E-drug: Re: Drug price mechanisms - request for information (cont'd)
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Let me try and explain the complicated Canadian situation re control
over drug prices; complicated because different levels of government use
different mechanisms for controlling prices. The federal government has
established the Patented Medicine Prices Review Board which calculates
the maximum introductory price for a new patented drug. It either
compares the price of the new drug to the price of other drugs already
on the Canadian market in the same therapeutic class or it compares the
proposed Canadian price to the prices in seven other countries (US, UK,
France, Germany, Switzerland, Sweden and Italy). Which comparison is
used depends on which of three categories the drug is placed in:
breakthrough/major therapeutic advance, moderate/little/no therapeutic
advance, line extension. The new drug cannot be more expensive than the
most expensive drug in the same therapeutic group or more expensive than
the median international price. The PMPRB also limits the rate of rise
of prices of existing patented drugs to the rate of inflation. The
PMPRB does not have any control over the price of nonpatented drugs or
generic drugs. (For those who want more information about the operation
of the PMPRB the website is http://www.pmprb-cepmb.gc.ca/mandate.html)
The Canadian provinces also have their own mechanisms for controlling
prices. Provinces generally have drug programs that pay most of the
cost of drugs for people over 65 and on social welfare, which generally
means that these programs cover about 40-45% of drug expenditures in a
given province. Provinces therefore have considerable buying power and
use this power to bargain with drug companies about the price of their
drugs. Ontario, the largest province with public expenditures on drugs
of about CAN $1.3 billion annually use to have a policy of "Best
Available Price" which meant that the Ontario government demanded that a
company sell to it at the lowest price that it sold to anyone in
Canada. When generic equivalents are listed on provincial formularies,
nearly all provinces also will only reimburse pharmacists for the cost
of the least expensive generic equivalent. Therefore, if the brand
costs say $1.00 per pill, generic A costs $0.75 per pill and generic B
costs $0.70 per pill, then irregardless of which product the pharmacist
dispenses s/he will only get $0.70 per pill. Some provinces also
control the price of the generics-Ontario will only list a generic
equivalent if it is at least 25% lower than the brand name product.
Subsequent generics need to be 10% lower than the price of the first
generic. Finally, British Columbia has introduced reference based
pricing for 5 categories of drugs-H2 blockers, nitrates, NSAIDs, ACE
inhibitors and (I think) the dihydropyridine groups of calcium channel
blockers. In each of these groups, the province has selected a
reference product and its drug plan will only pay the cost of the
reference product irregardless of which drug in the group is dispensed.
If the patient wants a more expensive product s/he has to pay the
difference. (Where there is a medical need for one of the more
expensive products the province will cover the entire cost.)
The Patented Medicine Prices Review Board was established through
legislation when Canada modified and subsequently abolished compulsory
licensing for pharmaceuticals. All of the provinces use a combination
of legislation and regulations to manage their drug plans.
I hope this helps.
Joel Lexchin
--
Joel Lexchin MD
Townhouse #2--40 Cedar Crescent
Glenside, S.A. 5065
Australia
Tel: +61 8 8338 0151
e mail: joel.lexchin@utoronto.ca
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