The tribunal in charge of regulating drug prices in Canada should more closely scrutinize the price of new drugs, rather than the annual price increases posted by manufacturers on already-marketed drugs.
That message was delivered to the Patented Medicines Prices Review Board in response to a discussion paper on drug price increases released by the board in March 2005.
![Figure](https://www.cmaj.ca/content/cmaj/174/11/1548/F1.medium.gif)
Figure. Pricing of generic drugs in Canada under review. Photo by: CP Images/Terry Why
“They said we had the wrong description of the problem,” explained PMPRB executive director Barbara Ouellet. As result, the board has produced a new discussion paper, scheduled to be posted on its Web site this spring.
Last year's discussion paper was prompted by concern that in 2004 prices increased for 35% of all patented drugs, an unusually high percentage.
Manufacturers have the option of increasing prices according to a formula based on the Consumer Price Index, and need only inform the board at their next reporting period, which could be up to a year later. The discussion paper outlined alternative approaches, such as a requirement that companies apply in advance for and justify any price increases.
However respondents identified the introductory price of drugs as a key problem. A major driver behind increased retail spending on drugs is the substitution of newer, more expensive medications for older, less expensive ones, Dr. Joel Lexchin, associate professor of health policy at York University, noted in a submission to the board.
This substitution is achieved in large part by intense promotional activities, he wrote.
Insurer Green Shield Canada argued that the PMPRB should take into account spending on drug promotion (marketing and sales) in its initial pricing reviews, as well as spending on comparative trials that demonstrate the value of a drug compared to others in the same therapeutic class. (The board is now limited, under the Patent Act, in the factors it can consider in reviewing price.)
Manufacturers, on the other hand, have argued that because the board only recognizes 3 categories of drugs, which have different pricing considerations, companies are limited in their ability to charge more for improvements made to existing drugs. (The 3 categories are new dosages of existing drugs, “me too” drugs that offer little or moderate improvement over an existing drug, and breakthrough drugs.)
Green Shield also pointed to problems created by tiered pricing and a consequent lack of stability and transparency in pharmaceutical pricing. For example, a drug listed for $1.90 on the Ontario Drug Benefit formulary in 2004 was sold to the Department of National Defence for 45 cents, it noted. As well, bulk buyers are sometimes offered rebates, and list prices are often higher than prices actually charged to larger pharmacy groups, the insurer noted.
Finally, some stakeholders argued that at the time of pricing of new patented drugs, the board should consider whether members of Rx&D, the association representing most trade name pharmaceutical companies in Canada, were meeting the commitment they made when they were granted patent extension to maintain a 10% research and development to sales ratio in Canada. In 2004, this ratio dropped to 8.3% for all patentees, the lowest ratio seen since 1989.
Meanwhile, this June the board will be posting the first quarterly report on pricing of generic drugs in Canada, Ouellet said.
Last October, the federal, provincial and territorial ministers of health agreed to give the PMPRB “responsibility to monitor and report on non-patented drug prices.” As well, to allow the board to regulate the price of non-patented drugs, “provinces will consider formally delegating their responsibility in this area to the federal government,” the ministers stated in a press release.