Evidence of meeting #121 for Health in the 42nd 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.
Liberal
Doug Eyolfson Liberal Charleswood—St. James—Assiniboia—Headingley, MB
I understand that. As I say, we're not sure how accurate the figure is.
Is there not a mechanism? As we've said, it goes back to the confidentiality. The industry says that it needs to charge these high prices because their R and D is so expensive, but they're not going to tell us what their R and D is.
Liberal
Doug Eyolfson Liberal Charleswood—St. James—Assiniboia—Headingley, MB
Is there not some legal mechanism in the regulations so that we can say, no, we need you to tell us what this is costing you to make to justify the prices...?
Executive Director, Patented Medicine Prices Review Board
No, not really. As I said, it could be compelled in a hearing context, but it's really difficult for most companies that are large multinationals with a huge inventory of products to disentangle the actual R and D that was spent, including the failures that got your product to market. Even if you could compel it—and I'm not aware of a jurisdiction that does—it would be very difficult to figure out.
You can look at SEC filings in the States, the 10-K filings, and get some insight into how much is being spent on R and D. Most companies spend about twice as much on marketing as R and D these days, but like I said, every once in a while you'll see a company that's a single-product company. Then there's pretty transparent visibility into what their R and D was, what their cost of making and manufacturing was, the cost of production—the cost of sales, I should say—and what their gross and net profit margin is. Sometimes it can be quite exorbitant.
Liberal
The Chair Liberal Bill Casey
Your time is up, Dr. Eyolfson.
We tried to get that information here, too, and we were unable to get anywhere near it.
Executive Director, Patented Medicine Prices Review Board
You're in good company.
NDP
Don Davies NDP Vancouver Kingsway, BC
So the way we price drugs in Canada is that we take seven comparator countries, three of which—the U.S., Switzerland.... Is Mexico part of that seven?
NDP
NDP
Don Davies NDP Vancouver Kingsway, BC
We take the most expensive prices in the world and we get a very high average. We take that as the median and then we allow the drug prices to go up to the highest price in the world. Do I understand that?
Executive Director, Patented Medicine Prices Review Board
Well, it depends on the circumstances. Oftentimes companies don't increase their price—
Executive Director, Patented Medicine Prices Review Board
There's a formula that's based on CPI. Provided they're compliant with that calculation, then yes, they can increase their price in keeping with CPI on an annual basis until they hit that wall, that absolute ceiling that is the highest international price. That doesn't happen in every case. It does in some cases. It doesn't in others, but—
Executive Director, Patented Medicine Prices Review Board
Yes. That's the system.
NDP
Don Davies NDP Vancouver Kingsway, BC
If it's our system that permits that, it's no surprise to me that we're paying world prices.
Executive Director, Patented Medicine Prices Review Board
I agree with that.
NDP
Don Davies NDP Vancouver Kingsway, BC
I'm not a health policy expert, but it would strike me as quite logical, as you pointed out, that if we just get a more representative larger basket with lower prices and take that as the median price, the prices will come down. That's a matter of logic. What's the barrier to doing this? Why is this government not doing that now?
Executive Director, Patented Medicine Prices Review Board
Well, as I mentioned, list prices are only half the battle, right? The real price is the price net of rebates, which—
NDP
Don Davies NDP Vancouver Kingsway, BC
That's where I'm going to go next, but just in terms of isolating this factor, why don't we change the comparator countries to the 12 more representative ones and get the U.S. out of there now?
Executive Director, Patented Medicine Prices Review Board
Well, that's been proposed, so that train has left the station. There is a regulatory process, and it takes time. I think it's complicated in this particular instance by the fact that we have other components to that regulatory proposal—namely, the new factors for the PMPRB to consider in determining what constitutes an excessive price. Those are very controversial, so we're facing a lot of—
NDP
Don Davies NDP Vancouver Kingsway, BC
Can I ask you, Mr. Clark, who makes that decision, ultimately, about the comparator countries?