Federal Government Proposes to Overhaul Drug Pricing Regulations in 2018

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Federal Government Proposing an Overhaul of Drug Pricing Regulations in 2018

The federal government has announced sweeping changes to drug price regulation in Canada that it estimates will deliver $12.6 billion in net benefits over 10 years through lower drug costs.

On Friday, the federal government released a detailed set of proposals to reform drug price regulations through the Patented Medicine Prices Review Board. They include:

  • Introducing new economics-based factors aimed at ensuring prices reflect value and Canada’s willingness and ability to pay for patented medicines. The factors include the value a medicine provides, the size of the market for the drug in Canada and other countries and growth domestic product.
  • Updating the schedule of countries used for comparing drug prices. While the current list of countries includes the United States — which the government says doesn’t have the same sort of regulatory framework to contain drug prices — it suggests the new schedule would reflect jurisdictions that are more in line with Canada’s market and economic situation. The new list of countries for comparison includes Australia, Belgium, France, Germany, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden and Britain.

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  • Drug companies would now have to report price and revenue information that’s net of all discounts, rebates and free goods and services, including confidential agreements with provincial drug programs. The government notes the current regulatory approach considers the prices of medicines in the same therapeutic class and only requires reporting direct discounts offered at the first point of sale, such as to wholesalers and pharmacy chains. By not including all of the various discounts offered, the reported price for those comparator drugs is often higher than would otherwise be the case, according to the government. As a result, the current approach may result in a higher price ceiling for the newer patented drug than would be the case if the regulator were able to factor in all of the discounts. The proposed amendments provide for reporting the information on a privileged basis.

The government suggests the proposals will result in $8.6 billion in lost revenues to the drug industry over 10 years. In outlining the reforms, the government noted the cost pressures from rising drug costs. In 2015, for example, 20 medicines had annual costs per patient of more than $50,000 each year. In 2005, meanwhile, there were 20 drugs with annual costs of at least $10,000 per patient each year, a number that rose to 135 in 2016.

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As for the drug industry, Innovative Medicines Canada said it’s reviewing the proposals but it reiterated its economic contribution to Canada and investments in research and development. It noted, for example, that its members generate $19 billion in economic activity and invest $1.2 billion in research and development each year. It also pointed out that 60 per cent of new medicines launched globally in major markets are available in Canada, a figure that compares to 40 per cent and 30 per cent, respectively, in Australia and South Korea, two countries on the proposed list of comparator jurisdictions.

“While we remain concerned regarding the potential impact on the industry of the proposed changes, we are hopeful and optimistic that we can find common ground solutions that will address the affordability of innovative medicines without delaying the launch of new drugs and hindering the industry’s ability to invest in Canada,” said Pamela Fralick, president of Innovative Medicines Canada.

The federal government has opened the proposed reforms for comment until Feb. 14.

*excerpts provided by Benefits Canada – December 2017

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