On Friday August 9, 2019, Health Canada announced final regulations to reduce the price of patented drugs in Canada. The new regulations represent the most significant changes to the Patented Medicine Prices Review Board (PMPRB) since its creation in 1987.
With Health Canada projecting $13.2B in savings over the next 10 years, the pending changes will have a major impact on both the affordability of medicines in Canada and the profitability of the broader biopharmaceutical sector.
The PMPRB Reforms Have 3 Core Components
The amended regulations will provide the Board with new or expanded powers in 3 important ways:
1. Access to an Expanded Set of Price Regulatory Factors. Beyond its ability to determine “excessive” pricing of a drug sold in Canada based on global comparator prices, the Board will now be able to refer to other factors to determine relative affordability:
Pharmacoeconomic Value; Market Size; GDP and per capita GDP.
2. An Updated and Expanded “Basket” of Comparator Countries. PMPRB will no longer consider the United States or Switzerland in the group of comparator countries it uses to determine whether Canadian prices are excessive – the two countries whose drug prices have traditionally been most likely to exceed Canadian prices. Instead, the Board is adding Australia and Japan to its comparator basket. Interestingly, South Korea was originally proposed as an additional comparator but ultimately not included in the final list. A detailed summary of the current and former “Baskets” is below:
3. Increased Net Pricing Transparency. The Board was previously restricted to referencing “List Prices” when assessing whether a given price was excessive or not. The regulatory changes announced this morning will compel pharmaceutical manufacturers to disclose the value of previously confidential discounts and price rebates.
We should also note that the revised Basket and Transparent Discount measures will apply to all products – both future and existing. However, the new Price Regulatory Factors will only apply to future products.
The reforms outlined above will come into effect on July 1, 2020 – giving manufacturers and other stakeholders less than 11 months to prepare for a new pricing regime.
Government is Focused on 3 Key Messages
1. The Government’s main priority is to increase the accessibility and affordability of drugs to all Canadians. Today’s reforms are a tangible step toward National Pharmacare – and will help Canadians regardless of whether they’re covered through by public and private drug Plans.
2. The changes announced today were long overdue, and represent the first major reforms of the PMPRB in more than 30 years. They also come after more than three years of extensive consultations, study and review.
3. Regardless of these reforms, the PMPRB still expects the revenues of the biopharmaceutical industry to increase over the projected ten years. Furthermore, there is no evidence to support the argument that higher drug prices in Canada lead to the creation of more jobs or larger investments.
There are Many Steps Between Today and July 1, 2020
- The regulations released today will be operationalized via new guidelines, which the Board hopes to post in mid-September. Stakeholders will then have 90 days to provide written comment.
- Following the receipt of public comments, the Board plans to hold a public policy forum where stakeholders will have a face-to-face opportunity to engage with PMPRB senior leadership and share their views and perspectives in person.
- The Board will also be striking some technical working groups to work through key issues with a view to having final guidelines out in February 2020.
After July 1 2020, All Eyes Will Turn to 2022
- The Advisory Council for National Pharmacare recommends a pharmacare regime be implemented by 2022.
- The $500M/year in funding for drugs for rare diseases is expected to commence in 2022.
- The Regulatory Review of Drugs and Devices led by Health Canada is supposed to wrap up by 2022.
However, it will be up to whoever forms government in October to determine whether or not they wish to proceed with further drug policies, such as pharmacare, and what those specific policies are.
Insights and Implications
- The new rules announced are mostly consistent with the proposed changes outlined in the December 2017 draft. One major change is removing Korea from the basket of comparator countries.
- The new changes have a bigger impact on new products. Existing products will be impacted by both new basket of countries and a new mandate to disclose the terms of previously confidential PLAs.
- Speaking on Health Canada’s teleconference this morning, PMPRB head Doug Clark said he expects that the new tools will cause “a considerable uptick in litigation as patentees test the boundaries of the new regime”. The Board currently pursues an
average of 1-2 cases of alleged excessive pricing a year.
- Today’s announcement will be touted by Government as the first tangible step toward a national pharmacare plan. With a federal election around the corner on October 21, we expect the Liberal Party to include a sharp focus on national pharmacare in its forthcoming federal election policy platform. This will include messaging around funding for the new Canada Drug Agency and fact that the new PMPRB regulations announced today will lower the prices of drugs paid by all Canadians.
Moving forward, the government will proceed with work on guidelines to support the implementation of these now finalized PMPRB regulations. Separate to that, all eyes will be watching the result of the upcoming election. Be it funding for drugs for rare diseases or a national pharmacare regime, nothing is currently set in stone, and the future of those initiatives will be left to the next government that Canadians will decide on October 21st, 2019.