Thank you for the opportunity to appear before you today.
My name is Matthew Herder. I'm a lawyer and an associate professor in the faculties of medicine and law at Dalhousie University.
My research focuses on laws, policies, and practices around pharmaceutical drugs. My publications and testimony before this very committee in 2014 helped contribute to a number of important changes to Canada's Food and Drugs Act, known as Vanessa’s Law.
I want to begin by registering my support for national pharmacare. It is not a panacea; however, it is highly preferential to the status quo and increasingly needed as more targeted, personalized therapies enter the Canadian market.
Building from my research brief, which I submitted to this committee, I will focus on the set of issues or challenges posed by the pharmaceutical industry's shift to more personalized therapies or precision medicine. In short, the range of drugs developed and marketed under the banner of personalized medicine both underscores the case for and helps define some of the essential features of national pharmacare.
Today I want to make three points.
My first point is that while personalized medicine remains a work in progress, the pharmaceutical industry has shifted its focus to more targeted therapies. In the last two decades, large-scale genomics and related research initiatives have generated a wealth of new information about the molecular underpinnings of human disease. But the process of discriminating between information that actually helps to prevent, diagnose, and treat human disease versus misinformation is just getting under way.
Researchers and drug companies are increasingly integrating genomic and epigenomic information into their drug discovery and development platforms. There are hundreds of such personalized therapies currently in development, despite the uncertain clinical value of many of the biomarkers that have been incorporated into these interventions.
This trend dovetails with industry's increasing focus on rare diseases. Indeed, many of the personalized therapies that have come on the market qualify for extra incentives that countries, such as the United States, have put into place to encourage research into rare diseases.
Pharmaceutical companies have allocated an increasing share of their resources toward rare diseases. For example, nearly a half of the novel therapies that were approved by the United States Food and Drug Administration in 2015 fell into that category. Why? This is because industry has figured out that the development of such therapies, also known as orphan drugs, can be as profitable, if not more profitable, than drugs that address more common conditions.
Developing orphan drugs tends to be faster and cheaper, because fewer patients are eligible to participate in trials. Once a rare disease drug is approved, it faces little to no competition in the marketplace, enabling companies to charge premium prices. Indeed, price tags of $200,000 to $300,000 per patient per year are increasingly common for rare disease therapies. As a result, the development of more personalized, targeted therapies, incorporating genomic and other sorts of biomarkers, account for a growing share of both public and private expenditures on prescription drugs in Canada.
My second point is that our national pharmaceutical regulator, Health Canada, is allowing these drugs on the Canadian market despite limitations in the evidence about the safety and effectiveness of those drugs.
For most of their existence, pharmaceutical regulators, such as Health Canada, have approached their task in a binary manner: should a drug be on the market, yes or no? In recent years, however, the approach has become more dynamic, with regulation theoretically continuing across the life cycle of a drug, both before and after it's on the market. This new approach to regulation is often called “adaptive licensing”. While adaptive licensing makes sense in principle, it may be a double-edged sword in practice.
We've long known that the evidence generated in the course of clinical trials has its limitations. Real-world use of drugs, without careful control from a research team, is when a drug's true safety and effectiveness profile becomes more evident. For that reason, no one thinks that ongoing, active monitoring of a drug's safety and effectiveness after it's been approved is a bad idea. However, if the promise of ongoing study, in effect, lowers the bar for approval in the first place, we run the risk of letting a lot more unsafe, ineffective drugs on the market.
The stakes of that gamble are especially high in the case of rare diseases. Because these drugs focus on small patient populations, a number of the standard procedures used by researchers to ensure that the results of their studies are robust are often not followed. Consequently, as two U.S. physician researchers recently put it, these sorts of studies run a greater risk of “identifying benefits that are not real or missing risks that are.”
In such instances, ongoing, rigorous post-market evaluation of a drug's safety and effectiveness is essential. Thankfully, Health Canada, following the passage of Vanessa's Law, has a number of new legal powers that should assist with that task; it can finally compel companies to carry out post-market studies and share information.
However, and here's the rub in terms of pharmacare, there's a fundamental mismatch between Health Canada's move to adaptive licensing and the provincial and territorial infrastructure concerning drug coverage. The existing patchwork of payers and health technology assessment bodies is poorly equipped to process and act upon new information about a drug's safety and effectiveness in real-time.
That brings me to my third and final point.
Our current patchwork of health technology assessment bodies and public and private payers lacks the capacity to handle the shift that we're in the middle of, namely, toward personalized, targeted therapies. As I've just said, evidence about a drug's safety and effectiveness should increasingly span both the pre- and post-market phases of a drug's life cycle. Yet few, if any, private insurers in Canada have the capacity to evaluate this information on an ongoing basis. It is doubtful whether a number of provinces have that capacity either. A national pharmacare program or formulary should in principle have greater institutional capacity to do so, and to establish key information-sharing channels with our national regulator, Health Canada.
Similarly, our current system lacks the capacity to negotiate more nuanced drug coverage deals with companies. Because of the tenuous nature of the evidence produced with respect to personalized therapies during pre-market testing, and the deep divide between standards of safety and effectiveness applied by Health Canada and the question of cost-effectiveness that public and private payers are focused upon, there is a growing need for more sophisticated reimbursement contracts.
One model is called coverage with continuing evidence development, or CED. Another is performance-based risk-sharing agreements, or PBRSAs, where payment for a therapy is contingent on observing benefits in patients following treatment.
Again, both public and private payers in Canada generally lack the ability to collect and analyze information on an ongoing basis, thus negating the value of those kinds of more sophisticated contracts with companies.
In contrast, a national formulary could do so, and in turn adhering to a much more evidenced and performance-based approach to drug coverage. Given the incredibly high-priced nature of many personalized rare disease drugs, maximizing value for money is imperative, and national pharmacare has a much better potential for doing so. Plus, the prices of these new targeted therapies need not be so high. The pan-Canadian drug pricing alliance only represents about 40% of Canada's drug purchasing power. National pharmacare representing all Canadians would substantially increased our bargaining capacity.
Finally, and perhaps most importantly, our present patchwork of health assessment bodies and payers lacks the capacity to handle the increasing politics of drug coverage. Our national drug evaluation body, CADTH, adheres to an evidence-based approach in making recommendations about which drugs to cover. But that's just it: CADTH only makes recommendations. Payers remain free to make their own decisions, so drug companies and patient groups train their attention on those governments, politicizing drug coverage decisions through media stories and playing a game of divide and concur with provincial payers.
A national formulary situated at arms-length from government, and relatively free of industry influence, offers the potential to de-politicize drug coverage decision-making. We know that drugs are notoriously difficult to delist, but given the limited nature of the evidence at any given point in time about a targeted therapy, the power to stop funding a drug or renegotiate payment structures depending on observed benefits is integral to a well-functioning drug reimbursement system.
If a national formulary is to have any meaningful ability to exercise that kind of power, its independence from government and industry alike must be protected.
Yes, industry and patient groups should be heard as part of that decision-making process, but they should do so under strict conditions of transparency to the Canadian public and without compromising formularies' ability to negotiate and act upon performance-based drug coverage agreements.
To conclude, personalized medicine's laudable goal is to enable more precise decision-making about which drugs to use. It remains a work in progress. National pharmacare designed as an evidence-based, independent, and transparent institution has the potential to to improve Canada's capacity to make more precise decisions about which drugs to pay for. It's imperative as more and more high cost targeted drugs of uncertain benefit enter the Canadian market.