Thank you, Mr. Chair.
Good afternoon, everyone.
First of all, I would like to thank the members of the Standing Committee on Health for the opportunity to testify today as an individual on the regulatory changes contemplated by the Patent Medicine Prices Review Board, the PMPRB.
My name is Yanick Labrie, and I am a health economist. I have taught economics at various colleges and universities in Quebec. In the past 15 years, I have conducted more than 30 studies on pharmaceutical policy issues for various research centres. My presentation today is based in large part on research that I have conducted and published in recent years.
In March 2020, the PMPRB's executive director stated that the tightening of price controls under consideration would not have a negative impact on R&D investment or drug launches in Canada. It was a surprising statement, to say the least, and one that contradicted both economic theory and the empirical literature on the subject.
First of all, we know from economic theory and experience that pharmaceutical companies rank potential investment projects in descending order of each one's expected rate of return. Obviously, in the context of tightening price controls, with increasing uncertainty surrounding R&D projects and declining anticipated profits, one should clearly expect a drop in pharmaceutical R&D investment in Canada if the PMPRB decided to implement its regulatory reform. The entire life sciences ecosystem across the country, particularly in Quebec and Ontario, would be affected.
Furthermore, there can be no doubt that pharmaceutical companies will tend to prioritize launching their drugs in countries where anticipated profits will potentially be highest. Since stricter price controls decrease companies' anticipated profits, there will be less incentive to prioritize new drug launches in the Canadian market, which is relatively small in the global context.
These are not merely theoretical predictions. Last year, I conducted an exhaustive review of the scientific literature on the links between price regulation, pharmaceutical R&D investment and access to medicines. That peer-reviewed study was published in the June 2020 issue of Canadian Health Policy. Only 4 of the 49 academic studies surveyed established a significant link between price controls and delays in new medication launches, and only one found no evidence that price controls reduce pharmaceutical R&D spending. All the other 44 studies showed that price control policies discourage R&D investment and reduce or delay drug launches in countries that impose them. Small markets for pharmaceutical companies, such as Canada, are particularly at risk of seeing delays in the marketing of new medicines.
You also have to understand that delayed drug launches generate societal costs because they prevent many patients from enjoying the drugs' health benefits sooner. These delays increase the risks of complications and premature death and have negative effects on patients' quality of life. They also increase the economic burden that patients are very often forced to bear while waiting for a more effective drug.
From 2009 to 2018, it took an average of 690 days, nearly 2 years, for provincial governments to agree to cover new medicines approved for marketing in Canada. Unfortunately, the tightening of price regulation contemplated by the PMPRB could vastly undermine pharmaceutical innovation and force patients to go without drugs they need or to wait even longer for access thereto.
The regulatory changes proposed by the PMPRB are based on the idea that the rising influx of costly drugs in recent years would compromise the capacity of insurance plans to bear the increased costs associated with them. However, the data that the Canadian Institute for Health Information has published on changes in total spending on prescription drugs in the past 10 years show that this is not all the case.
In fact, despite the rising influx of more expensive drugs into Canada, we have seen slower growth in total pharmaceutical spending in the past few years, including distribution and pharmacy services. Adjusted for inflation, real per capita spending on medicines has experienced zero growth in Canada since 2010.
Spending in all other main health expenditure categories has risen faster than spending on prescription drugs in the past 10 years. In 2019, prescription medicine spending represented 13% of total health expenditure in Canada, a figure that had declined since 2010. Spending on prescription drugs across the country also fell as a percentage of GDP from 1.7% in 2010 to 1.5% in 2019.
This pharmaceutical expenditure actually tends to be overestimated as it does not reflect confidential discounts secured by federal, provincial and private drug insurance plans.
In conclusion, I do not recommend that the members of the Standing Committee on Health support the regulatory changes contemplated by the PMPRB. Contrary to what one frequently hears, spending on drugs and pharmaceutical services is not out of control in Canada. Spending on prescription medicines has represented a steadily declining segment of Canada's economy and health budget since 2010.
The tightening of price regulation that the PMPRB is considering could well have negative consequences for the Canadian public. It will not only delay the launch of new drugs in Canada and reduce their number but will also discourage R&D investment, which is essential to guaranteeing the development and availability of new medicines for Canadians in future.
Thank you for your attention.