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The Tale of the Princess and the Pea: The Obscure but Impactful Federal Regime for Drug Price Setting

March 29, 2017
By: 
Louise Binder
Health Policy Consultant
Canadian Cancer Survivor Network

Pundits have shaken, stirred, turned upside down the federal budget for the last crumbs. I am left to comment on that pesky pea, hard to find but very important to the right princess. I trust I can convince you that the budget announcement to lower drug prices in Canada may be one of the trails to follow in health research and innovation.

Undeniably the pharmaceutical sector is an important part of Canada’s manufacturing and innovation ecosystems. The extent of its impact depends on which stakeholder group you ask. Its structure is a conundrum for Canada, a country that supports a social safety net for basic health care but has a key area of service delivery provided by the for profit private sector- the collision of public health versus private enterprise, the industry people love to hate.

Budgets balance incentives, taxation, regulation , monitoring of domestic policy and international trade agreements to mollify friends and foe alike. Health and innovation complexities abound and, in my view, will be exacerbated by genetics and genomics research, the rise of personalized medicine, the advent of treatments companion diagnostically driven, the promise of rare disease research and discovery.

Someone pays for treatments successfully approved (and indirectly those that aren,t). In Canada options are public payers, private insurers or individuals out of pocket. This assumes that the drugs are able to jump the myriad, and growing, government, and more recently, private insurance, reimbursement hurdles.

Reimbursers struggle to sustain affordability of the status quo, never mind managing expensive new treatments, many the fruits of Canadian innovation. The budget appropriately signals modifications from the present 1980s framework for drug pricing, potentially amending the Patent Act, overwise the purview the Innovation Minister except for the drug pricing sections. More explicitly, increased funding for the Patented Medicine Price Review Board (PMPRB) under the “PRESCRIPTION MEDICATIONS AND HEALTH INNOVATION” section signals the Minister’s intent to act.

It is also in my view a backhand slap at the industry for promising at least 10% investment in RxD under the 1980’s patent changes which has dwindled to 5%. Whether drug regulation in Canada affected that drop or not is in the eye of the beholder. Industry claims foul as some of the 10% not counted exclude research partnerships between universities and industry.

I predict amends to the Regulations under the Patent Act describing the seven countries Canada considers in determining if a drug price is “excessive “for Canada. The U.S. has long been on the chopping block as most expensive. European countries, U.K., Sweden, Switzerland, Italy, France and Germany less so, although Germany is potentially out too. ( N.B. It is dangerous to translate another country’s price structure out of context of its entire system.)

If implemented, the removal of the U.S. price from our “basket” may reduce the initial price for some products for Canada. Hopefully for patients, this means lower prices and more room to add new expensive drugs as the budget commits especially in areas like oncology where so much pressure exists. New Zealand may replace the U.S. which is in my view irrelevant, since prices of covered drugs there are low but few drugs are covered, especially innovative ones causing sustainability problems. Thus, based on what I have heard so far it is impossible to determine whether the sky is falling or not and any optimism have is based on our creating solutions to fit the problem, avoiding harmful unintended consequences. The Devil is in the details which are scant at the moment.

This is after all the Innovation Budget so the innovation gurus comment on those aspects. What is the link to innovation this issue ? Many innovators and manufacturers claim that expensive drug pricing regimes without counterbalancing research and innovation incentives, will diminish both in Canada. Others say this is historically inaccurate. Some worry that the trend for CIHR grants to request private industry partnership may be problematic if industry matching funds decline. Pundits must untangle this. The Stem Cell Network’s funding was renewed, good news. Health Canada and the Canadian Agency for Drugs and Technologies in Health received funding. Are these and the other initiatives announced for health and innovation enough to ensure leadership in an increasing competitive research and innovation global environment? Or are there other hidden peas under the mattress that others have found .