Health Committee on Nov. 6th, 2018

[Raj Grewal]

In terms of the patent process, do you think there are areas we can improve on in this country that would make it more beneficial for pharmaceutical companies to develop their drugs in Canada?

[Douglas Clark]

Well, I think you might have missed a line of questioning on that very issue. I don't think there's anything we can do under our patent regime that will serve as a policy instrument to attract R and D to Canada. The literature would suggest that other policy instruments are much stronger determinants of where pharmaceutical R and D investment is located, and they typically are things like head office location—companies usually focus their R and D efforts in proximity to their head offices—scientific clusters, access to good patient data, genomic data.

At the end of the day, all the IP regimes pretty much resemble one another in their approach to pharmaceuticals because we all have to comply with our WTO minimal norms and standards in that area under the TRIPS agreement. I would discourage that whole line of thinking, that something you can do by adjusting patent protection in Canada is going to have a material impact on R and D, either positive or negative.

[Raj Grewal]

We had patients and parents of patients come in to testify, and we heard a lot of testimony on the frustration of getting access to drugs and reimbursements, together with worries about provincial governments changing the rules halfway through. Is there anything we can do, from a federal pan-Canadian strategy perspective, to make this easier, to ensure that people or families who have to deal with rare diseases can have easier access or opportunities to get these drugs?

[Heather Logan]

I'll offer a comment to start.

One of the key elements that I think will be absolutely necessary to have in place, and that currently needs some infrastructure support and coordination, is around real-world evidence. If you imagine a future state where we can conditionally approve a drug, or where the payers conditionally approve a drug, their level of confidence about the clinical impact may be muted, so we have concerns about implementing the drug. However, because of patient need, there is a desire to do so.

You'd want to be sure, given the cost of these drugs, that at some point over the course of time you can evaluate whether the clinical outcomes you think you're paying for are actually the clinical outcomes you are paying for. The ability to collect, to analyze and to use real-world evidence is an area that I think we could excel at in this country. We have exceptional researchers and exceptional analysts. We have done an insufficient amount to coordinate that system.

Having said that, on October 21, CADTH, the Institute of Health Economics, Health Canada and one other organization, whose name I'm forgetting at the moment, organized a summit. An action plan is coming out of that. If there's a way to support that action plan, if it's supported by partners, it would be a positive step.

[The Chair, Liberal, Bill Casey]

Thanks very much.

Now we go to Ms. Gladu.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

I have a couple of questions. The first one is a very difficult question. We know that part of what the PMPRB does is determine if the price of a drug is excessive. We saw the costs of some of these drugs that were presented by the individuals who have come, so what is the maximum amount we would want to pay for a drug for a lifetime use?

[Douglas Clark]

The answer is that it depends on the drug and how effective it is and how much value it brings for the cost you're paying for it, right? Now unfortunately, all we can do in setting price ceilings with respect to these types of drugs that are first to market, first in class, have no competitors, is to look at the prices the company that has the patent for that drug is charging in other countries. Those prices do not reflect, as I mentioned, the true price in the market.

Increasingly, what we're seeing is that, because many countries try to control or at least contain costs in the pharmaceutical realm on the basis of what we call external reference pricing, comparing with other countries, there's been a convergence in the pricing of these new drugs that are coming onto the market. There's very little daylight between countries today, so it's not a very valuable reference point. I think that's why we're trying to look at, if those factors are approved, things like value for money, market size, GDP.

It will be a drug-by-drug assessment, so there's no one single answer. There may be instances where a drug that costs a million dollars a year is really good value. It all depends on the clinical effectiveness of that drug and how it compares to other drugs.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Okay. We have this list of countries that we're going to put in the bucket. One way of shortening the time to approve access for drugs for Canadians would be to say, you know, that because these people who are in the bucket are in countries that we very much respect—the U.K., France, etc.—if it was approved in their country, it would be automatically approved in Canada without our having to do anything else. What do you think about that idea?

[Douglas Clark]

Well again, that's not within the purview of the PMPRB. It's a Health Canada question, but it is actually moving in that direction to some degree, especially for the SAP drugs that they're trying to get onto the market and formalize their presence in Canada. They are contemplating working with the EMA, to a lesser extent the FDA, and I'm not sure about Australia, and accepting at face value the market authorization that's been granted in that country as a basis to grant it in Canada. It will still be on a case-by-case exceptional basis. I think it's mainly for those rare disease drugs that are on SAP currently, but it's a very good idea and it's one that's being adopted by Health Canada.

[Heather Logan]

I would add that the regulatory review of drugs and devices, R2D2, is actually including the use of foreign reviews as one of the projects. Again, Health Canada is the best organization to speak to that, but from what we hear from the regulators, they're already beginning to determine how that might happen and under what conditions. That kind of discussion is already under way.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

What about if we try to incentivize doing more clinical trials in Canada? We're punching above our weight, but we want people to not just do clinical trials but somehow incentivize them to build their facilities and get their drugs produced here.

Is there a way that you could incentivize people to do clinical trials by saying, if there's no negative outcome of the clinical trial that you do in Canada, you have automatic approval, or something like that?

[Douglas Clark]

That could work, I suppose, but again it's sort of outside our wheelhouse.

I think I said that Innovation, Science and Economic Development would be better suited to answer those types of questions

However, I think if we had the answer, the policy would be in place and we'd have a lot more clinical trials taking place in Canada.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

This is just one last question, from the private sector viewpoint.

Normally, if we knew the price we wanted to negotiate was the median price of an OECD bucket, we would just make that a contract term in every negotiation we had, and would demand that the manufacturers provide us with evidence that we're receiving that price.

Why don't we do that?

[Douglas Clark]

We do get that evidence, and if it turns out that they're not complying with their price ceiling, then we'll take appropriate action. An investigation will be commenced, and enforcement action will be taken; it could go to a hearing.

The reality is, as I mentioned, ceiling prices based on list prices bear less and less resemblance to the outcomes of those negotiations between the pCPA and the companies. The rebates are quite significant, but they're unknown to us.

List prices are a bit more relevant to private payers or out-of-pocket payers, because that's typically the starting point to negotiation. They have a lot less group buying power. They can't come together as a collective and negotiate, and avail themselves of that countervailing power.

However, I don't think there's a need to do that. I think we exist as a mechanism to ensure that takes place.

[The Chair, Liberal, Bill Casey]

Okay. Thanks very much.

My little note says that Ms. Sidhu is next, but Dr. Eyolfson is going to ask the questions on her behalf.

Dr. Eyolfson.

[Doug Eyolfson, Liberal, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair. That's a pleasant bonus.

I'm going to expand on Ms. Gladu's line of questioning. I was hoping she'd have more time to do this, so I'll just simply continue it.

We talked about how you identify prices that are quite above the median of the OECD countries, yet you said we are paying among the third-highest prices in the OECD.

How has this not been addressed in these places and corrective action taken, both with the rare disease ones, and again going back to insulin, and many other common drugs that we're paying much, much more for—sometimes orders of magnitude more—than other OECD countries?

[Douglas Clark]

The problem is that we're conflating what the PMPRB does currently with what's proposed.

Currently we compare our prices to PMPRB7, which is a fairly premium-priced set of countries.

What we're proposing is to compare ourselves to this basket of 12 countries where, on average, prices are more aligned or in tune with the OECD median. In the future, if these amendments come to pass, our list prices should converge toward the OECD median.

However, today, if you're a breakthrough drug or substantial improvement drug, you start off at the median of the PMPRB7, and then you're allowed to increase price in keeping with CPI until you hit that absolute ceiling of the highest international price. Typically, that's the U.S., where prices are two times to two and a half times higher than everybody else.

We start off at a ceiling that's not that stringent, and then it creeps up, it drifts up, toward the U.S., as opposed to going down towards the European countries that we compare ourselves to.

[Doug Eyolfson, Liberal, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you.

This is something that's come up before, and I need a refresher.

We had talked about the patent protections that were given back in the 1980s. There was an agreement from industry. Was it 10% of their profit would be to R and D, or—?

[Douglas Clark]

No, it was 10% of sales.

[Doug Eyolfson, Liberal, Charleswood—St. James—Assiniboia—Headingley, MB]

Yet the figure we have now is that they're spending about 4% of their sales.

Are they not in breach of this agreement?

[Douglas Clark]

Well, it was a handshake agreement. It's not a contract, so they're in breach of a handshake undertaking, I suppose, which—

[Doug Eyolfson, Liberal, Charleswood—St. James—Assiniboia—Headingley, MB]

You mean this wasn't actually written. It was more of an agreement.

[Douglas Clark]

It was memorialized in a letter from the then head of what was called something different at the time, but is now called IMC, and the minister of consumer and corporate affairs at the time.

The industry really takes issue with the way we are defining the scope of R and D today. They've done a number of studies that they say support the fact that they're actually doing more R and D in Canada than we are accounting for.

I think the studies speak for themselves. To me, they reflect more the industry's footprint in Canada, as opposed to just their R and D, strictly speaking, but I know that this question.... The R and D definition hasn't changed over time, and the R and D on those cases is gone—

[Doug Eyolfson, Liberal, Charleswood—St. James—Assiniboia—Headingley, MB]

Yes. That actually answered my question.

I'll end with this last question. As we've said, a reference was made to Dr. Lexchin's earlier testimony that they bandy about these figures of $2.5 billon for every drug but it's confidential data. Is there not some body that has the power to legally obtain this, to actually tell them that we are legally requiring them to disclose this to us?

[Douglas Clark]

That number, as far as I know, originates with a Tufts University study. I started off years ago in patent policy for the federal government. I was eventually transferred to—