Canada has found the key to lowering drug prices, but it won't be used any time soon

There's a battle being fought in the backrooms of Ottawa, and the outcome could determine how much Canadians will pay for new drugs.

The federal government has developed a series of regulations that would lower Canada's patented drug prices, which are among the highest in the world. Canada is second only to the United States in per capita drug costs.

But the new rules were like a gauntlet thrown down in the path of the pharmaceutical industry, which has been lobbying federal government officials ever since.

"Drug companies understand very well what's at stake, and they're massively mobilizing to make sure nothing happens," said Marc-André Gagnon, a pharmaceutical policy researcher at Carleton University.

Drug companies understand very well what's at stake, and they're massively mobilizing to make sure nothing happens.– Marc-André Gagnon, a pharmaceutical policy researcher at Carleton University

The dispute is over a policy document called Protecting Canadians from Excessive Drug Prices — a series of amendments to the Patent Medicine Regulations that former health minister Jane Philpott announced on May 16, 2017.

"Canadians are paying too much for prescription drugs," Philpott said at the time. "These measures will go a long way toward helping Canadians afford the medicines they need to live healthy, productive lives."

Marc-André Gagnon, a pharmaceutical policy researcher at Carleton University, says drug companies know what's at stake and are 'massively mobilizing to make sure nothing happens.' (Marc-André Gagnon/Evidence Network)

Industry resistance intense

Bringing Canada's drug prices down sounded like a reasonable idea. And the plan would work, according to the industry's own calculations.

Janssen Canada president Chris Halyk estimated "an average reduction in prices of approximately 20 per cent," in a submission letter sent to the federal health minister in February.

But if drug prices go down, so do industry revenues, falling by up to $ 26 billion over 10 years, according to one industry report.

That's one reason why the industry's resistance has been so intense. And it's wielding a big stick, threatening that companies could hold back the launch of new drugs in Canada if the amendments are approved.

In Janssen Canada's letter, Halyk wrote "the price reductions that are being proposed could result in it being not financially viable to launch some medicines in Canada."

The pharmaceutical industry is also warning that it might reduce research and development in Canada, putting jobs at stake.

"[The regulations] will have negative economic implications, leading to reduced research and development (R&D) investments, less innovation in Canada and fewer jobs in our life sciences sector," wrote AstraZeneca Canada president Jamie Freedman in a letter to Health Canada.

(A recent analysis found that the pharmaceutical industry has not kept up with previous R&D commitments.)

Discussions with industry reps 'a frustrating process'

Because of the industry uproar, the staff at the Patented Medicine Prices Review Board (PMPRB) decided to start detailed consultations with stakeholders last June, inviting several industry representatives to sit on the steering committee to assist in developing an implementation roadmap.

It's a bit like pulling teeth to engage the industry on these changes where their position is they're opposed to the underlying policy.– Douglas Clark, executive director of Patented Medicine Prices Review Board

But so far those discussions are not going well — a fact revealed by the frustrated bureaucrat who's leading the group.

In a newsletter last month, PMPRB executive director Douglas Clark reported that "progress on the issues under discussion has been slower than anticipated owing to the complexity of the subject matter and conflicting views of participants on the merits of the underlying policy."

In other words, the industry representatives are reluctant to talk about ways to implement the very rules that they are fighting against.

"It's been a frustrating process," said Clark, who is trying to get industry input on the nuts and bolts of putting the new rules into effect.

"It's a bit like pulling teeth to engage the industry on these changes where their position is they're opposed to the underlying policy."

Patient groups siding with industry, opposing changes

Innovative Medicines Canada represents more than 45 pharmaceutical companies. It has two seats at the steering committee table, but can't comment on the discussions.

"The PMPRB's terms of reference for the committee impose strict confidentiality on its members and deliberations," said Innovative Medicines Canada spokesperson Sarah Dion-Marquis in an email.

There are several other industry representatives at the table, along with representatives from provincial agencies and the private insurance industry. There are also two patient organizations — the Canadian Organization for Rare Disorders (CORD) and Myeloma Canada.

After several meetings Clark said the steering committee has split into two factions.

"You've got public and private payers on one side and industry and patient groups on the other, and views can be quite polarized," he said. Patient groups are aligned with industry on most of the issues, he said.

"There's not a lot of daylight between their two positions," said Clark.

Both patient groups have made submissions to Health Canada calling for the entire process to be halted.

Health Canada officials are also in the room, taking notes on the industry objections. And industry lobbyists are also speaking directly to federal officials on Parliament Hill.

Since last March, Innovative Medicines Canada and several other pharmaceutical companies have registered more than 50 communications with officials in the Prime Minister's Office (PMO) and the health minister's office.

"Our government engages regularly with health sector stakeholders, including the pharmaceutical industry, to discuss issues of [importance] to Canadians, including the price of prescriptions, national pharmacare, innovation, and drug shortages," said PMO​ press secretary Matt Pascuzzo in an email.

In June, Innovative Medicines Canada president Pamela Fralick met face-to-face with Health Minister Ginette Petitpas Taylor. BIOTECanada, a biotechnology trade association, was also there.

"The PMPRB was raised at this meeting, along with several other topics," said Dion-Marquis.

Firms would have to reveal confidential price deals

What are the proposed new rules that have sparked so much controversy?

Right now when deciding how much a new drug should cost in Canada, the PMPRB compares the Canadian price to the average of seven countries, including the U.S., which has the highest drug prices in the world.

The amendments would change those comparisons by dropping the U.S. and adding other countries with lower drug prices, including Australia.

The new regulations would also force companies to reveal to the PMPRB the true price they're charging, after confidential price negotiations with provinces.

And there would be a new formula to assess the value of new drugs, using a pharmaco-economic measurement called "quality-adjusted life year" (QALY).

The industry has issues with each of those changes, insisting that there will be severe consequences to both drug access and to industry jobs.

As our industry, and many other stakeholders, have stated publicly on many occasions, we are deeply concerned the proposed PMPRB regulatory changes will delay and potentially limit patients' access to new, life-saving medicines and vaccines, and will further put at risk thousands of jobs in Canada's vital life science sector.– Innovative Medicines Canada spokesperson Sarah Dion-Marquis

"As our industry, and many other stakeholders, have stated publicly on many occasions, we are deeply concerned the proposed PMPRB regulatory changes will delay and potentially limit patients' access to new, life-saving medicines and vaccines, and will further put at risk thousands of jobs in Canada's vital life science sector," said Dion-Marquis in an email.

So who's winning the backroom drug price war?

The new rules were supposed to come into effect on Jan. 1 — just over five weeks from today.

But the federal government has quietly abandoned that plan. And so far it has not announced a new implementation date.

When asked about the progress of the proposed regulations Health Canada spokesperson Geoffroy Legault-Thivierge said in an email, "Health Canada is taking the time required to carefully consider the comments received during consultations."

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