1. Pricing and Reimbursement Policies 27

2. Pricing Policies Patented Medicines Patented Medicine Prices Review Board (PMPRB) monitors and sets the price of patented medicines Judges whether a price is “excessive” for new patented drugs and existing patented drugs PMPRB regulations mandated and guided by s79-103 the Patent Act PMPRB uses 2 step process to set and review prices for new patented drug products: 1. 2. Scientific review Price review 28

3. Scientific Review The purpose of the scientific review process is to establish: “level of therapeutic improvement of a patented drug product” Level of therapeutic improvement assessed by Human Drug Advisory Panel Four categories of therapeutic improvement: 1. 2. 3. 4. Breakthrough Substantial Improvement Moderate Improvement Slight or No Improvement 29

4. Price Review Process Level of therapeutic improvement used to determine if a price is “excessive” 1. 2. 3. 4. Breakthrough: excessive price determined by international reference pricing (IRP); France, Germany, Italy, Sweden, Switzerland, the United Kingdom, and the United States Substantial Improvement: price is excessive if higher of IRP price OR highest non-excessive price compared with drugs in therapeutic class (TCC test) Moderate Improvement: IRP and/or TCC Slight or No Improvement: TCC or IRP 30

5. PMPRB Investigations and Hearings PMPRB can initiate investigations into excessive pricing If excessive pricing is determined, investigated party can agree to a lower price and offset any revenue based on excessive pricing (Voluntary Compliance Undertaking) If investigated party does not agree to lower price voluntarily PMPRB can hold hearings and ultimately order price to be lowered and double revenue amounts to be offset Hearing decisions are subject to federal judicial review 31

6. Reimbursement Policies Prescription drugs covered through private and provincial/territorial public plans Covers 98% of population Federal government only provides coverage for a small number of individuals, circa. 1 million Plans vary in scope, coverage and reimbursement policies from province/territory to province/territory 32

7. Generic Substitution and Pricing Substitution Interchangeability and substitution rules set at provincial level Substitution rules differ from province to province Biggest provinces – including Ontario, BC and Quebec – allow, but do not mandate generic substitution Saskatchewan, Manitoba, PEI, Newfoundland and Labrador mandate substitution Pricing High generic prices have resulted in provincial price caps: i. ii. Ontario: prices capped at 25-35% of brand list price Quebec: capped at highest provincial price e.g. Ontario iii. Alberta: prices capped at 45-56% of brand list price iv. British Columbia: prices capped at 35-42% of brand list price 33

8. Federal HTA Canadian Agency for Drugs and Technologies in Health (CADTH) conducts “clinical, cost-effectiveness, and patient evidence” assessments for public sector health care decision makers Common Drug Review (CDR): – review of Drug Submissions from public bodies – provides formulary listing recommendations to all Canadian publicly funded federal, provincial, and territorial drug plans except Quebec. Only 50% of drugs that undergo CDR recommended for reimbursement Final decision rests with provinces/territories – CDR makes recommendation does not mandate formulary listings 34

9. Provincial/Territorial HTA Provinces and territories have own HTA bodies Quebec: Agence d’Évaluation des Technologies et des Modes d’Intervention en Santé Ontario: Medical Advisory Secretariat (MAS) Alberta: Institute of Health Economics Provincial/territorial recommendations are also non-binding 35