The president of Innovative Medicines Canada said her members, which include multinational drug companies, fully support the role of generics. (Black Press Media file photo)

The president of Innovative Medicines Canada said her members, which include multinational drug companies, fully support the role of generics. (Black Press Media file photo)

Big pharma might cut R&D, delay new drugs if pharmacare means more generics: memo

Pharmacare is shaping up as a key campaign issue in the October election

Brand-name drug companies could put off introducing new medicine in Canada and scale back research here if the country makes a major shift to cheaper generic alternatives under a national pharmacare plan, according to an internal federal analysis.

The concerns were included last year in a briefing document for federal Finance Minister Bill Morneau that explored the feasibility and costs of a pharmacare program.

Pharmacare is shaping up as a key campaign issue in the October election, particularly for the Liberals.

The Finance Department’s analysis was created a few days before Morneau’s 2018 budget officially launched an advisory group on Canada-wide pharmacare, which the Liberals say will cut costs and improve Canadians’ access to prescription drugs. The document said more information is needed to fully understand how national pharmacare would affect drug spending in Canada — and what it would mean for revenues and business operations for the domestic pharmaceutical industry.

READ MORE: BUDGET 2019: Liberals to create national drug agency for pharmacare plan

In its look at the Canadian industry, the briefing note to Morneau said national pharmacare could influence the revenues of drug companies in several ways. Among the possibilities, it said a shift in favour of more generic drugs, mass-produced after patent protections for new medications expire, could lower costs.

But that could come with a cost for patients.

“For example, brand-name pharmaceutical companies may respond to a broad shift to generic drugs by delaying the introduction of new drugs in the Canadian market or by reducing the R&D activities that they undertake in the country,” said the analysis, labelled “secret,” which was obtained by The Canadian Press under access-to-information law.

“Innovative Medicines Canada, which represents pharmaceutical patent holders, has warned that a national pharmacare program focused on cost containment may result in reduced access to medicines for Canadians.”

The president of Innovative Medicines Canada said her members, which include multinational drug companies, fully support the role of generics. Some of the firms produce generic drugs as well, Pamela Fralick said in an interview.

Fralick said drug companies are eager for more details on Canada’s eventual pharmacare plan — but she stressed there’s a far bigger issue for the industry right now: regulatory reform.

In late 2017, the Liberal government proposed changes to the regulations governing patented medicines as a way to drive down drug prices. The update, which has yet to be put into force, would be the first major change to those rules in more than two decades.

The proposal calls for an expanded list of countries Canada can use when comparing patented drug prices. It also includes new factors for the Patented Medicine Prices Review Board, a quasi-judicial body operating at arm’s length from the government, to take into consideration when assessing whether a drug is overpriced.

Fralick argued that the proposed reforms need improvement. It they proceed as written, she said companies could suffer a hit to their bottom lines of between 30 and 70 per cent.

“(They’re) making drug-launch decisions, investment decisions, et cetera, based on what happens to this particular environment.”

With all the uncertainty, companies have been holding back on bringing investment to Canada until the regulatory environment has been settled, Fralick added.

Beyond the risk of missing out on investment dollars, she said if unfriendly conditions encourage companies to look elsewhere, new drugs could be delayed years before they get to Canada.

The briefing to Morneau said research and development investments by pharma companies in Canada already ”significantly lag” spending in other countries in the Organization for Economic Co-operation and Development, a group of 34 countries with advanced economies.

The ratio of sales to R&D for all patentees fell again in 2017, to 4.1 per cent. That’s a decrease of 65 per cent since its high point of 11.7 per cent in 1995, according to numbers from the price-review board. The industry invested $870 million in 2017 and employed 29,870 people, said the board.

“Since 2003, industry investment in R&D has been less than 10 per cent of sales — the target that the pharmaceutical industry committed to in exchange for more favourable patent terms in Canada,” said the briefing to Morneau.

Fralick disputed the argument that innovative drug companies have been falling short on investment. The PMPRB formula doesn’t capture major industry investments in university research chairs and through venture-capital channels, she said.

“There’s just a whole range of research going on in Canada that is not being counted,” she said, insisting that many of her members are “well above” the 10-per-cent target. “It’s unfortunate, there is a bit of tension right now with the industry right now.”

The cost of national pharmacare is expected to be steep.

An analysis by the parliamentary budget officer estimated a broad coverage regime would carry a $20-billion-a-year price tag. Recent work by the Canadian Institute for Health Information found that Canadians spent $39.8 billion on drugs in 2018, about $33.7 billion of it on prescription medication.

It’s the fastest-growing component of health spending, as Canadians live longer and spend more years with chronic conditions.

Andy Blatchford, The Canadian Press

Like us on Facebook and follow us on Twitter

Just Posted

(Dave Ogilvie/Contributed)
UPDATE: West Kelowna fire crews rescue injured mountain biker

The injury took place at the top of Smith Creek Road

Kelowna flags were flown at half-mast after the discovery of a residential school burial site in Kamloops. (File photo)
Central Okanagan school board chair reflects on recent tragedies

Moyra Baxter offers condolenses to residential school victims, slain Muslim family

Bentley resting on a bench at Kal Park in Vernon not knowing there is a baby rattlesnake curled up below. Bentley jumped down and was bit by the snake. (Facebook)
Dog bit by baby rattler at popular Vernon park

The rattlesnake was hidden underneath a park bench when it struck out

Kierra Smith (Contributed)
Kelowna swimmer headed to Toronto hoping to qualify for Olympics

If she qualifies, it will be Kierra Smith’s second time swimming at the Olympics

The RCMP presence in Central Okanagan public schools is being reviewed by the board of education. (File photo)
RCMP presence welcomed in Central Okanagan public schools

Staff survey feedback overwhelmingly positive from students, staff and parents

Canadian Prime Minister Justin Trudeau participates in a plenary session at the G7 Summit in Carbis Bay, England on Friday June 11, 2021. THE CANADIAN PRESS/Adrian Wyld
Canada donating 13M surplus COVID-19 vaccine doses to poor countries

Trudeau says the government will pay for 87 million shots to be distributed to poor countries

Jane Linden
KCR: Volunteering keeps you active

Kelowna Community Resources shares stories of its volunteers in a weekly column

Premier John Horgan speaks as provincial health officer Dr. Bonnie Henry, right, and health minister Adrian Dix look on during a press conference to update on the province’s fall pandemic preparedness plan during a press conference from the press theatre at Legislature in Victoria, Wednesday, Sept. 9, 2020. THE CANADIAN PRESS/Chad Hipolito
B.C. officials to provide details on Step 2 of COVID reopening plan Monday

Step 2 could allow for larger gatherings and a resumption of recreational travel

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Longtime SOWINS volunteer Diane Fru (far left) walks with members of her family as they Walk To End Abuse Sunday, June 13, 2021. South Okanagan Women In Needs Society (SOWINS) raised a record amount this year. (Monique Tamminga Western News)
Walk to End Abuse in South Okanagan breaks fundraising record

More than $53,000 raised so far while the pandemic has increased need for SOWINS’ services

Indigenous Services Minister Marc Miller is seen during a news conference, Wednesday May 19, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Indigenous child-welfare battle heads to court despite calls for Ottawa to drop cases

Feds are poised to argue against two Canadian Human Rights Tribunal rulings

Two-year-old Ivy McLeod laughs while playing with Lucky the puppy outside their Chilliwack home on Thursday, June 10, 2021. (Jenna Hauck/ Chilliwack Progress)
VIDEO: B.C. family finds ‘perfect’ puppy with limb difference for 2-year-old Ivy

Ivy has special bond with Lucky the puppy who was also born with limb difference

A million-dollar ticket was sold to an individual in Vernon from the Lotto Max draw Friday, June 11, 2021. (Photo courtesy of BCLC)
Lottery ticket worth $1 million sold in Vernon

One lucky individual holds one of 20 tickets worth $1 million from Friday’s Lotto Max draw

Most Read