A pharmacist counts prescription drugs in Ottawa in June, 2019. It has been estimated that the average cost of bringing a new drug to market is close to $900-million.CHRIS WATTIE/Reuters
Emmanuelle B. Faubert is an economist at the Montreal Economic Institute.
Imagine learning that a life-saving drug exists, but is not available in Canada.
Canadians have been told that strict drug price controls are designed to protect patients. In theory, keeping prices low sounds like a compassionate policy choice, but in practice, it has some serious side effects.
Simply put, our “cut prices first, ask questions later” approach makes Canada less attractive for pharmaceutical launches, delays access for patients and ultimately limits the availability of innovative treatments.
At the end of the day, cheap medications are great, but only if we can actually get them. Pharmaceutical innovation can help patients survive illnesses that once would have killed them. Study after study shows that in the past few decades, life expectancy in high-income countries has improved largely thanks to new drugs.
This is of course a huge win for patients, but it also matters for society at large. When people have access to effective treatment, they can keep living their normal lives. This means being able to do the work that feeds their families. It also means fewer children left behind owing to missed days and weeks of school.
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Additionally, innovative drugs often reduce costs elsewhere in the health care system. The medication that appears expensive when considered in isolation may prevent other expenses later on. Hospitalizations, emergency visits, surgeries and long hospital stays all cost far more than early and effective treatment. One Canadian study covering the period from 1980 to 2002 estimated that for every dollar spent on medications, hospital and other health care resource costs fell by between $1.05 and $1.50.
If pharmaceutical innovation saves lives and reduces pressure on hospitals, why does Canada make it so hard to bring those benefits here?
Developing a new drug takes years of research, followed by clinical trials. Then, there are the health bureaucracies to navigate. And most drug candidates fail.
It has been estimated that the average cost of bringing a new drug to market, accounting for failed experiments and the cost of capital, is close to $900-million.
Costs often reach upward of a billion dollars when taking into account the process of bringing a drug to market.
It is therefore unsurprising that pharmaceutical companies make strategic choices about where and when to launch new products. Countries with predictable regulatory environments, reasonable pricing frameworks, and faster pathways to insurance plan reimbursement tend to be prioritized. Countries that pile on delays and clamp down on potential returns tend to slide down the list.
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In this country, even after a medication is approved by Health Canada, it can face years of additional hurdles before it becomes accessible to patients through public coverage. Clinical and cost-benefit assessment are carried out in order to recommend to public insurers whether a drug should be covered or not. In parallel, the Patented Medicine Prices Review Board sets a legal maximum price based on domestic and international comparisons. From there, the pan-Canadian Pharmaceutical Alliance negotiates pricing for public plans, often involving confidential rebates and further delays.
This process is not fast, and it is not patient-centred.
The end result is predictable: long waits and weakened incentives to launch new drug therapies in Canada. If a firm has invested close to a billion dollars to develop a drug, and has limited resources to roll it out globally, will it prioritize a smaller market with low price ceilings? Indeed, the evidence bears this out. The share of drugs with major therapeutic benefits reaching the Canadian market within two years of their international launch fell to 31 per cent in 2021 from 46 per cent in 2018.
The delays are staggering. On average, Canadians wait 906 days, roughly two-and-a-half years, between Health Canada’s approval of a new drug and public reimbursement. Canada ranks last in the G7 and 19th out of 20 OECD countries in terms of delays in access to innovative medicines.
Patients do not put their illnesses on pause and wait patiently while bureaucratic steps pile up; they get sicker, their complications worsen, and some die.
Without abandoning cost-effectiveness or writing blank cheques, we need to recognize the limits of a model that prioritizes the lowest possible price, regardless of the impact on access and innovation. Policies designed to squeeze pharmaceutical returns can discourage investment and reduce the likelihood that new drug therapies will arrive in Canada early, if they arrive at all.