Value-Based Pricing of Pharmaceuticals in Canada: Opportunities to Expand the Role of Health Technology Asessment?

CHSRF Series of Reports on Cost Drivers and Health System Eficiency: Paper 5

Full Report  (PDF, 927 KB)

Don Husereau, BSc Pharm, MSc
Adjunct Professor, Department of Epidemiology and Community Medicine
Faculty of Medicine, University of Ottawa

Chris G. Cameron, MSc
Health Economist, Canadian Agency for Drugs and Technologies in Health

KEY MESSAGES

  • The rate of spending on health in Canada is rising faster than the rate of economic growth, creating concerns about the sustainability of Canada’s publicly funded healthcare systems. Expenditures on drugs is one of the fastest-growing areas.
  • Canada’s public drug plans currently use a formulary system informed by health technology assessment (HTA) to manage drug expenditures. There are concerns that the current formulary system limits consumer choice, provider autonomy, producer innovation and patient access. For example, if a drug is perceived as having low or uncertain value for money by a payer, it might not be listed on a public plan formulary, challenging prescriber autonomy and leading to out-of-pocket expenses for patients.
  • In addition, current pricing and reimbursement policies and practices in some provinces undermine the efforts of others to negotiate lower prices, resulting in higher prices for everyone (e.g. best price policies and confidential rebates). Further, this type of price discrimination based on provinces’ buyer market power is inequitable and can reduce access to drugs for certain individuals.
  • To maintain private sector innovation, patient access, health system fiscal responsibility and sustainability, some jurisdictions internationally have turned to value-based price negotiation mechanisms. Value-based pricing consists of negotiating prices for new pharmaceuticals based on the value the new drug offers society, as assessed through HTA.
  • Domestic and International evidence suggest that an effective and accepted mechanism of determining reimbursement price can result in reductions in net pharmaceutical expenditures.
  • Canadians would benefit from a pricing system with two distinct features: 1) pan-Canadian coordination, to reduce the potential for whipsawing; and 2) real-time evaluation of the drug value and feedback, to create more opportunities for negotiation. The single price negotiation would (i) determine which drugs would require price negotiation, (ii) clearly communicate to stakeholders what constitutes good “value” and how this will be translated into a price, and (iii) have the legislative authority to negotiate price on behalf of other provincial (and federal) jurisdictions and to keep negotiated prices confidential.
  • A single, coordinated price negotiation body would help reduce inequity across jurisdictions by leveraging the buying power and macroeconomic factors of provinces with larger drug budgets to those provinces with much smaller budgets and smaller industrial incentives. It would promote a standard regarding which interventions are legitimately valuable to society and which are not.
  • A price negotiation mechanism tied to real-world assessment would allow for even more options for price negotiation. Real-world assessment of drugs would increase the capacity to conduct disciplinespecific research, monitor health products throughout their lifecycle and strengthen Canada’s knowledge economy.