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AT A PRICING CROSSROADS
August 2006
by Randall C. Willis  |  Email the author
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One of the benefits of being Canadian and hav­ing lived for several years in the United States is that I have had the opportunity to experi­ence first-hand the healthcare systems in each country and to witness the reality behind the myths—lies, if you'd rather—that zealots on either side of the border tell about the other's system. But one area in which there is a very real and significant divide is in the pricing structure of pharmaceuticals.
 
For good or for ill, the Canadian government (like many others around the world) tightly regulates the prices that companies can charge for various drugs. And for the most part, com­panies have just had to take it—putting it down to the cost of doing business in Canada. Until recently, that is.
 
In June, Bristol-Myers Squibb Canada announced it would not make its anti-can­cer treatment Erbitux available to Canadians because it had been unable to agree on a suit­able price for the drug with Canada's Patented Medicine Prices Review Board. At the time, public relations director for BMS Canada Marc Osborne said the government's price was "not in line with the innovation it brings to patients."
 
Oh, how times have changed. Just a short nine months earlier, when Health Canada (the local FDA equivalent) approved Erbitux for the treatment of metastatic colorectal cancer, Judy Robertson, general manager of BMS Canada, said the company was "deeply committed" to delivering oncology treatments to Canadian patients. She added: "Bristol-Myers Squibb will work closely with health authorities to provide rapid access for Canadian patients to this inno­vative cancer therapy."
 
Not to demonize BMS Canada, it should be noted that drug and biotech companies have long pushed the Canadian government to be more accommodating in its pricing stance, and their bottom lines have suffered signifi­cantly from the streams of buses and emails that cross from the United States into Canada of patients seeking less expensive pharmaceu­ticals. And many of Canada's brand-name drug organizations and biotechnology associa­tions have lobbied the government to be more responsive, fearing sig­nificant losses to the country's economy and diminished quality of life.
 
As Mick Kolassa, associate director of the Center for Pharmaceutical Marketing and Management at the University of Mississippi, pointed out in Pharmaceutical Marketing (Haworth Press, 2002): "Contrary to the widely held opinion that pricing is simply a matter of adding up costs and establishing a markup, pric­ing experts agree that costs may help to establish a price floor but the market provides most of the information for the pricing decision."
 
In today's drug industry, researchers don't crack a cell—don't pick up a vial—don't scan a database without they or someone in their com­pany thinking about the ultimate return-on-investment of any drug that results. As proof-of-principle, witness the many arguments made about providing drugs to developing world countries with small economies. Call it Phase -I studies.
 
Which begs the question: Shouldn't BMS Canada have known what to expect from Patented Medicine Prices Review Board and factored that into its decision to sign a licens­ing and distribution agreement for Erbitux in Canada? The controlled pricing quandary is not without precedent, either, as the cost of Erbitux treatments in Europe are about half those in the United States according to Phyllis Carter, spokesperson for Merck KGa, who spoke with The Globe & Mail.
 
It will be interesting over the next few months to see whether the two parties will continue to talk about the problem or whether it will turn into a battle in the media. As it stands, provin­cial governments continue to foot the bill as Canadian cancer patients travel to the United States for Erbitux treatments—so, ironically, Canada's healthcare system is paying U.S.-pric­es for the treatment, in any event.
 
Meanwhile, BMS Canada sits there with the distribution rights to a drug that they refuse to distribute and therefore will see no financial gains from this property until they can manage to agree on a price. And to make matters worse, every time a drug pricing or availability dispute like this happens, interest groups in Canada start talking about compulsory licensing, whereby the government authorizes a third-party to produce a generic version of the drug.
 
And of course, both sides of the dispute stand to lose significant ground in the public eye, as we expect film footage of cancer patients bundled into cars traveling across the national border or waiting in hospitals, struggling along on secondary treatment regimens and media types asking why this has to be.
 
It's time to go back to the table, folks. Neither the drug industry nor government-sponsored healthcare can afford the black eye.

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