Fraser Forum

Ottawa postpones short-sighted drug-pricing regulations

Printer-friendly version
Ottawa postpones short-sighted drug-pricing regulations

On the eve of the introduction of potentially damaging new drug-pricing regulations, the Trudeau government seems to have finally heard the concerned voices of patient groups and policy experts. Specifically, new pricing regulations intended to further limit drug prices in Canada—which were supposed to come into effect July 1—have been pushed back to 2021. In the meantime, the Patented Medicines Pricing Board (PMPRB) is expected to announce new guidelines on June 15, followed by a 30-day consultation period.

The question is, will the PMPRB listen this time or will it once again ignore the wealth of evidence cautioning them against proceeding with the myopic regulations with potentially severe unintended consequences that may harm patients in the long-run.

It’s first important to understand that the PMPRB already sets the maximum allowable prices for all patented drugs in Canada using prices in other countries as a benchmark. So far, the comparisons have been based on a reasonable mix of countries with relatively high drug prices (the United States and Switzerland) and countries with relatively lower prices (such as Italy).

In a bid to lower drug prices, the Trudeau government proposed changes in 2017 that would drop the U.S. and Switzerland in favour of countries with relatively tighter price controls—Australia, Belgium, Japan, the Netherlands, Norway and Spain (South Korea was also included in the earlier stages).

The problem?

Historically, fewer innovative drugs are generally approved and launched in most of these new countries in contrast to the ones being removed (especially, the U.S.). So while the new changes may lead to lower prices in Canada, they would likely also lead to fewer new and innovative drugs available for patients waiting for newly discovered life-saving and life-improving treatments.

In addition, the government also proposed the use of use “cost-efficiency evaluations” to determine whether the value of the new drugs warrant the price being charged. While it’s one thing to use such evaluations for the purposes of public reimbursement, these evaluations would apply to all drugs sold in Canada. In effect, a bureaucrat’s decision in Ottawa would matter more than patients and private insurers. And if the regulated price is too low for the drug manufacturer to recoup their development costs (which can be between $2.9 billion and $5 billion per drug), patients and insurers will not be able to access them in Canada even if they’re willing to pay a higher price.

To be clear, there’s evidence to suggest that some Canadians (between 8 per cent to 23 per cent depending on the data source) have difficulty paying for the prescription drugs they need. The government’s role, if anything, should be to identify and help support these Canadians. Instead, the (now delayed) new regulations focus on regulating the price of drugs for all Canadians, including those who are grateful for access to life-saving, if expensive, medication.

While aimed at “Protecting Canadians from Excessive Drug Prices,” the amendments to the PMPRB (in their current form) focus almost exclusively on containing costs of new drugs via government regulation without any concern for the unintended consequences of doing so. Specifically, little to no consideration is given to the potential for these changes to reduce access to new life-improving prescription drugs in Canada, and hamper global innovation more generally.

Again, fortunately, just a month away from the July 1 deadline for formal implementation, the government seems to have come to its senses and delayed implementation in favour of another round of consultations. To be clear, unless revised, the new regulations are still scheduled to come into effect Jan. 1, 2021 and will apply to all medicines (including vaccines) that receive a drug identification number (DIN) after Aug. 21, 2019.

Let’s hope the new round of consultations prove to be more than lip-service and result in a careful and meaningful reconsideration of the proposals. We have another opportunity to get this right for both patients who have difficulty paying for their medications and patients who want to ensure companies around the world continue to innovate and develop novel therapies for hitherto untreated conditions.

Blog Category: 

Subscribe to the Fraser Institute

Get the latest news from the Fraser Institute on the latest research studies, news and events.