Would pharmacare spell trouble for drug companies?

The ongoing COVID-19 pandemic has brought the issue of prescription drug access back to the fore as questions of affordable access became international news in March. However, the question of how to guarantee access to necessary medications for Canadians is not new. During the last federal election, calls for a universal, national pharmacare plan were prominent and progressive groups have continued to lobby the Liberals to fulfil their election promise and make pharmacare a reality.

As it stands, Canada has the fourth highest drug costs in the world. In response, the Patented Medicine Prices Review Board (PMPRB), the federal organization that sets limits on the prices of patented medicines, has proposed changes to the way that it operates in order to bring down prices to a more reasonable level. The current high medication costs affect the costs associated with our COVID-19 response.

At the end of July, Health Canada approved remdesivir for use in people hospitalized with COVID-19. Remdesivir reduces hospital stay, on average, from 15 days to 11 days (it does not reduce the mortality rate), but that benefit comes with a cost. In the U.S. it’s priced at US$390 per vial, or US$2,340 per five-day treatment course. Even given comparatively lower Canadian prices, we could potentially spend tens of millions treating patients with the drug.

Not unexpectedly, the prospect of lowering prices for their drugs has provoked a response from the pharmaceutical industry and its allies. Life Sciences Ontario, whose membership includes most of the large drug companies such as Amgen, AstraZeneca, Bayer, Merck and Pfizer, released a survey claiming that companies would significantly cut back on the number of drugs that they launch in Canada. Patient groups, most of whom get donations from drug companies, claim that lower prices will mean that patients will not get access to new drugs, especially those for rare diseases.

Are drug companies really going to be in financial trouble? Will companies stop marketing drugs for rare diseases? Looking at nine of the 10 best selling brand-name drugs in Canada in 2018 may help answer those questions. (There was too little information about one of the 10 to analyze.) The table below, adapted from the 2018 report from the PMPRB, can help us to answer these questions. 

Table: Top selling brand-name drugs in Canada

What matters most to drug companies is how long they are the only ones allowed to sell a drug, i.e., how long their patents last. While patents are valid no other company can sell the same drug. Once the patent expires, then generally so do sales of the brand-name drug, as lower cost generics and in some cases biosimilars, the equivalent of generics for biologics, dominate the market.

Patents last for 20 years from the date when they are filed, but some of that time is taken up with doing clinical tests and the time it takes for Health Canada to decide whether to allow a drug on the market. For these nine drugs, the average monopoly time is 14.2 years. During that time, the companies making these drugs will reap billions of dollars in sales. Enbrel actually has 22 years of monopoly since the company making it didn’t bother to file for the patent until the drug was being sold. The patents for Epclusa and Keytruda will be valid until 2028.

Now, if these drugs were major therapeutic gains it might conceivably be justifiable to spend all of that money on them. But that’s not the case. On average, only slightly more than 10% of the drugs that were introduced onto the Canadian market between 1995 and 2016 were significant improvements on already existing drugs. From this group of best sellers, six of the nine were no better than already available drugs. That’s $2.4 billion that Canada spent in 2018 on drugs that, for the most part, didn’t benefit patients any more than older, cheaper drugs. (There are always some patients who are helped quite a bit by drugs that, on average, have marginal value.) 

What about the fear that drugs for rare diseases, orphan drugs, won’t make it to the Canadian market because companies won’t make enough money from them? Canada doesn’t have an orphan drug program, but the U.S. does and three of those nine top selling drugs had orphan status in the U.S., including Humira with its $791 million in Canadian sales. Diseases treated by orphan drugs are meant to affect under 200,000 people in the U.S. That would mean about 22,000 people here in Canada. Each one of those patients could be worth as much as $36,000 in annual sales of Humira.

So, are the drug companies and patient groups in trouble? Based on these nine drugs it’s pretty unlikely. Even if drug prices come down to the OECD median, a drop of 17%, companies will still be making billions over the average of 14 years of monopoly sales. (Innovative Medicines Canada, the lobby group representing the multinational companies, is projecting a much larger drop in prices for some medicines.) If orphan drugs earn companies hundreds of millions a year, they are not going to stop marketing them in Canada.

Selling prescription drugs is enormously profitable. PMPRB reforms and national pharmacare will make that business slightly less profitable, but there’s still lots of money to go around.  

Joel Lexchin, MSc, MD, is Professor Emeritus at the School of Health Policy and Management, York University, an emergency physician with the University Health Network, and a CCPA research associate.