Evidence of meeting #46 for Health in the 39th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was price.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Brien Benoit  Chairperson, Patented Medicine Prices Review Board
Barbara Ouellet  Executive Director, Patented Medicine Prices Review Board
Alan Bernstein  President, Canadian Institutes of Health Research
James Roberge  Chief Financial Officer, Canadian Institutes of Health Research
Clerk of the Committee  Mrs. Carmen DePape

3:35 p.m.

Conservative

The Chair Conservative Rob Merrifield

I will call the meeting to order.

We want to thank the witnesses for coming.

We have two subjects this afternoon. The first one is on the Patented Medicines Prices Review Board, and we thank Mr. Benoit for being here. And Barbara Ouellet, thank you for coming here.

Then in the second half we're going to be talking about the Canadian Institutes of Health Research. We have, no stranger to the committee, Dr. Bernstein. It's good to have you here.

We will start. Mr. Benoit, I believe, has to catch a flight, or be gone by 4:30. Is that true?

3:35 p.m.

Dr. Brien Benoit Chairperson, Patented Medicine Prices Review Board

I have to go to my day job, which is at the Civic Hospital.

3:35 p.m.

Conservative

The Chair Conservative Rob Merrifield

Do you have limited time, or are you okay?

3:35 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

We're okay for an hour. I have to be there at 5:30 or 6 o'clock.

3:35 p.m.

Conservative

The Chair Conservative Rob Merrifield

Okay.

We will start with your presentation and then open it up to questions. Then we'll go to Dr. Bernstein's presentation and open it for questions, if that's okay with the committee.

We will proceed right away, then, with your presentation. We look forward to what you have to tell us with regard to the estimates for the Patented Medicine Prices Review Board.

3:35 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

Thank you, Mr. Merrifield.

Bonjour. Good afternoon.

I'm pleased to have my first opportunity to appear before you as the chairperson of the PMPRB. I was appointed as chair last summer, but I've been a member of the board for almost two years now. Today we're going to discuss main estimates and undoubtedly a number of other issues of interest to committee members relating to the pharmaceutical pricing and pharmaceutical environment in Canada.

It's been almost two years since we appeared before this committee. Two years ago the then-acting chair, Réal Sureau, appeared before you in a similar capacity.

With me today is Barbara Ouellet, the executive director of the PMPRB. Following my opening remarks, we would be pleased to answer any questions you might have.

At the outset, please permit me to provide a bit of context concerning the role and mandate of the PMPRB. It is not the most widely known organization within the Government of Canada, but we believe we do significant work.

We were established by Parliament in 1987 under the Patent Act, and the PMPRB is currently part of the Health portfolio. However, as a quasi-judicial, independent body, we carry out our mandate at arms' length from the Minister of Health.

The PMPRB has a dual role, which includes both regulatory and reporting responsibilities. In terms of the first of these, the PMPRB reviews the prices of more than 1,000 existing patent medicines already under our jurisdiction, to ensure that the prices are not excessive.

At present, the PMPRB also is completing its review of 100 new medicines that came under the board's jurisdiction during the last year, 2006. As part of the PMPRB's regulatory responsibilities, the staff carries out investigations in cases where non-compliance has been identified. When we refer to non-compliance, we're referring to guidelines that we have developed, and I'll say a few words about those a little later.

Over the past 18 months, the PMPRB has issued eight notices of hearing into prices of patent medicines that appear to be excessive. The board staff is currently involved in some additional 33 ongoing investigations.

The second part of our mandate is our reporting role. The Board reports annually to Parliament, through the Minister of Health, on its activities and on pharmaceutical trends relating to all medicines. We also report on the R&D spending by pharmaceutical patentees.

Our report for 2006 will be submitted to the Minister of Health on May 31 next. Under section 90 of the Patent Act, the minister also has the authority to direct the Patented Medicine Prices Review Board, the PMPRB, to inquire into any other matter. Under this provision, the minister has twice directed the Board to carry out additional initiatives.

In 2001, federal, provincial and territorial Ministers of Health announced the launch of the National Prescription Drug Utilization Information System. Working in partnership with the Canadian Institute for Health Information, known under the acronym CIHI, the Board was charged with conducting an analysis of price, utilization and cost trends for prescription drugs.

Some examples of our current activities in the area of the national prescription drug utilization information system--our acronym is NPDUIS--include an analytical report on pharmaceutical trends; a study to forecast pharmaceutical costs; the development of a methodology and reporting guidelines to assist the pharmaceutical industry in meeting requirements of federal, provincial, and territorial drug plans for more transparent budget impact analyses; and the monitoring of new drugs in the pipeline that are expected to potentially have an important impact on drug therapy and underlying drug plan budgets.

On November 2, 2005, this role was expanded further when the federal Minister of Health, on behalf of the FPT ministers of health, directed the PMPRB to report on prices of non-patented prescription drugs, usually referred to as mostly generics.

This new responsibility in support of the national pharmaceutical strategy has resulted in two reports issued by the PMPRB to date. The first one is “Canadian and Foreign Price Trends”, and the second is “Trends in Canadian Sales and Market Structure”. In April this year, the third study on the market of new off-patent drugs will be released. This report tracks market development for drugs immediately following their patent expiry. Basically, we want to know if they're going to be picked up by generic manufacturers or not or simply abandoned. The fourth report of the quarterly series will focus on non-patented single-source drug prices.

I would like to focus for a moment on a couple of matters reflected in the main estimates that demonstrate the evolving nature of the environment in which the PMPRB finds itself now and how this is affecting our work. Figures for 2007-08 along with those of the previous fiscal year 2006-07 show that the total PMPRB budget has increased from $6.5 million to $11.5 million, which is almost double. It's an eye opener, and there are reasons for this. It would not be unreasonable to ask why such substantial change has occurred.

There are several factors that have contributed to this budgetary increase. These additional funds were allocated to the PMPRB to enable the board to conduct an increased number of public hearings to determine whether certain patented medicines were or are being sold in Canada at prices that may be excessive. In addition, these funds were needed to enable the board to undertake a comprehensive review and public consultation on our excessive-price guidelines.

These guidelines were last revised in 1994--so some 15 years ago. Although not binding on the board and on the patentees, the guidelines provide clear, predictable, and transparent information on how the prices of patented medicines will be reviewed and have historically greatly facilitated voluntary compliance in setting prices that are not excessive.

With respect to the matter of public hearings, I have personally taken decisions to issue eight Notices of hearing in the last 18 months. By way of comparison, this number is equal to the total number of notices of hearing issued by the Board going back to its inception in 1997 through to 2005. Moreover, of these eight notices of hearing issued between 1987 and 2005, only one full hearing was held, five were resolved through voluntary compliance undertakings, while two others are pending.

This relatively recent increase in the number of notices of hearing may not necessarily represent a longer term trend, but is a departure from the previous history of the Board. It is the reality currently being faced by the PMPRB as it seeks to ensure that patentees' prices for all patented medicines sold in Canada are not excessive.

One could speculate on the reasons for an increase in the number of hearings--for example, the shift in the drug pipeline away from blockbuster new chemicals to more incremental innovations. In part because of notices from third parties about price increases after a period of considerable price stability and our own experience with the shift toward more hearings, the board is currently undertaking a comprehensive review of its excessive-price guidelines. I'd like to remind you that in past years these guidelines were very effective in ensuring compliance; there were very few hearings. The pharmaceutical manufacturers seemed to follow them.

This review has involved a process through which we are seeking to address complex and wide-ranging issues. It is not a process that can be accomplished quickly or by cutting corners. Analysis has required a phased-in approach that reflects the broad scope of the review itself.

The primary purpose of the review of the guidelines is to ensure that the PMP's excessive-price guidelines appropriately reflect the board's interpretation of the price determination factors set out in the Patent Act and that the board's price review process remains relevant and responsive to the current pharmaceutical environment.

At the same time, we must make every effort to make certain that this review is carried out in a transparent and effective manner that encompasses opportunities for input from all interested stakeholders. This is a significant, important, and timely review. It addresses issues that go to the heart of price determination.

Here are two examples, to name a few. The first is the categorization of new drugs. We determine price tests, depending on which drug category a particular medication fits into. Some stakeholders feel they no longer adequately recognize the current type of innovation in the pharmaceutical environment. Then the price tests are used to determine if the price of a patent medicine is excessive or not. Concerns have been expressed that these tests, at one extreme, may not result in an appropriate price premium for the value of the drug in question, and at the other extreme are a major cost driver of public drug plans.

From our core regulatory and reporting functions, to our expert analytical support for F/P/T Ministers of Health, to major undertakings such as the review of the excessive price guidelines, the Board is engaged in a broad range of activities that ultimately touch the lives of all Canadians. We are committed to carrying out these responsibilities in a manner that is transparent, effective and accountable.

On behalf of the PMPRB, those were my opening comments. I would be pleased to answer any questions--and if I don't have the answer, she does, we hope.

3:45 p.m.

Conservative

The Chair Conservative Rob Merrifield

That's the principle of leadership--make sure you have enough people around you, so you can blame somebody. That's good.

We certainly want to thank you for your presentation and for coming.

We now open it up for questioning. It's one of the first times we've had an opportunity to question somebody on a topic other than childhood obesity for some time, so this is going to be a fresh new subject. We'll open it up with Ms. Brown.

3:45 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

Thank you, Mr. Chairman.

Welcome to representatives of the PMPRB.

From your description of your activity level and the budgetary reflection of that, may I say that I welcome what I sense to be a more aggressive and activity-oriented stance from the last few times we've had your organization in front of us.

I'm wondering about the source of these eight notices of hearings and 33 ongoing investigations. Are you getting complaints from the public, from pharmacists, from doctors, or from provinces that run drug plans, or is it simply the time in the history of the board when it is looking inward and reflecting on whether it's being aggressive enough?

3:45 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

We get very few complaints from the public. We get some complaints from provincial drug plans, but mostly the reason we're having these hearings and more investigations is that there's a tendency toward non-compliance with our guidelines. We believe the reason is there are fewer blockbuster drugs. A blockbuster drug would be one of a kind that would cure a particular disease and it would command a premium and the drug company would be very happy to get that. Rather, what we're seeing now--to use the colloquial expression--is tweaking of already existing medications. They change the number of times a day that you take it--instead of the same chemical three times a day, they wrap it up in a coating and you take it once a day, and the drug companies want quite a high premium for that.

3:45 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

Do these voluntary compliance undertakings through which you resolved five of these situations really boil down to your suggesting to the manufacturer that their price is a little high and you would suggest a lower one, and then they agree to it, or is it a process of negotiation and then an agreed-upon conclusion?

3:45 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

There's a process of negotiation. As the chair--and it's the same for the other board members--we are not party to any of the negotiations because we may at some time have to sit on an adjudicative panel, but our staff does do a lot of negotiation.

The staff will point out that the price is excessive; the company will respond that they didn't count this or that, and then there's a lot of middle road. If the company agrees to the staff's position, then this voluntary compliance undertaking goes on, and usually a VCU will result in some payback of excessive revenues.

3:45 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

Oh, that's excellent. Okay.

Towards the end of your presentation you talked about your role as interpreting the price determination factors set out in the Patent Act. Those go back quite a way, as you have told us. Do you think those price determination factors are all right the way they are, or do you think you might be moving towards suggesting amendments to them?

3:45 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

Madam, that is a very obvious good question.

Changing a statute in Parliament would require I don't know how much pulling of teeth. When we sit on these panels, we feel the wording of the Patent Act is too vague; it's not sufficiently prescriptive. However, changing the Patent Act would be very difficult, and the elements in there are what we're now discussing in these guidelines we have--the interpretation.

3:50 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

This group you're meeting with today is pretty good at pulling teeth, so should you come up with some suggestions for reforming that act and reforming those guidelines, you might wish to come back here. Maybe we could help you.

I'd like to move on to that portion of your mandate that reviews the amount of R and D done essentially in exchange for the patent. What is the ratio of R and D to sales for 2006, if you have it? If not, could you give me 2005?

3:50 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

We could give you 2005; it's 8.8%.

3:50 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

How did that compare with the year before?

3:50 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

The year before was roughly the same...8.3%, 8.8%. As we go further into the past, it was 9%, 10%, and there were even some 11% years here. In the past four or five years there has been a trend towards less R and D expenditure as a percentage of total gross sales.

3:50 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

Is there any way you have the authority to compel the pharmaceutical industry to achieve the 10% target mentioned in the act?

3:50 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

No; we have no such authority.

3:50 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

If you can't do it yourselves, do you think the idea is to inform the minister, and the minister is to do it? What are your options? I can understand the government's not giving a free-standing semi-judicial body, an adjudicative body, that kind of sanctioning authority, but they must have talked about a way to get at this if in fact the patentees failed to live up to their agreed-upon responsibility.

3:50 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

As I understand it, the agreed-upon responsibility was to put 10% of their gross total sales into R and D in Canada--

3:50 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

Yes.

3:50 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

--and they started out close to that. Then they came up to it and exceeded it, and now they're tending to drift back down.

3:50 p.m.

Liberal

Bonnie Brown Liberal Oakville, ON

Yes.

3:50 p.m.

Chairperson, Patented Medicine Prices Review Board

Dr. Brien Benoit

There may be many complex factors relating to that, and as you just heard earlier, there are fewer breakthrough drugs. Is that a reflection of less research, or what? I'm not really sure.