Health Committee on Nov. 6th, 2018

[The Chair, Liberal, Bill Casey]

Welcome to meeting number 121 of the Standing Committee on Health. Today we are discussing the barriers to access to treatment and drugs for Canadians affected by rare diseases and disorders.

I understand there will be an interruption. Apparently, there's going to be a vote sometime this morning. We should be ready for that and we may have to knock off early. I'll try to keep on schedule. I'll try not to be rude but if somebody goes over, I'll have to cut them off because we want to get through as many as we can.

We have two excellent witnesses this morning. From the Patented Medicine Prices Review Board, we have Douglas Clark.

From the Canadian Agency for Drugs and Technologies in Health, we have Heather Logan. They're both anxious to testify. I talked to them earlier and they're anxious to get going.

Welcome.

We're going to start with Mr. Clark.

You have a 10-minute opening statement.

[Douglas Clark, Executive Director, Patented Medicine Prices Review Board]

Mr. Chair, members of the committee, good morning. Thank you for the invitation to appear before you today.

Before I move on to the questions, I want to take a few minutes to explain where the Patented Medicine Prices Review Board, or the PMPRB, stands in the Canadian health care system, the challenges we currently face as a price regulator, and the ongoing efforts to modernize the way we fulfill our regulatory mandate.

The PMPRB was created in 1987 as the consumer protection pillar of a major set of reforms to the Patent Act, which were designed to encourage greater investment in pharmaceutical R and D in Canada through stronger patent protection for pharmaceuticals. PMPRB is a quasi-judicial body with a regulatory mandate to ensure that patentees do not abuse their patent rights by charging consumers excessive prices during the statutory monopoly period. Its creation arose out of the concern that stronger patent protection for medicines might cause prices to rise unacceptably so as to become unaffordable to consumers.

PMPRB is a creature of the Patent Act, which is the responsibility of the Minister of ISED, but given the nature of the products that we regulate, the provisions in the act that relate to us are the responsibility of the Minister of Health. While the PMPRB is part of the health portfolio, our role as an administrative tribunal with a quasi-judicial function means that we operate at arm's-length from the minister and from other health portfolio members.

Under our current framework, new patented medicines are assessed for the degree of therapeutic benefit they provide relative to existing medicines on the market. Depending on the outcome of that process, patentees are expected to set their prices with regard to a price ceiling that is based on the price of that same medicine in what we call the PMPRB7 countries, the price of medicines in Canada in the same therapeutic class or some combination of the two.

Once a patentee sets a medicine's introductory price in relation to that ceiling and enters the market, it may increase its price but subject to limitations based on changes in the consumer price index. Our only absolute ceiling is that the price of a patented medicine in Canada can never be higher than the highest price in the PMPRB7.

The PMPRB's regulatory framework is implemented by the board staff, who are public servants like me and who monitor and investigate patented medicines that seem excessively priced. The staff apply the tests and thresholds specified in the PMPRB's guidelines to identify potential cases of excessive pricing practices. When a price seems excessive, the patentee is asked to submit a voluntary compliance undertaking, which may include a written commitment to lower the price of the patented medicine and to offset any excess revenues.

In the absence of an acceptable VCU, an investigation may proceed to a public hearing before a panel composed of Governor in Council appointed members of the PMPRB's board. During such a hearing, the board panel acts as a neutral arbiter between the parties, i.e., the patentee and staff. If the panel determines that the patented medicine was sold at an excessive price, it may issue an order requiring the patentee to reduce its price to a reasonable level or to repay any excess revenue that resulted from selling the patented medicine at an excessive price.

An order of the board can be enforced in the same manner as an order of the Federal Court.

Since the establishment of the PMPRB over three decades ago, the pharmaceutical industry has changed significantly. R and D is increasingly focused on high-cost medicines such as biologics, genetic therapies targeted to smaller patient populations and medicines for rare diseases. The risk of excessive pricing is often greater for these products since they have few, if any, competitive substitutes and demand for new and better treatments among the more severely afflicted population is very high.

This is especially true for medicines that are the first of their kind or for which alternatives are less effective or have less tolerable side effects.

The current market dynamic has led to affordability challenges for public and private payers that, if left unaddressed, pose a very real threat to the sustainability of the pharmaceutical system in Canada. Between 2006 and 2016, the average annual cost of treatment for the top 10 selling patented medicines in Canada increased by 1,500% and the number of medicines in Canada with an annual per-patient treatment cost of at least $10,000 increased fivefold.

Fully 30% of public and private insurer spending on pharmaceuticals in Canada is allocated to these drugs versus only 5% a few short years ago, yet it covers fewer than 2% of beneficiaries. Drugs designated as orphan by the U.S. FDA or the EMA now account for almost 50% of new patented medicines coming under the PMPRB's jurisdiction every year.

The patented medicine prices in Canada are among the highest in the world. When it comes to the 35 member countries of the Organization for Economic Co-operation and Development, or the OECD, only the United States and Mexico have higher prices than Canada. In 2017, median prices of patented medicines in OECD countries were on average 19% lower than the prices in Canada.

Over the past several decades, many developed countries have relied on international price comparisons as a method to contain pharmaceutical costs. As regulators in these countries grapple with a growing influx in very high-cost drugs, they are increasingly looking at other methods for evaluating drug prices that consider the relative cost of the drug in relation to its health benefits and the impact reimbursement would have on total population health and health system expenditure. Although public list prices in other countries are still commonly referenced, they are increasingly a starting point to a more probing and substantive analysis of a medicine's economic value and affordability.

Corresponding changes to the PMPRB's regulatory framework are necessary so that it too can adapt to these changes. As members of the committee may know, the Minister of Health has recently proposed amendments to the PMPRB's regulatory framework that, if passed, would equip us with the regulatory tools and information we need to effectively protect Canadian consumers from excessively priced patented medicines in today's environment. The desired result of these changes is for the ceiling prices of patented medicines in Canada to be more closely aligned with prices in like-minded countries, more reflective of their relative value to the health system and more informed by the affordability constraints of the Canadian economy.

The modernization of the PMPRB is just one aspect of the Government of Canada's broader effort to not only make prescription drugs more affordable for Canadians, but also to ensure that Canadians have faster access to new medicines to meet the needs of the health care system.

We are aware of concerns that the proposed changes to the PMPRB's regulatory framework might delay or compromise Canadians' access to the very latest patented drugs. However, there is little evidence to support the argument that lower prices result in less access. The reality is that many countries with similar health care systems and economies to Canada's pay less for drugs yet enjoy the same or better access. The same is true of R and D investment.

Canada is not alone in struggling to reconcile finite budgets with patient access to promising, but costly, new health technologies. While our system can absorb one, two or maybe even dozens of high-cost drugs, it will collapse under the weight of hundreds, no matter how good they are. At the end of the day, the single most important determinant of access is affordability. The best drug in the world won't bring value to society if no one can afford it, or if the effect of paying for it for the fortunate few is to deprive effective health care to multitudes.

Thank you. I look forward to your questions.

[The Chair, Liberal, Bill Casey]

Thank you very much. There are some interesting numbers there.

Now we will go to Heather Logan, with the Canadian Agency for Drugs and Technologies in Health, for 10 minutes.

[Heather Logan, Acting Vice-President, Pharmaceutical Reviews, Canadian Agency for Drugs and Technologies in Health]

Mr. Chair, thank you for the opportunity to present to the committee this morning.

I'd like to start by telling you about the Canadian Agency for Drugs and Technologies in Health, CADTH, and how our work enhances the accessibility, affordability and appropriate use of pharmaceuticals and other health technologies in Canada.

CADTH is an independent not-for-profit corporation that was established in 1989. Our primary goal and principal success criterion is impact—by providing better health, better patient experience and better value for Canadians. The members, or the owners, of CADTH are the federal, provincial and territorial deputy ministers of health who fund CADTH. This includes Health Canada and all provinces and territories except Quebec. We are governed by a board of directors that reports to the deputy ministers.

We refer to ourselves as an HTA, a health technology assessment agency, meaning we provide evidence-based assessments of the clinical and cost-effectiveness of drugs, diagnostics, and medical, dental and surgical devices, procedures and programs. In essence, we have two broad areas of work, our drug portfolio and our medical devices portfolio. We have a number of programs and products in place to support the management of medical devices in Canada. However, I will focus my comments today on our drug portfolio.

CADTH provides a range of services to support the effective management of pharmaceuticals in Canada, most notably the CADTH common drug review, CDR, and the CADTH pan-Canadian oncology drug review, pCODR. The CADTH common drug review program is a federal, provincial and territorial process that was established in 2004 to provide a common approach for reviewing the clinical and cost effectiveness of new drugs and existing drugs that may have new uses. We also receive input from patient groups as part of that review.

The common drug review supports coverage decisions for 18 of the 19 publicly funded drug plans in Canada, including the six plans managed by the Government of Canada for such specific populations as the military, veterans and Canada's indigenous peoples. Quebec has its own system for drug reviews through its HTA organization, INESSS, which is very similar to the approach CADTH uses and is increasingly becoming well aligned with CADTH through our excellent relations.

The pan-Canadian oncology drug review program was established by the provinces and territories in 2010, again with the exception of Quebec, and was transferred to CADTH on April 1, 2014. The federal government joined as a funding partner on April 1, 2016. Similar to CDR, the pan-Canadian oncology drug review provides a common process for the assessment of cancer drugs and makes reimbursement recommendations to Canada's federal, provincial and territorial public drug plans and cancer agencies to guide their cancer drug-funding decisions. The CADTH CDR and pCODR programs support funding decisions for individual drugs. We also conduct multi-drug reviews on classes of drugs under the auspices of our optimal use program.

One other service I would like to mention is our rapid response service, where we provide quick evidence reviews on the dauntingly large and complex medical literature. This service is extremely helpful in that it directly addresses the urgent needs for evidence that informs policy and practice. It's a widely used service, with more than 4,000 reports completed in the last decade by federal, provincial and territorial governments.

Early in 2018, CADTH adopted a new three-year strategic plan. The plan articulates a bold new direction for CADTH, and positions us as a key player in enhancing the accessibility, affordability and appropriate use of health technologies in Canada. Under the strategic plan, CADTH is building upon its success as a health technology assessment agency to become a health technology management, HTM, enterprise. We are implementing strategies to enable life-cycle health technology assessment, increased collaboration and engagement, and comprehensive implementation support. We are expanding our reach by embedding CADTH staff in jurisdictions across Canada and by being responsive and agile, catalyzing opportunities to align efforts across the drug review and approval system. It is CADTH's commitment to collaboration and integration that has brought us before the Standing Committee on Health today.

CADTH is pleased to be supporting a national consultation on a proposed supplemental process for highly specialized and complex drugs, including those used in the treatment of rare diseases. As this new initiative will help shape the future of Canada's drug review process, CADTH is planning to initiate an extensive consultation to ensure that Canadians have an opportunity to be able to provide input and to align our own processes with this new supplemental process.

It is estimated that there are more than 7,000 known rare and ultra-rare diseases. Of these, approximately 95% have no effective treatment options. This gap has become the focus of a considerable amount of attention by the pharmaceutical manufacturers for research and development, which can be associated with both high risk and high reward; by clinicians who are searching for effective options to improve quality of life, alleviate pain and suffering, and cure disease; and, more importantly, by patients and families who live with the often significant impact of these diseases.

In our experience, submissions from pharmaceutical manufacturers for drugs that treat these diseases are often associated with several challenging realities.

One, the size of the target population is small, making it difficult to conduct a clinical trial. Regulators such as Health Canada and health technology assessment organizations like CADTH consider randomized clinical trials the gold standard. When less-than-robust trial data are available, there is a correspondingly high degree of uncertainty about the true magnitude of the clinical benefit, or the efficacy, and also the safety and cost-effectiveness of the therapy being reviewed.

Two, clinical trials for rare and other diseases often use surrogate end points rather than real outcomes, which further increases the uncertainty regarding the effects of the treatment on clinical outcomes that are of primary concern to patients, such as mortality and quality of life.

Three, for reasons that are not always fully understood—they perhaps relate, at least in part, to the high cost of research and development, small eligible population and length of time required to recoup the investment to bring the drug to market—the cost of these therapies is invariably extraordinarily high.

In short, drugs used to treat these highly specialized and often complex diseases are often plagued by limited evidence, lower confidence in the magnitude of clinical benefit, extremely high cost and highly uncertain cost-effectiveness. This reality makes it difficult for CADTH's expert review committees to recommend reimbursement and for public payers to offer reimbursement given the finite resources of the public health care system.

In the past several years, CADTH has engaged in numerous initiatives to clarify and enhance our pharmaceutical review processes to address these challenges. These include enhanced training of our review staff to enhance our assessment of treatments with limited evidence; updating the deliberative framework of the CADTH expert review committees to allow for leeway in making funding recommendations for treatments of rare diseases; allowing greater opportunities for manufacturers to submit alternative types of data, so-called real-world evidence; strengthening clinician and patient engagement in the review process; and expanding opportunities for early dialogue and engagement with manufacturers. Most importantly, CADTH recently established a new parallel review process, in collaboration with INESSS and Health Canada, that will allow reviews to be completed within the shortest possible timelines.

Recently CADTH announced an initiative to integrate panels of clinical specialists into our review process to better inform and assist the pan-Canadian pharmaceutical alliance and provincial drug plans to implement drug funding recommendations. These panels enhance CADTH's engagement with the clinical community and further reinforce regional representation for important pan-Canadian funding recommendations. We have partnered with our HTA colleagues at INESSS in Quebec in a pilot initiative to hold joint panels for a truly national approach to these challenging reviews.

Finally but importantly, CADTH is pleased to be able to support the expensive drugs for rare diseases, EDRD, working group in conducting a national consultation about a proposed supplemental process for highly specialized and complex drugs. The EDRD was established by the deputy ministers of health in 2014 to explore the management of rare diseases with evidence-based approaches. The EDRD working group is being co-led by three provinces—British Columbia, Alberta and Ontario. As they were unable to send a representative today to appear before the committee, they gave me approval to share some of the information with you on their behalf.

The proposed supplemental process includes provisions to address several of the challenges I have already spoken about. These include limited data regarding efficacy, safety and cost-effectiveness; high uncertainty in the magnitude of clinical benefit; and the high cost of these drug treatments. While the members of the EDRD working group are best positioned to explain the specifics of the proposed supplemental process, we can confirm that it includes options that may help public drug plans provide time-limited access to these therapies as additional clinical evidence is being gathered.

Consultations have been organized for the EDRD working group to hear directly from clinicians, ethicists, researchers, patient groups and the pharmaceutical industry during web-based sessions on November 5, 6, 8, 13 and 14 respectively. More than 180 individuals have registered to participate in one of these consultations. Following this, there will be an opportunity for interested stakeholders to provide a written submission.

Information from the consultation process will be considered by the EDRD working group to inform discussion at the federal, provincial and territorial level about potential enhancements or changes to the proposed supplemental process. Because CADTH is integrally involved in supporting the provinces in this work, we are able to consider how this new proposed supplemental process might impact CADTH's review process and to modify our own approach accordingly to align efforts.

Ultimately, CADTH exists to serve the needs of its customers by providing evidence-based funding recommendations to support jurisdictional decision-making. We will continue to be responsive to opportunities to enhance our process, and are pleased to continue to support the EDRD working group and our other partners to address access, appropriate use and affordability of drugs, including those for highly specialized and complex diseases.

Thank you, Mr. Chair, for allowing me to present today, and I welcome any questions that the committee members may have.

[The Chair, Liberal, Bill Casey]

Thank you for your presentation.

Dr. Eyolfson.

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

Thank you, Mr. Chair.

Thank you, both, for coming. It was very valuable testimony, and I'll probably by contacting you both off-line regarding some more information on this.

Mr. Clark, thank you for your comment about the claims from industry that, by lowering our prices, we will decrease R and D and decrease access to new medications. I have had to wrestle with that argument from many stakeholders. You've said there is really no evidence to support this. Is that correct? Could you elaborate on that?

[Douglas Clark]

The very example of Canada would provide sufficient evidence to conclude that there's not much link. As I mentioned, we pay the third-highest prices for patented medicines in the world, and yet the ratio of our R and D to sales pales in comparison to the countries we compare ourselves to under our regime—the PMPRB7 countries.

The original composition of that group of countries was based on the assumption that if we emulated the types of IP regimes in those countries and priced in line with them, we would come to enjoy a similar level of R and D as in those countries. Obviously, that assumption has not been borne out over time. Currently, we are at an historical low in our ratio of R and D to sales.

When the PMPRB was created, and the patent protection was strengthened for pharmaceuticals, the industry committed to doubling their ratio of R and D to sales from 5% to 10%. It currently stands at about 4.4%, versus over 20% R and D to sales in the countries we compare ourselves to on average under the PMPRB7.

I would say that one need look no further than the Canadian experience to draw that conclusion. There is no empirical evidence, and I'm not aware of any studies that suggest an organic connection between IP and R and D, or price and R and D.

Most of the countries in the PMPRB7 have lower prices and more R and D than us. Also, the same can be said of Austria, Norway and Australia.

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

Thank you.

I just want to make sure I heard you correctly that, despite the fact that we have the third-highest prices in the PMPRB7....

[Douglas Clark]

The OECD...

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

I'm sorry. We have the third-highest prices in the OECD. We are at a historical low in our R and D in Canada.

[Douglas Clark]

Yes, we're lower than where we started in 1987 when we committed to strengthening patent protection for pharmaceuticals and established the PMPRB to protect consumers from excessively priced patented drugs. We were at about 5% at the time.

The industry did meet its 10% commitment in the mid-nineties, but it's been trending downward since 1999. It's been below 10% since 2003. Apparently, yes, it's at an historical low of about 4.4%.

I don't want to serve as a mouthpiece for the industry, but they would tell you that the way in which they conduct their R and D is no longer effectively or fully captured by our definition. I'll leave it to them to advocate on their behalf.

We feel that we are comparing apples to apples when we look at R and D to sales in Canada versus the ratio of R and D to sales in the PMPRB7 countries that I alluded to.

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

Thank you. That's very useful.

Another statement you said that speaks to some communication I have had from different stakeholders is that the main barrier to access is affordability. Is that correct?

[Douglas Clark]

Yes.

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

Thank you. That is something we've always believed. The reason I ask is that there is some literature being put out, particularly through some lobbying by the Canadian Chamber of Commerce, which is making some people believe that if we were to establish national pharmacare, this would lead to a lot of untoward drawbacks for small business. One of the statements they made—and this was from a policy resolution of the Canadian Chamber of Commerce—was that if we make cost the main focus instead of access, we will decrease the development of new drugs. Does that make any sense to you?

[Douglas Clark]

To be quite candid, I don't think anything Canada does has an impact on global R and D and innovation on a macro level. I suspect the same conversations probably took place back in the fifties and sixties, when Tommy Douglas was advocating medicare and a publicly funded health care system. I've heard lots of doomsday scenarios. I'm not aware of this particular study from the Chamber of Commerce, but at the end of the day, one would presume that if prices were lower, volume would go up—that's typically how supply and demand works—and more people would have access to the drugs.

Ultimately, it's a matter of finding a juste milieu between access and cost and price. That's where we think we're headed with these changes. That's taking into account value for money, by which I mean pharmacoeconomics or cost-effectiveness, and overall affordability in terms of the market size of the drug and its impact on the budgets of public and private drug plans.

I'm not sure if I answered your question.

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

Thank you. Again, that was very useful.

Now, this is off the topic of rare diseases, but it speaks to the dynamic of our current pharmaceutical environment. We have on one side the developers of the drugs for rare diseases. They say these are very expensive, and I don't doubt that they are.

[Douglas Clark]

They're definitely very expensive.

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

They're very expensive to develop. Randomized clinical trials aren't really viable in many of these extremely rare diseases with high mortality. At the same time, we have an essential medicine that we know works: insulin. It was given, basically, to the world by its creator a century ago, and yet we have not seen any decrease in the price of this medication in decades. If anything, some forms of it have actually gone up.

You were mentioning your price review. Is there a mechanism through your agency that can help in terms of influence? You say that you call companies to task if they're charging excessive prices. Would you say that insulin is being charged excessively right now?

[Douglas Clark]

To start, I will address the first part of your question.

I think it behooves me to correct a common misunderstanding or misapprehension about R and D costs related to very rare orphan drugs. If you look at the literature, it's pretty clear that R and D costs to bring a drug for a very rare disease to market are only a fraction of the R and D costs of a more common or conventional drug that isn't designated as an orphan. It's somewhere in the order of 25%. The real issue, I guess, is the small patient population and what opportunity that provides to recoup drug costs at the end of the day.

Some people have suggested that the profit margins for companies that are bringing forward orphan drugs are well in excess of the profit margins for companies that are producing more conventional drugs. That might be something that's worth taking a look at over the long term. It's just very difficult to disentangle R and D costs for a lot of these big multinational companies, but I can tell you that in our experience, looking at companies that are single-product and that produce orphan drugs, sometimes we're seeing gross profit margins in the order of 90%. That is—

[The Chair, Liberal, Bill Casey]

I'm sorry, I have to cut you off there.

[Douglas Clark]

Okay. I didn't get to the insulin question, and I apologize.

[The Chair, Liberal, Bill Casey]

I hate to do it. It's very valuable information.

Mr. Kmiec, you have seven minutes.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

I'll spend most of my time asking questions of CADTH.

Are you subject to any parliamentary oversight? You said the deputy minister of health sits on your board. If I do an access to information request to CADTH, will I get information?

[Heather Logan]

No, access to information requests are possible through the provinces, which are members of CADTH. To the best of my knowledge, there's no ability for access to information requests through CADTH.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

So the Auditor General has no jurisdiction over CADTH?