value over 10 years”, and that this amount would not be disruptive to industry employment or investment. This fact is disputed by some industry sources, namely, an industry association group Innovative Medicines Canada, which quotes a figure of up to $26.1 billion and claims the potential for job losses, cuts to R&D budgets, resulting in less access for patients to innovative therapies.

The government-backed proposal would make changes to both the regulatory and reporting framework of the PMPRB, but, there are two specific changes that are of concern for consumers. First, a change to the list of countries which the Board uses for international price comparison, which, ultimately determines a fair market price for patented medicines. The amendment would expand the list from seven comparable countries to twelve, but notably, the U.S and Switzerland—two countries which typically have higher prices than Canada—would no longer be included. This move would have a significant impact on both the highest and median international price comparison metrics used; lowering the maximum chargeable prices, which is likely to result in lower prices for Canadians as manufacturers would need to adjust prices to be in compliance.

The second and more significant of the recommendations, according to Dr. Nigel Rawson, pharmacoepidemiologist, pharmaceutical policy researcher, and senior fellow at the Fraser Institute, taken from his op-ed in The Hamilton Spectator, is that the PMPRB will assess the value of new drugs “by reviewing cost-effectiveness analyses submitted to the Canadian Agency for Drugs and Technologies in Health (CADTH).” The CADTH makes recommendations about reimbursement in public insurance drug insurance plans throughout all of Canada, except for Quebec. While the CADTH does not set drug prices it “frequently recommends substantial price reductions”, writes Rawson. The new value assessment framework would see the PMPRB attach dollar thresholds to CADTH cost-effectiveness analyses, above which drugs would no longer be insured. According to Rawson, similar legislations have “been abandoned by every developed country that has adopted or considered them” as they fail to reflect factors like “patient and insurer willingness to pay and health trade-offs, that should guide insurance coverage decisions.”

If a drug passes the threshold test, further evaluations will be made to estimate anticipated market sizes and compare this with proxies for buying power of individual Canadians, all in an attempt to determine how the price of the drugs impact patient and insurer finances. A drug whose impact is deemed high could see prices further lowered.

Rawson, however, sees several issues as “the number of potential patients in Canada is often small and, consequently, higher prices than in large markets such as the U.S. or the European Union are justified” and “higher prices are also acceptable for new efficacious drugs for diseases for which no therapy exists or the present treatment is ineffective.”

While few will argue that Canadians don’t deserve protection form unfairly priced medications, some, including Rawson are concerned the new regulations will actually reduce the availability of drugs in Canada. Manufactures may simply choose not to market new drugs in Canada if they feel they are unable to profit in the new regulatory framework. The cost of producing and researching new drugs is enormous and companies need to be entitled to recoup these costs.

As Rawson points out the PMPRB has previously “struck a balance” between protecting consumers and “recognizing the importance of pharmaceutical innovation” but he, and others, believe the proposed changes could instead become a barrier to new medicines for Canadians.


Dr. Bradley van Paridon is a writer and science communicator who holds a PhD in Parasitology.


Leave your comment:

Your email address will not be published. Required fields are marked with *.

Enter Code:
not case-sensitive

While the above article is based on thorough research, we do not claim to offer a substitute for medical advice from a qualified healthcare provider. The article was written for information and educational purposes only. We aim to provide helpful information to our readers, but cannot provide a treatment, diagnosis, or consultation of any sort, and we are in no way indicating that any particular drug is safe or appropriate for you and your individual needs. To receive professional medical attention, you must see a doctor.