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.
