Industries affected by Ottawa’s long-delayed drug price reform are hoping the turmoil will end soon as a parliamentary committee continues its investigation this week into the chaos behind the scenes.
The Liberal government announced changes to federal rules on drug pricing in 2017 to try to push prices lower. But no new rules have come into force because of pressure from the pharmaceutical industry and a series of court challenges.
The latest attempt was quashed when Health Minister Jean-Yves Duclos wrote to the federal regulator – the Patented Medicines Prices Review Board – in November asking it to indefinitely halt new rules because of industry concerns, and a board member resigned in protest in February.
The House of Commons health committee began hearings last Thursday to probe the matter and heard from Mr. Duclos. The board member who resigned – health law professor Matthew Herder – will testify Tuesday, along with Douglas Clark, the outgoing executive director of the board.
The saga has injected a major dose of uncertainty into Canada’s pharmaceutical industry, as well as a number of sectors that support it, such as insurance and pharmacies.
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Judges largely sided with the pharmaceutical industry in two court rulings at the Superior Court of Quebec on Dec. 18, 2020, and again at the Court of Appeal of Quebec on Feb. 18, 2022. Most of the reform package was struck down, such as allowing the PMPRB access to companies’ confidential pricing data. One piece survived, which was an update to which countries Canada compared its drug prices to.
Drug makers argued during consultations and in court that the federal reform was inappropriate because the PMPRB existed only to make sure there were no one-off high prices, such as for a rare-disease drugs, not to apply downward price pressure on the industry as a whole.
“Their mandate is not to regulate prices,” said Pamela Fralick, president of industry lobby group Innovative Medicines Canada.
The patented pharmaceutical industry has argued that if the government restricts their revenue too much, it will be unprofitable to bring new drugs to Canada.
Pharmacies have argued against the new rules, too. A major source of revenue is a percentage markup on the price of a drug, plus a dispensing fee. The pharmacy industry has argued that if drug prices go too low, it will lead to staff cuts and worse services.
“The challenge is that a lot of the pharmacy business model is quite closely tied to drug pricing,” said Sandra Hanna, a pharmacist and chief executive officer of the Neighbourhood Pharmacy Association of Canada.
When Mr. Duclos testified at the health committee last Thursday, he said the government remained committed to bringing down drug prices in Canada, which are the third highest in the world after the United States and Switzerland. However, he said Ottawa also wanted to support the pharmaceutical industry.
“This is an opportunity, as we’re doing now, to build up the biomanufacturing centre in Canada,” Mr. Duclos said. He then named some of the companies that the government has invested in, including Moderna and Astra-Zeneca.
When Mr. Herder, director of the Health Law Institute at Dalhousie University, resigned from the drug regulator in February, he said he thought the Health Minister was becoming too close to the pharmaceutical industry and that was why reform efforts had stalled.
Provinces play a major role in controlling the cost of drugs through public-health insurance plans. Provincial, territorial and some federal plans negotiate drug buying with manufacturers through a group called the pan-Canadian Pharmaceutical Alliance.
Private insurance companies have asked to join those negotiations because they cover 37 per cent of all prescription drug buying. But they have been left out, resulting in private insurance paying more for drugs than public plans.
Some of the largest insurance providers warn that rising drug costs are making workplace benefits financially unsustainable and increasing premiums paid by employers and workers.
“The ongoing increase in the number of high-cost drugs coming to market is putting a strain on the system. No question,” said Stephen Frank, president of the Canadian Life and Health Insurance Association. “Some of those increases are well above inflation. You can’t run like that forever.”
Editor’s note: An earlier version of this article incorrectly said private insurers pay for 62 per cent of prescriptions drugs in Canada. In fact, that number is 37 per cent.