Regulatory changes for how the Patented Medicines Prices Review Board (PMPRB) formulates price ceilings for patented drugs have been proposed and are due to come into effect in July of 2022. This report examines the proposed change and quantifies its long-term impact. We find that a change to the median of eleven comparator countries is important, but that more flexibility to re-adjust prices would potentially contribute more to reducing expenditures by Canadians.
We estimate the potential importance of the proposed change in reference countries by looking at their counterfactual impact in a representative year, in this case 2018. Canadian expenditures would have been lower by 19 per cent, ceteris paribus. This leads us to conclude that in a future where the changes are fully implemented, expenditures could be 19 per cent lower than they otherwise would be.
We find that most (12 percentage points) of that reduction comes from reassessment of prices and better alignment of price comparisons rather than switching comparator countries.