In the past year, nearly 50 life-extending or saving medications have either canceled or delayed their launches in Canada, with some already approved by Health Canada. Dr. Michelle Hladunewich, a nephrologist and Physician-in-Chief at Sunnybrook Health Sciences, warns that Canadians may soon find themselves without access to cutting-edge treatments for rare diseases.
Dr. Hladunewich attributes part of this issue to the Most Favoured Nation (MFN) policy initiated by U.S. President Donald Trump in May 2020, which mandates that Americans pay the lowest prices for prescription drugs. Dr. Bettina Hamelin, President and CEO of Innovative Medicines Canada, emphasizes that Canada is one of the eight countries identified in this policy that have historically benefitted from lower drug prices compared to the United States. Hamelin argues that the United Nations has deemed this arrangement unfair, stating that these favored nations are not contributing their fair share towards drug innovation costs.
Bringing a new medication to market typically costs pharmaceutical companies around $3.5 billion and takes a decade or more. Much of this investment is recouped through higher prices in the U.S., where the market is significantly larger. Hamelin mentions that this creates an "upward pressure on pricing" in Canada, as companies attempt to balance costs and profits amid aggressive negotiations.
In Canada, the process of setting drug prices is intricate and time-consuming. Once Health Canada approves a drug post-clinical trials, pharmaceutical companies must navigate evaluations by Canada’s Drug Agency and negotiate with the pan-Canadian Pharmaceutical Alliance (pCPA) for public insurance coverage. They then face an additional challenge of gaining approval from ten separate provincial health formularies.
Due to the influence of the MFN pricing policy, companies may find themselves needing to push for aggressive pricing negotiations domestically, or risk setting unfavorable reference prices for their drugs in the U.S. Senior Counsel Rambod Behboodi elaborates on concerns within the pharmaceutical industry that the MFN pricing could deter companies from introducing new drugs in Canada, making pricing a benchmark for the U.S. market.
A survey conducted by EY revealed that at least 16 drug launches in Canada were canceled and an additional 32 were delayed as a direct result of MFN pricing policies. An example includes Novartis's recent situation with its drug Vanrafia, designed to address IgA nephropathy. Although it was approved by Health Canada, Novartis subsequently decided not to seek reimbursement, citing limited success in securing coverage under the current access conditions in Canada.
Dr. Hladunewich cautions that this situation could lead to reduced access to essential drugs in Canada. There are concerns that if drug prices need to rise in Canada, it might strain public and private insurance frameworks, which could ignite a larger debate regarding the country's healthcare policy.
Hamelin sees a silver lining in the MFN policy, suggesting that it might prompt the Canadian government to invest more in the life sciences and pharmaceutical R&D sectors, as recommended by a recent task force to the Ministers of Health and Industry. She asserts that investing in innovative medicines not only saves lives but also reduces healthcare costs and boosts the economy.
The Canadian Minister of Health's office has responded to inquiries about addressing the MFN policy and potentially adopting recommendations from the task force. They announced initiatives aimed at strengthening Canada's pharmaceutical capacity, promoting domestic manufacturing, and expediting the approval process for new drugs.
Going forward, Behboodi anticipates a volatile market in the upcoming months, especially as U.S. politicians push for progress on drug pricing reductions ahead of the midterm elections. The repercussions of these changes are likely to impact both Canadian and U.S. markets significantly.
