Opinion: Canada should negotiate a fairer share of drug R&D costs


Instead of relying on price regulation, Canada should enter into drug price negotiations

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Major changes are underway in the pricing of patented drugs in Canada. Currently, the Patented Medicine Prices Review Board (PMPRB), a federal agency, is responsible for setting maximum prices for patented drugs (i.e. pharmaceuticals, biologics and vaccines) . The agency has been criticized for failing to contain prices, which are higher than in some peer countries. This criticism is unfair: the tools that the PMPRB used to regulate drug prices when it was created in 1987 have become less effective over time.


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To address this issue, the federal government has authorized the PMPRB to introduce new pricing regulations, which are now expected to come into effect in January. We think this is the wrong strategy. Instead of relying on price regulation, Canada should engage in drug price negotiations with manufacturers and our trading partners with the goal of achieving a more equitable international burden-sharing of the global costs of drugs. R&D.

At present, it is not clear that this burden is shared fairly. Most drug costs are paid for by patient insurance plans, private or public. Different plans pay different prices. In Canada, provincial, federal and territorial public drug plans use “value for money” assessments to negotiate prices for new patented drugs with drug companies, but these prices do not apply to private plans. or to uninsured persons. Other countries have their own versions of value-for-money reviews and price negotiating agencies.


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A feature of negotiations in many countries is that the prices paid by drug plans are kept secret. To maintain secrecy, drug companies post list prices publicly, but then give drug plans “off-bill” discounts that lower transaction prices. There is little information on actual prices by country, but it seems clear that the United States and Canada pay more than countries with national drug plans like the United Kingdom and Australia. Thus, countries differ in their contributions to global drug R&D costs.

The use of secret discounts has also reduced the effectiveness of the PMPRB toolkit. When regulating the list prices in Canada for many new patented drugs, the PMPRB uses the median list prices charged for the same drug in a group of seven comparator countries. In 1987, when the PMPRB was created, secret discounts were rare: drug plans paid list prices. With confidential discounts, list price regulation is less useful.


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The new rules that the PMPRB hopes to start enforcing in January will reduce current prices and transaction prices. To lower list prices, the new rules modify the set of comparator countries, removing two countries with the highest list prices (the United States and Switzerland) and adding six, including Spain, with prices relatively low catalog. The PMPRB also intends to apply value-for-money assessments to establish maximum transaction prices.

But the PMPRB’s approach is problematic. First, the Federal Court recently ruled that it could not force drug companies to hand over transaction price data. Second, other countries – the United States in particular – will not look favorably on our attempts to lower the price of our drugs through regulation. They will see this as a violation of the spirit of sharing the burden of drug R&D through the international patent system. Third, there is a risk that falling prices will cause pharmaceutical companies to delay the launch of new drugs on the Canadian market.


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In a recent article published by the CD Howe Institute, we propose a two-pronged approach to solving these problems. First, the new Canadian Medicines Agency should be responsible for negotiating transaction prices for new drugs on behalf of Canada’s public and private plans, thereby rendering the PMPRB’s price regulation obsolete. Second, Canada should engage with peer countries to negotiate a new international drug R&D treaty that will establish equitable contributions to drug R&D and monitor contributions at the country level, i.e. by the price paid for drugs. new drugs, or through direct support for drug R&D.

We voluntarily pay the costs of developing new drugs because we want to protect or expand the global commons. A fair and efficient sharing of these costs can only be achieved through international negotiations. As a responsible member of the international community, Canada should work hard to move them forward.

Financial post

Åke Blomqvist is Adjunct Research Professor at Carleton University and Health Policy Specialist at the CD Howe Institute. Paul Grootendorst is Associate Professor in the Leslie Dan Faculty of Pharmacy at the University of Toronto.


In-depth reporting on The Logic’s innovation economy, presented in partnership with the Financial Post.


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