New Canadian Drug Agency Established to Address Soaring Drug Prices and Gaps in Prescription Drug Coverage

Here in the US, there has been a tremendous amount of discussion in recent years about the soaring cost of prescription drugs, and about potential strategies to increase patient access and affordability. However, some may be surprised to learn that there is a similar discussion going on north of the border in Canada. While the Canadian federal government provides universal healthcare to Canadians, that benefit does not include prescription drug coverage. Rather, Canadians have a complex patchwork system of public and private insurance plans that provide coverage for prescription drugs. However, many are critical of this public-private system as it has led to coverage gaps and failed to prevent soaring drug prices, resulting in 4.1 million Canadians being uninsured or underinsured.

On March 19, 2019, the Canadian federal government announced the formation of a new “Canadian Drug Agency” which will “take a coordinated approach to assessing effectiveness and negotiating prescription drug prices.” This new federal agency will work in concert with existing provincial and territorial governments, which are currently responsible for administering their own publicly-funded plans, typically directed to those patients most in need. The Canadian Drug Agency will also develop a “comprehensive, evidence-based” list of prescription drugs, in an effort to provide a uniform and consistent formulary for patients across the country. Finally, the Agency will develop a “national strategy for high-cost drugs for rare diseases.”

In announcing the new Agency, the Canadian federal government noted that prescription drug spending by Canadians has soared over the past three decades, increasing from C$2.6 billion in 1985 to C$33.7 billion in 2018. The government also noted that, while the public-private drug coverage system includes over 100 public programs and 100,000 private plans across Canada, it is not adequate “to handle the increasingly expensive drugs coming to market.” The Canadian Drug Agency is expected to respond to this ever-increasing and unsustainable need, and, according to the Canadian federal government, is expected to “help lower the cost of prescription drug prices for Canadians by up to C$3 billion per year over the long term.”

Reactions to the creation of the Canadian Drug Agency has been mixed. Innovative Medicines Canada (“IMC”), a policy and advocacy association for the “innovative pharmaceutical industry,” said that it welcomed the measure as it “has the potential to streamline … complex drug regulatory processes,” but also cautioned that the Agency’s success would depend on collaboration by all stakeholders, including federal and provincial governments. The IMC also stressed that drivers of life sciences investment and innovation must be protected in the process. Meanwhile, the Canadian Life and Health Insurance Association, an association representing Canada’s health insurance companies, applauded the Canadian federal government’s plan, but said that it “was looking forward to further details” on how the coordination of efforts would lower drug prices while ensuring a “common level of coverage regardless of where Canadians live or work.”

The new Agency would be phased in over the next several years. The Canadian federal government has proposed providing Health Canada with C$35 million over a four-year period, beginning in 2019-2020, to establish a transition office to support the formation of the new Agency. There is to be an additional investment of C$1 billion over a two-year period, beginning in 2022-2023, to implement the rare diseases component of the initiative, with up to C$500 million per year going forward.