For decades, Americans have paid higher drug prices than Canadian patients.
But U.S. President Donald Trump is on a mission to change that. Last year, he announced plans to implement “Most Favoured Nation” (MFN) drug pricing in the U.S. Such a policy aims to cap Medicare payments for drugs at the lowest price paid by other developed countries, potentially including Canada.
While this may sound like a win for American patients, it threatens to slow pharmaceutical innovation, delay Canadians’ already slow access to life-saving treatments and drive prices up here at home.
The reason is that most countries have been free riding off the United States when it comes to pharmaceutical innovation.
U.S. consumers pay higher prices for drugs to help pay for research and development, about 2.78 times higher than in Organisation for Economic Co-operation and Development (OECD) countries like Canada. If U.S. prices are suddenly capped at much lower levels, the well for funding research and development for life-saving drugs will start to run dry.
This represents a crisis in the making for patients all around the world, including here in Canada.
Prices in Canada will likely rise
Canadian patients already wait an average of 450 more days than Americans to get access to new drugs, because of slower submissions and approvals. If there is less innovation in the U.S. because of Trump’s MFN pricing rules, fewer drugs will be developed, and the wait times for Canadians to access new drugs will only worsen. Some drugs might not even become available to the Canadian market at all.
It’s also likely that prices in Canada will rise. If Canada becomes a reference point for the U.S. in MFN benchmarks, pharmaceutical companies could hike prices here in Canada to help protect U.S. revenues.
To avoid a global race to the bottom and an end to the kind of research and development that has produced critical life-saving drugs over the past decades, Canadians must make research and development more possible here in Canada and brace for higher prices.
What are some possible actions Canada can take to quicken drug approvals and help offset U.S. costs?
One solution is to adopt the New Zealand approach, which has shortened the approval process to 30 days if a drug is already approved in two peer countries.
Another is to follow the United Kingdom, which recently struck a deal with the U.S. that will see the U.K .increase spending on branded medicines by 25% and raise cost-effectiveness thresholds, which will allow for more higher-priced drugs to be approved under the U.K.’s health-care system.
Not long ago, Canada went in a direction opposite to the U.K. by taking the U.S. out of the equation when calculating the maximum price Canada should pay for new drugs to get prices down further.
The Patented Medicine Prices Review Board (PMPRB) sets a maximum price for new patented medicines. Until recently, it did this by comparing a drug’s list price with that of seven other countries, including the United States. But the government of then-prime minister Justin Trudeau changed the list of comparator nations and, importantly, removed the U.S. from the list. That had the effect of reducing, even more, the maximum prices the government will pay for new medicines, a move in the opposite direction of what the U.K. is doing to try to share some of the innovation cost burden with the United States.
U.S. should be a comparator country
At a minimum, to help shoulder the cost burden of drug research and innovation, Canada should reinstate the U.S. as a comparator country. This would help ease tensions with the United States at a time when the renegotiation of the Canada-United States-Mexico Free Trade Agreement (CUSMA) is up in the air. Canada can’t continue to rely on the U.S. to innovate and then keep lowering what the government is willing to pay for life-saving drugs.
At a time when the U.S. is moving to lower drug prices for domestic consumers, Canada needs to read the room and help shoulder the cost of innovation to ensure Canadians can access critical drugs moving forward.
If the federal government chooses not to act and refuses to increase the drug prices the government is willing to pay, Canadians will face further delays in accessing critical new drugs.
Trump’s changes will have a significant impact on the pharmaceutical industry. If Canadians don’t want to fall further behind on access to critical drugs, Canada’s politicians need to step up, cut bureaucracy and increase spending on pharmaceuticals.
Originally published here
