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News Release
Pharmaceuticals bill will drive
up costs:
MRG/CHC brief opposes Bill C-91
1992
The following is a summary of a brief prepared by the Medical
Reform Group and the Canadian Health Coalition opposing Bill C-91,
the pharmaceuticals legislation introduced by the federal Progressive
Conservative government.
The federal government has introduced Bill C-91 which will abolish
compulsory licensing for drugs, with the consequence that the company
introducing a new drug onto the Canadian market will be in a monopoly
position until the patent on the drug expires -- about 13 years.
The government claims this bill will lead to increased investment
in Canada by the multinational drug companies and at the same time
consumers will be protected against undue price increases. Similar
claims were made when Bill C-22 was passed in 1987. In this brief,
the Canadian Health Coalition and the Medical Reform Group will
first analyze the effects of Bill C-22 in order to see how well
reality matches the initial set of predictions around the bill.
We will then focus our attention on whether or not the new legislation
is really necessary for the economic viability of the multinational
sector of the pharmaceutical industry. Finally, we will conclude
with an analysis of the likely impact on consumer prices should
Bill C-91 be enacted.
To date the large generic drug companies have not suffered financially
due to Bill C-22, but the full impact on them has yet to be felt.
When Bill C-22 was introduced the government and the industry promised
that it would lead to the creation of 2,000 new R & D jobs between
1988 and 1995 in the pharmaceutical industry. To date, R & D
jobs have only been increasing at 215 per year, well short of the
250 necessary. Although prices on patented drugs have been rising
at less than the Consumer Price Index since 1988, prices on all
drugs, patented and unpatented, have been going up faster than the
CPI. More importantly, the delay in the appearance of generic competitors
means that significant cost savings are foregone. If there is a
single generic competitor, the difference between the generic drug
and the brand name one is 24%; when there are four generic competitors
the difference is 65%. If there was generic competition for the
cholesterol lowering drug Mevacor, the Ontario Drug Benefit Plan
could be saving more than $1.4 million annually. Spending on R &
D in Canada has increased significantly, but most of the money is
being used to fund clinical trials, not to do basic research. In
a survey of leading medical researchers, 90% foresaw a likely conflict
of interest in accepting money from the drug industry; 80% deemed
pharmaceutical clinical research 'me too' research; and 40% were
worried about a potential delay in the publication of unfavourable
results.
The pharmaceutical industry in Canada has consistently shown high
profit levels. Over the decade ending in 1987 the pretax rate of
return on equity for drug manufacturers averaged 34.5% compared
to an average for all manufacturing industries of 15.2%. Despite
these enviable figures the industry argues that it needs increased
patent protection in order to realize an essential return on its
investment in the drug discovery and development process in Canada.
The drug companies claim that it takes a global investment of US$231
million to bring a new drug from discovery to marketplace and only
one in three drugs recover their R & D costs. However, the studies
that the industry uses to back up these claims deal with only a
very narrow universe of new drugs and drug companies and it is not
clear that their results can be generalized in the way that PMAC
does. Moreover, recent research has challenged their conclusions.
A survey of 39 American, Japanese and European companies found that
the large majority said it took less than US$200 to research and
develop a new drug.
New drugs are launched in Canada at a substantial premium compared
to older, and in many cases, just as effective drugs. Between 1982
and 1989 antihypertensives, antiarthritics and ulcer medications
introduced onto the Ontario market were priced 35-60% higher, on
a daily treatment cost basis, than existing drugs. With compulsory
licensing newly introduced patented medications are subject to price
competition from gen-eric products within seven to ten years. Without
compulsory licensing there is no price competition until the patent
expires. At this point that is an estimated 13 years, but if approval
times for new drugs drop, as both the government and the industry
hope they will, then instead of 13 years it could be 14 or 15 years.
The Medical Reform Group and the Canadian Health Coalition believe
that the benefits from Bill C-22 have not been clearcut and that
the costs may only be beginning to be recognized. Therefore, we
cannot accept the government's pronouncements about the effects
of Bill C-91. Furthermore, we can find no evidence that the new
bill is necessary for the economic health of the industry. On the
contrary, there is good reason to believe that the elimination of
compulsory licensing will only serve to drive up the cost of prescription
drugs. Therefore, we recommend that the government abandon its plans
to proceed with Bill C-91.
Subject Headings: Abortion
Rights – Community
Health – Community
Health Centres – Drug
Substitution – Epidemiology
– Epidemiology/Community
Medicine – Health
Administration – Health
Care Budgets – Health
Care Cost Containment – Health
Care Costs – Health
Care Delivery – Health
Care Finance & Fund-Raising – Health
Care in Canada – Health
Care in Ontario – Health
Care in the U.K. – Health
Care in the U.S. – Health
Care Myths – Health
Care Reform – Health
Care Resources – Health
Care Services – Health
Care Workers – Health
Clinics – Health
Determinants – Health
Economics – Health
Expenditures – Health
Issues – Health
Policy – Health
Policy/Seniors – Health
Service Organizations – Health/Social
Justice Issues – Health
Statistics – Health/Strategic
Planning – History
– Hospitals
– Labour
Medicine – Medical
Associations – Medical
Costs/Foreign – Medical
Education – Medical
Ethics – Medical
Human Resources – Medical
Personnel – Medical
Research Funding – Medicare
– Medication
Use – Medication
Use/Seniors – NAFTA/Health
– Occupational
Health & Safety – Patients'
Rights – Pharmaceuticals
– Physician
Compensation – Physician
Human Resources – Pro-Choice
Issues – Public
Health – Publications/Health
– Social
Policy – Women's
Health
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