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Cheaper isn’t always better, and prescription drugs are no exception

Earlier this month, the Patented Medicine Prices Review Board published new regulations that could see drug prices cut by up to 20 per cent.

Taking a page from United States President Donald Trump, Prime Minister Justin Trudeau’s government has adopted a reductive, fair-means-cheap pricing equation. The effects may be damaging for the pharmaceutical industry, Canadian innovators in life sciences, our patients, and the future of our health-care system.

Making medicines is hard. Making a business around making medicines is harder. Most research fails, and requires enormous up-front investment and infrastructure. Patent life is five to eight years on average, with markets shrinking as personalized medicine takes hold. Prices are controlled by governments interested in cost containment rather than long-term impact. This is a precarious business model. And for Canadians to continue to receive life-saving treatments at a fair price, it needs to change.

Like it or not, drug development is driven by capitalism. Fortunately, innovative drug companies are overwhelmingly driven by people dedicated to patients. Companies must be profitable to offset their massive investments and risk. The world’s biggest pharma company, J&J (Johnson & Johnson), just cracked the Top 100 of Fortune Global 500. Far ahead are oil and gas, automotive, and consumer electronics companies.

The Patented Medicine Prices Review Board (PMPRB) argues that big pharma is not investing enough in research and development, quoting their target of 10 per cent of revenues using decades-old methodology out of line with current innovation investment models. For example, the PMPRB does not count J&J’s investment in JLABS at Toronto’s MaRS Discovery District as an R&D investment.

Canada itself is only investing 1.5 per cent of its health budget in R&D. If 10 per cent is the bar to meet, why not commit to investing 10 per cent of the public health budget in innovation? Why not lead by example?

Some policy-makers tout open innovation as the solution to drug discovery, circumventing patents that protect IP. While this is useful for sharing basic, pre-competitive science, it is not a pathway to viable commercial products. Who funds the enormous costs of clinical trials in an open innovation model? Who is responsible for regulatory compliance and patient safety? Who assumes the risk?

Patents are a reward for innovators; they spur competition, which in turn drives price reductions.

Going after excessive drug pricing is easier than tackling ongoing issues in our health system that need attention, namely: a national pharmacare program, quality over volume, improvements to primary care, and more attention to all factors of health—not just acute care. These challenges are all well documented. What we need is action.

The Trudeau government’s approach to commoditizing drugs has implications beyond its impact on the pharma industry. Canada is one of the only developed nations with no rare-disease strategy. More diseases will fall into this category as we unravel the underlying science behind their mechanisms. If we don’t devise a new business model for how we fund drugs and incentivize research, our entire health-care system may be placed at risk.

Looking again to the U.S., former president Barack Obama made a difficult decision to set the Affordable Care Act in motion. History will remember his bravery in tackling the one challenge that every other administration, regardless of political stripe, feared taking on.

Trudeau has a similar opportunity. I sincerely hope his progressive sensibilities will give him pause to reconsider his current course of action with regards to drug pricing in Canada. Put patients first, be a health visionary, and make Canada a leader in health care once again.

Jason Field is president and CEO of Life Sciences Ontario.


Life Sciences Ontario
Melissa Hughes
Director, Marketing & Communications