Overview of Pharmaceutical Pricing and Regulation in Canada
The pharmaceutical pricing and reimbursement system in Canada is unique due to the absence of a national pharmaceutical negotiator and formulary. The Patented Medicine Prices Review Board (PMPRB) sets price ceilings federally, while provincially, the CADTH reviews drugs for reimbursement recommendations. Pricing negotiations occur at various levels, impacting different segments of the population. Drug costs are a significant portion of health spending in Canada, particularly affecting uninsured individuals.
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PMPRB Update Pharma Symposium Canada March 31, 2015
Canadian pricing and reimbursement regime Canada is the only developed country in the world with a universal public health insurance program that excludes coverage for prescription drugs. As such, Canada is fairly unique in that it does not have a national pharmaceutical negotiator and formulary for its population. Federally, the PMPRB reviews patented drugs and sets price ceilings based on level of therapeutic improvement, domestic prices and prices in the PMPRB7 .* At the provincial level, CADTH reviews drugs for therapeutic benefit and cost effectiveness and makes reimbursement recommendations to participating public payers. 2
Pricing and reimbursement (continued) Provincial and territorial health ministries negotiate prices directly with manufacturers, either individually or under the auspices of the pCPA. Private insurers manage employer-sponsored drug plans and also negotiate prices with manufacturers, but wield less purchasing power than provinces. Uninsured Canadians (mainly the working poor) pay for prescription drugs at list prices. One in ten Canadians said to be unable to afford to fill their prescriptions (CMAJ 2012). Payer Share of drug costs 42% 35% 23% Public insurance Private insurance Out-of-pocket (uninsured) 3
Pharmaceutical Regulation in Canada is Shared PMPRB Jurisdiction covers patented drug products sold in Canada, whether through market approval or under Health Canada s Special Access Program (SAP) Over Life of Patent(s) Health Canada Health Canada Post-Market Surveillance Review For Safety, Efficacy & Quality Market Approval Private Drug Plan Reimbursement Public Drug Plan Reimbursement CADTH Common Drug Review Individual Federal/Provincial Public Drug Plan Listing 4
Drug share of total health spending (2012) Total Canadian Out-of-pocket (uninsured) Other Public Health 5% Capital 5% Admin 3% Other 4% Professionals 10% Other 6% Other Institutions 10% Prescription 22% Other Prescription 14% Professionals 32% Drugs 16% Drugs 39% Physicians 15% Non- Other Institutions 20% Non- prescription 2% prescription 17% Hospitals 30% Physicians 2% Hospitals 3% Drugs are the second/third (depending on year) largest health cost for Canada, but they are by far the largest health cost for uninsured Canadians . 5
PMPRB 101 The PMPRB is an independent, quasi-judicial consumer protection agency with a regulatory and reporting mandate. We are 60 civil servants on staff and 5 Cabinet-appointed Board members. On the regulatory side, staff review patented drug prices to ensure they are not excessive as per the Patent Act and corresponding Regulations and Guidelines. Where staff considers the price of a drug to be excessive, a patentee can agree to pay back excess revenues and/or lower its price through a voluntary settlement (VCU). If the patentee refuses a VCU, a hearing will be held before a panel of Board members if the Chairperson considers it in the public interest. If the panel decides a drug is excessively priced, it can order the patentee to reduce its price and/or pay back excess revenues. 6
Regulatory mandate At intro, a drug s price ceiling is set based on its category of therapeutic improvement, the price of domestic comparators and its price elsewhere in the PMPRB7.* Four therapeutic categories, with descending price ceilings (in theory): Breakthrough Substantial Improvement Moderate Improvement Slight/No Improvement 1. 2. 3. 4. After introduction, an existing drug is eligible for CPI-based price increases. At no time can a drug s price exceed the highest in the PMPRB7 (HIPC rule). * France, Germany, Italy, Sweden, Switzerland, the UK and the US. 7
Reporting mandate Annual Report Analysis of prices of patented drugs, price trends of all drugs, and R&D spending: http://www.pmprb-cepmb.gc.ca/en/reporting/annual-reports National Prescription Drug Utilization Information System (NPDUIS) Established in 2001 as an F/P/T research initiative to provide policy makers and drug plan managers with analyses of price, utilization and cost trends The NPDUIS Advisory Committee advises the PMPRB and provides expert oversight and guidance for the analytical reporting of the initiative The Committee is composed of BC, AB, SK, MB, ON, NB, NS, PEI, NL, YK, NIHB & HC, CIHI and CADTH. 8
NPDUIS Reports published in 2014/15 CompassRx, 2012-13 Generic Drugs in Canada, 2013 December 11, 2014 New Drug Pipeline Monitor, 6th edition December 2013 Utilization of Prescription Opioids in Canada's Public Drug Plans, 2006/07 to 2012/13 April 2014 Research agenda Private Drug Plans in Canada: Generic Drug Market, 2013 International Retail Price Comparison, 2013 Compass Rx, 2013-14 Private Drug Plans in Canada: Cost Driver Analysis, 2013 Utilization and Cost of Biologics, 2005/06 to 2012/13 Private Drug Plans in Canada: High-Cost Drugs, 2013 New Drug Launch Monitor, 2014 New Drug Pipeline Monitor, 7th edition 9
New NPDUIS flagship report Comprehensive analysis of cost drivers in public drug plans: Price effects Demographic effects Volume effects Drug-mix effects Release date is today! http://www.pmprb-cepmb.gc.ca/ 10
Compass Rx push-pull drug spending effect Although net growth in drug spending has been low in recent years because of the pull effect of increased generic substitution and generic price reductions, that phenomenon appears to have run its course. Total Push Effects 8.5% Demographic Volume Drug-Mix In the coming years, the cost drivers behind the push effect are expected to pose a challenge to the sustainability of both public and private drug plans, for example, in 2014: Spending on high cost biologics grew by 10.4%; Spending on high cost oncology drugs grew by 12.3%. Price change Generic Subs Total Pull Effects -9.2% 11
Has Canada already turned the corner? Canadian Drug Spending Growth Rate 14.0% 11.6% 12.0% 8.6% 10.0% 6.5% 8.0% 5.6% Year over year growth rate 5.0% 6.0% 4.4% 4.0% 1.8% 1.7% 0.6% 0.6% 0.6% 2.0% 0.2% 0.0% 0.0% 2009 2010 2011 2012 2013 2014 -0.6% -2.0% -0.5% -0.9% -4.0% -3.4% -5.2% -6.0% -8.0% Total Market Brands Generics Source: IMS Brogan. Canadian Drug Stores and Hospitals Purchases, MAT December 2014 12
Latest data on drug-mix effect High-cost product launches 350 12 Spending on New Active Substances (million C$) 300 10 Spending per Product Launched (million C$) 250 8 200 6 150 4 100 2 50 0 0 2007 2008 2009 2010 2011 2012 2013 2014 Total Spending Per Product Launched Source: IMS Brogan. Canadian Drug Stores and Hospitals Purchases, MAT December 2014 13
Canadas performance is not strong within PMPRB7 PMPRB7 Drug Sales (AGR 2005-2013) 5.0% 4.5% 4.3% 4.0% 3.8% 3.7% Average Growth Rate (% per year) 3.4% 3.5% 3.2% 2.9% 3.0% 2.6% 2.5% 2.0% 1.5% 1.0% 1.0% 0.5% 0.0% France Switzerland Sweden Germany Italy UK Canada US Source: IMS MIDAS, 2013 14
nor within the OECD Drug Expenditure (PPP/c), OECD 2012 OECD Average: $498 USA $1,010 Canada $771 Belgium $736 Japan $718 Germany $668 France $651 Australia $588 Hungary $574 Switzerland $562 Austria $561 Slovakia $535 Spain $523 Slovenia $513 Iceland $512 Sweden $478 Finland $473 Portugal $473 Korea $454 Netherlands $450 Czech Rep $439 Norway $414 Luxembourg $399 UK $367 Poland $321 Estonia $311 New Zealand $297 Denmark $295 Israel $274 Mexico $70 $0 $200 $400 $600 $800 $1,000 $1,200 Source: OECD, 2012 15
and price is clearly a contributing factor Average PMPRB7-to-Cdn Price Ratios 2.25 2.07 2.00 1.83 1.75 1.50 1.21 1.25 1.15 1.11 1.05 1.04 2005 1.00 1.00 0.99 0.95 1.00 2013 0.90 0.88 0.79 0.78 0.72 0.75 0.50 0.25 0.00 France UK Italy Sweden Switzerland Canada Germany US 16
Why are prices going down in other countries? Over the 2010-2012 period, 23 European countries began planning or executed a major reform of their pharmaceutical price regulatory framework. Country UK Year 2014 Type of Reform Annual, per company, public expenditure ceilings 0% growth for next two years. Sweden 2014 7.5% price reduction for drugs >15 years old not subject to generic competition. Switz 2013 Legislated negotiated price reduction of 2500 drugs. Italy 2013 Expenditure ceiling, performance based reimbursement, 2-year price re-evaluation. France 2012 Mandatory price review every 5 years, reimbursement rates cut for low innovation medicines, new stringent therapeutic evaluations. Germany 2011 Consolidation of regulatory roles, mandatory rebates to public plans. 17
Germany: impact of AMNOG Germany-to-Canada Drug Price Ratio 1.25 1.20 1.15 1.10 1.05 Canada 1.00 0.95 0.90 2005 2006 2007 2008 2009 2010 2011 2012 2013 2011 AMNOG reform is expected to save 2 billion per year and has already reduced the price of the 25 top-selling brand drugs by an average of 23%. 18
As prices go up, R&D is going down R&D-to-Sales Ratio, Canada and PMPRB7 126.2% 140% 120% 102.5% 100% 80% 2000 2011 60% 44.4% 40.5% 35.1% 40% 25.3% 21.7% 20.4% 20.4% 19.4% 18.4% 17.4% 17.3% 16.8% 10.1% 20% 6.2% 6.2% 5.6% 0% Canada All Comparators France Germany Italy Sweden Switzerland UK US 19
Why is this happening? R&D Evidence does not support purported link between price, IP and R&D. Other factors, such as head office location, science base, clinical trial infrastructure, population density, etc. appear to be better predictors of locus of pharmaceutical R&D Price As noted, EU countries are taking aggressive action to control drug costs. No national purchasing authority in Canada, and key decisions impacting price are made independently of one another by different F/P/T players. PMPRB regime not keeping up with international or industrial trends. 20
Payers are concerned about sustainability The (provincial drug plan) programs are starting to face extreme financial constraints. The growth that we re seeing in some categories of drugs is far beyond what were ever anticipated four or five years ago. Fred Horne, Alberta Minister of Health, speaking at April 7, 2014 CADTH symposium We re now at a point where ongoing sustainability of meaningful prescription drug coverage is threatened for a vast number of Canadians. In the past few years alone, the number of very-high-cost medications for genetic disorders, cancer and auto- immune diseases has increased substantially -- and this trend is expected to continue. Frank Swedlove, President of CLHIA, speaking at the October 30, 2013 Conference Board 2nd Summit on Sustainable Health Care 21
Whats next for the PMPRB? In 1987, Canada signalled its willingness to pay its fair share of international drug development costs with enactment of present day drug patent policy Bill C-22. Bill C-22 also created PMPRB as consumer protection pillar of that policy. PMPRB7 selected on basis of assumption that by offering comparable fair prices and patent rights, Canada would come to emulate R&D levels in these countries. With Canadian prices approaching second highest of PMPRB7 and R&D at record lows, that assumption now being questioned, as is relevance of PMPRB. Timing opportune for fresh look at PMPRB framework in light of current CETA changes, sustainability concerns and GoC priorities (eg. price gap, defending consumers). PMPRB to publish new three year strategic plan in spring 2015 stay tuned 22
Thank you. Merci. www.pmprb-cepmb.gc.ca Twitter: @PMPRB_CEPMB 23
