Canadian Drug Pricing Policy

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Canadian DrugPricing Policy
AARP International Forum on Prescription Drug
Policy Washington
Tom Brogan President BROGAN INC. June 2003
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Canadian Drug Pricing Policy

• Explain the difference in Canadian and US
  Prices
• Historic factors
• Federal review agency
• Provincial government impact on pricing
• Conclusions and Policy Considerations

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Economic Impact on Price

• Pricing historically lower in Canada
• 1968 19 below US
• 1976 15
• 1982 19
• 1983 16
• Price for individual market
• Income per person 22 below US
• GDP per person 15 below US

Single Source Drugs Only
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Government influences on pricing
Federal Patented Medicine Prices Review Board
reviews prices for all patented drugs sold in
Canada
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1987 Federal Policy Changes

• Patent system restructured
• Compulsory licensing restricted
• Industry RD commitment main objective
• Price review - quid pro quo
• Major public opposition

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RD-to-Sales Ratios of Reporting Companies
(1987-2001)
Source PMPRB Annual Report 2001
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Patented Medicine PricesReview Board (PMPRB)

• Guidelines (transparency)
• Main Factors
• Consumer Price Index (CPI)
• International prices
• Therapeutic class

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PMPRB Impact

• Companies plan pricing to comply
• Some flexibility in administration
• Price control applicable to few drugs
• 21 Voluntary compliance agreements 2 hearings
  in 15 years

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Pharmaceutical Price Trends
Intl Max Rule
Intl 6 European countries US
1987 45 of patented drugs below median
1997 78 of patented drugs below median
Source PMPRB- Trends in Patented Drug Prices-1998
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Provincial Price Influences

• 40 of drug market paid by provincial government
  plans (depending on drug)
• Provinces influence prices through market access
• Restrict reimbursement based on therapeutic and
  cost advantages

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Provincial Policies and Practices

• Formularies
• Detailed listing process
• Submissions
• Clinical
• Application to covered population
• Budget impact and pharmacoeconomic analysis

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Provincial Policies and Practices

• 1994 price freeze
• Generic substitution
• Special Listings
• First line vs. second line
• Selected indications only
• Reference-based pricing
• Manufacturer agreements on sales
• Cost-sharing / income-testing

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New Molecular EntitiesNo. type of listing by
province 58 new drugs receiving NOC in 1999-2001
Source BROGAN iMAM
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Growth in Public Plan Total Cost, Seniors
1993/94 2002/03, Ontario
Growth Rate Beneficiaries over 65
3 10 9 7 10 11 16 14 14
Total Cost Drug Cost Dispensing Fees
Source Brogan Inc. Ontario Drug Benefit Database
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Increase in Drug CostCanada US, 1996-2001
Source IMS. Health Inc.
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Cost Drivers, Private PayersAnnual Change,
2001 to 2002
19.8
Source Brogan Inc. Private Payers Database
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Cost per Claimant by Age2002-2003
Ontario Public 2002/2003
Private Payers 2002
Age
Source Brogan Inc.
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Multiple Drug Use Sample of Data 1996-2000
Age
Source Brogan Inc. Private Payers Database
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Conclusions

• Historic price differential
• Economic differences between US and Canada???
• Federal policy objective to stimulate RD - not
  price control
• PMPRB has impacted prices

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Conclusions

• Company pricing decision based on market access
  to public plans
• Utilization driving costs despite extensive
  administration
• Efforts to ensure appropriate use

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Policy Considerations

• Government has disproportionate power and impact
  relative to private sector buyer.
• Potential for perverse effects
• Impact on RD
• Consider total health care

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Impact of DrugsHIV/AIDS