ANALYZING THE LATEST ANNUAL REPORT FROM THE PMPRB

The Annual Report of the Patented Medicine Prices Review Board (PMPRB) for 2007 was tabled in Parliament and made public on June 18, 2008. On the face of it, the Annual Report suggests consistent trends in the prices of patented drugs in Canada, but is there more that may lie behind the usual statistics and reports on PMPRB activities?

This question becomes particularly relevant in light of the current level of enforcement activities by the PMPRB and its ongoing review of its Excessive Price Guidelines.

Price Trends for Patented Drugs

On price trends, the PMPRB reported that prices for patented drugs declined, on average 0.1 percent in 2007. This change is in line with trends throughout most of the PMPRB's history where prices on average have either declined or increased at rates well below the rate of increase in the Consumer Price Index (CPI). In fact, the last time that prices for patented drugs increased by more than 2 percent in one year was in 1992.

In its Guidelines review, the PMPRB has proposed to review prices in "any market" i.e., by province and by class of customer. The PMPRB has traditionally reviewed the average ex-factory price of a patented medicine across Canada. The Annual Report breaks out price changes by province and territory and by class of customer. The results show little variation. In 2007, prices to pharmacies increased by 0.6 percent and prices to wholesalers by 0.3 percent. Prices to hospitals declined by 2.9 percent. Similarly, the data show little variability across the provinces and territories of Canada. The largest price decline in any province was 0.5 percent in New Brunswick, while the larger price increases were 0.5 percent in Québec and Newfoundland and 0.7 percent in Saskatchewan. All of these changes, whether by class of customer or by province and territory, were well within the PMPRB's Guidelines based on changes in the CPI. In 2007, the CPI increased by 2.1%.

It is interesting to note the little variability among provinces given the introduction of policy changes in 2006 and 2007 in Ontario and Québec and to a certain extent in other provinces. Both major provinces ended their decade-long freeze on formulary prices and have reported price adjustments for a number of products but the policy changes do not appear to have had a significant impact on average price trends for patented drugs.

International Price Comparisons

The PMPRB also reported that Canadian prices for patented drugs in 2007 ranked second highest as compared with the seven countries it uses for price comparison purposes. According to the PMPRB, only the U.S. had higher prices. In previous years, it has reported that Canadian prices were generally in the mid-range of prices in European countries. Furthermore, median international prices declined relative to Canadian prices in 2007 and, for the first time since 1993, were actually below Canadian prices, by about 2 percent.

These statistics need to be examined with considerable caution. The PMPRB's report shows that Canadian prices actually declined slightly in 2007, while prices in five of the seven countries went up. So why was there a difference in the relationship with international prices? The answer can be found in the significant changes in exchange rates in recent years. The Annual Report notes that virtually all of the changes in the relationship between Canadian and foreign prices in 2007 occurred because of the appreciation of the Canadian dollar against other currencies in recent years. The PMPRB's use of a 36-month average exchange rate methodology helps to smooth out the impact of exchange rate changes over time, but is now reflecting the changes seen in recent years. The current relationship with foreign prices is neither surprising nor should it be a source of significant concern.

Comparing PMPRB Price Reviews and CDR Recommendations

One of the interesting features about the PMPRB as a price control body is that it is intended to operate separately from public reimbursement programs. While the PMPRB applies a test of "excessive" price, the Common Drug Review (CDR) applies very different standards of clinical and cost-effectiveness in reviewing drugs for purposes of recommending coverage by public drug plans.

In its Annual Report, the PMPRB provides an update on the price review status of drugs which were reviewed by the Canadian Expert Drug Advisory Committee (CEDAC) for purposes of the Common Drug Review (CDR) in 2007. Of the 28 drugs reported by CDR for 2007, six, or more than 20%, were not reviewed by the PMPRB in 2007. Five were not under the PMPRB's jurisdiction as no patents have issued for those drugs; one was not being sold. Of the remaining 22, the PMPRB found 17 drugs to be priced within the Guidelines while five remain under investigation or under review. In seven instances, the CDR recommended against listing the drug even though the PMPRB concluded that the price was within the Guidelines.

Sales of Patented Drugs

A further significant statistic in the Annual Report is the magnitude of the change in sales of patented drugs in 2007. The PMPRB reports that sales increased by 3.0 percent, which is, with the exception of 1994, the smallest rate of increase in sales of patented drugs in the 20-year history of the PMPRB.

For a copy of the PMPRB's Annual Report for 2007, please visit:
http://www.pmprb-cepmb.gc.ca/english/view.asp?x=91