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ARCHIVED - RPP 2006-2007
Patented Medicine Prices Review Board
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Section I - Overview
Chairperson's Message
I am pleased to present the 2006-2007 Report on Plans and Priorities for the Patented Medicine Prices Review Board (PMPRB). The PMPRB is an independent, quasi-judicial body established by Parliament in 1987 under the Patent Act. Its mandate is two-fold: the regulatory mandate to ensure that the prices of patented drugs sold in Canada are not excessive and a reporting mandate to contribute to informed policy-making by governments through reports on pharmaceutical prices and trends, utilization, and research and development.
Pharmaceutical policy has been the subject of considerable debate in Canada over the years. The main constant in this debate has been the issue of how best to bring Canada's intellectual property regime in line with new international agreements, while providing access to affordable medications for all Canadians. In more recent years, rising pharmaceutical expenditures have taken centre stage with public programs and consumers. The Canadian Institute for Health Information (CIHI) reported that drugs represented over 16% of total health care spending in 2004, surpassing physician spending as the second highest category of health care spending after hospitals.
Public drug programs have introduced new measures to contain costs and promote appropriate prescribing and utilization practices as federal, provincial and territorial (F/P/T) Ministers of Health continue to explore new approaches to collaboration.
The PMPRB is part of that process. The PMPRB is the federal expert body on questions related to drug prices. It is responsible for analysis and reports under the National Prescription Drug Utilization Information System (NPDUIS). Through critical analyses of price, utilization and cost trends, the PMPRB provides Canada's health system with more comprehensive and accurate information on how prescription drugs are being used and on cost drivers.
Building further on F/P/T collaboration, First Ministers signed a 10-Year Plan to Strengthen Health Care in 2004. Part of this agreement included the development and implementation of a National Pharmaceuticals Strategy. Recently, Health Ministers reiterated their commitment to better align their regulatory and reimbursement regimes to ensure the best possible outcomes for Canadians. Among other initiatives announced at their annual meeting in October 2005, the Ministers agreed that the PMPRB should be given responsibility to monitor and report on non-patented prescription drug prices. Beginning in the spring of 2006, the PMPRB will publish quarterly reports on a number of key areas: Canadian sales and price trends; generic to brand name price comparisons; and cost of therapy and utilization patterns, to name a few.
Important advances in health care policy are being made to respond to the changing needs of Canadians. By raising issues and encouraging open debate, the PMPRB can contribute to better decision-making, and ultimately to healthy Canadians with access to quality health care, including non-excessive prices for pharmaceuticals.
Brien G. Benoit
Vice-Chairperson
Management Representation Statement
I submit for tabling in Parliament, the 2006-2007 Report on Plans and Priorities (RPP) for the Patented Medicine Prices Review Board.
This document has been prepared based on the reporting principles contained in the Guide for the Preparation of Part III of the 2006-2007 Estimates: Reports on Plans and Priorities and Departmental Performance Reports:
- It adheres to the specific reporting requirements outlined in the TBS guidance;
- It is based on the department's approved Program Activity Architecture structure as reflected in its Management, Resource and Results Structure (MRRS);
- It presents consistent, comprehensive, balanced and accurate information;
- It provides a basis of accountability for the results achieved with the resources and authorities entrusted to it; and
- It reports finances based on approved planned spending numbers from the Treasury Board Secretariat in the RPP.
Brien G. Benoit
Vice-Chairperson
Summary Information
| Reason for Existence - The PMPRB has a dual role: Regulatory - To protect consumers and contribute to Canadian health care by ensuring that prices charged by manufacturers for patented medicines are not excessive; Reporting - To contribute to informed decisions and policy making by reporting on pharmaceutical trends and on the R&D spending by pharmaceutical patentees. |
| 2006-2007 | 2007-2008 | 2008-2009 |
| $6,512.0 | $6,480.0 | $4,948.01 |
| 2006-2007 | 2007-2008 | 2008-2009 |
| 48.0 | 47.02 | 39.01 |
| Planned Spending ($ thousands) |
|||||
| 2006-2007 | 2007-2008 | 2008-2009 | |||
|
Strategic Outcome: |
|||||
| Type | |||||
| Priority #1 Compliance and enforcement |
Ongoing |
Activity: Expected results: |
$3,107.0 | $3,112.2 | $3,229.2 |
| Priority #2 Report on pharmaceutical trends |
Ongoing |
Activity: Expected results: |
$1,455.0 | $1,457.8 | $1,158.8 |
|
Activity: Expected results: |
$1,350.0 | $1,350.0 | -- | ||
|
Activity: Expected results: |
$600.0 | $560.0 | $560.0 | ||
Departmental Plans and Priorities
Priority # 1 - Compliance and enforcement
The Patented Medicine Prices Review Board (PMPRB) is an independent, quasi-judicial body created by Parliament as a result of revisions to the Patent Act in 1987 (Bill C-22) which increased patent protection for pharmaceuticals. The PMPRB represents the strategic component of the federal government's policy to balance consumer protection and affordable health care with the trade and industrial development objectives of pharmaceutical patent legislation.
The PMPRB is responsible for regulating the prices that patentees charge, the "factory-gate" price, for prescription and non-prescription patented drugs sold in Canada to wholesalers, hospitals, pharmacies, or others for human and veterinary use, to ensure that they are not excessive.
Board Staff reviews the prices of patented medicines sold in Canada to ensure that they are within the Board's Excessive Price Guidelines (Guidelines).3 When it finds that the price of a patented drug product appears to exceed the Guidelines, and the circumstances meet the criteria for commencing an investigation, Board Staff will conduct an investigation to determine the facts.4 An investigation could result in:
- its closure where it is concluded that the price was within the Guidelines;
- a Voluntary Compliance Undertaking (VCU) by the manufacturer to reduce the price and take other measures to comply with the Guidelines; or
- a public hearing by the Board to determine if the price is excessive and to make a remedial order.
Over the past decade, Canada has experienced considerable stability in the pricing of medicines in Canada. In 2004 the PMPRB received information that indicated that the situation may be changing. In response to this information, the PMPRB launched a discussion paper, in March 2005, soliciting stakeholder input on the issue of price increases for existing patented drugs. The discussion paper explored the evolution of the Guideline for price increases of patented medicines, historical price trends and observations that suggested a possible change in patented medicine price stability in Canada.
The PMPRB received 19 submissions in response to its Discussion Paper. Stakeholders raised a number of complex issues related to how drugs are categorized for price review purposes, introductory price tests and variations in prices, possibly leading to some excessive pricing, at the level of specific classes of customers and/or in specific provinces/territories.
Categorization of new medicines: Stakeholders are questioning/challenging the relevance of the drug categories used for price review purposes. The pharmaceutical industry, in particular, is critical of the current categorization of new patented drugs on the grounds that it does not recognize incremental innovation.
Industry stakeholders point to patient compliance and quality of life as indications of moderate improvement. They argue that category 3 does not sufficiently distinguish these important innovations in drug delivery i.e., doesn't separate "moderate" from "little or no" improvement.
Introductory Price Tests: Provincial/territorial governments, policy experts and other stakeholders claim that introductory prices for patented medicines are a major cost-driver affecting public and private drug plans and consumers.
Under the current Guidelines, a Category 2 drug product is a breakthrough or provides a substantial improvement over existing treatment. According to the Guidelines, the introductory price of a Category 2 new drug product cannot exceed the median of the international prices charged for the same drug in the comparator countries listed in the Patented Medicines Regulations, 1994 (Regulations) France, Germany, Italy, Sweden, Switzerland, the U.K. and the U.S.. A Category 3 is new drug product that provides moderate, little or no therapeutic advantage over comparable medicines. The price of a Category 3 drug cannot exceed the prices of all of the comparable drug products based on a Therapeutic Class Comparison (TCC) Test.
Recent analysis conducted by the Board Staff showed that, for 25% of Category 3 new drugs whose prices were not considered excessive by virtue of a TCC test had prices that exceeded the median of the international prices in the 7 comparator countries. This means that some manufacturers of category 3 drugs achieved a Canadian price premium over the price that would have been allowed had their drug been categorized as a Category 2 "breakthrough". Such a result indicates a systemic problem and gives credence to stakeholder views that the PMPRB's introductory price tests are a cost-driver.
Price Determination Factor s: Some stakeholders recommended, for price review purposes, a more thorough use of all the existing factors outlined in the Patent Act (e.g., including cost of making and manufacturing a drug). Others advocated the review of price increases based on new factors, such as research-and-development expenditures or promotional spending of patentees.
Price Increases: The Board's Guidelines provide that price increases for existing patented medicines are limited to changes in the Consumer Price Index (CPI); and the price of a patented drug in Canada may not, at any time, exceed the highest price for the same drug in the foreign countries listed in the Regulations. The Board has determined that its Guidelines remain appropriate in this regard. However, this is a matter that may be challenged in anticipated hearings.
Price variations across markets: Currently, the prices of individual patented drug products are reviewed in relation to an average transaction price (ATP) for Canada. The ATP is an average of the prices charged to individual customer classes (wholesalers, hospitals, pharmacists and others) in each of the 13 provinces and territories, weighted by the volume of sales. Findings of preliminary research conducted by the PMPRB suggest that the prices of some drug products do vary significantly across jurisdictions and customer classes. The implication of this is that certain customers and provinces may be paying excessive prices while lower prices are offered to others for the same drug product.
The Patent Act states that the PMPRB's mandate is to determine whether a patentee "is selling or has sold the medicine in any market in Canada at a price that, in the Board's opinion, is excessive."
As a result of the findings of the various analyses conducted by the Board Staff and stakeholders comments, the Board believes it is important, for the fundamental credibility of its regulatory program, to engage in a major review of its Guidelines.
The PMPRB has begun significant analytical work and will undertake further consultations with stakeholders to identify and consider possible options for changes to the current Guidelines. This will also include a legal assessment of the need for commensurate changes to the Patented Medicines Regulations, 1994 and possibly the Patent Act. Next steps will be determined upon completion of this work. The work began in 2006-2007 and will continue into 2007-2008.
Priority # 2 – Report on pharmaceutical trends
The PMPRB reports annually to Parliament through the Minister of Health. The PMPRB's Annual Report, which covers the calendar year, includes a review of its major activities, analyses of prices of patented medicines and of the price trends of all drugs, and reports on the R&D expenditures as reported by patent-holding drug manufacturers. The PMPRB also reports through its quarterly NEWSletter and various studies.
In addition, pursuant to an agreement by the Federal/Provincial/Territorial (F/P/T) Ministers of Health and at the request of the federal Minister of Health, the PMPRB conducts research under the National Prescription Drug Utilization Information System (NPDUIS). The purpose of NPDUIS is to provide critical analyses of price, utilization and cost trends so that Canada's health system has more comprehensive and accurate information on how prescription drugs are being used and on sources of cost increases.
In the summer of 2005, the PMPRB conducted a NPDUIS Stakeholders Needs Assessment by surveying members of the NPDUIS Steering Committee (comprised of representatives of F/P/T drug plans, except Quebec). The purpose of the needs assessment was to determine what information is required to make informed decisions about strategic pharmaceutical management issues. As a result of the needs assessment, the following projects have been identified as priorities for 2006-2007:
- An annual report on trends and cost-drivers;
- Development of national guidelines for budget impact analysis; and
- Monitoring and reporting on the new drug pipeline.
As part of the September 2004 "10-year Plan to Strengthen Health Care", First Ministers committed to develop and implement a National Pharmaceuticals Strategy (NPS). Further, they directed Health Ministers to establish a Ministerial Task Force to develop and implement the NPS and report on progress by June 30, 2006.
The overall objective of the NPS is to ensure more timely, equitable, uniform and affordable access to drugs for all Canadians and to improve the management of drug costs and drug plans for all jurisdictions, including the federal government.
Recognizing the complexity and the magnitude of the Strategy, F/P/T officials identified five priority focus areas: catastrophic drug coverage; expensive drugs for rare diseases; common national formulary; real world drug safety and effectiveness; and, pricing and purchasing.
Multiple source (generic) drugs are ordinarily introduced at a lower price than the reference brand-name drugs. While multiple source drugs are generally less expensive than their brand-name equivalents, a number of studies have demonstrated that prices of the top-selling non-patented drugs in Canada - both multiple and single source - may be higher in Canada than in other countries.
Recent research results highlighted the need for more ongoing information on the prices of non-patented drugs. Regular reporting of prices and price trends could enable public drug plans to negotiate better prices for non-patented drugs and achieve international price parity, thus contributing to the sustainability of the public drug plans and the Canadian health care system.
In October 2005, the Federal Minister of Health on behalf of himself and his P/T colleagues, directed the PMPRB to monitor and report on the prices of non-patented prescription drugs in Canada. On July 4, 2006, the PMPRB released the first of a series of quarterly reports on prices and trends for non-patented prescription drugs - Non-Patented Prescription Drug Prices: Canadian and Foreign Price Trends.