International Reference Pricing Reforms

Canada’s plan to revise reference basket

In a bid to reduce medicine prices in Canada, the Canadian Minister of Health announced the revision of the reference basket for international reference pricing (IRP).
Medicines prices in Canada are regulated by the federal government, through the PMPRB (Patented Medicine Prices Review Board). The current reference rule used by the PMPRB to fix medicine prices takes an average price of a basket of countries: France, Germany, Italy, Sweden, Switzerland, UK and USA. Medicine prices in the USA are typically the highest worldwide, therefore, Canada plans to amend the reference basket by replacing USA with New Zealand, a country that reports lower prices. The Ministry of Canada is expecting to save millions of dollars a year with this reform and is expected to come into effect in 2018.
To illustrate the potential impact of this change, Global Pricing Innovations simulates the new scenario using Afinitor, indicated for the treatment of breast cancer, as an example.
The current Ex-Factory price for Afinitor 5 mg in Canada is CAD 6,002.70.
canada-dataSource: GPI Pulse. Exchange rates from PMPRB: average of the 36 monthly exchange rates for each country (taken to 8 decimal places) as published by the Bank of Canada. (1 EUR = 1.45 CAD, 1 NZD = 0.9112 CAD, 1 SEK = 0.156 CAD, 1 CHF = 1.2938 CAD, 1 GBP = 1.86 CAD)
If Canada’s reference basket were to include New Zealand instead of USA, the price for Afinitor 5 mg 30 tablets could be reduced by around 35% (6,002.70 CAD to 3,901.30 CAD). It is also worth keeping in mind that the price decrease in Canada will also impact medicine prices in other countries such as Bahrain, Brazil, Colombia, Egypt, Oman, Saudi Arabia, South Africa and Taiwan.

International reference pricing trends

Transitioning international reference systems appear to be a common trend and is one that is set to continue. International Reference Pricing is still one of the most popular tools used by Governments to control pharmaceutical expenditure. In addition to Canada, other countries that have recently amended reference rules to further reduce medicine prices include:
Ireland: From August 2016, the Irish Pharmaceutical Healthcare Association (IPHA) increased the frequency of price reviews and expanded the reference basket from 9 to 14 countries. The reference basket was also changed to include low price countries such as Greece or Portugal.
Switzerland: In 2015, the Federal Office of Public Health (FOPH) expanded the reference basket from 6 to 9 countries to include Belgium, Finland and Sweden leading to the reduction of medicine prices in Switzerland.
The topic of International Reference Pricing was recently discussed at a round table at the Pharma Pricing & Market Access Congress in London. The main point of agreement from both payers and industry representatives highlighted that although International Reference Pricing is a useful method of controlling pharmaceutical expenditure in the short-term, the long-term impact on market access could be detrimental to patients. Industry could delay launching products or consider not launching in some countries due to the global revenue impact of IRP.