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Limiting the prices of drugs will make them less accessible for Canadians

Montreal, April 18, 2019 – Patients could pay a high price for Ottawa’s reform—which aims to cut the maximum prices at which new drugs can be sold by up to 70%—by seeing their access to new drugs slowed down or even compromised, shows a publication launched today by the MEI.

While Canadians have always been among the first to gain access to pharmaceutical innovations, a substantial decline in maximum prices could increase delays and find them bringing up the rear in terms of timely access.

“Manufacturers will be inclined to introduce drugs first where prices are higher, in order to finance the high costs of research and to recover their investments. Meanwhile, they will delay launches where prices are lower. This phenomenon has been documented in Belgium, for example, where drugs are often introduced later since prices there are lower,” explains Mathieu Bédard, author of the publication.

In Canada, the prices at which drugs can be sold is set by the Patented Medicine Prices Review Board (PMPRB), a federal agency that takes into account the current prices of drugs in a selection of countries.

In 2016, the federal government proposed a reform of the PMPRB that aims to change the list of countries, increasing it from seven to twelve. The United States and Switzerland, where drug prices are high (and where more drugs are accessible) will be removed from the current list, to be replaced by Australia, Belgium, South Korea, Spain, Japan, Norway, and the Netherlands, where prices are generally lower and where fewer new drugs are introduced, on average.

“Moreover, the reform that Health Canada hopes to adopt could lead to a snowball effect, through which the adoption of a low price by one of the countries used as a benchmark leads to a price drop here, which would in turn push prices lower in another country where Canada serves as a benchmark, and so on. A sudden price drop would compromise access to drugs. This happened in Bulgaria, where the reference pricing mechanism caused 200 products to be taken off the market in 2012,” points out Mathieu Bédard.

“One of the most basic teachings of economics is that price ceilings cause shortages. New drugs contribute significantly to increasing longevity and to our quality of life, and the PMPRB should not be able to delay Canadians’ access to pharmaceutical innovations, let alone deprive them of access altogether,” concludes Mr. Bédard.

The Viewpoint entitled “Reducing Drug Prices Too Much Will Make Them Inaccessible” was prepared by Mathieu Bédard, Economist at the MEI. This publication is available on our website.

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The MEI is an independent public policy think tank. Through its publications and media appearances, the MEI stimulates debate on public policies in Quebec and across Canada by proposing reforms based on market principles and entrepreneurship.

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Interview requests: Daniel Dufort, Director of External Relations, MEI. Tel.: 514-273-0969 ext. 2224 / Cell: 438-886-9919 / Email: ddufort@iedm.org


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