Drug pricing in Canada

It happened quietly, at the eleventh hour. Regulatory changes to pharmaceutical drug prices were due to come into force on January 1^st. Two days before, the federal government announced that they were delayed by another six months, the second such extension. Billed as the most significant overhaul of the system in 30 years, the new regulations are supposed to give the Patented Medicines Price Review Board (PMPRB), a federal agency, new tools to protect Canadians from excessive drug prices.

 “The COVID-19 pandemic has increased demands for pharmaceutical products and created shortages,” said Aisling MacKnight, a spokesperson for health minister Patty Hajdu. “This is why the coming-into-force of the regulations has been postponed.”

The new regulations have been in the works since December 2015, and the process to adopt the modernized regulations. PMPRB has met with over 260 stakeholders, and received 120 written submissions as part of the process.

“I don’t think anyone is complaining about the added six months to the coming-into-force date,” says Daphne Lainson, partner and chair of the firm at Smart & Biggar LLP in Ottawa, who represents innovator companies. “It’s unprecedented times, and as we’re all struggling in the current situation, I haven’t heard anything negative about it.”

However, Lainson says she was surprised that the delay was announced so close to the deadline, as she hadn’t heard anything through the regular channels to suggest that it was in the works.

“It was not unwelcome,” says Lainson. “It removed some of the pressure and uncertainty, and PMPRB did some webinars in November and early December, and there were a lot of questions about how this will work, and the changes to processes and the new forms and how you fill them out. It’s a big change, and these changes take some time.”

Lainson notes that patented medicines were always such a small piece of overall healthcare spending. And while industry generally been open to improving and reforming the system, it has not been fully heard, says Lainson. “We had a very protracted playout of the guidelines, which were only finally released relatively late last year, and given how long it took to get to that point, it doesn’t seem that industry’s concerns were really addressed.”

The new guidelines change the list of countries for drug price comparisons. Using that information, PMPRB determines what is a reasonable price for the Canadian market.

The incoming regulations were also impacted by two court decisions – one from the Quebec Superior Court, and one from the Federal Court, both of which are awaiting appeal. They struck down provisions that would have allowed PMPRB to collect price information that is the net of third-party rebates.

“This ruling upholds the constitutional validity of the entire Patented Medicines Regime,” says Health Canada spokesperson Geoffroy Legault-Thivierge. “Most of the Government of Canada’s amendments to the Patented Medicines Regulations were upheld. The Government of Canada is reviewing the decision and is considering next steps.”

“The delay of the [coming-into-force] date of the amendments provides industry with additional time to prepare for the new reporting obligations as the COVID-19 pandemic continues to challenge all stakeholders,” says Legault-Thivierge. “A delay will also allow industry further time to familiarize themselves with the PMPRB’s final guidelines.”

According to Lainson, these constant delays create difficulties for clients because of the uncertainty. She is operating under the assumption that PMPRB will be offering further guidance on deadlines contained within the regulatory changes, such as when certain prices are grandfathered.

“Businesses need to be planning and have their workflows in place to get the information,” says Lainson, adding that when the new regulations come into force, any price changes demanded by the PMPRB would impact on agreements companies have with provincial governments, as an example.

“You’ve got other actors that are going to be impacted by any pricing changes, and they need to be aware and have that factored in,” she says. “That’s part of the reason that, for drugs on the market, the Board was planning a longer period for companies to bring their price to the new level. You do have to work with the distributors and provinces in order to adjust the pricing.”

Lainson adds that there are also new reporting requirements for new drugs on the market, which will require companies to adapt.

There have been some public connections drawn between the incoming PMPRB regulations and the reluctance of companies to introduce drugs into the Canadian market, whether it’s with the cystic fibrosis treatment drug Trikafta, or even the COVID-19 vaccines, which was suggested in an op-ed in the Financial Post by former GlaxoSmithKline CEO Paul Lucas.

“I haven’t heard anything around a nexus between vaccine procurement and PMPRB,” says Lainson. “From everything I’ve seen, companies are going out of their way to try and service the globe, and doing everything they can to bring vaccines to patients everywhere. I haven’t heard any suggestion anywhere that the vaccines have been tied to this.”

Lainson says that the whole objective of these companies is the health and welfare of people.

“Yes, they are publicly-traded companies, so they have obligations to their shareholders that they are going to run a profitable business, so it is a balance, but I do feel that there is definitely a commitment to treat Canadians in any way that they can, but with anything, there can be business decisions that will impact on timing,” says Lainson.

Lainson says that Canada can do more to support pharmaceutical research companies. While PMPRB has statistics that show that Canada is attracting little in terms of investment, it’s a complex question in the global economy.

“I’m not sure if that data in isolation is appropriate,” says Lainson. “As a country, it would be helpful for us to invest in innovation to move us competitively, and in terms of pharmaceutical manufacturing and development, it is important. We definitely could be doing things differently to try and foster innovation.”