drug pricing in canada: how it works and where it doesn't
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photo by jeff haynes/afp via getty images
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prescription drugs are the second biggest cost to the canadian healthcare system, at $39.8 billion in 2018, just behind hospitals. while we do not have the same pricing worries as our neighbours across the border, the ballooning costs of prescription drugs is still a growing concern for the federal government. but what exactly goes into deciding the price?
according to the conference board of canada, typically, ingredients make up about three quarters of the cost. dispensing fees and mark-up constitute the remainder.
it is the responsibility of the patented medicine prices review board (pmprb) to ensure that medicines sold in canada are not priced excessively. the independent, quasi-judicial board was established in 1987 under the patents act.
the price is set at either the international median of france, germany, italy, sweden, switzerland, the uk and the us, or, if it doesn’t offer that much therapeutic improvement, what the board calls a ‘me too’ drug, the price is set around the same domestic class.
“if you’re a really good drug, you’ll get the international ceiling to start off with,†said douglas clark, the executive director of pmprb. “if you’re not such a good drug, you’ll get the domestic therapeutic class and then you’ll be able to increase your price with inflation but never higher than those seven countries we compare ourselves to.â€
if the board does find a price to be excessive, they can hold public hearings and order price reductions, but only for the factory gate price, the price in which the patentee sells to wholesalers, as they don’t have jurisdiction over wholesalers and pharmacies. when settled in court, the company agrees to a price reduction and pays excess revenue to the crown.
however, there have been recent changes to pmrpb guidelines in response to skyrocketing prices. the changes were finalized in august of this year but won’t come into force until july 2020.
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“[drug prices] have grown five-fold in the last ten years and now accounts for 30 percent of total pharmaceutical spending in canada but covers only 1 percent of claimants,†said clark. “we’ve just been seeing this trend go up and up.â€
one patient, amanda terfloth, has had to deal with a prohibitively expensive prescription since 2001, when she was first diagnosed with a pituitary tumour. the medication, called dostinex, at the time was over $20 per pill. after neurosurgery, she lived a decade without the medication, until october 2019 when she was told to go back on it.
those with rare conditions are often at a loss when it comes to expensive medication.
“the patent for dostinex expired in i believe 2006. the generic is cabergoline. the problem is i can’t actually buy cabergoline. it’s been in shortage for years and the expected date of return [on drugshortagescanada.ca] is listed as n/a,†said terfloth.
sometimes, due to price setting, international pharmaceuticals simply don’t manufacture the drug. pfizer inc., an american company, is the marketing authorization holder of dostinex. however, for a decade now, it has been marketed by quebec-based paladin labs, which, according to a spokesperson, is keeping up with the increased volume. two different kinds of generic cabergoline are listed on drugshortagescanada.ca. one is produced by apotex inc. and has been in shortage since february 2018 with an estimated end date of april 2020. the other cabergoline is produced by actavis pharma company and has been in shortage since january 2015 with no end date in sight.
“i heard from trillium [the formulary] that the drug company likely doesn’t see it as profitable enough to manufacture,†said terfloth.
she says that because of this, even if it was affordable she would be unable to fill her prescription.
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clark also cites an obfuscation of the international benchmark as a reason for the new guidelines.
“other countries followed canada’s lead and decided they were going to peg their prices against other countries,†said clark. “[pharmaceutical companies] responded by negotiating confidential rebates and discounts off of those prices so nobody really knew any more what other countries were paying in the market and there was no point in benchmarking your price.â€
other powers now at the pmrpb’s disposal now include looking at pharma-economic values, market size and gdp when comparing and determining prices.
“the generic is about $140 for 8 pills and the brand name is $180 for 8. it’s kind of a hostage audience in my case,†said terfloth. “what else are you going to do? it’s not like buying nike, ‘oh i’m going to shop around for something else.’ it’s the one drug i need that affects the hormone in my brain.â€
terfloth is currently applying to ontario’s extended access program while her prescription sits unfilled. she has written several op-eds for the toronto star on her situation, attracting many messages of support and criticism for what seems like a lopsided ‘universal’ health care system.
“people told me i should start a gofundme,†said terfloth. “i don’t know if we can talk smack about the american system if i’m having to fund care.â€
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