Not to be outdone by their neighbor to the South, Canada announces new regulations to reduce drug prices

In early August 2019, the Canadian government announced regulations to reduce patented drug prices, with the intent to save Canadians over $10 billion (USD) over the course of a decade. The new regulations are the final amendments to the Patented Medicines Regulations and come after months of delay, which had prompted speculation that the government would back down in the face of lobbying or run out of time before Canada’s October 2019 election.

Under the new rules, Canada will change the list of countries the Patented Medicine Prices Review Board (PMPRB) compares domestic prices with. This change involves dropping the US and Switzerland as comparison countries, where prices tend to be highest. It will also allow the PMPRB to have the actual market price of medicines in Canada, instead of the “sticker” price which tends to be an inflated list price, to better determine the reasonableness of a price ceiling. Last, the changes allow the PMPRB to consider whether the drug price actually reflects the value it offers to patients.

For those unfamiliar, Canada’s approach to drug pricing is different from ours in the United States – instead of bargaining prices down, the PMPRB outright declares some prices to be an illegal abuse of patent rights. Drugmakers base their list prices on the agency’s published guidelines and when there is a disagreement, PMPRB staff can challenge drugmakers at an internal tribunal. While most cases are settled, appeals can go to federal court and even beyond. For example, some drug companies have gone all the way to the supreme court of Canada to challenge PMPRB guidelines.

These changes are the biggest reform to Canada’s drug price regime since 1987, when the PMPRB was created, and only apply to drugs approved by Health Canada after the rules are officially published this year (expected publication date: August 21, 2019). The new regulations are expected to save money for patients, employers and insurers, including the government, and are expected to reduce drug company profits.

Given the United States’ current consideration of allowing drugs to be imported from Canada in an effort to reduce costs to patients in America, this change may also impact and eventually cut the earnings of drugmakers in the United States, the world’s largest pharmaceutical market.

The amended Patented Medicines Regulations will be published in the Canada Gazette, Part II, on August 21, 2019. In the meantime, Canadians may request a copy from Health Canada at PMR-Consultations-RMB@hc-sc.gc.ca.

Initially, these new regulations were expected to go into effect in January. The government delayed the effective date, however, to collect and review feedback. The new date of effect is July 1, 2020.