#92 Producing and Pricing Drugs in Canada

Dr. Joel Lexchin, Emergency physician at the University Health Network, Professor Emeritus at York University, and Associate Professor in the Department of Family and Community Medicine at the University of Toronto


March 10, 2021

Pharmaceutical drugs are a pillar of modern healthcare - from preventative medicines to life-saving therapies. We therefore rely on pharmaceutical companies to discover, develop, and deliver new drugs to patients in need. We know that this process is both risky and expensive, but does that justify the drug prices we see in Canada today? Who decides what’s a fair drug price anyways? And what is the role of academic science in this whole operation? Join us as we answer these questions and more, with our expert guests: Dr Alison Symington, consultant with Life Sciences Ontario, describes the process of drug discovery and the relationships between academia and industry. Dr. Wong-Rieger, President and CEO of Canadian Organization for Rare Disorders, describes the challenges faced by individuals with rare diseases. Dr. Nigel Rawson, Senior Fellow with the Fraser Institute, introduces us to the Patented Medicine Prices Review Board and their upcoming changes. Finally, Dr. Joel Lexchin, Emergency physician at the University Health Network and Canadian drug policy expert, explains some of the challenges to setting fair drug prices in Canada.

Written by: Adrine de Souza

Profile - Dr. Alison Symington
Profile - Dr. Durhane Wong-Rieger
Profile - Dr. Nigel Rawson
Profile - Dr. Joel Lexchin
Patented Medicine Prices Review Board (PMPRB)
Proposed PMPRB changes
Canada Pharmacare Act (Bill C-213)
Canadian Organization for Rare Disorders (CORD)
Innovative Medicines Canada
Article - academic vs industry for drug discovery
Drug Discovery @ U of T

Seth Kibel [0:00] Before we begin, we would like to acknowledge that here in Toronto, we are on the traditional territory of many Indigenous nations, including the Mississaugas of the Credit River, the Anishinaabe, the Chippewa, the Haudenosaunee, and the Huron-Wendat. This meeting place is still home to many First Nations, Inuit, and Metis peoples, and we are grateful for the opportunity to live and work on this land. As we explore stories of medical science, we also ask our listeners to learn about and reflect on the long history of science and medicine as tools of oppression against Indigenous peoples, and the complex perceptions of and barriers to healthcare that are still experienced by Indigenous peoples in Canada today.

Stephanie Tran [0:38] As Canadians, we're usually pretty smug about our health care system, but it's definitely not perfect. Some say we need universal pharmacare and that our medication prices are too high. In fact, Canada has among the highest drug prices in the world. A recent study found that one in five Canadian households could not take a prescribed medication due to cost.

Seth Kibel [0:58] In this episode, we explore the issue of drug development and drug pricing in Canada, we explore who is actually doing the research to find new drugs, what it means to bring new medications to the market, and why it's so difficult for everybody to agree on fair drug prices. I'm Seth

Stephanie Tran [1:13] And I'm Stephanie. Welcome to Episode 92 of Raw Talk Podcast.

Seth Kibel [1:28] First, we sat down with Dr. Allison Symington, strategic Life Sciences Consultant at Life Sciences Ontario, former Executive Director of Biotechnology Education Canada and former Research Scientist at Sanofi Pasteur. While we've heard bits and pieces of the drug development pipeline during some of our previous episodes, we asked Dr. Symington to give us a big picture overview of the process.

Dr. Alison Symington [1:52] The first step is really understanding what the target mechanisms are. Often that's done in academic labs. It's about pure discovery. Wwhat is the mechanism of a disease? What's the right target? Those kinds of things and then you go through a period where you're going to validate that that's the right target. So it has a genetic target? What what are you going to use? Usually, that also can often be done inside an academic facility. And then you get to a point where you want to manufacture something that you want to test it in clinical trials, also in animals, etc. The drug process really is once you've validated it, and often now we use artificial intelligence to do some of this work up front, then you develop a potential drug. Now you want to test it. We have to get into a situation where you might have to go to a contract manufacturer. You might need to spin out your own company, but you're certainly to go to someone with expertise. In Canada, we don't have a huge number of these contract manufacturers. We have some depending what the drug type is. So I have to tell you, it's quite different if you're making a synthetic drug versus a biological drug, but overall, the process is the same. What happens is you'll take that drug and you'll do a range of pre-clinical studies, which will be both analytical and in animal models. That shows not just safety and toxicology profiles, it also gives you an idea of dosing, gives you an idea the work. I have to say that assumes there is an animal model, so sometimes there is not. And then typically you start into the clinical phase. Drug development is not linear. You kind of do some development. Okay, we've got a molecule is not bad but now we have to go back and find a bit of a better one. Okay, we went to Phase One, we did the dosing. It was okay, but now actually, we we did Phase Two, we need to go back to high dose. Okay, we have to go back to Phase One show to that higher doses are okay. There's a lot of this going around. That's why the drug development process takes quite a long time.

Seth Kibel [3:52] So all the way from start to finish, how long is the entire process of drug development?

Dr. Alison Symington [3:57] That's a great question. It depends what kind of drug, but you're probably talking to a seven to 12 year cycle to get it approved. Many take much, much longer, 20 years. Unbelievably some of the COVID vaccines took a year. That's because they got expedited approval. So when I'm talking about drugs that have had gone through the normal one, I'm not talking about drugs that get expedited approval. Those are drugs that are for serious life-threatening diseases of which we have no therapy and we are urgently in need. But even through emergency approval, they need to continue to do clinical trials. At any time, they can be stopped if something happened to those clinical trials to say, we found something we didn't see. I was involved in a vaccine trial with 80,000 people in one of the businesses I did and now we're getting real life clinical data from the vaccines for example, in millions. Emergency uses are slightly. So one year, I have to tell you for your people listening, is a medical miracle. Honestly, I was in vaccine development for many years. I work for a vaccine company. So it is a testament to the collaboration of science that we have vaccines, but it's not typical of the drug development process. What will be interesting to see as some of the things that have happened will be translated post-pandemic into the process of approval.

Seth Kibel [5:26] Once a drug is approved, what happens next?

Dr. Alison Symington [5:30] Okay, so depends where you are. So if we're talking about Canada, but then goes to another set of reviews to determine what price it's going to be because we have some regulated pricing here, and actually, the government's got some legislation out about that. It's put on hold for now, but it's talking with them about we determine what price it is, who gets it. In Canada, there's a multilateral process where we have a common drug review, and then we have to get on what we call the formulary before you can sell it. So in order to get it approved, Health Canada has to do a full study on your drug. This is 1000s of pages of documents that they are going to look at. They're also going to go see where you manufacture it. They're going to see that you meet all the regulations. That will be an ongoing situation where they may come again, every year, every second year, depends on the risk. So toothpaste, which is a drug in Canada, because of the amount of calcium and fluoride in it, obviously doesn't get as many inspections as a vaccine because we don't inject it into ourselves, etc. So that depends. In order for them to do that approval process, it's a lot of work for Health Canada to look at those things. Everywhere you want to get approved, you need to go to that jurisdiction and get it approved. So now the difference there slightly as if you're in Europe, of course, you're covered by the European Union and that's multicountry. The other thing, which I didn't mention this off, so what's tied up in this is patenting. So early on in the process, drug discovery, somebody, whether it's the academic or later in the process will have put together a patent application to protect them. So when it does get to market, they have some level of exclusivity, a study most people quoted, which was a 2014 study is that it's about $2 billion per drug to get it to market.

Seth Kibel [7:17] Drug discovery and development don't only happen in industry, it's also a huge part of research in academic institutions. We asked Dr. Symington about the differences between academia and industry when it comes to drug discovery.

Dr. Alison Symington [7:30] Industry has gone over a change. In the last few years, when I was in industry, we had a full research lab that was dedicated to discovery. Many of the big pharmaceutical companies don't do that as much anymore, and what they do with a work with academic or they do technology scouting and look at academics, and they do it that way. So that's one way that happens. The drug is licensed often by the university at a very early stage then a pharmaceutical company, group of pharmaceutical companies may take that over, take that license, so royalty goes back to the university, and then they develop it into a drug. So that's one way of happening. And a lot of pharmaceutical companies are doing that. Academics have spun out companies themselves, have developed drugs themselves, they sell the company or drug etc. because when you get past phase one clinical trials, we're talking about millions and millions of dollars here. It's very hard to raise that kind of money for a small company. So they'll either connect with a large pharma company, or they'll just sell the rights to that drug. That is why you see most of the large drugs coming out of big companies and you also hear in the newspaper about multimillion dollar mergers or or buyouts. It's because the process is so expensive. It's one thing to have a molecule. It's another thing to get the molecule into the body and get it to the right place and get the right formulation and also do it under the correct what we call Good Manufacturing Practices. That's the other issue that pharma has access to all of that information and academics usually do not have access to the facilities or the money. So drug discovery does not happen in pharma and it does happen in academics. It's really the drug development process post-discovery that changes. The other thing is that a lot of farmers are very interested in open innovation. So a lot of them are doing what we call pre-commercialization where they go together. So I can think of a couple of examples. The structural genomics consortium at UofT is one example where there are lots of companies there in a pre-commercialization setting, all working with the structural genome consortium to understand mechanisms of disease, understand targets, which are freely published to the world, no IP, and then they can take that information, anybody can take that information and then use that to develop a drug development process. It used to be there was one or two ways of doing this. Now there's many, many ways to to get between, hey, I've got a gene of interest or a target of interest and here I've got a drug.

Seth Kibel [10:00] What role does the pharmaceutical industry play in Canadian healthcare?

Dr. Alison Symington [10:04] Pharmaceutical companies, whether they be large pharmaceutical companies, small ones, or pre-commercialized companies being spun out of universities etc., that's where new drugs come from. That's where innovation is the collaboration across academic institutions in the life science with pharmaceutical companies really is astounding. Canada has a very, very vibrant life science academic community, UofT, McGill, Vancouver, and everywhere in-between, depending on what the specific issue is. We have pharmaceutical companies here. We have small biotechs. But we have less of large pharmaceutical companies doing their manufacturing here. We need to continue to attract them to do clinical trials in Canada. Canada is a very attractive place to do clinical trials because of our multicultural groups but we need to continue to encourage them to do it here. Because if they do clinical trials here, then our patients have access to first-line therapies. We need to continue to work with the government about streamlining regulations and not getting rid of regulations. So I taught Regulatory Affairs a long time. So I'm not advocating getting them but streamlining them appropriately, so that things don't get tied up for so long that patients are waiting. And then we need to have a fair and equitable way of assigning what the price of a drug should be so that they are available to everybody, that the pharmaceutical companies are managing because I said 2.4 billion. The reason that number is so large is because so many fail, only about 17% of any drug that enters Phase One ever gets to Phase Three. We have a lot of failures so they do need to cover that. People say yeah, but they got this drug and that blockbuster. That's true, and especially to have some of the bigger ones but it's still a huge enterprise to be able to do this. So there needs to be a fair and equitable price where Canadians are getting the best drugs. It has to be a coordinated approach by government, by pharma, foundations, the patients and I would say one of the things that pharma has done and I would say the government started to do as well, is patients have become the central voice. So we've really moved since, I've been in pharma. I was in vaccine development so it's a little different, but where we call it talk about patient centered care and pharma talks about patient centered care. So that's good. They have more of a voice. We can really understand it's very complex, getting a drug on the market and get to like people.

Stephanie Tran [12:27] We just heard about the long process of drug discovery, and it's clearly really complicated. It can also be difficult to understand why people should care about the long process of drug development, like discovering a target molecule filing a patent and raising the capital for clinical trials. But for some, the success of this process can literally be the difference between life and death. To learn more, we spoke to Dr. Durhane Wong-Rieger, the President and CEO of the Canadian Organization for Rare Disorders, or CORD. Hi, Dr. Wong-Rieger. Thank you so much for joining us on the show. So to start, what is the definition of a rare disease? And if these diseases are so rare, why should the vast majority of Canadians care about rare diseases?

Dr. Durhane Wong-Rieger [13:06] I'm sure you all know people with rare diseases, you may just not think about it right away, because there are some 7000 rare diseases. So even though each one of them actually affects only a few people collectively, we think in Canada, about one in 12 persons actually has a rare disease. And to be honest, more people are living with rare diseases and with cancer, more than with cardiovascular disease, more than are diagnosed with diabetes. It's not pre-diabetes, but diabetes. So collectively rare diseases is a huge patient population and obviously a huge healthcare public health issue. It's just that because the numbers for the individual diseases are so small, you may not actually know that. You will know some of the major diseases. You know, cystic fibrosis. You'll probably know muscular dystrophy. You'll know hemophilia. You'll know sickle cell disease, even though it is very populous in certain areas of the world, Northern Africa, Southern Italy, etc. It's actually a rare disease when you think about it globally. But then there are so many, many really rare diseases. So we do for instance, in the news a lot today is spinal muscular atrophy, a progressive neuromuscular disease that affects you know, very few people want to maybe 30,000. There's some diseases that we deal with that will affect maybe as few as 1 in 100,00, 1 in 60,000. So in Canada, we may have 300 to 500 people with these conditions.

Stephanie Tran [14:24] So rare diseases are actually not rare at all.

Dr. Durhane Wong-Rieger [14:27] They're not rare at all is an important word. And I said if you talk with people, you probably know people that have their diseases. They may or may not be talking about it. They may or may not still be living.

Stephanie Tran [14:38] Many of our listeners have probably heard that medications used to treat rare diseases are categorized as orphan drugs. What does this label mean? And why are medications that treat rare diseases given this distinct categorization unlike all other drugs that we have?

Dr. Durhane Wong-Rieger [14:53] There was a huge imperative to try to develop treatments for rare diseases because many of these therapies were not actually deemed to be cost-effective. Companies would sometimes be developing a drug and then they would not continue with it because they recognize that even if it would work. They would never get the money back. The numbers of people are too small. And so they would orphan the drug, put it on a shelf, and not actually pursue it. The Orphan Drug is the major act in the US that actually has stimulated the research and development in rare disease treatment, because it provides incentives for researchers and for drug manufacturers to actually pursue them, gives longer terms in terms of patent protection, gives exclusivity, but also gives financial support for doing the research itself. Prior to the Orphan Drug Act, it's a true story. There was a mother. She had two kids who had the Tourette syndrome and her kids were on this clinical trial. The company that was doing the clinical trial was doing it for a major disease group. But they felt oh my gosh, this small disease group might also benefit from it because it has some similarities. They recognize the trial was not working well at the major disease group. They said we're going to pull the drug. The mother says, are you kidding me? My kids are on it is actually working for them. What do you mean? There's nothing else they can take. And company says, sorry, we can't develop it, because it's never going to be cost effective. So they stopped it. She set up a huge protest. At the end of the day, the Mum was able to persevere getting all kinds of support going into the Congress getting the support of Senators and representatives to pass the Orphan Drug Act that basically said if you will develop these drugs, we will provide these incentives for you. The decades prior to the Orphan Drug Act in the 80s, there are 10 new drugs over the entire decade. Since that time, there have been almost 700, or maybe even more than 700 drugs for rare diseases that have been developed. The EU passed similar legislation. Japanese have been doing some stuff. The Koreans have been developing it. Other countries came into it as well. Canada has at least said we'll take a pass on it. We don't really want to get involved in developing drugs for rare diseases. Other countries can do it, we'll just buy it. And they actually literally said that. We'll just purchase the drug.

Stephanie Tran [16:55] That's amazing. Considering the amount of medical innovation that usually happens in Canada?

Dr. Durhane Wong-Rieger [17:00] Well, yes, and no, think about what we're doing vaccines right now. Think about that antibiotics or treatments for COVID-19. We're playing catch up. It's horrible. Unfortunately, a little bit of like, you know, other people can do it. We'll dabble on the edges, maybe, but for us to make a big concerted effort? I don't think so. So unfortunately, this has been a little bit of where Canada is. There's amazing research that takes place in the laboratories, in the universities, but to develop it to the next stage where it actually becomes a treatment. That's where we fall apart. We don't do the investment. We will not kind of push it in order to make it into an actual viable product.

Stephanie Tran [17:36] So where does Canada stand in terms of medical innovation?

Dr. Durhane Wong-Rieger [17:41] Canada is risk averse. We are very cautious country. We like things to kind of work right? And I think that's the challenge. Many of these drugs are high, high risk. Even the first drug I was telling you about [with] the woman, [the drug] her kids were on. The drug never panned out. So for every drug that actually does work, as you know, there are hundreds that do not. Even with this drug, once you were going into clinical trials, it would have taken an investment from some kind of a Financial Group, but they would be taking the chance. Without the government backing it up to some degree, there isn't the kind of security. Both in the sense of being highly innovative, and also being willing to tolerate risk, it makes it very challenging to go into these kinds of treatments, because they are in fact very high risk in terms of how how likely they are to work. What we do really well is we work well internationally. There's a consortium called the International Rare Disease Research Consortium, which I actually belong to as part of the head of the patient's constituency there. We do a lot in terms of being part of international projects. In fact, we heard the expression over and over again, Canada punches way above its weight and use international ones because we have expertise. We have really smart people. We have great training in there. We have great facilities. So when we get into an environment where there's the other kinds of support, including investments, we do amazingly well. We have a lot of respect internationally in terms of what Canada brings to it.

Seth Kibel [19:02] It's clear that improving the process of drug development and discovery in Canada is important in creating novel therapies for those living with debilitating rare diseases. But another factor that determines whether those living with rare diseases can access treatment is drug pricing. Medications that treat rare diseases can be extremely expensive. In Canada, the prices for treatments for rare diseases can range from $100,000 to $2 million per year. They're sometimes required for the person's entire lifespan. In 2019, more than half of all of the high cost drugs for rare diseases available in Canada costed more than $200,000 per patient per year. In Canada, these expensive medications for rare diseases can be paid for numerous ways. Sometimes they're covered by public drug programs paid for by the government. Other times these drugs are paid for by private drug plans typically provided through one's employer. There's also some special access programs. But in many cases, patients and families are left to cover these expenses out of pocket. The reasons for these high prices are complicated. The inherent rarity of a rare disease means that there are very few people living with it. This means that there's often a very small market for rare disease medications. Also, as we previously heard, the process of discovering and subsequently bringing a new medication to market is a really expensive one. To learn more about the challenges of drug pricing, we spoke to Dr. Joel Lexchin.

Dr. Joel Lexchin [20:23] So I graduated from medical school in 1977 at the University of Toronto, and since 1982, I've been an emergency physician, initially in Hamilton and then since 1988, at University Health Network. In addition to that, from 2001, to 2016, I taught Health Policy at York University then I retired from that, so I'm now considered a Professor Emeritus. I have an appointment at the University of Toronto, because I work in a teaching hospital. I'm an Associate Professor in Family and Community Medicine there. I've been looking at this area for 40 years now roughly, maybe a little bit longer, and I do a pretty wide range of research. So I look at the evidence behind drug approvals. I will look at how Health Canada evaluates that evidence and communicates that. I will look at post-market safety. In other words, do drugs run into problems after they've been on the market? Do they have to be taken off the market because of drug safety? Are post-market safety problems a reflection sometimes of how quickly drugs have been approved by Health Canada? A pretty wide range of issues.

Seth Kibel [21:55] We asked Dr. Lexchin about whether the price of orphan drugs really reflects the therapeutic value and accurately accounts for the costs associated with research and development.

Dr. Joel Lexchin [22:05] When we're looking at orphan drugs - clearly there's a need for drugs for a lot of conditions that small numbers of people have - we're looking at that we really need to think rethink the whole idea of how do we stimulate R&D into these areas? And how do we pay for these drugs? And should we be paying what the drug companies are asking for? Or should we be paying what the drugs are actually worth? So one example of that is there's a new pretty good drug for cystic fibrosis. In the United States, this drug is running at a little more than $300,000 a year per person. There's an independent organization based on the East Coast that does health technology assessment. They've looked at this drug. They've looked at the benefits based on the trials that have been done. They've looked at the price and they said, this drug was cost-effective if you drop the price by 75%. So what they're saying is the drug companies are asking for three to four times what the drug is worth in terms of the benefits that it gives. I think that we need to be doing that with orphan drugs, too. That doesn't mean we shouldn't be paying for them and that doesn't mean that if they're really expensive, but really worth it, that we shouldn't be paying that kind of money. It does mean that we need a much deeper analysis of what's going on with orphan drugs than what we currently have, which is the drug companies and some patient groups saying we need this money, the drugs are worth it, you need to pay for the drugs and if you don't pay for the drugs, then people's lives are going to be your responsibility.

Stephanie Tran [24:05] As we just heard, determining drug prices is a difficult process. In fact, the way drug prices are determined in Canada is currently up in the air. In Canada, the prices of medications are reviewed by the Patented Medicine Prices Review Board or the PMPRB. As of July 1 of this year, the PMPRB is undergoing major reforms that will drastically change how we determine drug prices in Canada. To learn more about the function of the PMPRB and the proposed changes, we spoke to Dr. Nigel Rawson, Dr. Rawson is a pharmaco, epidemiologist, pharmaceutical policy researcher and Senior Fellow with the Fraser Institute.

Dr. Nigel Rawson [24:42] The PMPRB, it's easier to use an acronym, sets ceiling prices for medicines and it's done that since the late 1980s, so 30 years. It's worked reasonably well. There are some views that it's not worked as well as it could have done or kept the prices down as tight as it could have done. Particularly the current government feels that so they've proposed some changes. The first change in that is that they're going to change the international comparison of the PMPRB uses to assess prices. So it compares the potential price in Canada with prices in a batch of other countries. Currently, there are seven. They include the United States and Switzerland, which are obviously higher price countries, so that tends to move up the medium price. The plan is to remove the United States and Switzerland and introduce a number of other lower price countries. The first step is that the assessment of international countries and that'll push the prices down. It's expected around 20%. On top of that, the government proposed looking at using some pharmaco-economic tests and some tests on the market size and sales and so forth, that will continue to push the price down if they reach certain thresholds. One of the reasons for the PMPRB changes is to reduce prices to enable us to move in my opinion, towards national pharmacare of a size that we can afford. And that national pharmacare may include a basic national formulary. As I said, the council recommends we start with that one of the risks is that we start without and never expand it to the larger bond run type of formulary that the Advisory Council talked about because costs.

Stephanie Tran [26:21] What could these changes mean for Canada? Are there other countries that have adopted a similar strategy?

Dr. Nigel Rawson [26:26] New Zealand has for 25 years have a system to control prices as a fixed budget for paying for medications per year. This has made New Zealand itself particularly unattractive to brand name pharmaceutical companies. It tends to have products launched at least submitted for approval much later than in several other countries, particularly Canada. Even if they are approved, they're not always available for various reasons. Canada has the potential for moving like down the scale of attractiveness heading towards the New Zealand situation. Their access is generally poorer than in this country so they have less oncology drugs and cardiovascular medications. Whether you can say it's associated or not is another matter. There are surveys of senior pharmaceutical executives that indicate that they're very concerned about the situation. They're thinking about delaying bringing drugs here. In some cases, they're thinking of not bringing drugs to Canada, because it's just simply not worthwhile. The price, that potential price reduction would just make it sustainable. If suddenly somebody says, you need to reduce your product by 95%. Your reaction is, well, is it really worth it?

Stephanie Tran [27:50] We asked Dr. Wong-Rieger about her thoughts on the reforms.

Dr. Durhane Wong-Rieger [27:54] The rare disease community have been very much advocating against the reforms that have been brought in. It really does trouble as both the way in which they're being brought in, and what's actually in them. I mean, frankly, the Patented Medicine Prices Review Board has a very important task and that is to make sure that Canada doesn't get charged access prices, that we're not paying more than others. That being said, it does not mean that we get to pay the lowest in the world. And I think that's what's happening is that because there's such this level of distrust between the PMPRB and the industry, which they're supposed to be able to monitor and they find themselves unable to monitor, they've now brought in what I call very draconian policies to try to really clamp down on it. They say you haven't been participators, we've given you the set of rules and guidelines, you've ignored them, or you've been able to get around them. So we're now going to bring in some really heavy, heavy hands. The challenge, again, was that it was going to, if they applied it the way that they want to and which is what still on the table, it would actually push Canada to very low. We are right now somewhere in the middle of the OECD countries. It will bring us closer to the bottom of it. And what happens is that if you're a manufacturer, you're not going to want to come into our country very early on if the price you're trying to get is a low price. There's two parts to it. One is a reference pricing. Many countries have reference pricing, it basically says look, we want to pay what other countries are paying. In the absence of knowing what is the right price for a drug, we will agree that the right price is what other people are paying so let's not pay more than that. That was sort of the big tool for the PMPRB, non-excessive pricing. What they did that we thought was quite right, they throughout the US and throughout Switzerland, as they say your prices are really high and we're going to go with the other countries that we think will bring a better balance to it. Okay, so if we apply those rules, it will put us probably a little bit below with the median is. Which is okay, if that's where you want to be, it's not a bad place to be. Remember these are list prices. These are not the actual negotiated pricing. Unfortunately, pharmaceutical pricing works like this used car market. You go in there and you negotiate. You try to bargain. Nobody trusts the other person. This is terrible. So this is the way it's being done. It's been done globally. It's the worst possible way you can think of in terms of actually bringing drugs to patients but that's the way it works. And the negotiated price is actually a confidential price. So quite frankly, we have no idea how we actually sit in actual paid prices relative to other countries, because the way in which I negotiate with you is you agree that those prices will be held confidential. Because if we know other countries are referencing it, they will want the same prices. Again, it's like the worst kind of a used car market, honestly. We apply those same rules. So actually getting major innovative therapies, they're life saving for patients. No wonder the system doesn't work. So this has been the case. Now in most countries, we negotiate those rights in every other country. We negotiate those prices with the negotiating. We go into the used car lot and you negotiate, right? What Canada has decided to do is say, no, no, no, we are not gonna let you do that. We're going to set the prices back headquarters. We're going to guess what that negotiated price was going to be and we're going to tell you that you can not charge any more than what would be your negotiated price. What's happened is that the drug industry said, well, we can't do that. Usually, those prices are confidential. Now you're telling us that you're going to set them for us. And quite frankly, you're going to set them using rules that are not transparent. And no, you do not get to challenge it back. There is no negotiation on it. What they have proposed and the rules that we think they're applying based on what they've said are going to put us, especially rare disease drugs in a hugely challenging spot. The trouble with Rare Disease drugs is that the data they have are based on very small clinical trials for very short periods of time. In many cases, we've got no past history in terms of how well they might work, right. So we know that for many of the cardiovascular diseases, diabetes, and everything else, we got long histories of these, and we're comparing to drugs that been around for a long time how much better they work. In many cases, these are also the first drug that's ever been for this patient population. And so I'm going to guess to you that it's going to work for 20 years. Well, guess what? No, my patients have actually ever lived 20 years, I'm thinking it's going to work for 20 years but I have no evidence. So what happens is the value assessment starts to discount how much I'm actually gonna give to it, because it's uncertain. You're telling me this is the value returned to me after 20 years. I'm telling you, you're giving me data, it's based on 12 months of research. I have no confidence in it. So I'm going to discount it. So this is again, what PMRPB does, it says okay, we'll just count the value of it. So what could have been, let's say it was worth like $20,000. I'm going to say in order for me to actually have any kind of a price in here, I'm going to say that it's really 1/10 or 1/100 of that. And that's what happens, we need to have people who aren't perceived to have a conflict of interest. We need people like you guys to say, look, we can be somewhat of that neutral arbitrator, let us take some roles in terms of being able to help bring partners together, and to look at the balance, right, because there needs to be a balance.

Seth Kibel [33:05] We also talked to Dr. Lexchin about the proposed changes.

Dr. Joel Lexchin [33:09] I've been following this issue pretty closely. So we need to go back again in time a bit. A very quick summary is that the way we currently regulate drug prices was established in the late 80s. What the aim was, was to increase the amount of research being done in Canada. The idea was, okay, let's pick countries that do the amount of research that we would like done in Canada. We'll price our drugs sort of in the middle of what these countries price their drugs at and that will encourage the drug companies to do more R&D here. That actually worked for about the first 10 years, and then it stopped working. Now as a percentage of overall sales, the amount of R&D that's done in Canada is lower than it was in 1988. It's about 4.5% of sales. So that didn't work. What it did was it left us with about the fourth highest drug prices in the world. Some of the countries that we chose to compare ourselves to were countries with very high drug prices. So primarily Switzerland and the United States. The United States is a major outlier when it comes to drug prices. We didn't get the R&D in the long term that we wanted, but we certainly got high drug prices. Now the aim of these changes to the Patented Medicine Prices Review Board is to reduce Canadian drug prices to about the average of the Organisation for Economic Co Op nad Development, that's a grouping of I think it's the 40 richest countries in the world. Right now, we're almost at the top of that. We'd like to be in the middle. That's basically what the aim of these changes are. Drop Canadian drug prices, so that we're at the same level roughly is Australia, or Norway, or Denmark, countries where there's same economic status is Canada and roughly the same type of medical practice. We'd like to be paying about the same amount for our drugs.

Seth Kibel [35:43] How will these changes affect drug prices and access to medications in Canada?

Dr. Joel Lexchin [35:47] The people who support the changes say that they'll drop drug prices by 25-30%. The people who oppose the changes, primarily the drug companies, but also patient groups that receive funding from drug companies and some of the right wing think tanks like the Fraser Institute are saying that the price cuts are going to be much more dramatic. There has been a lot of argument that if we drop the drug prices, companies are not going to be interested in introducing new drugs into Canada. As I said, at the start, I've been looking at this issue for 40 something years and way back in the early 1970s. When the NDP government in Manitoba set up a formulary, the government started paying for drugs and said, if there are generics available, we're only going to pay for the generics. The predecessor for innovative medicines, Canada said, well, if Manitoba does that, we're going to have to think about whether or not we're going to invest in Manitoba and maybe we won't market our drugs there. So this kind of argument that if Canada does something about drug prices, the drug companies are not going to introduce their products is largely a red herring. If they're going to make money, they're still going to introduce their drugs. There's no indication that they're not going to make money. Prices in Denmark are a quarter roughly, or a third of what they are in Canada, and drugs are still being introduced in Denmark. Even more to the point, most of the new drugs that are introduced in any given year in Canada or anywhere else, and this is based on independent assessment of their therapeutic value, there's only about 1 in 10 new drugs that have a major therapeutic advance over already existing medications. So the argument that drug companies are going to withhold drugs, and you're going to start to see bodies lying in the street because people couldn't get the medications that they needed, again, is largely a red herring. Let me just give you one other example. In Australia, there are something like 230,000 people with hepatitis C. The Australian government wanted to be able to offer treatment for all of these people. But at the price that the companies were charging for their hepatitis C drugs that was about I think, $50,000 per person, for the course of treatment. The Australian Government just couldn't afford the amount of money. You can multiply 50,000 by 230,000, and it comes out to some enormous amount of money. So what the Australian government did was they went to the drug companies and said, okay, we will guarantee you a market. We will guarantee you a market of 230,000 people and in return, you have to drop your prices. So the drug companies dropped their prices down to I believe it's about $7500 per person. So the prices dropped down to 1/6. The drug companies were happy because they had a huge market, the Australian Government was happy because they could then treat everybody and the patients were happy because they got cured. When we're looking at drug prices, rather than have fights with patient groups, we need to make allies of these groups and together, the government, the doctors, the patient groups, sit down with the drug companies and say, okay, these are the conditions under which we can find your drug in terms of how much money we'll pay for it, but you know, if the drug doesn't show benefits that it looks like it's should, then we might have to stop or you might have to pay or you might have to take a lower price. We think that there are X number of people who are going to take this drug per year but if it turns out that there are two times that many people, then you're going to have to take a lower price for the drug.

Seth Kibel [40:24] When you say things like withholding drugs, what does that actually mean? What does that look like in real life?

Dr. Joel Lexchin [40:31] There are various arguments that are being made by the industry and its allies. So one of them is that the drugs just won't be introduced in the first place. And the second is that they're going to delay the introduction of them. Drug companies, although huge, still have limited resources, so you can make more money by introducing your drug in Germany than you can in Canada. So you're going to introduce it first in Germany, and then you'll put the resources into introducing it in Canada. Canada gets it six months or a year later than Germany. Those are some of the arguments that are being made by the drug companies, either not introducing them at all, or introducing them later into Canada. That revolves around how much money they're going to get for their drug. I regard that as a form of extortion. Either you give us what we want, or we're going to punish you. But what's never addressed, at least from the drug company side is, why are these drugs costing so much in the first place? So why does zolgensma which is a drug for spinal muscular atrophy cost, in American terms, $2.1 million. It's a one shot drug but $2.1 million is a lot of money. So what's what's behind that price? Show us how much money you spent on research. The drug companies don't want to do that. In fact, they don't do that. You don't have to do this in public. You can do this to the people who are going to be paying for the drugs. In Ontario, it would be the Ontario Ministry of Health and long term care. Show us the money. Show us your books. Prove to us that this price is justified. But the drug companies don't want to do that. And in fact, they've never done it anywhere, not just in Canada, but in any other country. That's the first thing. The second point is drugs for rare diseases. This issue came to the fore in the United States in the early 1980s. At that point, in time, the argument was that the population for these drugs was so small that, commercially, the drug companies were never going to do anything to develop these drugs just because they couldn't make any money. They set up a whole series of incentives for the drug companies to do it. But fast forward 30 years or a little more than 30 years, look at the top 10 selling drugs in the United States. Seven out of those 10 drugs have an orphan drug indication. That says to me that it's really not logical anymore to argue that you need all these incentives to do the research because you're still making lots of money from these drugs.

Stephanie Tran [43:46] The PMPRB changes are controversial. It's difficult to create a environment where pharmaceutical companies are incentivized to create medications, while tightly regulating drug prices to keep them affordable.

Seth Kibel [43:57] One thing is clear, Canada would benefit if more drugs were developed here at home. We should get better at converting the academic discoveries made in our world class institutions into new medicines and therapies that are actually brought to market here in Canada first. So to all your grad students out there, we know you're the real heroes.

Dr. Durhane Wong-Rieger [44:15] We don't have to build the rocket ship. We don't have to send the people to the moon. We can actually contribute, though, in ways that are on a smaller scale that are niche to what we do. That's what we could do, and we should do, but it still takes investment. It still takes the government to say this is an important area. What we recognize is that investment rare diseases doesn't just benefit rare diseases. Many of the therapies that we have for rare diseases actually go into more common conditions. That's exciting things. You know statins? That was actually developed initially for rare condition. It's like the most common kind of a drug was hanging around all over the place, right? It was originally developed for a condition that was a very high blood pressure. For these rare disease patients who had this condition, they would actually suffer almost fatal blockages, and it was found that this drug would actually be able to treat any of these patients. Then also we realized, of course, there are a lot of people at high blood pressure, similar diseases or conditions and this drug works amazingly well. Canada, if it doesn't want to get into the total novel, innovative space could actually look at where the molecules where else might useful.,We do a great job of genomic sequencing. We have a tremendous facilities. Again, you know, SickKids and Ottawa, Montreal, all of these have amazing facilities and great researchers.

Stephanie Tran [45:33] We covered a lot today, we took you from the bench side into clinical trial financing, to patient advocacy, to pharmaceutical policy analysis, and in some ways, we're left with more questions than answers. How should we restructure our research system to incentivize discovery and knowledge translation in our Canadian labs? How do we ensure that rare diseases aren't left out of the drug discovery pipeline? How do we create drug pricing structures that simultaneously allows for innovation, but also keeps new medications at accessible prices?

Seth Kibel [46:01] These are difficult questions, but we hope that our interviews could provide insight into some of them. In the meantime, major changes are on the way with the new pmprb drug pricing reforms. If this episode was intriguing to you keep an eye out for discussions on pharmacare and accessible drug prices in the future.

Stephanie Tran [46:20] A very special thanks to our guests. Dr. Allison Symington, Dr. Nigel Rawson, Dr. Durhane Wong-Rieger and Dr. Joe Lexchin for speaking with us and sharing their insights, and of course, thank you for listening. To learn more about their work, check out the links in our show notes.

Seth Kibel [46:36] This episode was hosted by myself, Seth Kibel, and Stephanie Tran. Kiko Miyata helped conduct the interviews and Adrine De Souza was our content creator. Jesse Knight was our executive producer. And Esther Silk was our audio engineer. Tune in next week for Episode 93 on the topic of antibiotic resistance.

Stephanie Tran [46:53] Raw Talk Podcast is a student presentation at the Institute of Medical Science in the Faculty of Medicine at the University of Toronto. The opinions expressed on the show are not necessarily those of the IMS, the Faculty of Medicine, or the University. To learn more about the show, visit our website rawtalkpodcast.com. Stay up to date by following us on Twitter, Instagram and Facebook @rawtalkpodcast. Support this show by using the affiliate link on our website when you shop on Amazon. Also, don't forget to subscribe on iTunes, Spotify, or wherever else you listen to podcast and rate us five stars. Until next time!