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Empirical evidence supports critics of Patented Medicine Prices Review Board (PMPRB) regulations

TORONTO, Aug. 21, 2019 (GLOBE NEWSWIRE) -- Canadian Health Policy Institute (CHPI), a Toronto-based private-sector think-tank established in 2012, has published several studies that bolster the arguments of critics opposed to new regulatory guidelines proposed by the Patented Medicine Prices Review Board (PMPRB). The regulations will drastically depress the price ceiling for patented medicines sold in Canada. Empirical research suggests that this will likely reduce new drug launches and discourage industry-funded clinical trials in Canada. Analysis of the PMPRB’s own data show that there is no health spending crisis related to the prices of patented medicines that justifies new regulation. In fact, the weight of available evidence suggests the guidelines could lead to higher total healthcare costs by hindering clinical access to efficient innovative pharmaceutical treatment technologies. Moreover, a detailed examination of the regulations found the proposed pricing rules to be arbitrary and based on questionable assumptions; and raised serious technical concerns about the proposed methods for determining price ceilings.

Extreme price regulation.
The proposed guidelines include new criteria for international reference prices, therapeutic class comparisons, pharmacoeconomic health technology assessments, the expected market size for the drug and cost relative to GDP. A 2018 study examined how the changes will affect industry decisions on whether to seek regulatory approval (i.e. to launch) new drugs in Canada. The study found that in some cases, the new rules would require an 80% to 90% decrease in the manufacturer’s price versus the current rules.i

Price linked to new drug launches in 31 OECD countries.
A 2018 study examined data from the PMPRB and the Organisation for Economic Co-operation and Development (OECD). A multi-variable linear regression analysis was conducted to test the statistical relationship between the number of new drug launches across 31 OECD countries and three independent variables: the market price level for patented drugs, the per capita GDP and the total market size (population) in each country. Market price level was the only one of the three independent variables that was a statistically significant predictor of the number of new drug launches (P<0.050). The analysis confirms that lower priced markets experienced fewer new drug launches, and vice versa, that higher priced markets tended to experience more new drug launches (Coeff.=.283).ii

Price linked to the number of industry-funded clinical trials in 31 OECD countries.
A 2019 study tested for statistical correlations between the geographic distribution of industry-funded clinical trials across 31 OECD countries and variation in drug price levels, controlling for differences in GDP and market size. A multi-variable regression analysis showed that price-level (P=0.000) was a statistically significant predictor. The coefficient results show that a 1-unit variation (+/-1.00) in the average foreign-to-Canadian price ratio for patented medicines is associated with a variation of +/-613.355 industry-funded clinical trials.iii

Facts about the cost of patented drugs in Canada.
The PMPRB’s own figures show that in 2017 total sales of patented medicines in Canada at manufacturer list prices before rebates totaled only $16.8 billion. Analysis showed that gross sales of patented drugs have accounted for less than 1% of GDP for the last 28 years. Patented drug sales were the same percentage of GDP in 2017 (0.78%) as in 2003 (0.78%), a 15-year period of zero average annual growth relative to GDP. Accounting for public drug plan rebates, the net national cost of patented drugs was only 0.68% of GDP in 2017.

Gross sales of patented drugs accounted for only 6.9% of the $243.4 billion reported by CIHI for total health spending in Canada in 2017. Patented drugs accounted for a smaller percentage of total health spending in 2017 (6.9%) than in the year 2001 (7.1%), a 17-year period of near zero average annual relative cost growth. Accounting for public drug plan rebates, the net national cost of patented drugs was only 6.0% of total health spending in 2017.iv

Access to new drugs linked to lower healthcare costs in Canada.
A 2019 study compared the availability of medical resources and government health expenditure across the healthcare systems in the provinces; and tested for statistical correlations between the variables. Regression analysis showed that the availability of new medicines on the public formulary was in a statistically significant inverse relationship with government health expenditure (P=0.020). Higher availability of new drugs was correlated with lower overall health expenditures. The regression coefficient (Coeff.=-20.010) implied that for every 1 unit increase in the availability of new drugs between provinces, there was an associated decrease in per capita government health expenditure of $20.01 net of the variation of all other variables in the model.v The findings are consistent with a separate systematic literature review which found 68 studies published in peer-reviewed academic journals from 1990 to 2018 confirming that pharmaceutical innovation is empirically associated with treatment efficiencies attributable to virtuous technological substitution/

Critical analysis of the PMPRB regulation.
In 2017 CHPI published a detailed critique of the original PMPRB proposal. The paper evaluated the merits of proposed “economics-based price regulation factors” and “pharmacoeconomic evaluation” identifying significant problems and limitations not acknowledged by the PMPRB. It also examined the relevancy of the PMPRB, concluding that at best its mandate is redundant and at worst obsolete.vii

Hyperlinks to the research referenced in this letter are shown below. CHPI will provide complimentary digital copies upon media request.



i Rawson, Nigel SB. New Patented Medicine Regulations in Canada: Case Study of a Manufacturer’s Decision-Making about Regulatory Submission for a Rare Disorder Treatment. Canadian Health Policy, October 2018.

ii Skinner, Brett J. Consequences of over-regulating the prices of new drugs in Canada. Canadian Health Policy, March 27, 2018.

iii Skinner, Brett J. Patented drug prices and clinical trials in 31 OECD countries 2017: implications for Canada’s PMPRB. Canadian Health Policy, August 2019.

iv Canadian Health Policy Institute (CHPI). Facts about the cost of patented drugs in Canada: 2018 Edition. Canadian Health Policy, February 2019.

v Canadian Health Policy Institute (CHPI). Medical resources and spending across provincial healthcare systems in Canada. Canadian Health Policy, July 2019.

vi Canadian Health Policy Institute (CHPI). Evidence that innovative medicines improve health and economic outcomes: focused literature review. Canadian Health Policy, April 2019.

vii Skinner, Brett J (2017). Does Canada need a Patented Medicine Prices Review Board? Canadian Health Policy, October 26, 2017.

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