New efforts by the Canadian government to regulate the cost of drugs threaten access to innovative treatments for patients with rare diseases, according to a new report from the Canadian public policy think-tank Fraser Institute.

The report, Regulatory, Reimbursement, and Pricing Barriers to Accessing Drugs for Rare Disorders, suggests proposed new pricing regulations in Canada will make it harder for rare disease patients to get access to innovative medicines. That’s because proposed changes, the report argues, will serve as a disincentive for drugmakers to make their medicines available in Canada.

“Drugs for rare diseases are often very expensive because they are costly to develop and target a small number of patients, so when governments push too hard to lower prices, pharmaceutical companies have little incentive to launch these drugs,” said Nigel Rawson, Fraser Institute senior fellow and author of the report.

Though much of the report is aimed at painting the landscape for rare diseases, the review of drugs to treat them, and how the reimbursement process in Canada works, at the heart of the report are concerns about proposed new rules for Canada’s Patented Medicine Prices Review Board—a federal body that regulates the prices of all patented medicines in Canada.

One change being considered is the comparators of drug prices that the review board will use to ensure drug prices in Canada are not excessive. The review board compares drug prices in Canada to prices in France, Germany, Italy, Sweden, the United Kingdom, Switzerland, and the United States. It then assesses the uniqueness of the product and its therapeutic benefit. Because there has been concern that this approach has not done enough to reduce drug prices, one proposed reform is removing the United States and Switzerland from the list of comparator countries and adding Australia, Belgium, Japan, the Netherlands, Norway, South Korea, and Spain, all countries that have tighter price controls.

Should a drug pass muster on the comparator test, it will then be subjected to a new cost-effectiveness test to determine the value of the drug. Should it pass both tests, a final consideration will be to evaluate the potential impact of the price on patients and payers. Manufacturers of drugs that fail these tests have an opportunity to make a case for their pricing.

The report argues that these proposed changes are creating “much uncertainty among patients and pharmaceutical manufacturers” and has the “the potential to delay the launch of new innovative drug in Canada by decreasing its attractiveness to companies as a market for their products, especially expensive drugs.”

“The proposed changes are anticipated to result in reductions in the price of drugs for rare and ultra-rare disorders by 70 to 90 percent, which would be a major disincentive to the marketing of these drugs in Canada because not only will the maximum allowable prices not cover the costs of distributing the drugs, but selling at such low prices would lead to demands for lower prices in other countries that use Canada as a comparator,” the report said.

Rare disease patients in Canada do not have access to the same drugs that rare disease patients in the United States or Europe have. As the report notes, drug companies prioritize launching drugs in the United States and Europe before seeking market access in Canada. Drug companies filed submissions for 84 percent of drugs for ultra-rare and rare disorders approved by Health Canada between 2002 and 2016, after filings to the U.S. Food and Drug Administration or the European Medicines Agency with a median delay of 253 days.

A total of 23 drugs for rare or ultra-rare diseases approved by the FDA and/or EMA during this period, had not been approved by Canada by the end of 2016. A more than 70 percent increase in Canada for its regulatory review fee, the report said, may be a further disincentive for smaller companies launching drugs for these disorders.

The issue is complicated by the fact that unlike the United States or Europe, there is no Orphan Drug Act or similar policy in Canada to provide incentives to drugmakers to bring to market drugs for small patient populations. Health Canada proposed an Orphan Drug Regulatory Framework in 2012, but it was not enacted. In October 2017, the current federal government deleted all references to the framework from the ministry’s website without notice or consultation. Health Canada has said that it is has taken other steps to improve access through broader measures.

Though Fraser describes itself as independent and non-partisan, it is considered a conservative think-tank and its funders in the past have included big corporate interests, including the pharmaceutical industry. It is not surprising to see it oppose price regulations on drugs.

But the report does raise troubling issues of concern for how Canada, in seeking to rein in spending on drugs, will balance the problem of providing access to needed therapies for patients with rare diseases.

Driving prices down for drugs will only increase access if those drugs are made available within the country. Canada appears to be embracing an approach that fails to consider the unique dynamics of rare disease drugs. As such, rare disease patients who are among the most in need of access to innovative medicines may end up paying the biggest price by never gaining access to drugs available elsewhere.

September 5, 2018