Pricing Reforms Prompt Canadian Business Rethink

The R&D based pharmaceutical industry would welcome changes to guidelines that will operationalize controversial new pricing regulations in Canada but industry experts say more is needed.

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It's a question of cost

Pharmaceutical companies in Canada have responded to controversial new pricing regulations by cutting staff and withdrawing products from health technology appraisal processes. Potential changes to draft guidelines that set out how the regulations will work in practice will be well received but should go further, says Arvind Mani, founder of Morse, a Canada-based consultancy firm.

The Patented Medicines Prices Review Board (PMPRB), which sets ceiling prices in Canada, told the Pink Sheet that it was considering changes to draft guidelines that operationalize controversial pricing regulations.  (Also see "Canada To Rethink Controversial Pricing Rules" - Pink Sheet, 19 Mar, 2020.) The regulations are aimed at cutting medicine prices and were met with strong resistance from the R&D-based industry. They are scheduled to come into force on 1 July.  (Also see "Canadian Drug Pricing Reforms Could Lead To Medicine Shortages" - Pink Sheet, 20 Aug, 2019.) 

Under the new regime, new patented medicines deemed to be at greater risk of excessive pricing will be subject to a new maximum rebated price ceiling based on market size and pharmacoeconomic value. Medicines will be classified as such if the actual market size exceeds a threshold of CAN$25m (US$17.1m), or if the 12-month treatment cost is greater than 50% of GDP per capita.

However, the PMPRB said it was considering changing the screening criteria so fewer drugs entered into this category. It is also considering the cost-effectiveness and market size thresholds for the drugs that do fall into this category.

Business Impact

It is encouraging that the PMPRB is contemplating significant changes, said Mani. Adjustments to the screening criteria for Category I drugs would be welcomed by industry, he said.

Nevertheless, Mani says that important questions remain about how cost-effectiveness and market size thresholds will be applied in setting price ceilings. “I believe that if these measures are implemented, even to a limited subset of drugs on the market, it will take the industry and the PMPRB months – if not years – to fully work out the implementation details, which would further prolong the sense of pricing uncertainty in the Canadian market.”

"Canadian clients have cancelled potential consulting engagements for new product launches citing the pricing environment as the reason.” – Arvind Mani, consultancy firm Morse

According to Mani, the new pricing environment has already adversely affected companies, which have reduced staff numbers and reorganized product launches.“I have heard from a senior Canadian executive that their global head office expect them to provide a 10-year pricing projections but they are unable to provide anything for even the next six months – making it difficult for the Canadian affiliate to gain approval to launch new products here.”

Mani has observed a “sharp upturn in the number of files manufacturers have withdrawn for review by [Canadian HTA body] CADTH over the past several months.” He concedes that other factors could be at play but thinks that the uncertainty caused by the change in pricing rules could be a contributing factor.

Indeed, Mani reports that a US company receiving advice from Morse on the Canadian reimbursement environment indicated that it is “anxious [about entering] this market in light of these pricing changes.” Meanwhile, Canadian clients have “cancelled potential consulting engagements for new product launches citing the pricing environment as the reason.”

Tecentriq

One example of Swiss firms rethinking business in Canada concerns Roche. It has withdrawn a submission for its anticancer Tecentriq (atezolizumab) that was under review by two health technology appraisal bodies, the Pan-Canadian Oncology Drug Review (pCODR) and the the Institut National d’Excellence en Santé et en Services Sociaux (INESSS).

“We have taken this decision while we seek certainty regarding the guidelines, and await additional evidence to further inform payer decision-making, with the goal of optimizing patient access to this important therapy,” Roche told the Pink Sheet.

The company will continue to assess the impact of the PMPRB reforms on its portfolio on a case-by-case basis as it gains clarity on the final guidelines, once available, a spokesperson said.

Meanwhile, Roche is asking the federal government to “listen to patients, life sciences organizations and provincial governments, who are all calling on the government to suspend and re-evaluate the PMPRB regulatory amendments given their significant impacts.”

"Roche will continue to assess the impact of the PMPRB reforms on its portfolio on a case-by-case basis as it gains clarity on the final guidelines, once available." – Roche

Roche claims that the new pricing system “seems excessive and unsustainable.” It said that in line with the PMPRB’s own studies, drug prices could fall by up to 70%. “Reductions of this magnitude will have a substantial impact on companies’ ability to launch and seek reimbursement. Our concerns include potential delays in new drugs reaching Canadian patients quickly or at all, as well as the environment for clinical trial research in Canada and the prospects for the life sciences sector in Canada.”

Roche also doubts that the reforms will actually lead to meaningful overall savings as patented prescription medicines represent less than 3% of total government health spending. “In fact, studies have shown that every dollar spent on medications results in offsetting health and societal benefits by two dollars.”

"Some will continue to oppose these reforms regardless because the end result will still be lower ceiling prices for many patented medicines in Canada.” – PMPRB

The PMPRB has defended its position and says that when it consulted on the draft guidelines, it received feedback from both “proponents and opponents of the reforms.”

“Throughout the consultation process, the PMPRB has sought to reassure its stakeholders that it intends to use its new regulatory tools responsibly and in the best interests of all Canadians.  However, we recognize that some of our stakeholders will continue to oppose these reforms regardless because the end result will still be lower ceiling prices for many patented medicines in Canada.”