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opinion: under the hood of drug-price control
to what extent are patients suffering and dying to subsidize government drug budgets, irrational policy, access delays and red tape?
jul 24 2020
4 minute read
the pmprb and federal government continue to disregard signals that tight price regulation cuts the number of new drug launches.
george frey/getty images files
the patented medicine prices review board (pmprb) sets maximum prices for prescription medicines in canada. it published revised draft guidelines in june to replace a much-criticized earlier version. the new draft would allow the pmprb to put new government regulations into practice starting in 2021. though the guidelines are open for public comment until aug. 4, the pmprb’s executive director, who has final approval, is not required to take account of the responses. he has, however, encouraged “people to really look under the hood and see if they think we’ve got it wrong.” so, what is under that hood and what is the dashboard signalling?
the drug-price tribunal will maintain its narrow approach to assessing each medicine’s therapeutic value. for instance, though a new drug might be easier for patients to use (e.g., pill versus injection) the pmprb likely would not consider it a major improvement. and if tribunal staff, who are not medical experts, say a medicine has less benefit, that lowers its price ceiling. that’s a problem under the hood.
the new guidelines also continue to apply federal rules telling the pmprb to use lower-price countries in its international comparisons instead of higher-price ones (including the united states). on average, this will reduce the list prices of all current and future patented medicines in canada by about 20 per cent — to around the median for oecd countries.
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the board also persists in wanting to regulate prices using a brand-new factor: pharmacoeconomic methods based on data and techniques that lack agreed standards and produce subjective estimates that very much depend on who makes what assumptions. these untested methods have not been subject to anything like the scrutiny a new drug gets for safety, effectiveness or quality. nor are they found under the hood of drug price regulators anywhere — for the simple reason that they are unfit for this purpose. canadian patients will bear the risk of this experimental tinkering.
the draft guidelines also continue a second innovation not found elsewhere: setting a drug developer’s profit by applying escalating price cuts using arbitrary annual sales thresholds. for example, the maximum list price of a high-cost drug with annual sales of $12 million-$50 million will be reduced by up to 50 per cent for government drug plans, depending on its assessed therapeutic and pharmacoeconomic value.
to be fair, an improvement in the draft guidelines that is worth noting is that the pharmacoeconomic and market-size test thresholds are now twice the unreasonably low values the pmprb had originally proposed. but that means the originals were wrong by 100 per cent.
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in general, the pmprb and federal government continue to disregard signals that tight price regulation cuts the number of new drug launches. pharmaceutical executives’ opinions indicate the proposed changes will negatively impact both overall business plans and launches of new products in canada, while a systematic literature review found that in 44 of 49 studies examined, drug price controls significantly reduced investment in research and development and/or access to innovative drugs. an analysis of new medicines launched between 2000 and 2019 in the top 25 countries by pharmaceutical sales shows that, allowing for a one-year lag due to new applications being submitted later in canada than in larger markets, the number of new launches globally was consistent with those in canada until 2019 (the most recent available data) when the number fell to just 13, compared to the 37 launched globally in 2018. that flashing dashboard light means we are falling behind.
the government and pmprb also ignore history. in the 1970s, four european countries produced more than half of all new drugs, but after price-control policies were introduced, the contribution of these countries shrank to a third, while the u.s. surged as the global leader in drug development.
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the pmprb and others in ottawa persist in believing that severely reducing prices will not impact the supply of new drugs and vaccines to canada. but even before their formal adoption the guidelines are already delaying and denying access to important new medicines. they would pile new barriers on top of existing ones that make it harder for patients to access new medicines through public drug plans. above all, they create uncertainty for decision-makers: drug developers don’t know what prices they can legally sell their medicines for and, consequently, are avoiding the canadian market.
under the hood what we see in the proposed guidelines is a political agenda that uses untested methods to regulate low prices. canadians need a better process for enabling rational drug prices and faster access for patient needs. to what extent are patients suffering and dying to subsidize government drug budgets, irrational policy, access delays and red tape? time to take a really serious look under that hood.
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nigel rawson is president of eastlake research group and affiliate scholar with the canadian health policy institute. john adams is co-founder and ceo of canadian pku and allied disorders inc. and volunteer board chair of the best medicines coalition.
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