Transcript Pharmaceutical Industry in Canada

Drug Pricing in Canada
Victoria Brown, Anureet Sohi, Lisa Weger
SPHA 511
• 4th fastest growing market with 8% annual
growth rate
• Canada ranks in 8th place in world market of
pharmaceutical sales
• One of the most profitable and innovative
industries in Canada
INDUSTRY
PROFIT MARGIN
Computer and electronic product
manufacturing
3%
Motor Vehicle and trailer
manufacturing
4%
All industries
8%
Pharmaceutical and medicine
manufacturing
13%
Oil and gas extraction and support
activities
18%
Source: Statistics Canada
• The pharmaceutical industry is made up of
three main branches:
– Large multinational companies who focus on
numerous patented medications and their
development
– Large companies who focus on producing generic
medications
– Smaller biotechnology companies who focus
primarily on research and market only a few drugs
• Drug Patent – A type of license that under new
legislation lasts 20 years for patents filed today
- a patented drug provides companies the sole
right to manufacture, market and sell a drug.
- also implies that the company does not have to
disclose all of the chemical components of the
drug.
• Generic Drug – Drug produced without patent
protection usually when patent expires
RANK
LEADING
COMPANIES
R&D
LOCATION
TOTAL
SALES ($
Millions)
MARKET
SHARE
(%)
1
Pfizer
Montreal
2288
13.4
2
AstraZeneca
Montreal
1121
6.6
3
Johnson
&Johnson
Toronto
1106
6.5
4
GlaxkSmithKline Toronto
996
5.8
5
Apotex
Toronto
950
5.6
6
Wyeth
Montreal
675
4.0
7
Novartis
Toronto
647
3.8
8
Sanofi-Aventis
Quebec
625
3.7
9
Merck Frosst
Montreal
602
3.5
10
Bristol-Myers
Squibb
Montreal
552
3.2
MAT Combined Data December 2005
• Majority of success of the pharmaceutical
industry is research and development
• Currently only 3 out of 10 new medications
will recoup their research and development
costs
• To bring a new patented medication to market
costs approximately one billion dollars
• In Canada roughly 80% of drugs are marketed
annually
• Of these drugs 10% are breakthrough drugs
• About 49% are moderate improvements over
existing therapy
• Important stakeholders include:
– Professional associations (pharmacists, other
health care professionals)
– Pharmacies
– Patient groups
– Pharmaceutical companies
• Social responsibility to provide Canadians with
fairly priced and efficient medications
• Moral responsibility to develop and produce
medications sometimes without thinking
about financial factors and recouping
development investments
• Obligation to use knowledge obtained from
the development and research within the
industry to develop medications
• Obligation to develop medications not only for
mass market conditions (hypertension, etc)
but also for diseases that affect smaller
subsets of the population
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•
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•
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•
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Prices (brand name & generic drugs)
Pharmacists’ professional fees
Retail & wholesale mark-ups
Population composition
Prescribing habits
Drug utilization
Trends towards newer drug therapy
• Federal government
• 1969: Patent Act Amended:
Compulsory Licensing
• 1987: Bill C-22
Patent Extension to 10 yrs
• 1993: Bill C-91
Patent Extension to 20 yrs
Compulsory Licensing
• PMPRB (Patented Medicines Price Review
Board)
• 1987—Consumer protection pillar
• Regulate prices of Patented Drugs
• Independent & autonomous
• Quasi judicial body
• Sets price guidelines
– Introductory drugs
• Limits price increases
– Existing drugs
• Does not set drug prices
• Excessive price
Voluntary Compliance Undertaking
•
•
•
•
Relevant market
Same therapeutic class
Countries other than Canada
Changes in Consumer Price Index
• Patented drug manufactures:
– Profits
– Market Share
• Increased contribution from drug sales to R&D
from 5% to 10%
– Generic companies only imitate Patented drugs
Regulated differently……..
• Intellectual property protection
• Regulation of the drug approval process
• Reimbursement and formulary decisions
– Provincial policies and drug plans
• Cost containment
– Product Selection
Generic over Brand
– Price Selection
Lowest priced drug
– Reference Based
Pricing (BC)
Therapeutic class
• Generic manufacturer rebates
• Authorized generics
• High Patent drug prices
– Federal price control determines maximum
allowable drug price based on highest priced drug
in therapeutic class
• Contradicts publicly funded, universal health
care system.
• Fair: cost-containment strategies
• Promote macroeconomic stability & control
– Patent extension
– Increased R&D = Economic growth
– Lack of competition
• http://www.youtube.com/watch?v=KWrpWjP
8rFI
• Industry stakeholders will be both winners and
losers:
– Pharmaceutical companies
– Pharmacies
– Pharmacists
– Patients
It just depends on the scenario!
• Canadian brand-name drugs are priced
lower
than the US (the reverse is true for generics)
• Canadians benefit because they pay less for brandname drugs than Americans
• But …
• US citizens also benefit from the lower prices when
they cross the border to purchase ‘Canadian’ drugs
(Grey Market)
• This could negatively effect the supply of Canadian
drugs for Canadians … a situation where Canadians
would be the “losers”
•
•
•
Two theories:
Lack of competition in Canada
Side effect of policies to lower prices
•
•
What can we do?
Impact of our policies on price, price
competition and barriers to market entry
• In 2006 Ontario reformed to reduce the allowable
limit on rebates to
(from
)
• Created controversy around cost savings being
passed on to the customer/patient
• Resulted in tension for pharmacists (and pharmacies)
around linking compensation to drug prices vs the
services they provide
• This year Ontario has once again made a move to
mandate lower prices, other provinces will probably
follow
• Patent holding pharmaceutical companies
benefit because they can release a drug onto
the market quickly and gain market share,
dictate the price, etc
• Other companies don’t want to enter the
market – not enough incentive
• Lack of market competition means higher
prices, few options, etc for patients
• BC - Reference Based Pricing and low income
patients
• Ontario Drug Benefit Program – places a cap
on the generic price as a % of the brand-name
• SK and QC - use a competitive tendering
process
• Joint Regulation:
– Various countries looking to joint drug approval
process, anticipating various benefits
– Can drug pricing follow?
– Many companies have locations globally …
– Sell to the same customers …
• Lessons to be learnt from New Zealand
•Profitable and innovative industry in Canada that consists of both large
companies and smaller firms who manufacture brand name (patented)
and generic (non-patented) medication
•Corporate social responsibility to develop and produce fairly priced
and efficient medications for Canadians that target both mass market
conditions and diseases affecting a smaller subset of the population
•Patented drug prices regulated by PMPRB.
•Generic drug prices regulated based on provincial drug plans and
formularies.
•Government regulation decreases market competition thereby
increasing drug prices.
•Be mindful of the impact our ‘price lowering policies’ have on the
market (barriers to entry and price competition)
•There are many approaches to price regulation – we could all benefit
from working together and learning from other countries methods