The Patented Medicine Prices Review Board (PMPRB)

What you need to know and why it matters to drug access in 2016

Mandate of PMPRB• To ensure that patent drug prices charged by manufacturers

are not “excessive”

• If excessive, PMPRB can hold hearings and demand a price reduction retroactively

• To be a consumer protection agency to police patent monopoly position of pharmaceutical industry to ensure it does not charge excessive prices because of this monopoly

• To avoid “ransom” situation on pricing; abuse of power

History of its Creation• Created in 1987 as part of overhaul of Canada’s drug

patent regime

• PMPRB was the quid pro quo for stronger patent protection

• Measures of PMPRB’s success were:1. non-excessive pricing measured against other listed countries2. doubling of RxD by brand name companies from 5% to 10 %

Canadian Drug Policy

• After Health Canada approves sale, PMPRB reviews proposed ceiling or list price set by manufacturer to ensure it is not excessive

• Provinces/territories/federal government then negotiate collective price for public plans

• Private insurers negotiate prices for plans or pay PMPRB price

• Uninsured pay PMPRB price unless under public plan

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PMPRB Underpinnings

Provides guidance to patentees on ensuring prices are not excessiveDefinition of therapeutic class and comparatorsProcess for international price referencingCPI adjustmentsOther technical processes: “How to apply the Regulations and Legislation”Changes only require consultation with stakeholders

Guidelines

Outline the reporting requirements- Sales data- R&D expendituresSpecifies the basket of countriesChanges require debate and ratification by cabinet

RegulationsProvides the Mandate of the PMRPBOutlines the factors that define ‘excessive’ pricesChanges require legislative amendments

Patent Act

PMPRB Regulatory Framework - The ACT

• Patent Act: establishes mandate to regulate patent prices; reports to Parliament through Minister of Health

• Regulate: ensure prices are not excessive

• Report: trends in drug sales and pricing for all medicines and R&D spending for patentees

• N.B.: PMPRB cannot do anything else without changes to the Patent Act by Parliament

What does that Act say ?Section 85 identifies the factors that PMPRB must consider in evaluating excessive prices:1. Prices at which the same medicine has been sold in Canada 2. Prices at which medicines in the same therapeutic class have been

sold in Canada 3. Prices at which medicines and other medicines in the same

therapeutic class have been sold in other countries4. Changes in Consumer Price Index5. Other factors in the Regulations6. If necessary, after considering 1-5, costs of making and marketing

the medicine7. Other factors the PMPRB Board considers relevant

PMPRB Regulatory Framework – the Regulations

Regulations to the Act: list the basket of countries for PMPRB to consider and definition of price as ex-factory

Basket of countries are: U.S., Germany, Italy, France, U.K., Sweden, Switzerland

Interpretation of the basket left to PMPRB- low end, median, high end price Regulations can only be changed by Order in Council- Parliamentary process

PMPRB Regulatory Framework- The Guidelines

• Compendium of Policies, Guidelines and Procedures >non-binding interpretive guidance and direction from PMPRB Board to patentees and PMPRB staff about how to comply with the Act and Regulations >changes require relevant stakeholder consultations

Current guidelines assign a ceiling price based on therapeutic benefit relative to existing drugs

CPI increases are allowed provided they do not result in higher prices than the basket of countries pay

N.B. This is the only part of the Regulatory Framework PMPRB controls This Compendium is the basis for the present consultation

Introductory price review – level of improvement

• PMPRB conducts a scientific review of each new medicine

• Considers 4 issues:– Primary indication– Level of therapeutic improvements– Comparators– Comparative Dosage regimen

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PMPRB Price Tests Based on

Level of Therapeutic ImprovementModerate

ImprovementSlight or No

ImprovementSubstantial

Improvement

Median International Price*

Higher of TCC orMidpoint betweenTCC & Median

TCC or RRTHigher ofTCC orMedian

Prices can never be higher than Highest International Price (HIPC)

Breakthrough

TCC = Therapeutic Class ComparisonRRT = Reasonable Relationship Test

*France, Germany, Italy, Sweden Switzerland, UK, US

Why Consultation Now?• PMPRB has been criticized by governments for not keeping prices low enough relative to

basket of countries and for not getting R&D as high as promised

• Private sector complains of high prices

• CADTH has become more robust, recommending “value” for public reimbursement to provinces/territories

• pCPA has come into being to negotiate F/P/T prices

• The advent of high cost specialty drug for smaller populations rather than mass marketed blockbusters are creating drug budget sustainability issues

• The Canadian economy is generally volatile

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“Since 1987, the empirical evidence has not supported the notion that price and intellectual property protection are important drivers of pharmaceutical R&D investment.”“In light of the above, the PMPRB will examine whether and to what extent changes to its regulatory framework are warranted if it is to ensure that Canadians pay their fair share for patented drugs, as was originally intended. In the short term, this entails examining options to modernize and simplify the Board’s guidelines, in keeping with the model of incremental change that has been employed since 1987. This examination will be informed by issues [including]:• Affordability• Market power• Price transparency• Canada’s price gap with European PMPRB7 countries• Price differentials between public and private payers• Regulatory BurdenLonger term, the PMPRB will engage its federal, provincial and territorial partners in discussions on broader reform, which would take into account international best practices such as more integrated decision making on cost effectiveness, reimbursement and pricing.”

Protect Empower Adapt

New Motto:

Source: PMPRB’s strategic plan

The Guidelines Modernization is part of a broader PMPRB strategic plan

Is PMPRB Still Relevant ?

• Ceiling price must be set somehow

• PMPRB has the experience and expertise to determine this price

Commentary: PMPRB still plays a pivotal role in determining pricing for Canada

Consultation Questions 1. How do you define “excessive” ?

Practically a patient generally considers any price that stops them from accessing a necessary medication because either otherpayers or they cannot afford it is excessiveHowever systems are supposed to take a more objective approach to pricing

PMPRB must look its public role in stopping “excessive” pricing It does not measure “value” or “affordability” CADTH , pCPA and the provinces/territories/federal governments do that

publicly and private payers do that for private plans It measures therapeutic benefit, other internal and international prices

What if we do not like this formula?

• If Canadians want PMPRB to define measures of excessive pricing fundamentally differently we must convince Parliament to change the Patent Act and Regulations

• PMPRB can only change the Guidelines by which it interprets that mandate, not the mandate itself

Use of Comparator Countries’ Prices

How much weight should be put on them ?

• What is the “right” list ?• How much weight should be put on international prices ?

Commentary : Factors including economics, social and political structures, health care system, demographics are relevant. The U.S. as our influential neighbour cannot be completely ignored.International prices are a good check and balance to see if initial perspective is serious off target

Important Factors in Section 85 of the Act

Therapeutic Benefit

Commentary: More beneficial or “breakthrough” drugs should be entitled to higher prices otherwise we stifle innovation and they do save more money overall in health and the economy

BUT they are most susceptible to monopoly pricing so greater policing is required

Potential Solution : Redeploy resources from other areas to develop better approaches in this area including a dispute resolution mechanism where excessive pricing is detected

Section 85 Factors (cont’d)

Changes in CPICommentary : Drug prices should NOT automatically go up because CPI has risen.Most products go down in price over time, not up.

Potential Solution: Remove this as an automatic opportunity from the Guidelines.

Other consultation questionsShould price ceilings be low, median or high end of the basket prices?

Commentary: Follow comparable countries’ approach unless there is reason not to do so.

Is R&D still relevant?

Commentary: No. PMPRB cannot control this and pricing does not appear to impact this.

Should PMPRB have different levels of oversight based on therapeutic improvement?

Commentary: Yes, put your resources where your problems are. Where market forces will drive price, less intervention is needed.

Private versus Public “Discrimination”

Is it excessive to have “discriminatory” pricing between private and public prices?

Commentary: Private insurance companies are for profit business making huge profits. Part of being a for profit enterprise is that you manage your costs. They have the power and resources to negotiate lower prices with the pharmaceutical industry. They have a different purpose and population to cover than public plans. Creating a PMPRB system around their needs rather than the needs of the public health care system is not good health policy.

Retroactivity of Guideline Changes

Commentary: Changes horses in midstream is not fair to those who played by the rules.

And finally… Commentary: Why does PMPRB keep the funds it gets back from winning “excessive” pricing charges ?

The Act permits the PMPRB to make an arrangement to return those funds to the provinces upon request but this has only been done once and not recently.

Shouldn’t PMPRB distribute net after costs to those in the system who paid the excess prices until the case was resolved ?

Next Steps for Patient GroupsEither engage in responding to the consultation individually, in groups or other coalitions and/or with CCSN and its partners who are replying

Take opportunities when speaking to decision makers to tell them what you think about the issues of drug pricing policy in Canada

Join CCSN, Save your Skin Foundation, Schizophrenia Society of Ontario and its partner groups at a 2 day Summit on Drug Pricing in Canada in Toronto to learn more and to share your ideas with other patient groups

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