After a 5-year fight to lower drug prices, Ottawa's pledge quietly falls apart

The first clue was the timing — late afternoon before a long weekend. 

It's a classic move for governments to make controversial announcements when fewer people are paying attention. 

So when an innocuous-sounding news release from Health Canada about "proceeding with amendments to the Patented Medicines Regulations" came out at 5 p.m. on April 14, the eve of the Easter holiday, there were few headlines. 

But it was breaking news, because the Trudeau government was announcing the end of a five-year⁠ fight ⁠with the pharmaceutical industry over regulations to lower drug prices.

When the federal health minister explained almost a week later why his government was abandoning reforms that could have saved billions in drug costs, Jean-Yves Duclos cited the industry's needs⁠ "for research, development and production capacity."

So what began with a promise to protect Canadians ended with a commitment to support pharmaceutical companies.

The battle laid bare the fault lines between Canada and the global pharmaceutical industry — and pharmacare advocates believe it could be a harbinger of the resistance that might await a national pharmacare plan.

Some of the most passionate opponents were patients, fighting on the side of the industry, lobbying for the right to pay some of the highest drug prices in the world.

And the world was watching. Canada was trying something new to control drug prices, and the outcome might have set an international precedent. That put the global pharmaceutical giants on high alert, experts note.

"Canada would be the first country to put in place some regulation to make sure you can't abuse your pricing power by putting in place regulations based on market size," said Marc-André Gagnon, a political economist with Carleton University's School of Public Policy and Administration.

"This was something super interesting for other countries, but threatening for the global drug industries."

'Without question' policy would lower drug costs

The saga began with a speech to the Economic Club of Canada in 2017, when then-health minister Jane Philpott outlined a suite of regulatory reforms to Canada's drug price agency — the Patented Medicine Prices Review Board (PMPRB).

"Without question, it will have a significant impact on the lives of Canadians. It will lower unacceptably high drug costs," Philpott told the diners, who paid $100 for a seat at the sold-out event.

WATCH | Ottawa promised tweaks to patent drug system would save billions:

Ottawa says Canadians will save billions with tweaks to patent drug system

5 years ago

Duration 2:00

The federal government is making changes to the way it will evaluate new drug prices, a tweak it says will save Canadians billions over the next 10 years.

With those new tools Canada would become one of the first countries in the world to require proof that the pharmaceutical industry's most expensive new drugs provide value for money.

The new policy would also force pharmaceutical companies to tell the truth about their prices. The final prices are decided only after closed-door negotiations  — becoming closely guarded corporate secrets. That means Canada's drug price agency doesn't know the actual prices it is mandated to evaluate.

And finally, the new rules would change the list of countries used to determine if Canada's price is excessive, dropping the U.S and Switzerland, and adding six new countries with markets similar to Canada.

Altogether, it was a formula that would work to lower prices, according to both industry and government assessments.

The pharmaceutical lobby hit back with a constitutional challenge, two federal court challenges and a series of threats, including trade disputes, job losses and a warning that they would delay the launch of new drugs in Canada. 

That mobilized an angry coalition of patient groups — many with funding ties to the pharmaceutical industry — who insisted the threat to withhold new drugs would create a drug-access dystopia.

"Millions of lives are at stake," tweeted the Canadian Organization for Rare Disorders. The federal government's new policy would force "prices so low that lifesaving medicines are no longer coming to Canada," said the Canadian Society of Intestinal Research in a tweet. 

"It was kind of apocalyptic in terms of the wording used," said Gagnon. "People do not understand the real dynamics at play in the pharmaceutical sector right now and why we absolutely need to change the way we're regulating patented drug prices."

Surprising support for high drug prices

Canada already has a drug access problem caused by high prices. Every year, global drug prices reach new levels and Canadians pay some of the highest ⁠prices in the world.

One in four Canadians⁠ report that they can't afford to fill prescriptions, according to a 2020 Angus Reid Institute survey. Studies have shown Canadians are giving up food and heat to try to cover the cost of their prescription drugs.

With some drugs costing more than $500,000 per patient per year, provinces and private drug plans often put restrictions⁠ in place — such as requiring a patient to wait until they're sick enough to qualify for an expensive therapy. Some drugs are so expensive they're not covered at all,⁠ leaving patients to launch fundraising campaigns to get someone to pay. 

But when the federal government tried to get the situation under control, the pushback revealed surprising support for high drug prices. 

Groups speaking against the policy included pharmacy chains⁠, doctors  and research groups ⁠— all concerned that Canada could not afford to pay less for drugs. Their argument hinged on the dangers to Canada of creating a hostile climate for the drug industry.

But even in a friendly climate, the pharmaceutical industry didn't deliver on its promises to Canada. 

More than 30 years ago, after pressure from the U.S. drug lobby, Canada extended drug patent protection to 20 year⁠s. In exchange for two decades of monopoly power, Canada was promised greater pharmaceutical research and development (R&D). But R&D investment in Canada has fallen steadily, to one of the lowest among industrialized countries. 

'Grovelling in front of drug companies'

From the beginning, there were indications the new policy was ill-fated.

"I want new regulations in place no later than the end of 2018," Philpott told the luncheon crowd when she announced the new regulations.

But that first deadline quietly passed, as backroom bureaucrats struggled to consult with industry and patient groups on how to implement the policy. At the time, executive director of the PMPRB, Douglas Clark, described the negotiations as "like pulling teeth."

The federal government delayed the regulations ⁠four more times over the next two years, putting Canada at odds with the international pharmaceutical industry at an awkward time — in the middle of a pandemic, competing with the world for vaccines.

"I think Canada would have been able to go forward with this if we didn't have the pandemic," said Gagnon. "We're kind of grovelling in front of drug companies to have supply agreements on vaccines that are not produced here. Basically, Canada was in a very precarious position."

The industry dragged Canada through the courts, including launching a constitutional challenge in Quebec, arguing that the drug pricing regulations were treading on provincial authority. 

The Quebec Court of Appeal struck down two of the three regulations in February, allowing only Canada's right to use a list of countries for price comparison. The federal government decided not to appeal the decision to the Supreme Court of Canada.

Instead, on the eve of Easter weekend, Duclos withdrew the two most controversial amendments. In the end, Canada would not ask the pharmaceutical industry to reveal its true prices or to justify that it was providing value for money.

The lone surviving policy — the list of 11 comparator countries — is scheduled to come into force on July 1, five years, four delays, and three court challenges later. The estimated drug price savings have been reduced to around $3 billion over 10 years, a third of the original estimates.

As he explained his reasons, Duclos said, "we are mindful that we need to have in Canada a strong pharmaceutical industry, especially given the lesson that we have seen through COVID-19." 

Two weeks later, the federal government announced that Moderna was building a new COVID-19 vaccine manufacturing plant in Quebec.

One more chance to fight drug prices

Canada has another chance to challenge the pharmaceutical industry over excessive drug prices. 

The Trudeau government, in an arrangement with the NDP,  said it will finally deliver on a long-standing promise ⁠of national pharmacare⁠ — a policy that would give Canada strong purchasing power to get a better deal. But experienced pharma-watchers expect the pharma lobby to push back.

"Is this government too cosy with industry? Are they too concerned about profits and jobs in pharma? This is the ultimate acid test," said Steve Morgan, a health economist at the University of British Columbia and expert in international drug pricing.

The financial stakes for the pharmaceutical industry could be even higher this time, because the collective buying power generated by a national pharmacare plan is expected to reduce drug costs by $5 billion per year.

But this time Canada is no longer leading on drug price reform. As the only country with a national medicare program that doesn't provide access to prescription medicines, difficult international precedents have already been set.