Canada Making Moves Against the Pharmaceutical Industry

Better Negotiating Powers Against Pharmaceuticals

In Canada, several mechanisms are used to determine the prices of prescription drugs. Those methods include a myriad of federal and provincial agencies (PMPRB and Pan Canadian Pharmaceutical Alliance) working together to stop predatory pricing practices from pharmaceutical companies. 

Examining the market prices of prescription pharmaceuticals in other nations to establish how much to charge for a drug is one method these organizations employ. For instance, Canadian agencies would require corporations to price a drug at a similar market price in Canada as is in other countries if the drug is routinely priced at similar market rates in nations like Germany, France, Australia, and Norway.

This method of price negotiation is quite effective, as it provides governments leverage against companies who seek maximum profits on their sale of drugs and ensures that prescribed medications remain affordable for Canadians. 

What Canada has done now is change the list of comparator countries used to exclude countries with extraordinarily high prices for medication compared to their peers and add countries with more affordable pricing. Namely, the United States and Switzerland have been removed, while Australia, Belgium, Japan, the Netherlands, Norway, and Spain have been added. Effectively, as a result of the new comparator countries having relatively more affordable medicine pricing than Canada, it will help reduce pricing even further for Canadian medications in the long term. 

This move was a long-time coming. The United States and Switzerland are currently the countries with the highest cost of medications out of the OECD. The United States, in particular, is an extreme outlier in medicine pricing, so removing them will be extremely effective in reducing price pressure upwards during negotiations using the new comparator list. 

Ontario Biosimilar Drug Reform 

On the provincial side, the province of Ontario has taken steps to lower its spending on medications by replacing expensive biologic patented medications with biosimilar ones with the same effects but at reduced prices. 

The Ontario government says that "Biosimilars undergo the same robust and rigorous approval process by Health Canada and to be approved in Canada" and thus have "no clinically meaningful differences in terms of safety and efficacy." As a result of this new policy, the Ontario government will save nearly $150 million a year in public spending. 

This policy is already a reality in several provinces and territories. And now Ontario joins to be one of them.

Is there Political Will in Canada's Parliament? 

With these two new policies officially in place, what does this mean for the long-awaited national Pharmacare program the Liberals have been championing since the 90s? Is this a sign that governments at all levels are willing to challenge the pharmaceutical industry and push for reform? Or is this simply a compromise between business and government to not implement Pharmacare? 

Fortunately, one might be more optimistic this time around. As part of the supply-confidence agreement between the Liberal Party and the New Democratic Party, a national Pharmacare program is stated specifically as one of the major policies the two parties want to implement by 2023. The agreement states two things: the program will establish a national formulary of essential medicines covered under a national pool of funds and a bulk purchasing plan allowing the federal government to purchase prescription drugs in large quantities from pharmaceuticals at reduced prices. Both of these policies, in tandem, will significantly reduce out-of-pocket prescription drug prices for Canadians by the government forcibly reducing prices with better negotiation power and social program leverage. 

In addition, a recent statement from the leader of the NDP, Jagmeet Singh, has hinted that Pharmacare may be on the horizon as promised in the agreement. Singh says, "We're very confident that'll [Pharmacare] be delivered as a part of what we forced the government to agree to." and "We forced them to agree to do this, and it should be tabled by the end of next year." If we were to analyze this statement, this could either mean that Singh is truly confident that Pharmacare will happen due to him being personally assured by the Liberals, or it may equally be possible that he is bluffing his confidence to the media. 

But there may be a reason to be more optimistic than not if current federal and provincial policy trends continue to go against the pharmaceutical industry's interests and toward affordability for governments and people. Then, there is good reason to believe Pharmacare will become a reality as early as next year. To paint a similar story, most political pundits were skeptical that a national daycare program would ever become a reality in Canada since the 80s. Still, the Liberals got it done last year, and now Canada is on track to have a world-class national early learning and childcare program by 2026. A similar story may occur for Pharmacare; after decades of neglect, the Liberals may get it done next year as promised in their agreement with the NDP and their 2021 election campaign. 

Public Spending and Affordability 

Induced cost reductions for the government would be a significant factor in putting Pharmacare into place. According to research presented by the National Advisory Council on the Implementation of National Pharmacare, Canada would save $.3 billion in 2022 and $5 billion annually by 2027 if Pharmacare were to be adopted. Specifically, the council indicates that total spending on prescription drugs without Pharmacare in 2027 would be $51.6 billion and $46.8 billion with Pharmacare, thereby showcasing the $5 billion cost saving. Every year after that, the gap in savings would, of course, increase further and further. For families, that would mean savings of at least $350 a year after 2027. 

Under the current system, the council projects with data from the Parliamentary Budget Office that the lack of implementation from 2015-2016 would increase public spending on prescription drugs by 50-65% by 2027. 

In the current economy, any savings done by government policy will be seen as favorable to constituents looking for more affordable medication and governments looking to tame inflation through reduced public spending. It's a win-win for everyone. Reduced public spending for governments to invest in affordability programs, less spending for Canadians needing medications, and a stick for the Canadian pharmaceutical industry to keep in line with public interests. 

From a policy standpoint, reforming any prescription drugs in Canada seems to be a win for all parties (except for the companies, of course). Nonetheless, in an era where Canadians are feeling the pinch from a lack of healthcare support, inflation, and affordability. Bringing down the costs of a certain batch of goods like medications seems to be a good idea to tackle all these issues indirectly. More affordable medications increase the likelihood of Canadians purchasing the medications they need, thereby reducing the strain on Canada's already battered healthcare system, affordable medications will also reduce public spending resulting in reduced deficits, and Canadians will be left with more money in their pockets at the end of the day. The only 'losing party' are pharmaceutical companies which will have a reduced ability to profiteer off medications Canadians need for their health. 

To implement this policy, Canadians should do whatever they can within their constituencies and local offices so that it finally materializes after decades of extreme neglect. 

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