Canada Announces Reforms to Reduce Prices on Patented Drugs

The Canadian government has announced amendments to its regulations concerning patented drugs that it says will make medicines more affordable. According to Health Canada, these changes will save Canadians $13.2 billion (US $9.97 billion) over the next decade.
Kelly Davio
August 12, 2019
The Canadian government has announced amendments to its regulations concerning patented drugs that it says will make medicines more affordable. According to Health Canada, these changes will save Canadians $13.2 billion (US $9.97 billion) over the next decade.

Under the Patent Act, enacted in Canada in 1987, the Patented Medicine Prices Review Board (PMPRB) can take action against patent holders who charge what the board determines to be an excessive price. Factors that PMPRB takes into consideration include the price for which a drug is sold, the prices of other drugs in the same class are sold, the price charged in other countries, and changes in the consumer price index (CPI).

Drugs are assessed for their therapeutic benefit relative to existing products, and depending on the outcome of that assessment, are given a ceiling price based on the median price of the same drug in United States, United Kingdom, France, Germany, Switzerland, Italy, and Sweden. The ceiling price can then grow in keeping with the CPI.

The new amendments, which will be published on August 21, 2019, will change the basket of countries to which Canada compares itself, and will remove the United States and Switzerland—the only 2 countries with higher drug prices than Canada—from consideration.

Health Canada also said that it will assess “the actual market price of medicines in Canada—rather than inflated list or 'sticker' price—to more accurately assess whether a price is reasonable when setting a price ceiling.” Finally, the PMPRB will have the power to consider whether the price of a drug reflects its value for patients.

In a statement, Canada’s Minister of Health, Ginette Petitpas Taylor, said that the reforms are “the biggest step to lower drug prices in a generation,” and that the changes will “lay the foundation” for universal drug coverage under the country’s Pharmacare program.  

Drug makers were quick to voice concerns about the regulations; Innovative Medicines Canada (IMC), which represents drug makers, said in a statement that regulations will drop drug price ceilings by up to 70%, thereby weakening companies’ business cases to launch new medicines in Canada. IMC also warned that the regulations will impact decision-making with respect to conducting clinical trials in Canada.

The changes to Canadian regulation come shortly after the United States set forth 2 potential pathways for importing cheaper drugs from foreign countries, including Canada. The Trump administration has also proposed to use what it calls an International Pricing Index to allow Medicare to more closely align what it pays for Part B drugs with prices paid in other nations.
 

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