Why are EpiPens so much cheaper in Canada?

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But while commentary since the U.S. EpiPen controversy emerged has focused on regulatory controls in Canada, the federally run Patented Medicine Prices Review Board monitors and, if necessary, contests price increases only for drugs with at least one active patent. In the case of EpiPen, it’s no longer under patent, Genin confirmed.

“And when the patent expires, that’s pretty much the end of it,” says Noel Courage, a patent lawyer and partner at Bereskin & Parr LLP in Toronto, of the review board’s role.

So what’s behind EpiPen’s stable prices in Canada? For one, massive increases would be a bad publicity move, says Neil Palmer, the Ottawa-based president of pharmaceutical pricing consultancy PDCI Market Access Inc., which has worked with Pfizer.

“Pfizer has many other products in Canada, and I think there’s a reputation issue, frankly . . .,” he says. “[A price hike] would cause a hue and cry for a product that’s not particularly important to them, I don’t think, in terms of the overall scheme of things. They have much bigger sellers than that. So why cause the public relations issue when you don’t need to?”

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And then there’s the matter of provincial agreements. Either independently or through the pan-Canadian Pharmaceutical Alliance, provinces can negotiate with manufacturers for lower drug prices, says Palmer. If the manufacturer agrees, the list price remains the same, but every quarter, it would reimburse the provinces the agreed-upon (and confidential) amount. If the manufacturer won’t offer a discount, provinces can simply leave the drug off their formularies.

The provinces are unlikely to tolerate a significant price hike for EpiPens, says Palmer. And while he suggests private payers are more likely to put up with price hikes, Stephen Frank, senior vice-president of policy development and health at the Canadian Life and Health Insurance Association in Toronto, argues governments and insurers should negotiate with manufacturers together to further drive down costs. Insurers’ requests to join the alliance have yet to succeed, however.

Some insurance companies, Frank adds, have begun negotiating with manufacturers individually as competition laws prevent them from forming a parallel alliance and negotiating as a block.

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If, unlike with the EpiPen, a drug has at least one active patent, the review board works to ensure it’s available at an appropriate price. After a scientific review, which looks at all available peer-reviewed clinical trials and assesses the drug’s level of innovation, board staff begin the pricing review, says Tanya Potashnik, the review board’s director of policy and economic analysis in Ottawa.

“Our guidelines are designed to look at the price of the new medicine and compare it either to the same drugs or the same indications domestically, as well as the price for the same medication and other medication with the same indications internationally,” she says. More specifically, the review board aims to have Canadian prices be in the median range of prices in the United States, Britain, Switzerland, Sweden, Germany, Italy and France.

“Some review of historical documents suggests it was a bit of an aspirational basket,” says Potashnik. “That is, this was a basket of countries where there was a significant [research and development] footprint. And so we once thought that if we have similar pricing structures, similar [intellectual property] regimes, that we would emulate over time the kind of investment footprint that exists in these countries.”

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Insurers, however, aren’t happy with the approach.

“The existing basket of countries are amongst the highest-cost countries in the world,” Frank says. And in the case of the United States, it doesn’t have price regulation. “And so by targeting the median of those seven, we’re essentially targeting to be the third or fourth highest-cost country in the planet.”

A short-term solution could involve matching Canadian drug prices to the median in all countries of the Organisation for Economic Co-operation and Development, he argues. But because provinces often pay reduced prices that private payers don’t see, the international comparisons aren’t that helpful.

“You need to build in different ways of assessing whether a price is excessive and trying to establish what that level should be,” he says. “And that’s probably more of a pharma-economic kind of assessment of each drug that doesn’t really rely on what the prices should be in other countries but more of an objective assessment of the value of the drug, its alternatives, its impact on the total spend in the system, whether there are competitors.”

Palmer agrees, adding that fluctuating currencies are also a concern. “You can have a situation where a product in Canada costs 60 per cent more than in the U.S. simply because [of] the shifting exchange rates when the price in neither country changes . . .”

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If the review board decides a manufacturer’s prices are excessive, it will instruct the company to reduce them, says Courage. “The firm can agree to put it lower or they can push back and have a big argument and talk about the economics of it, et cetera. If they can’t agree, then the board will have a hearing. They’ll set a price and either side is free to appeal then to the Federal Court.”

In January 2017, a hearing will begin for Alexion Pharmaceuticals Inc.’s drug Soliris, which the review board is taking to task for costing $500,000 per patient per year to treat a rare blood disorder and $700,000 to treat a rare genetic disorder. Alexion has refused the review board’s request for it to lower prices and repay excess revenues from selling the drug at an elevated cost. After the hearing, the review board has the power to enforce a price reduction and revenue repayment.

Since 1993, there have 29 public hearings, says Potashnik, with the review board collecting $157 million in excess revenues.

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Yet those revenues automatically go to the federal government, says Frank. Hoping to stop that trend, the CLHIA has petitioned for, and received, intervener status in the Soliris hearing. “We believe there should be a mechanism in place so the employer or the individual who paid the excessive price get the benefit of this award and that not it just simply goes into federal treasury.”

A drug manufacturer is unlikely to pull its product from Canada if it can’t agree with the review board on pricing, says Courage. That’s because manufacturers have to invest so many resources into getting their drug approved in the first place, so if they’re in talks with the review board, they likely have a commitment to the Canadian market.

“I think where companies are very sensitive to Canadian price regulation, they know the Canadian price is going to be lower, they may not launch in Canada at all,” he says.

Correction: Story updated Sept. 15 to correct a misquote of the word “shifting” in the quote from Palmer about exchange rates.