Potential changes concern pharma companies

Proposed changes to the way Canada puts a ceiling on patented drug prices have put pharmaceutical companies on alert, says an Ottawa intellectual property lawyer.

Earlier this summer, Health Canada released a consultation report entitled “Protecting Canadians from Excessive Drug Prices” that included a number of suggested amendments to the federal Patented Medicines Regulations, which are in turn used by the Patented Medicines Prices Review Board to determine the level at which a drug’s price crosses the threshold to become excessive.

But Daphne Lainson, partner in the Ottawa office of intellectual property boutique Smart and Biggar, says the breadth of the potential changes has drug companies worried.

“We have a system that has been in place for a while, with some certainty around it. Companies understand how it works and what to expect,” says Lainson, whose practice includes advising clients on pharmaceutical regulatory law.

“By changing the metrics, it has the potential to introduce some uncertainty in the market, which is not great for Canadian consumers.”

Many of the issues dealt with in the report are better left to reimbursement negotiations with provincial bodies and private drug plans once drugs come to market, she says.

“The government appears to be creating basically a parallel workstream to one that is already handled by other bodies. I’m not sure it makes sense to have that duplicative effort in advance of any kind of market access,” Lainson says.

“It’s unfortunate, because the PMPRB only deals with drugs under patent protection, which is only a very small segment of the market. If they really want to address pricing, the mechanism shouldn’t be via the PMPRB but via reimbursement negotiations.”  

Chandimal Nicholas, a lawyer in the intellectual property practice group at Cassels Brock & Blackwell LLP, says the time is right for a fresh look at the process.

Although the PMPRB was created in 1987, its associated regulations have not seen substantial alterations in more than two decades, according to Health Canada. 

“It’s hard to say how much of an impact the changes would have at this stage, but I like the fact that they seem to be taking a more nuanced approach and looking at things on a drug-by-drug basis,” Nicholas says. “That’s a good step in the right direction.”

In a statement announcing the consultation, Minister of Health Jane Philpott put the emphasis firmly on affordability, pointing out that only the U.S. and Mexico pay more than Canadians for patented medicines, according to statistics gathered by the Organization for Economic Co-operation and Development.

In addition, the OECD median is 22-per-cent lower than the Canadian level.

“Canadians are paying too much for prescription drugs, and the Government of Canada is committed to making drugs more affordable,” Philpott said.

“Modernizing our approach to the regulation of patented drug prices is a big step in this direction, and will complement the work we are already doing with the provinces and territories through the pan-Canadian Pharmaceutical Alliance to make prescription drugs cheaper. These measures will go a long way towards helping Canadians afford the medicines they need to live healthy, productive lives.”

One of the most significant proposals by Health Canada involves a change to the basket of comparator countries the agency uses when setting its price ceiling.

Until now, drug companies needed to submit their wholesale prices in seven countries. What has attracted the most attention to the new basket is not the additions to the expanded 12-country list but the removal of the U.S., which typically had the highest price in the group for most drugs.

Eileen McMahon, chairwoman of Torys LLP’s intellectual property and food and drug regulatory practice groups, says American drug companies are worried that the change will exert downward pressure on price caps and reignite old fears about a black market in cheaper Canadian versions of drugs.

“Given Canada’s close proximity to the U.S., the chance that some of these drugs will leak back into the U.S. market is something that is concerning to companies,” she says.

According to McMahon, the focus on lowering drug prices could turn the regulations into an international issue due to the upcoming renegotiation of the North American Free Trade Agreement.

With much of the research and development into innovative drugs going on in the U.S., she says discontent may grow if Canadian drug price ceilings come down even further below American levels.

“You can imagine President Trump complaining about Americans innovating and paying their way while other countries don’t,” she says.

Lainson says it makes more sense to include the U.S. in the comparison basket than some of the new arrivals, which include Australia, Belgium, the Netherlands and South Korea.

“When it comes to patenting, Canada’s regime is much more consistent with the U.S. than other jurisdictions,” she says.

“We have a patent linkage system that is quite similar and new patent term extensions that provide more parallels with the U.S.”

Health Canada’s proposals also suggested expanding the criteria the board will take into account when determining an excessive drug price.

While traditionally the regulations focused on supply-side factors such as the costs of making and marketing drugs, the agency wants to expand its focus to the demand side of the equation.

That would mean the PMPRB can look at three new areas in reaching its determination: a cost-benefit analysis of a particular drug to patients; the size of the market for the drug here and abroad; and Canada’s GDP.

Nicholas says the new factors “make a lot of sense” to him, although he’s skeptical on the inclusion of Canada’s GDP.

“It’s a bit of a crude economic indicator, so I wonder how useful it would be,” he says.

Lainson’s concern is that the focus on demand risks intruding on the provincial jurisdiction over reimbursement pricing when drugs actually come to market in Canada. 

“Those processes already include a number of these considerations, including various pharmacoeconomic factors,” she says.