Thank you very much. I appreciate the opportunity to speak to you today.
By way of introduction, I am an economist by training, and I am a full professor of health policy at the University of British Columbia. I think it's important to note, for instance, that I've published over 150 peer-reviewed research papers on pharmaceutical policy. I've won literally millions of dollars in peer-reviewed research grants in Canada and the United States. I have served as an expert on expert advisory committees concerning matters related to pharmaceutical pricing and access for the World Health Organization and the OECD.
I'll keep my opening remarks very brief, as I prefer to use the available time to help fill knowledge gaps that you might have identified as important to your work.
I will start by expressing my support for reforms to our patented medicine price regulations. The old regulations were never designed to provide significant protection against high prices in Canada. They were designed on the false premise that, if Canada paid about the same amount for pharmaceuticals as countries with high levels of pharmaceutical R and D, then Canada would also become a country with high levels of pharmaceutical R and D.
That was never going to happen, and, sure enough, it didn’t. As I wrote during the 10-year review of the PMPRB in 1997, there was much to fix in the regulations from their outset, but the need for regulatory reforms has become even greater in recent years.
Two trends are important here. First, the pricing of pharmaceuticals has become entirely secretive worldwide. Drugs are priced like cars at a dealership. There is the list price, which everyone knows is higher than anyone should really pay, and then there is the actual price, negotiated in secrecy between the seller and each individual buyer.
Paradoxically, it was the widespread use of international reference pricing regulations that was the main reason that secrecy has now become the norm in pharmaceutical pricing. That is, so many countries were using international comparisons of list prices to determine the maximum prices that should be charged within their countries that manufacturers decided to go with confidential prices and confidential price negotiations as a means by which they could charge the most they possibly could in every market. In order to do that, they had to inflate, that is, to raise, list prices in every market. The benchmarking of list prices to international comparisons is now the norm, and, frankly, it is no longer enough.
This brings up the second reason for regulatory modernization. That is the excessive prices that are now frequently asked for for many medicines, especially for medicines that are specialized drugs for treating serious conditions. Excessive patented drug prices are indeed possible, because patents give manufacturers temporary monopolies over the sale of particular medicines.
The potential for abuse of the resulting market power is high, because consumers of patented medicines, also known as “patients with medical needs”, can suffer and might even die if they are unable to afford a treatment. By legally limiting the net-of-confidential-rebate prices that a manufacturer can even ask the Canadian health care system to pay, new patented drug price regulations could prevent the worst cases of excessive pricing and, at the same time, speed up negotiations over final prices and the terms of coverage for Canadians. Patients would get the medicines they need more quickly, and our health care system, ideally a system with universal pharmacare incorporated within it, would likely be able to afford to cover more of those medicines.
Industry will oppose these reforms, and they will provide funding to patient groups willing to oppose the reforms, too, but that doesn’t mean the regulations are wrong. If anything, it means that, unlike the original 1987 versions of the PMPRB regulations, the proposed reforms might actually work.
Thank you. I look forward to any questions you have.