I'd like to begin by thanking the committee for the invitation to speak today.
I'd like to take a moment to particularly acknowledge the support of the Canadian Institutes of Health Research, the CIHR, both for my personnel support and for my program of research. Without the CIHR, frankly, academics like me would be unable to attend meetings like this.
As evidence of the international recognition of Canada's CDR, I would also like to acknowledge the U.S.-based Commonwealth Fund for providing us with a grant to study the common drug review in an international context, with an aim to providing lessons for Canada and for the United States.
Before turning to an international context, I want to quickly go over a few questions about why one would review medicines.
I'm an economist by training, and I perhaps look at markets in a slightly distinct way from other health policy analysts. I want to first reflect on an example that we would consider on the idea of market discipline.
It is the idea of using the market to find and reward value for money in a marketplace. This would occur if consumers were well informed about their needs and wants; if they could reliably judge a product's ability to meet those needs and wants; if they had a variety of options to meet their needs and wants, including the option of not consuming; and finally, if they faced the full costs of the purchases they make. Under such circumstances, as you would find in most shopping centres, consumers could in fact find and reward value for money in the marketplace.
However, the pharmaceutical sector is different. Pharmaceuticals are not consumption goods; they are inputs into care. We are not in the business of purchasing pills and tablets in this sector. Whether you are a patient or it's a drug plan, you're in the business of purchasing health outcomes.
If you are an individual who has a need for improved health incomes, it is likely that you are vulnerable in some circumstance. Therefore, as a consumer, you may not necessarily have the time or the ability to appraise and judge the options available for your needs.
In fact, to establish the effects of treatment options is very difficult. It is tough to decide whether nature, placebo, or the drug in question is responsible for changes in the health of a patient or the health of a population. Therefore, we require large clinical trials. In fact, because no one trial is typically definitive, we tend to require the meta-analysis of many trials involving thousands of patients, or what is referred to as health technology assessment.
Another unique characteristic of the pharmaceutical sector is that patients do not pay. This is not a condemnation of either private or public insurance, but it's an acknowledgment that when selecting treatment options for a given need, patients will not typically be as price sensitive as consumers in a regular marketplace. Similar to patients, physicians may not be price sensitive, even if well informed, given the fact that doctors seldom pay for the prescriptions they prescribe.
What are the implications of this? From an economic perspective, pharmaceuticals and their consumers are non-standard in economic terms. I would argue that imperfect information about value for money is the single greatest market failure in the pharmaceutical sector. The lack of a financial incentive to act on information about value for money would be the second.
I'm going to skip the topic of expenditure in Canada as classified by the PMPRB, but I'd be glad to take questions on this.
I'd like to turn to the fact that around the world we are seeing an increasing number of national drug review processes to help correct market imperfection about information concerning value for money. But why do they exist?
Well, as acknowledged, drugs are not ordinary goods. They are inputs into care. The licensing process required to bring a drug to market is designed for purposes that are different from the intent of drug coverage policy. Drug coverage policy requires comparative information and economic data. The science is extraordinarily complex. Therefore, it requires that expertise and capacity be built in a country to be able to handle the task of technology assessment.
I think these are some of the reasons that countries have what we would refer to as central drug review processes.
Turning to what the goal of these things is, I would argue that it is largely around economic efficiency and decision-making, in light of the fact that public and private budgets are limited. We do not have infinite resources. Therefore, we require some basic evidence and some simple economics to make better decisions around how we allocate those limited resources.
The kind of information we need to know is this. For example, is a product less effective, equally effective, or more effective than comparators? Is it less expensive, as expensive, or more expensive than its comparators? With those three bits of information on each dimension of cost and effectiveness, decisions can be informed through central drug review processes.
Some of the decisions will be easy, such as that when a drug is less effective but more costly than alternatives, surely no one will consume it. Other decisions will be ones in which you will require deliberation with the public and the payers to decide whether a drug, for instance, that is more effective but more expensive is actually worth the additional cost to the public budget or to private budgets. Similarly, some decisions will require negotiation between purchasers and providers, such as in cases where drugs are about as effective and about as costly as alternatives.
In the study we conducted on behalf of the Commonwealth Fund in the U.S., we studied the Canadian common drug review process and the process for a centralized drug review in the United Kingdom, Australia, and New Zealand. We also studied one of the processes in the United States.
I'm going to quickly talk about the cases of Canada, the U.K., Australia, and New Zealand. Just note that the processes themselves are extraordinarily complex, there's no doubt. This is a tough business to be in, appraising products to help inform coverage decisions.
There are a few commonalities, and the first is that all of these processes are distinct from licensing. The goals of the licensing process are different from the goals of a process to inform coverage policy.
The second is that all of these processes involve some form of clinical assessment of evidence and some form of assessment of economic evidence.
Third, the commonality of these things is that there is a centralized appraisal; that is, a committee of experts that sits to determine the meaning of the scientific and economic evidence in the context of decisions for a given country or given region.
One of the differences between the countries we studied is in the decision-making context—or more to the point, the funding context—in which decisions are taken.
Turning to Australia, there is an organization called the Pharmaceutical Benefits Advisory Committee, or the PBAC, which makes centralized review guidance for the national formulary in Australia.
The context of Australia is one of a national pharmacare benefit, and it uses a national formulary. The centralized review is required, and in fact the minister cannot list a medicine on the national formulary without the PBAC making a recommendation to do so.
It's a pragmatic process that involves a 17-week cycle to review approximately 100 drugs per year, including generics. The rationale is published on the Internet and made available to the public through those mechanisms as well as through public input in various stages of the review.
Prices in the Australian context are in fact negotiated as part of their review process. Following a recommendation of the PBAC, price negotiation begins between government and supplier.
Turning to New Zealand, we have an environment there with universal pharmaceutical coverage and a national formulary managed by a centralized management agency, referred to as PHARMAC. Centralized review by the Pharmacology and Therapeutics Advisory Committee, the PTAC, is required under the process for coverage in New Zealand, but in fact PHARMAC may make listing decisions that differ from PTAC recommendations, in part because listing decisions are conditional on price negotiation.
The process in New Zealand is pragmatic, in that the organization reviews between 30 and 40 drugs per year. Selective information is available on the Internet. As mentioned, price negotiation is tied to the process.
Turning to England and Wales, the organization, the National Institute for Health and Clinical Excellence, otherwise known as NICE, is an organization that does some of these assessments in the context of universal coverage for pharmaceuticals, but uniquely in the U.K. they operate under what's called a negative formulary. Ostensibly, all products on the market in the United Kingdom are eligible for public coverage, and it is devolved to the regional decision-makers to make implicit rationing decisions about what will and what will not be prescribed in a given context.
It's under those sorts of contexts that the NICE has evolved a very selective process. Only drugs that are deemed to be controversial or of high impact to the health system are reviewed and centrally appraised through the NICE process. As a result, NICE reviews only approximately 11 drugs per year, and the reviews are exhaustive processes of consultation and negotiation with stakeholders that take up to one or more years per review.
The guidances recommended by NICE at a national level become mandated at the regional level. There is no price negotiation in the context of the English and Welsh system.
Turning to Canada, whose system you all are intimately familiar with, we are involved in a system that involves mixed coverage. We have a multiplicity of different formularies in Canada run by public, private, federal, and provincial drug plans. The common drug review is required by most public plans except Quebec's, yet decisions unique to the context of Canada remain centralized. “No” and “yes” both mean “maybe” in some sense in the context of the Canadian system.
The initial focus was on new chemicals and combinations of chemicals, probably for budgetary purposes, in my view, just to keep the process pragmatic as they got off the ground.
It is a pragmatic process involving a target of about 25 drug reviews per year. Summaries of rationales are posted on the Internet, and as you know, there are now public representatives on the expert advisory committee. Unique to Canada and the U.K. is that there is no price negotiation tied to the CDR process. It is simply an assessment of appraisals or evidence at the price listed by the manufacturer.
Turning to the international context, or at least international experience, I had the fortune of interviewing decision-makers from all the countries that we have studied, as well as meeting them personally at a meeting I hosted in Vancouver last year, and again in Wellington, New Zealand, just last March, to discuss the challenges that common drug review processes face around the world.
I could suggest—I think objectively, because I do not work for and have never worked actually with the common drug review—that it is rapidly becoming an internationally recognized and respected peer among the agencies internationally. I would argue that it's probably underfunded, but we could talk about that later.
The CDR and its peers face several common challenges, one of which is drugs that are approved for sale based on surrogate markers of their effectiveness; that is, they are effective at doing something to the biological structures or systems of the body, but we do not yet know whether that will in turn relate to health outcomes. This is problematic around the world.
Drug review processes suffer or deal with poorly designed trials. In particular, most trials involve drug-to-placebo rather than drug-to-drug comparisons, and in the context of making rational economic decisions, we need to know drug to drug: is this better than its alternatives?
There are serious challenges with respect to transparency and confidentiality in that drug review processes are limited to the extent to which they can report to the public about the data they use for decision-making processes, and this is true not just in Canada but around the world.
And finally, there is an issue with respect to real-world indication creep. Manufacturers often rightfully claim that their products are cost-effective in certain segments of the population. However, as is often the case, when products are on markets it's difficult to prevent the use of those products from creeping into areas where there may be better or alternative treatment options from the perspective of cost-effectiveness.
So my closing point really is that I think the CDR is well respected, and I think that processes like the CDR are indeed necessary so that we can provide incentive, or in fact obligation, for manufacturers to bring the kind of evidence that is necessary for a rational drug policy.
Thank you.