While much of the business community was focused on the negotiations to modernize the North American Free Trade Agreement (NAFTA), the Canadian government in December 2017 proposed sweeping changes to its Patented Medicine Prices Review Board (PMPRB) that will have detrimental effects on Canadian citizens and innovative American manufacturers.
PMPRB is a quasi-judicial body that regulates the price of patented medicines in Canada regardless of whether the customer is a public insurer, a private insurer or paying cash. Canada announced several regulatory changes to how it would set these maximum prices, including plans to remove market-based economies such as the United States and Switzerland from its list of comparator countries – and add countries that are not of similar economic standing such as South Korea and Spain – in order to force down prices. A number of studies show that the proposed regulatory changes will have serious consequences that will not only harm the investment climate in Canada but also limit Canadian patient access to new lifesaving medicines.
According to a February 2018 Macdonald-Laurier Institute study on the PMPRB changes:
PDCI Market Access Inc. studied the issue and found that:
ACTION for Trade’s Special 301 submission to the U.S. government highlighted this issue, saying:
“When trade partners arbitrarily set prices of innovative medicines, or peg innovative products to older, previous generation products, the incentives for future innovation falter. These tactics, which artificially lower the prices paid for medicines developed in the United States, can be compounded by a lack of transparency and due process.”
“Canada’s PMPRB seeks to expand its authority to interfere in private sector negotiations and to set Canadian prices by importing bad policies from poorer countries. In June 2017, Health Canada released a consultation document proposing to expand the mandate of the PMPRB from ensuring “non-excessive” prices to ensuring “affordable” prices for pharmaceuticals. Key proposals would amend the basket of reference countries such that prices of patented medicines would be set at the OECD median, introduce various new factors to determine whether a price is “excessive,” and require manufacturers to report all indirect price reductions. These changes would have a serious negative impact on U.S. companies operating in Canada. In advance of mandated public consultations on the new draft regulations, PMPRB has already issued a hearing decision against a U.S. company.”
A 2017 Ernst & Young economic analysis found:
According to a Morning Consult poll of American voters:
USTR’s Special 301 Report on Intellectual Property Rights found:
Because of the proposed changes to PMPRB — among other IP violations — USTR downgraded Canada to its Priority Watch List in the Special 301 Report on Intellectual Property Rights.
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The research shows that price control regulations coming out of Canada for life-saving medicines do not value innovation, and will ultimately harm Canadian patients, hinder life sciences research and development, and hamper an economically important industry.