Report to the President: Prescription Drug Coverage, Spending, Utilization, and Prices.. 4.5.1 Canada

04/01/2000

In Canada, the provinces have responsibility for assuring their citizens access to health care under a Federal mandate that establishes general eligibility and benefit standards. All provinces provide some level of prescription coverage for the elderly and social assistance recipients. Coverage for the remainder of the population varies by province. Many of the consumer-oriented cost control techniques used in the United States are also used in Canada, such as formulary management, drug utilization reviews and copayments (Angus and Karpetz 1998).

In addition to consumer-oriented cost control mechanisms, Canada regulates the entry price of newly patented pharmaceuticals through the Patented Medicines Prices Review Board (PMPRB). The primary mandate of the board is “to prevent brand name firms from abusing their monopoly position during the market exclusivity period” (PMPRP 1998). The PMPRB is responsible for regulating the maximum prices charged by manufacturers for all patent-protected prescription and non-prescription drugs sold in Canada. The board has no authority over the prices charged further down the distribution chain by wholesalers or retailers. Furthermore, once a drug goes off patent its price is no longer regulated by the PMPRB. (Angus and Karpetz 1998; Anis and Wen 1998; PMPRB 1998).

The PMPRP issues pricing guidelines that defines “excessive” drug prices for three categories of products:

  1. Line extensions of existing medications, such as different strengths of the same product. A price is presumed to be excessive if it does not bear a reasonable relationship to the price of other strengths of the same drug sold by the company.
  2. Breakthrough drugs. A price is presumed to be excessive if it is greater than the prices of all other medications in the same therapeutic class and exceeds the median factory price charged for the same strength and dosage form in Germany, France, Italy, Sweden, Switzerland, the United Kingdom, and the United States.
  3. New chemical entities offering moderate, little or no therapeutic improvement. Price is presumed excessive if it exceeds the prices of all other medications in the same therapeutic class (Anis and Wen 1998; López-Casasnovas and Puig-Junoy 1999; PMPRB 1994).

The PMPRB also regulates prices of patent-protected products already on the market. In this case, a price increase is considered excessive if it exceeds the rise in the general consumer price index (CPI) (Angus and Karpetz 1998; Anis and Wen 1998; Dickson 1992; PMPRB 1994). If the price is found to be “excessive” the PMPRB can negotiate or order a price reduction. The company may appeal this decision through the court system. If the PMPRB and the company are unable to reach an agreement the PMPRB can revoke the patent on the product (Dickson 1992; PMPRB 1994).

Although Canada has the second lowest per capita spending on pharmaceuticals in the G7 nations, there is still an ongoing struggle for the government and drug benefit plans to contain costs. Provincial governments employ a number of drug cost control approaches such as patient copayments and formularies. The British Columbia government has instituted a policy of reference pricing for select therapeutic categories (López-Casasnovas and Puig-Junoy 1999). Initial research findings suggest that the regulation has produced a shift toward prescribing of the reference product in each therapeutic class and that drug expenditures within the targeted therapeutic categories have declined as a result (Narine 1999).

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