Government Briefs: Aiming for Equity

To: Standing Committee of Industry
By: Garry Cruickshank, Vice-President
Noëlle-Dominique Willems, Director of Government and Public Affairs
Date: April 1997

Preamble | Introduction | Comments and Concerns | Conclusion

Preamble

The Canadian Pharmaceutical Association has been representing pharmacists from all areas of practice for the past 90 years. It is an honour for us to appear today before this Committee.
The Canadian Pharmaceutical Association (CPhA) which provides leadership for Canadian Pharmacists would like to state the following as a preamble to its position on C-91:

In our 1992 brief on Bill C-91, we had stated the following: "All of our members will be affected by Bill C-91, perhaps none more so than the community pharmacist who is the health professional at the important interface with the consumer for most of the drug dispensing in Canada."

We went on to say: "However, we know drug prices are but one component of drug cost increases to governments, insurers and the public. Changes in utilization, coverage, compliance problems, mix of drugs used, and the higher-priced new drugs are other contributors to these increases. But the entry price of new products is a major factor that must be constrained."

As health care professionals, we recognize that a number of factors affect the fast rising cost of medications in Canada and that singling out any one of them will not help us address the problem in a coherent fashion. We also recognize that as governments are shifting costs to employers and individual payors, it is important to take into consideration the impact all cost increases in medication have had on consumers and particularly on our senior population through cost-sharing measures.

It is with this in mind that the Canadian Pharmaceutical Association has facilitated and coordinated the National Pharmacy Coalition on Managed Care in order to propose strategies to payors to help control costs of medication in public and private drug plans through various drug use management strategies. Concerned about the well being of our patients, CPhA works closely with a variety of groups to encourage greater responsibility in the decisions about drugs and the optimal use of medication by a better informed public. We have also given input to the National Forum on Health on measures to better coordinate and manage drug plans and look forward to further work in those areas.

Introduction

When it presented its brief in 1992, the Canadian Pharmaceutical Association felt it was important to include provisions to assess the impact of the amendments to the Patent Act and see if they had had the intended effect or if there was a need to adjust some of the provisions in the Bill, or its regulations, to ensure that the original goals had indeed been achieved.

In the pharmaceutical field in Canada, the dual goal of encouraging foreign investment and sustaining a strong national industry has been undertaken and, to a great extent, achieved over the past 10 years by ensuring that both have had a fair chance of growing and thriving. It is with this in mind that C-91 was originally introduced. However, times change and force us to constantly reevaluate the impact of measures put in place under different circumstances.

Some of the evaluation criteria (levels of R & D) and monitoring mechanisms (the Patented Medicines Price Review Board) needed to proceed with the assessment of the direct results of C-91 were built into the legislation or given as commitment to the Government of the time. The long term impact however of increasing patent protection to 20 years has not yet been fully felt and we should keep that in mind while proceeding with the current review.

Legislation exists within a broader context and, in the case of C-91, the protection afforded patented medicines also needs to be evaluated as to its impact on our publicly administered health care system. This is particularly crucial in the current context of deficit reduction which has entailed drastic cutbacks to health transfers to the provinces.

The equity the federal government should be seeking lies in taking into account the facts that:

• the provinces currently bear a major share in the costs of public drug programs (without assistance from federal transfers since medications outside of hospital settings are not covered under the Canada Health Act),
  
• the provinces do so without having any control over the setting of patented medicine drug prices, (though they can give input, they have no decisional power),
  

and weigh this in light of Canada's interest in fostering investments, job creation and sustainability of industrial concerns, home grown as well as those resulting from foreign investments.

Given their lack of control over prices and in response to escalating costs, many provinces have had to rely on the implementation of other cost control measures such as de-listing from provincial formularies, reference-based pricing and mandatory generic substitution to keep their drug benefit plans manageable. This in turn has had an impact on the patented medicine companies which have seen their market share diminish. Though some provinces have implemented changes with input from pharmacists, others have not. In view of the fact that pharmacists are health care professionals with unique knowledge of drug products and their use, coupled with the fact that they are in the best position to deliver optimal cost- effective drug therapy to consumers, we would like to once again recommend the following:

That any national and provincial government plans to limit drug prices or the overall cost of pharmaceutical products, or to make any changes in the other elements affecting drug costs, such as drug utilization patterns, be developed in collaboration with pharmacists.

As front line primary health care professionals who provide drug therapy, advise patients on medication and are pivotal in the claims adjudication process for patients in an increasingly cost- restricted context, pharmacists wish to submit the following comments and concerns about the impact of C-91.

We will address some of the areas covered by C-91, and some related matters as well, keeping in mind the broader context which has given rise to the need for patent protection but has also made us all very aware that legislation can at times be perceived to go against the social interest of the Canadian public.

CPhA Comments and Concerns on C-91

Term of Patent Protection

As in 1992, CPhA believes in the need for adequate protection of intellectual property and the 20 years currently afforded by C-91 are in accordance with our international commitments under NAFTA and GATT. The positive environment created by C-91 has lead to the strengthening in Canada of the new biotech industry which in turn has contributed to more Research and Development being done in Canada as well as to the creation of many jobs for Canadians. This sector has grown from 12 companies in 1990 to 224 in 1997.

At this time we feel that the 20 year protection is appropriate and that because the full impact of C-91 has not yet been felt, it would be premature to consider going beyond 20 years. This in our mind would also apply to attempts to prolong patent protection under the model of "patent restoration" currently being practised in the United States. At this point in time, patent legislation does not offer the possibility of distinguishing between various types of patents for different categories of medications such as breakthrough, line extensions and "me-toos". Should a longer patent protection be considered at a future date, one would hope that only breakthrough drugs would be granted such an extension.

As of 1995, efficiencies have been introduced in the process for granting Notice of Compliances in Canada. The differences with other countries as to the actual time a drug can be on the market are disappearing. This in itself extends the opportunity for manufacturers to recover their investment in research for new medicines. As the process for drug approval improves, the 20 years protection becomes more meaningful.

Linkage Provisions

These provisions are the most sensitive for stakeholders, particularly because it is the one provision which has given rise to the most challenges, disputes and court cases. When C-91 was first drafted, this provision was put in place to actually prevent disputes by linking the Notice of Compliance to the initial patent on a medicine. Unfortunately, the original intent seems to have been forgotten or circumvented.

The Canadian Pharmaceutical Association is concerned that the ensuing litigations can only result in cost increases down the road as manufacturers attempt to recover their legal costs.

There is a temptation to do away with the provisions, but we feel this would be overreacting, that we would lose the sense of balance that has been created in this matter as attested by the repartition of the challenges which have been decided. We would rather recommend going back to the original intent of the linkage regulation. Namingly by relying on the date of patent expirations of the first patent for a product. The initial document would clearly identify and refer to each product, molecule and process used by the innovator for its first patent filed on the product. These types of affidavits would be used by a joint committee of the Patent Office and the Health Protection Branch to determine, at the time of application for a Notice of Compliance, if the issuing of a Notice of Allegation (NoA) is warranted. We also believe the NoA should include more pertinent information than it currently does in order to elicit a quicker, fuller and more precise response from the innovator company.

The Patented Medicines Price Review Board (PMPRB)

The Canadian Pharmaceutical Association over the years, has worked closely with the PMPRB. We have responded to its consultation documents and have commented extensively on its mandate and its work. We feel that the Board has been efficient. While private and public drug plans are experiencing cost increases between 8 and 11%, prices of patented medicines have kept in line with inflation. This clearly indicates that other factors need to be taken into consideration to work at controlling the escalation in drug plan costs. Some more attention could be placed on the setting of entry prices for new drugs which many still feel to be fairly high due to the basket of countries used for comparison in setting the prices. The PMPRB should seriously consider moving to a purchasing power parities system to determine medicine entry prices in Canada.

We would at this point in time recommend once again that the PMPRB mandate be broadened to include all drugs, patented and non-patented. We are aware of the implementation difficulties with this proposal but we believe that all governments should work jointly to find arrangements that would allow the Board to operate with these expanded powers.

Recently, the Board has tightened the rules on Patent Dedication and we feel that this will address some of the problems encountered with the price of certain dedicated patent drugs though these new regulations do not apply retroactively. We would like to recommend that the Board be given authority to review the prices and annual increases of previously dedicated patents particularly those where the patent has expired but which remain single source drugs.

Though some would think that the market can take care of itself, comparable generic drugs in other countries have come on the market at lower prices than in Canada. This has also had an impact on the cost of medications to consumers and to private and public plan payors. Some provinces have tried to limit the entry price of medicines on the market by instituting measures such as maximum allowable cost (MAC) in Alberta, Nova Scotia and New Brunswick (MAP), and reference-based pricing in British Columbia. In those provinces however with the exception of British Columbia's Pharmacare program, the plan only applies to defined segments of the population, and other consumers are left to pay the full price of those drugs. The generic companies themselves set the entry price limit at no more than 80% of the innovator's price.

Taking the experience of other countries into consideration, it seems that the Canadian market does not self-regulate as well as other comparable markets and that therefore some monitoring measures, and if need be regulatory measures, should be considered to ensure that costs of generics in Canada are comparable to those in the basket of countries used by the PMPRB for patented medicines. This could be done through a similar process to that used for patented medicines in setting the entry price of the first generic version of a drug onto the Canadian market. This initial drug would then be used by other manufacturers as a basis to set a competitive price.

Other C-91 Provisions

The provisions in the original amendments to the Patent Act required a review after four years of implementation. In light of the fact that the full impact of the amendments has yet to be fully felt, CPhA would like to recommend that another review of the impact of C-91 and the potential amendments which will be brought about as part of this review be once again assessed in four years and that this process become an integral part of the legislation.

Though the Research and Development funds commitment from industry were not included in the Act, the Canadian Pharmaceutical Association would like to recommend that they form the basis of an official appended document to C-91. We recommend that the commitments by industry be renewed and assessed once again in four years and that the obligation of ensuring fair cross- Canada repartition of the Research funds be reiterated.

Related Provisions on Early Working for Generic Companies

The Canadian Pharmaceutical Association agrees with the advantage granted generic companies through the early working provisions which enable them to manufacture and stockpile a product 6 months before the expiration of a patent. These provisions along with the ability to apply for Notice of Compliances 2 to 3 years before patent expiration have ensured that generic equivalents of patented medicines could come on the market as soon as patents expire.

This in turn has guaranteed that some lower cost alternatives could be available upon patent expiration. Unfortunately, this advantage has not been used to its fullest by generic companies on a broader array of drugs. One can hope that a greater number of generic companies coming in the market place will result in more drugs being genericized thus decreasing costs for more patients and consumers.

Export Considerations

CPhA also feels that the limits placed on exportation of generic medications before patent expiration in Canada are discriminatory for Canadian companies and may in fact cost Canada jobs in the long run. Some companies have already built facilities in other countries to be able to get their products to market as soon as patents expire.

We would therefore like to recommend: That the Government undertake to revise the export rules linked with patent protection to allow generic companies to manufacture, for export purposes only, before the 6 (six) months early working period. That this be allowed for any drug which comes off patent in another country more than 6 (six) months prior to patent expiration in Canada.

The packaging for such drugs would have to clearly indicate that it is for export only in order to avoid illegal entry back into Canada. This would ensure the protection of patent rights as granted by C-91.

Pharmacists as Part of the Solution

At the beginning of our presentation, we highlighted the fact that there is not one reason only for drug cost escalation. Increased reliance on drugs has positively impacted on reduction in hospital stays and consequently drug utilization has also increased. This has been more visible since drugs were no longer covered by the hospital envelope.

These changes have prompted pharmacists to seek innovative solutions to control drug costs, promote appropriate utilization, work at reducing the negative impact of non-compliance and ensure optimal pharmacotherapy. Programs such as Drug Regimen Reviews, Drug Utilization Reviews and Pharmaceutical Care contribute to improving drug therapy.

Pharmacists have proposed new ways of enhancing proper use and compliance by working with governments in setting up quantity management strategies such as Trial Prescription programs. These programs were set up as a result of "Medicine Cabinet Clean-up Campaigns" where drugs brought back to the pharmacy indicated high waste of fairly expensive medications which had been prescribed for 14 days and more.

Trial prescription programs are particularly efficient for relatively high price drugs with a high incidence of unwanted side effects. The drugs are dispensed for seven days after which time patients can either come and get the balance of the medication or get a prescription for a different drug from their physician. The pharmacist usually calls the patient back when he/she does not return for the remainder of the initial prescription to ensure that the patient is indeed taking the appropriate steps for treatment.

When fully implemented, this pharmacy-made solution will help reduce non-compliance, wastage and consequently costs to consumers and payors. The CPhA recommends that these types of programs be considered for all new drugs coming onto the market for which a high risk of unwanted side effects exists.

Recognizing that optimal drug therapy requires the collaboration of patients, physicians and pharmacists, CPhA has worked with the Canadian Medical Association to produce a Joint Statement entitled: "Approaches to Enhancing the Quality of Drug Therapy".

With this in mind, pharmacists are also working with physicians to find ways of implementing therapeutic interchange programs according to protocols. In order for these programs to be fully implemented, some of the provisions in provincial pharmacy regulations will have to be amended.

As primary health care professionals with unique knowledge about medications, pharmacists are conscious that we must all contribute to the management of drug therapy, encourage appropriate utilization and counsel and inform patients. We will also continue to work with governments and employers to bring solutions to the high costs of their drug benefit plans.

Conclusion

In closing, we feel that the costs to the system of the additional protection afforded patented medicine companies has been partly offset by the mandate and powers of the PMPRB. We continue to believe that we all have a vested interest in seeing that patent medicines are developed, manufactured and well protected in Canada. Without the medicines innovator companies discover, there could not be a strong generic industry in Canada and consumers would not benefit from the arrival on the market of medically necessary drugs. Without medicines people's lives would be reduced on average by 15 years.

The C-91 Amendments which treat patents for medicines separately from other types of patents confirms what the National Forum on Health also recognizes in its "Directions for a Pharmaceutical Policy in Canada:

That drugs are as much a part of "medically necessary" care as are the services of physicians and hospitals, seems now too obvious to deserve discussion....In a fundamental sense, it implies that we do not wish to treat drugs as a "commodity", on a par with shoes and ships and sealing wax, and that it is irrational and inconsistent with our broader objectives to do so.

The legislators who introduced the amendments to C-91 were forward looking. Their work should be recognized as such and not be tinkered with in areas where the amendments have lead to an equitable system for all concerned.

The Canadian Pharmaceutical Association hopes that the above recommendations will be useful to the Committee in trying to address the problems which have arisen with C-91. We will continue to monitor its impact and work with all governments to find solutions which will ensure the cost- effectiveness of optimal pharmacotherapy for all Canadians.

For more information, please contact:
Philip Newton, Senior Director of Marketing and Communications
Tel: (613) 523-7877 or 800-917-9489
Fax: (613)523-0445

PDF Français
Mémoire de l’Association pharmaceutique canadienne au Comité permanent de l'Industrie chargé de la révision de la loi C-91 (PDF)