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AARP International Forum
on Prescription Drug Policy
Washington
Canadian Drug
Pricing Policy
Tom Brogan
President
BROGAN INC.
June 2003
BROGAN INC.
Canadian Drug Pricing
Policy
“Explain the difference in Canadian and US
Prices”
 Historic factors
 Federal review agency
 Provincial government impact on pricing
 Conclusions and Policy Considerations
Economic Impact on Price
Pricing historically lower in Canada
1968
1976
1982
1983
19% below US
15%
Single Source
19%
Drugs Only
16%
Price for individual market
Income per person 22% below US
GDP per person 15% below US
Government influences on
pricing
Federal Patented Medicine Prices Review Board reviews prices
for all patented drugs sold in Canada
$
Provincial gov’t decision process for determining which drugs to
reimburse for population covered (seniors, welfare, others)
1987 Federal Policy Changes
 Patent system restructured
 Compulsory licensing restricted
 Industry R&D commitment main
objective
 Price review - quid pro quo
– Major public opposition
R&D-to-Sales Ratios of
Reporting Companies (1987-2001)
14%
12%
10%
8%
6%
4%
2%
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
0%
Rx&D Patentees
Source: PMPRB Annual Report 2001
Patented Medicine Prices
Review Board (PMPRB)
Guidelines (transparency)
Main Factors
Consumer Price Index (CPI)
International prices
Therapeutic class
PMPRB Impact
 Companies plan pricing to comply
 Some flexibility in administration
 “Price control” applicable to few drugs
 21 Voluntary compliance agreements +
2 hearings in 15 years
Pharmaceutical Price Trends
Ratio of Prices for Patented Drugs in Canada to Median
International Prices 1987-1997
1.4
1.2
1.2
Int’l = 6 European countries + US
1.2
1.1
1.1
1.1
0.6
1.1
1.0
1.0
0.8
1.1
0.9
0.9
0.9
1987: 45% of patented
drugs below median
1997: 78% of patented
drugs below median
0.4
0.2
0.0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Source: PMPRB- Trends in Patented Drug Prices-1998
Provincial Price Influences
 40% of drug market paid by provincial
government plans (depending on drug)
 Provinces influence prices through
market access
 Restrict reimbursement based on
therapeutic and cost advantages
Provincial Policies and
Practices
 Formularies
 Detailed listing process
 Submissions
– Clinical
– Application to covered population
– Budget impact and
pharmacoeconomic analysis
Provincial Policies and
Practices
 1994 price freeze
 Generic substitution
 Special Listings
• First line vs. second line
• Selected indications only
 Reference-based pricing
 Manufacturer agreements on sales
 Cost-sharing / income-testing
New Molecular Entities
No. & type of listing by province
58 new drugs receiving NOC in 1999-2001
Special Listings
Full Listings
No. of listings
50
40
30
15
12
20
10
24
6
6
29
14
17
BC
AB
9
9
18
21
15
5
14
16
NB
NS
0
SK
MB
ON
Province
Source: BROGAN iMAM™
QC
Growth in Public Plan Total Cost,
Seniors 1993/94 – 2002/03, Ontario
Total Claim
Cost
$2.5 B
$2.0 B
$1.5 B
$1.0 B
$0.5 B
0.8B
0.9B
0.9B
1.0B
1.1B
1.2B
1.3B
1.6B
1.8B
2.0B
Source: Brogan Inc. Ontario Drug Benefit Database
02
/0
3
01
/0
2
00
/0
1
99
/0
0
98
/9
9
97
/9
8
96
/9
7
95
/9
6
94
/9
5
93
/9
4
$0.0 B
Total Cost= Drug Cost + Dispensing Fees
Increase in Drug Cost
Canada & US, 1996-2001
% Increase in Canada
20%
20%
% Increase in the US
16%
16%
15%
15%
12%
11%
10%
9%
17%
16%
13%
11%
10%
5%
0%
1996
Source: IMS. Health Inc.
1997
1998
1999
2000
2001
Cost Drivers, Private Payers
Annual % Change, 2001 to 2002
% Change
25%
20%
19.8%
19.8
15%
10.9%
10.9
8.0
8.0%
10%
6.9%
6.9
3.8
3.8%
5%
0%
Cost
Claimants
Source: Brogan Inc. Private Payers Database
$/Claimant
$/Rx
Rx/Claimant
Cost per Claimant by Age
2002-2003
Ontario Public
2002/2003
Private Payers
2002
$1,340
$1,500
$1,111
$1,217
$909
$1,000
$627
$500
$401
$265
$206
$126
Source: Brogan Inc.
Age
85
+
-8
4
75
-7
4
65
-6
4
55
-5
4
45
-4
4
35
-3
4
25
-2
4
15
<1
5
$0
Multiple Drug Use
Sample of Data 1996-2000
# Drugs per
Claimant
7
1996
6
2000
5
4
3
2
1
0
<15
15-24
Source: Brogan Inc. Private Payers Database
25-34
Age
35-44
45-54
55-64
Conclusions
 Historic price differential
 Economic differences between US and
Canada???
 Federal policy objective to stimulate
R&D - not price control
 PMPRB has impacted prices
Conclusions
 Company pricing decision based on
market access to public plans
 Utilization driving costs despite
extensive administration
 Efforts to ensure appropriate use
Policy Considerations
 Government has disproportionate
power and impact relative to private
sector buyer.
 Potential for perverse effects
– Impact on R&D
– Consider total health care
40
1,600
35
1,400
30
1,200
25
1,000
20
15
800
600
10
400
5
200
0
0
3
/9
2
9
9
94
/
3
5
9
9
4/
9
96
/
5
7
/9
6
9
8
9
9
7/
9
99
/
8
00
/
99
Deaths
Drug Cost
Impact of Drugs
HIV/AIDS