Some Canadian drugs are overpriced before they are patented

Canada needs a new system for controlling drug prices that does not depend on whether or not a drug has received a patent, according to an article by York Professor Dr. Joel Lexchin.

Drug prices in Canada can be unregulated for years, a period during which companies may overprice the drugs and market them, says Lexchin, a professor in the School of Health Policy & Management in York’s Faculty of Health and an emergency physician at the University Health Network Dr. Joel Lexchin, professor in York University's Faculty of Healthin Toronto.

Left: Dr. Joel Lexchin

His commentary, “Marketing before patenting: implications for price controls in Canada”, appears in the journal Open Medicine. It is based on new research which examined how many drugs in Canada are marketed before they are patented, whose prices are therefore not controlled by the federal Patented Medicine Prices Review Board. He also looked at the time period between marketing and patenting, and any excess revenue generated before those drug prices were regulated.

In total, 42 drugs were marketed between 2000 and 2008 before being patented, and complete data was available for 33 of those.

“Some of these drugs were potentially being marketed for weeks before they came under the jurisdiction of the review board and had their prices controlled, but some of them may have been marketed for years,” says Lexchin. “Only three of the 33 drugs were found to be overpriced, but the fact that one of the 33 drugs may have been marketed without price controls for more than seven years is troublesome.”

When drugs are finally patented, their prices are reviewed and if a drug is deemed to be overpriced, the review board can order a company to repay any excess revenue to the federal government. The problem is that if companies overprice their drugs, the drugs may not be added to provincial formularies such as the Ontario Drug Benefit Formulary. In Ontario, the government covers most drugs listed on the formulary for people who are eligible, so if a drug is not on the list, the cost will not be covered.

In addition, although excess revenue from the drugs is eventually recovered, it is paid to the federal government, not the provincial governments which fund drugs through their drug benefit schemes, or to private insurers or people who are paying the cost out-of-pocket, says Lexchin.

The best remedy for various problems caused by using patent status to regulate prices is simply to treat all drugs on the market equally and regulate all prices, he concludes.

More about Joel Lexchin

Dr. Joel Lexchin received his doctor of medicine from the University of Toronto in 1977 and for the past 22 years has been an emergency physician at the University Health Network. He is currently a professor in the School of Health Policy & Management at York University and an associate professor in the Department of Family & Community Medicine at the University of Toronto.

From 1992 to 1994 he was a member of the Ontario Drug Quality & Therapeutics Committee and he was the chair of the Drugs & Pharmacotherapy Committee of the Ontario Medical Association from 1997-1999. He has been a consultant for the province of Ontario, various arms of the Canadian federal government, the World Health Organization, the government of New Zealand and the Australian National Prescribing Service.

He is the author or co-author of more than 90 peer-reviewed articles on topics such as physician prescribing behaviour, pharmaceutical patent issues, the drug approval process and prescription drug promotion. He is a co-author of Drugs of Choice: A Formulary for General Practice and author of Drug Therapy for Emergency Physicians.