TORONTO, May 8 (Reuters) - A tiny, little-known government agency is ramping up regulation of Canada's pharmaceutical industry, seeking to rein in prices for patented drugs that are among the highest in the world, according to industry sources and a Reuters analysis of government data.
The federal Patented Medicine Prices Review Board (PMPRB) is targeting an increasing number of expensive drugs, including a rare-disease medication made by Horizon Pharma that can cost C$325,000 ($253,409) a year, documents reviewed by Reuters shows.
The agency can challenge the list price of any patented drug in Canada and order companies to repay some revenue. Data show the number of open PMPRB investigations into potentially overpriced drugs has more than doubled since 2013, reaching 122 as of March 2018.
(See graphic on escalating enforcement actions here tmsnrt.rs/2LuY5og)
New proposed regulations could enhance the PMPRB's powers and help set a broader agenda for taming prices in Canada.
This shift toward greater regulation - years in the making but not always so visible - could hurt pharmaceutical revenues in Canada and has alarmed drugmakers. But it could benefit private drug plans and provincial governments and help patients with out-of-pocket costs.
In addition, although Canada is a relatively small market for major drugmakers, lower prices in Canada could spread into the U.S. market, experts say. Washington is considering a proposal to base some drug prices on the cost of medicines in other developed nations.
Cross-border sales could also put pressure on U.S. prices for patented drugs, which lead the world and well exceed even Canada's. Some American patients already buy prescription drugs illicitly from Canada, and last year the U.S. Food and Drug Administration created a working group to study legalizing some wholesale imports.
The pharmaceutical industry's main lobby group in Canada, Innovative Medicines Canada, has argued that the changes, if approved by the cabinet of Prime Minister Justin Trudeau, could delay or limit Canadians' access to new patented medicines. Reuters reported in February that drug companies offered to give up C$8.6 billion($6.4 billion) in revenue over 10 years to head off the PMPRB reforms.
Last month, the U.S. Trade Representative said in a report that it was closely monitoring the reform effort, noting it "would significantly undermine the marketplace for innovative pharmaceutical products."
Drugmakers around the world are under pressure as governments and insurers grapple with skyrocketing drug prices, especially the United States.
Stephen Frank, president of the Canadian Life and Health Insurance Association, said changes at the PMPRB reflect a broader willingness to tackle drug prices.
"There's a momentum and an energy around becoming more engaged on pricing issues," he said. "There's many layers to this, that have sort of aligned to give them the space they need to try and be more active."
From its founding in 1987, the PMPRB was an unusual agency. With a budget of C$15.4 million and approved staff of 83, it is one of the smallest federal departments in Canada. By comparison, the National Film Board employs about 400.
Healthcare is generally a provincial responsibility in Canada, but the PMPRB draws its power from federal patent law. Instead of bargaining drug prices down, it can declare some to be an illegal abuse of patent rights. It caps prices paid by private as well as public plans. The agency's cases are most often settled out of court.
Its size belies its importance. Canada's universal healthcare system does not cover most patented - or generic - prescription drugs, which are paid for by more than 1,000 public and 100,000 private, employer-sponsored drug plans as well as patients themselves.
Executive Director Douglas Clark, who took over in 2013, said he believes the rise in investigations has been driven more by the escalating prices set by pharmaceutical companies than by his agency's toughened stance.
But the agency could soon gain more muscle. The reform proposal, shepherded by federal regulator Health Canada, would allow PMPRB to figure in the effectiveness of drugs and what Canadian governments can afford when determining whether costs are excessive.
Announced in 2017, the rules were scheduled to take effect in January but have been delayed as the government reviews feedback.
There is no guarantee the reforms will proceed, especially given the uncertainty of federal election results in the fall. But even if they are shelved, Clark said, his agency has some ability to change pricing guidelines on its own.
"We don't have the same maneuverability if we don't have regulatory change, but we'll make the best of what scope we have," he said.
The PMPRB is already taking on some of the drug industry's big players.
The agency recently targeted Horizon Pharma, for instance, deeming its drug Procysbi, tagged at C$325,000, excessively priced.
Health Canada approved the drug in 2017 to treat a genetic disorder known as cystinosis, which afflicts about 100 Canadians. Without treatment, the condition causes irreversible kidney damage.
The federal approval essentially elbowed out a far cheaper alternative drug, making it difficult for patients to get.
Horizon argued that its medication was superior, that the$180 million it spent on research and development justified the price and that patients unable to afford Procysbi were able to get it on discount or for free.
Sales in the United States and Canada were $154.9 million in 2018.
In January, PMPRB sought to force the company to reduce Procysbi's list price by at least 71 percent. The agency argued that the current price was so much higher than the similar alternative drug - listed at around C$25,000 - that PMPRB should set aside its usual guidelines, based largely on what is charged internationally.
Horizon is fighting back, saying in a recent statement that PMPRB wants the drug to sell at "a small fraction of the lowest price in the world." The matter is set for hearings and could be decided in federal court.
But in the end, said Joel Lexchin, a University of Toronto professor and pharmaceutical policy expert, the problem of escalating drug prices won't be settled by individual showdowns with drug makers over specific drugs. A broader approach - like the new proposed regulations - is needed, he said.
"We can't really keep going with these one-offs," he said. "We need a general policy."
($1 = 1.3437 Canadian dollars)
Editing by Denny Thomas and Julie Marquis