Pharmacare 2020 ConferenceVancouver, Feb 26-27, 2013

Michelle BoudreauExecutive Director, PMPRB

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Outline________________________________________________

Policy objectives in practice

How does it really work: an imperfect alignment?

Concluding remarks

Policy Objectives in Practice - key quotes and court pronouncements______________________________________________

“…changes (to Bill C-22) will also ensure consumer protection by creating a drug prices review board to monitor drug prices. . .”

The Honourable Harvie Andre made this comment upon introducing Bill C-22 for second reading on November 20, 1986.

The protection of consumer interests was one of the “Five Pillars” of public policy addressed by amendments to the Patent Act creating the PMPRB.

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Policy objectives in practice- key quotes and court pronouncements______________________________________________“…The Board’s interpretation of its mandate under the relevant provisions was consistent with its consumer protection purpose and should not be disturbed.”

Supreme Court of Canada’s decision in the Celgene/Thalomid matter, January 2011

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Policy objectives in challenging and changing reality…________________________________________________ Policy objective of the day – 25 years ago – was Canada’s drug prices

would never be the highest and would be, on average, in the “middle”

Very dynamic market with many factors at play

A national regulatory framework that sets a ceiling (“non-excessive price”) for all consumers, all patented drugs and all payers and cash-paying consumers

Transparency in pricing around the globe makes comparisons increasingly challenging as a price regulator

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How does it really work - price tests ________________________________________________ Blend of therapeutic improvement & international referencing Recognize incremental pharmaceutical innovation

At introduction, price premium aligned with therapeutic improvement: Four levels of therapeutic improvement:

1) Breakthrough – Median of International Price Comparison (MIPC)2) Substantial Improvement – Higher of top of Therapeutic Class Comparison

(TCC) and the MIPC3) Moderate Improvement – Higher of mid-point between top of TCC test and the

MIP, and top of TCC (primary & secondary factors apply here)4) Slight/No Improvement – Top of TCC

After introduction, monitor Average Transaction Price (ATP) subject to CPI based price increases and cannot be greater than highest international price (HIP)

How does it really work - price tests________________________________________________

Price tests are applied in accordance with therapeutic improvement

Based on specific circumstances, price ceilings at intro may be set differently For example, in 2011, within the “slight or no improvement

category” (70% of new drugs) the highest international price comparison (HIPC) test sets the

Maximum Average Potential Price (MAPP) 30% of the time because the TCC was higher than HIPC, or a TCC could not be conducted

the TCC sets the MAPP 40% of the time

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How does it really work - MAPP compared with public price________________________________________________

* Brand price sets the MAPP – brand price $0.65

Drug Cat Intro- MIP

Intro - HIPC

Pivotal Test

MAPP IntroBench Price (ATP)

Publicly available price

Brand-X SNI 1.15 2.95 TCC 2.45 0.68 0.69

Brand-Y SNI 1.40 1.85 TCC 1.52 1.50 1.50

Generic-A SNI 0.85 1.50 TCC* 0.65 0.42 0.33

Average Ratio of 2011 Price to Introductory Price, by Year of Introduction________________________________________________

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.85

0.90

0.95

1.00

1.05

1.10

1.01

1.06

0.94

1.01

1.06

1.02

0.97

1.03

0.98

1.06

0.99

0.93

1.00

0.93

0.99

1.04

Source: PMPRB

Ra

tio

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Concluding remarks________________________________________________ Recognizing innovation and ensuring a non-excessive price = a delicate

balance

Very dynamic market with many factors at play

Consumer protection vis-à-vis drug pricing remains an important policy objective

Transparency in pricing around the globe makes comparisons increasingly challenging as a price regulator

Affordable access and sustainability is a concern shared by consumers, regulators and payers

Thank you.Merci.

michelle.boudreau@pmprb-cepmb.gc.ca

www.pmprb-cepmb.gc.ca

Twitter: @PMPRB_CEPMB

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Annex – additional information and statistics

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Market trends - Canada Compared to the World ________________________________________________ In 2005 and 2011, Canadian drug sales accounted for 2.4% and

2.6%, respectively, of the global market

Small, but significant market

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Market trends - Canada Compared to the World________________________________________________ Growth in drug sales outpacing comparator countries

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Market trends - Canada Compared to the World________________________________________________ Canadian prices comparatively higher than a number of OECD

countries

S.Korea Ita

ly UK

Australia

France

Spain

Austria

Belgium

Sweden

Switzerland

Denmark CA

N

Germany

Mexico

Japan US

A0.00

0.50

1.00

1.50

2.00

2.50Avg Bilateral Foreign-to-Canadian Price Ratios: Top 300 selling oral solids in Canada

IMS Health Data, 2010

Market trends - Canadian Public Drug Plan* Spending on Rx Drugs, Rates of Growth and Annual Totals, 2005/06 to 2010/11

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* NPDUIS, all public drug plans, including NIHB, are included with the exception of Newfoundland; Yukon; NWT’s and Quebec. Its important to keep in mind that there may be some provincial plans, like disease specific plans, that are not included even if the province is included. The totals include drug cost, retail/wholesale mark-ups as well as dispensing fees.

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PMPRB Price Tests - How Does it Really Work?________________________________________________ Of the 109 New Drug Products introduced in 2011:

12% under investigation

69% were of slight or no improvement

25% of moderate improvement

5% of substantial improvement 1% breakthrough

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Reference pricing at introduction and for existing drugs based on 7 comparator countries - France, Germany, Italy, Sweden, Switzerland, UK, and US Policy changes in these countries could impact prices in Canada

Over last three years, Germany has most often been the highest referenced price for PMPRB price tests, followed by US Recent cost containment measures by reference countries may lead to lower prices

in Canada (e.g., Germany)

PMPRB Price Tests - International Referencing________________________________________________

Frequency in setting Highest International Price Comparison test at introduction

France Germany Italy Sweden Switzerland UK USA

2008 0 2 0 1 0 2 3

2009 0 7 0 1 1 0 3

2010 0 6 0 0 0 0 4

2011 0 5 1 1 0 0 15

13579111315

Regulatory Statistics High level of compliance - On average, 93-95% overall compliance

Between 2000 and 2009, average of 86 new patented drug products/year Of the 109 new drug products introduced in 2011:

79% within Guidelines 13% under investigation 8% outside of Guidelines but do not trigger an investigation

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2011 2010

New Drug Products Introduced

109 68

Number of Investigations

69 87