Negotiations to limit drug prices should not limit patients’ access to innovative drugs, writes Nigel Rawson.

By Nigel Rawson, February 7, 2019

The Trudeau government is concerned about the affordability of prescription drugs. One of the tools used to contain drug costs is the pan-Canadian Pharmaceutical Alliance (pCPA), which negotiates prices for medicines with pharmaceutical manufacturers on behalf of the federal, provincial and territorial governments’ drug plans. But we know little about the pCPA’s processes, practices and governance because the organization is shrouded under the cloak of the Council of the Federation. Canadians need to know how the pCPA impacts both the costs of drugs and their access to them.

The pCPA was established in August 2010 by the premiers of all provinces and territories except Quebec, with the objectives of increasing access to drug options, achieving lower drug costs and consistent pricing, and improving consistency of coverage criteria across Canada. Five years elapsed before the pCPA became a formalized entity with a permanent government-funded staff and office. The Quebec and federal government drug plans joined in 2016.

Apart from some brief material around its policy directions regarding new and subsequent entry biologic drugs and guidelines about how negotiations should be approached by pharmaceutical manufacturers, little information is publicly available about the pCPA. The only regular information released by the pCPA is monthly active and completed negotiation lists; for example, 46 negotiations were active and nine were completed in December 2018. Otherwise, its procedures and actions lack transparency.

We do know that once the Canadian Agency for Drugs and Technologies in Health (CADTH) and/or the Institut national d’excellence en santé et en services sociaux release a final recommendation about whether a medicine should or should not be reimbursed by public drug plans, the pCPA decides whether a negotiation about the drug’s pricing will take place. If the pCPA proceeds with a negotiation, governments must decide whether they want to join it. For new brand-name drugs, all governments tend to participate but they are not obliged to do so.

Government participation in a negotiation indicates that, should an agreement be reached between the lead province and the manufacturer, both parties will sign a letter-of-intent that implies the drug will be listed in any subsequent Product Licensing Agreement (PLA) with an agreed price and reimbursement listing criteria. The drug plans are, however, not mandated to list a medicine that has been successfully negotiated. As a result, an agreement does not guarantee listing in all participating plans. Using the basis of the letter-of-intent terms, manufacturers must negotiate individual PLAs with each jurisdiction, which may introduce additional criteria or coverage limitations based on the individual government’s assessment of its needs and resources, as a condition of funding.

Since May 2016, pCPA representatives are observers in meetings of CADTH’s expert health technology assessment committees and their advisory groups. They receive confidential and redacted information from CADTH’s recommendation evaluations prior to the pCPA deciding whether and how negotiations with manufacturers will proceed. According to CADTH, the purpose of this connection is to provide an opportunity for the pCPA to receive relevant information on drugs reviewed by CADTH and to support business planning.

Pharmaceutical companies are, however, denied access to the confidential information shared between CADTH and the pCPA. As a result, the pCPA has an important advantage if negotiations have begun. A 2017 analysis of recommendations for rare disorder drugs indicated that an objective of the CADTH-pCPA integration is to ensure that a negative recommendation results in no pCPA negotiation, while a positive one sets up factors for inclusion in the negotiation – usually the need for a sizeable price reduction.

Although little information is available about its governance, the pCPA is clearly only accountable to the federal, provincial and territorial governments. While individual negotiations are understandably confidential, the lack of transparency about issues surrounding negotiations is concerning because the pCPA is an agency of Canadian governments. As such, the pCPA receives public funding but, because no apparent parliamentary oversight of it exists, the organization is protected from the usual means of government accountability such as freedom of information requests, whistleblowing, Auditor General of Canada reviews, and ombudsman or integrity commissioner inquiries and investigations.

In December 2018, the pCPA submitted a brief to the House of Commons Standing Committee on Health (HESA), which is undertaking a study of barriers to access to treatments for Canadians affected by rare disorders with the objective of developing recommendations for actions to remove these barriers. This provides an opportunity to gain greater insight into the workings of the pCPA.

In its brief, the pCPA identified three key challenges that it sees as important to its work. These are:

  • Evidence limitations – the evidence available about a drug’s efficacy, safety and cost-effectiveness at the time of negotiations is often considered by the pCPA to be inadequate with which to make drug coverage decisions.
  • High drug pricing – extremely high prices threaten drug program affordability, sustainability and subsequently patients’ access to these drugs.
  • Gaps in national alignment and coordination of processes.

Manufacturers of costly drugs for rare disorders are expected by the pCPA to “provide adequate evidence around their drug products’ safety and efficacy to support coverage decisions.” Pharmaceutical manufacturers’ evidence about the safety and efficacy of a medicine is designed to satisfy the regulatory requirements of the United States and Europe because their populations represent the two largest world markets. The same evidence is normally used in the company’s submission for regulatory approval from Health Canada.

Data about efficacy and safety are not developed to satisfy the needs of a public drug insurance price negotiating organization in a small market like Canada. The pCPA’s expectation is unlikely to be achieved. Rather, it is more probable that a manufacturer whose regulatory evidence does not find favour with the pCPA, which usually leads to a demand for a sizeable price reduction as the starting point of negotiation or a decision not to negotiate, will delay bringing its drug to Canada or will avoid the Canadian market.

In its HESA brief, the pCPA raises concern about high prices for drugs for rare disorders. The development of a new drug has been estimated to cost over $2.8 billion. If the drug is only likely to be used by a few hundred patients worldwide, a high price is necessary not only to recoup its development expenses but to provide investment for future drug developments and reward the company’s investors. In addition, if a company knows that, when it enters a pCPA negotiation, it is likely to be faced with a demand for a major price reduction, there may be a tendency to maximize the starting list price.

The pCPA states that its requirement for manufacturers to justify their extremely high prices has yet to be fulfilled – a remarkable complaint from an organization whose own transparency is sorely lacking. The pCPA’s emphasis on drug cost-containment is demonstrated by its support for a national regulatory approach to price control through the Patented Medicine Prices Review Board. In its submission to the reform consultation process of the Board, the pCPA strongly recommended that the United States be replaced as a comparator by New Zealand, Australia, South Korea or Brazil, countries where drug prices are strictly contained.

The pCPA claims that its negotiations have led to estimated annualized savings of $1.98 billion. This is likely to be a theoretical amount based on reductions between opening and final prices achieved in negotiations for both brand-name and generic drugs. Set against this “saving” is the significant cost of the pCPA to Canadian taxpayers – $50 million from the federal government and at least $3 million from the provinces and territories over the past two years for an office of just 10 people.

The question arises as to where this money is going? I am not aware of any other government program with this number of employees and an annual budget of this scale that has no requirement to provide publicly available reports on its finances. In contrast, for example, the Patented Medicine Prices Review Board had a budget of just over $11 million in 2017-18 and 60 full-time equivalent positions, which are reported publicly.

The pCPA’s HESA brief concludes with a request for the federal government to provide funding for expensive drugs for rare disorders and to implement the proposed Patented Medicine Prices Review Board economic tests. The pCPA is, thus, encouraging the federal government to implement policies that further undervalue innovation and that would significantly decrease Canada’s attractiveness as a jurisdiction to which pharmaceutical manufacturers want to bring their new medicines. The pCPA’s role is not to propose national pharmaceutical policy but to negotiate prices.

The pCPA and its government owners should be focused on improving the transparency and accountability of the organization. Transparency and accountability are fundamental principles of good governance, which require a process to report, explain and answer for the consequences of decisions so that all stakeholders can see how and why they were taken. While its accountability is to its funders, the pCPA’s support from the public purse should require it to have a degree of accountability to all Canadians, especially patients.

A comprehensive annual account of issues confronted by the pCPA and how it dealt with them, together with details of its income and expenditure, would be a valuable step forward. More broadly, since the federal government claims to be focused on both the affordability of prescription drugs and their accessibility, the pCPA should demonstrate to Canadians that its negotiations to contain the costs of new drugs are not limiting patients’ access to innovative drugs that could extend their lives or improve their quality of life. The pCPA receives a generous amount of taxpayer’s money, but its inadequate transparency and accountability continue to be of concern.

Dr. Nigel Rawson is a pharmacoepidemiologist, a pharmaceutical policy researcher, president of Eastlake Research Group and the author of Drug Safety: Problems, Pitfalls and Solutions in Identifying and Evaluating Risk.