As president and CEO of Life Sciences Ontario (LSO), a former government official, a scientist who has contributed to patented therapeutics and a Canadian citizen, I am compelled to respond to Dr. Danyaal Raza’s Feb. 2 opinion piece in Healthy Debate. In his article, Dr. Raza makes a number of bold claims in support of the federal government’s recent changes to the pharmaceutical-pricing environment. However, the article relies on flawed and outdated data that require further clarification.
Let me start by noting that the Patented Medicine Prices Review Board (PMPRB) regulations are a symptom of a much larger problem that needs to be addressed: the broken relationship between government and the life sciences sector. Take, for example, Canada’s response to the COVID-19 pandemic. In May of last year, the governments of the United Kingdom and France reached out to the sector and partnered early with leaders in the industry to line up the capacity and contracts that would boost production and secure access to COVID-19 vaccines. Canada’s goal, on the other hand, is to have enough vaccines to inoculate just 3 million Canadians by the end of March of this year. We’re 41st in the world in terms of per-capita inoculations and we’ll probably remain in that position throughout the first quarter of this year, during which new variants threaten to overrun Canada’s largest provinces.
In this challenging context, and out of concern for the impacts of these regulations on Canada’s life sciences ecosystem, LSO has taken an evidence-based approach to illustrate how and why the PMPRB reforms impede Canadian research and the availability of new medicines and vaccines.
Let’s review some assertions.
Does Canada have some of the highest drug spending in the world?
Dr. Raza makes this point by using a table showing Canada with the fourth highest level of so-called “pharmaceutical spending” per capita among Organization for Economic Cooperation and Development (OECD) nations; Canada is eclipsed only by Germany, Switzerland and the United States.
The problem is twofold. First, it doesn’t consider the benefits of spending on pharmaceuticals that are, in many cases, the best use of limited health-care resources, keeping patients out of clinics and hospitals by preventing and treating diseases.
Second, the data is selective and exaggerated. The table is drawn from Canadian Institute for Health Information data that lumps in innovative medicines with generic medicines, over-the-counter medicines and a range of ancillary costs, such as wholesaler distribution, drug plan administration and pharmacists dispensing fees. To get a clearer picture, if we use the PMPRB’s own data from its 2018 Annual Report, we see that patented medicines (the only drug category subject to the PMPRB regulation changes) accounted for $16.7 billion, or just 6.6 per cent of total health spending. Moreover, according to the Canadian Health Policy Institute, spending on patented medicines as a percentage of GDP was the same in 2019 (0.8 per cent) as it was in 2003 – a 16-year period of zero average annual growth relative to GDP. This doesn’t even consider the massive rebates generating billions in annual savings across all governments that aren’t counted in the PMPRB’s comparative data. They bring per-capita spending down significantly. Finally, the PMPRB includes patented medicines that have lost market exclusivity and are subject to generic competition in its calculations, which significantly overstates spending on medicines that could be the subject of inappropriate monopolistic behaviour.
Is industry bluffing about delaying launches and pulling back investments in research and clinical trials?
No, this is real and already happening.
A report commissioned by LSO from IQVIA released last summer found that in 2019, the year the price controls were adopted, Canada only benefitted from access to 13 globally launched medicines when we should have had closer to 30 based on historical trends.
This downward trend was further substantiated in a 2021 LSO-sponsored third-party survey of 43 pharmaceutical leaders that found more than a third have already delayed bringing new treatments to Canada, and nearly all anticipate further impacts on medicine launches and investments in the health research ecosystem.
Furthermore, a recent peer-reviewed paper from the Canadian Health Policy Institute observed a significant decline in Phase III and Phase IV clinical trials in Canada, both of which are reliant on large industry scale, expertise and investment.
Did Big Pharma abdicate on its 10 per cent R&D investment to sales ratio commitment?
In working groups and discussions between PMPRB, Industry Canada (now known as ISED), accounting experts and pharma over the past decade, it has been demonstrated that the PMPRB methodology to calculate the investment ratio is outdated and does not reflect today’s reality of extramural research (in hospitals and universities) beyond pharma walls, pre-competitive multi-company collaborations and clinical trial investments, along with a host of other investments into Canada’s economy and health-care system.
A 2017 report from Ernst and Young found that Innovative Medicines Canada members (not all of whom reported) invested 9.97 per cent of gross patented-medicines revenue into a 21st century definition of R&D that is comparable to how R&D expenditures are reported in other OECD nations.
Do national pricing levels impact pharma investment and drug launch decisions?
Contrary to the assertion based on one limited study that is almost two decades old, the link between pricing levels and investment and launches is very real and documented.
A systematic review of published academic studies between 1995 and May 2020 on the pricing and investment/drug access question conducted by researcher Yanick Labrie found that: “Forty-four of the 49 studies reviewed showed a significant negative relationship between drug price controls and investment in pharmaceutical R&D or access to innovative drugs. The claim that there is no link between price and R&D or access to medicines is not supported by the evidence from the scientific literature.”
It is also telling that the federal government decided to exempt COVID-19 vaccines and therapeutics from the new pricing regime, demonstrating that it knows the PMPRB changes are a regulatory barrier to accessing new vaccines and medicines.
Here’s the rub: Governments have all the necessary tools today, right now, to limit pharmaceutical prices and spending. In addition to the current powers of the PMPRB, provincial and territorial governments can also control the prices of medicines reimbursed in their jurisdictions through other statutory, legal and policy tools, and through the efforts of the pan-Canadian Pharmaceutical Alliance.
To conclude, many of Dr. Raza’s assertions are misguided. Ultimately, Canadian patients, scientists and health systems are paying the price for this failed policy experiment, which is not what our country needs at this critical moment.
Life Sciences Ontario is an industry lobby group sponsored in part by various pharmaceutical companies.