Pricing and reimbursement

Price regulation

To what extent is the market price of a medicinal product or medical device governed by law or regulation?

In Canada, the price of patented medicines is subject to review by the Patented Medicine Prices Review Board (PMPRB). The PMPRB is tasked with ensuring that the prices of patented medicines sold in Canada are not excessive. The authority for the PMPRB comes from the Patent Act and their jurisdiction is limited to patentees of an invention pertaining to a medicine. This has been interpreted broadly, and manufacturers that have patents that are even tangentially connected to the medicine they sell need to consider whether the PMPRB will have jurisdiction. If no patent pertains to the medication, then the PMPRB does not have jurisdiction over its price.

If the PMPRB has jurisdiction, it will review the prices at which medications are sold to determine whether they are excessive. In doing so, they are empowered to consider several factors, including the prices at which the medication is sold in certain other countries, the price at which medications in the same therapeutic class are sold, the pharmacoeconomic value and the size of the market in Canada.

The price of generic medications is regulated by legislation in some, but not all, provinces. For example, in Ontario, regulations made under the Ontario Drug Benefit Act provide that generic medications will only be reimbursed by the public plan if the price is no more than a certain percentage of the interchangeable innovative product. The permitted percentage depends on the dosage form (oral solid versus other) and the number of other generic versions on the market. Additionally, certain designated molecules have lower percentage caps on their pricing.

Similar restrictions do not exist for medical device companies.

Negotiations between manufacturers and providers

Must pharmaceutical and medical device manufacturers negotiate the prices of their products with public healthcare providers?

Reimbursement decisions relating to innovative medicines are often the subject of negotiation. In seeking reimbursement for a product, an innovative manufacturer will request a review by the Canadian Agency for Drugs and Technologies in Health (CADTH), which includes consideration of the proposed price and pharmacoeconomics. CADTH will assess the medication and make one of three recommendations: reimburse; reimburse with clinical criteria or conditions; or do not reimburse. Following a decision from CADTH, manufacturers will negotiate with the public payors, either individually or via the pan-Canadian Pharmaceutical Alliance (an alliance of public drug plans), in order to secure listing. While the list price itself is not generally negotiated, manufacturers will often negotiate a confidential rebate paid to the public plans in exchange for listing the medication.

In addition to the legislated provisions for generic prices set out above, the pan-Canadian Pharmaceutical Alliance has negotiated an initiative with the Canadian Generic Pharmaceutical Association to implement price limits for generics reimbursed by public plans expressed as a percentage of the innovative drug price. As with the legislated price limits, these vary depending on the dosage form, the number of other generics on the market and the molecule. Generally, the public payor will not reimburse a generic if the price exceeds the cap imposed.

Reimbursement

In which circumstances will the national health insurance system reimburse the cost of medicines?

Public reimbursement for the cost of medicines in an outpatient setting is generally provided by provincial health insurance plans, although some individuals are covered by federal plans (eg, indigenous peoples, members of the military and inmates of federal penitentiaries). Each plan sets out its own eligibility requirements and determines the list of medications it will reimburse.

For example, in Ontario, drugs are reimbursed for individuals over 65 years of age, individuals on disability benefits, individuals with low income and individuals with high drug costs. In contrast, in British Columbia, the public drug plan is available to all individuals covered by provincial health insurance, but the amount of reimbursement provided is based on income.

For inpatients in public hospitals, medications are generally covered by the hospital. Each hospital (or in some cases groups of hospitals) will determine the medications that they provide. Medications not contained on their formularies must often be provided by the patient, although generally the formulary is intended to cover all medically necessary medications.

Price adjudication

If applicable, what is the competent body for decisions regarding the pricing and reimbursability of medicinal products?

Pricing decisions are made by a combination of the PMPRB and public payors. Reimbursability decisions are made by the public payors taking into account the assessment by CADTH.

Discount

Are manufacturers or distributors of medicinal products statutorily obliged to give a discount to health insurance schemes or third parties?

Manufacturers and distributors are not statutorily obliged to give discounts to health insurance schemes or third parties. However, many innovative manufacturers provide rebates to public payors in exchange for listing their drug products. Increasingly we are seeing similar arrangements with private insurance providers.