Private plan sponsors can expect to see lower drug prices resulting from recent changes to the Patented Medicine Prices Review Board, but there may also be unintended consequences.
The reforms, announced Aug. 9 and expected to come into effect July 1, 2020, will update the reference countries Canada uses to compare its prices internationally. They’ll eliminate the U.S. and Switzerland, which are the only two countries with higher patented drug prices than Canada, and add Japan, Spain, Norway, Australia, Belgium and the Netherlands.
They’ll also provide the PMPRB with the market price of medicines in Canada, adding any possible rebates, instead of the inflated sticker price to allow the board to better assess whether a drug price is reasonable when setting its ceiling price, and give the board the ability to consider whether the drug’s price reflects its value to patients.
Health Canada said the changes are expected to save Canadians about $13.2 billion over 10 years.
The changes are necessary for bringing clarity to the drug pricing process and a win for plan sponsors, says Mike Sullivan, chief executive officer and co-founder of Cubic Health Inc. “Any changes to try to bring a bit more transparency and stabilize pricing, etc., is obviously going to be good news to any employer payer, so that’s great.”
However, the changes will only apply to drugs that aren’t on the market today, he notes, and won’t do anything to reduce the impact of the high-cost drugs that plan sponsors are currently dealing with.
Sullivan cautions employers against seeing the PMPRB changes as a “magic bullet” for managing their drug plan sustainability issues. “Plans need to be more engaged into how to responsibly and thoughtfully manage their existing challenges today with the existing drugs on the market that won’t be impacted by these new changes, and stop thinking this is . . . going to solve things,” he says. “There’s a lot employers can be doing today to better manage their claims experience . . . and then any additional benefits that come down the road through these changes, that’ll just be gravy.”
Suzanne Lepage, a private health plan strategist, agrees the changes are positive for reducing plan sponsors’ drug spend over time, but says there are associated risks. “The potential downside could be the fact that we’ll see less new drugs coming to the market in Canada, either taking a longer time to launch so they’ll come after other countries or they just will decide not to launch them in Canada at all.”
Pharmaceutical companies set their prices globally, she notes, so a country with a pricing scheme that sets a low price for a drug that’s subsequently referenced by other countries would be a disincentive to launch it. “Globally, we represent about two per cent of the overall market and if the pricing model isn’t conducive to a company succeeding with their product they may just bypass Canada or delay Canada.”
That eventuality could have consequences for employers. “One of the important parts of a benefits plan is giving employees access to treatments they need to stay healthy and to stay at work and avoid disability,” says Lepage. “If any of these new drugs that don’t come to Canada would accomplish that goal, there might be other costs associated with the benefits plan, like increased absenteeism, reduced productivity and increased disability, so we don’t know what that will look like, but that’s a risk.”
The PMPRB also published its latest report on the Canadian generic drug market on Wednesday, which found Canada has “one of the strongest generic drug markets” among Organisation for Economic Co-operation and Development countries in terms of sales and use, with generic sales up to $5.4 billion in 2018 from $3 billion in 2006.
Despite Canadians’ increasing use of generic drugs, the total sales figure was virtually the same in 2018 as in 2010 due to steep price reductions during that time, noted the report. Between 2007, when the PMPRB began tracking the generic landscape in Canada, and 2018, generic drug prices dropped almost 60 per cent.
The report also said the April 2018 agreement between the Pan-Canadian Pharmaceutical Alliance and the Canadian Generic Pharmaceutical Alliance “effectively close[d] the gap between Canadian and international prices” for generic drugs.
In 2018, generic drug utilization accounted for 76 per cent of the volume of drugs in the Canadian pharmaceutical market, which was the third highest market share of OECD countries after the U.S. and Germany.