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August 19, 2021 – Canada’s efforts to reduce pharmaceutical prices should not come at the cost of contributing our fair share to developing new treatment innovations, and should rely more on negotiations with manufacturers than regulation, according to a new paper released by the C.D. Howe Institute.

In “Cutting Square Deals: Drug Prices, Regulation, and Patent Protection,” authors Åke Blomqvist and Paul Grootendorst review the way Canadian drug prices have been negotiated and regulated, and discuss how new approaches must reflect both the desire to control healthcare costs and the expectation that Canada should not “free ride” on global pharmaceutical R&D.

“Canadian drug prices are higher than in many peer countries,” write the authors, “but in our efforts to reduce them we should avoid the perception that Canada is a 'free rider' in terms of carrying a fair share of R&D costs.”

Over the past several years, the federal government has consulted widely in formulating new rules for the regulation of patented brand-name drug prices through the Patented Medicine Prices Review Board (PMPRB) and a long-delayed set of rules that are expected to result in large price reductions, is now slated to come into force in January 2022. But in designing policies and institutions to reduce drug prices, say the authors, one must keep in mind the obligations that Canada has as a member of the international community that shares in the financing of pharmaceutical R&D under the current global patent system. The authors question whether direct price regulation is the best way of resolving the tension between these two objectives.

As an alternative to stricter regulation, Blomqvist and Grootendorst propose relying on the new Canadian Drug Agency (CDA) to achieve lower prices through negotiation with manufacturers. They recommend that the CDA take over the Pan-Canadian Pharmaceutical Alliance’s current role – which should be expanded to include negotiating confidential discounts on behalf of all private or public plans; and redefining the role of the Patented Medicine Prices Review Board, which could focus on collecting and reporting data on Canada’s contribution to global R&D financing. On a parallel track, Canada should support the efforts of multilateral institutions such as the World Health Organization and others to create a less contentious international burden sharing system.

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For more information contact: Åke Blomqvist, Adjunct Research Professor at Carleton University and Health Policy Scholar at the C.D. Howe Institute; Paul Grootendorst, Associate Professor at the Leslie Dan Faculty of Pharmacy, University of Toronto; Lauren Malyk, Communications Officer, C.D. Howe Institute, 416-865-1904 Ext. 0247, lmalyk@cdhowe.org

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.