Pharmaceutical Drug Pricing: PMPRB Framework for Launch, Therapeutic Benefit Categories & Global Market Strategies

Negotiating a drug price: Framework for rational decision-making PMPRB

The cost of patented medicines often sparks debate worldwide. In Canada, the Patented Medicines Prices Review Board (PMPRB) plays a crucial role in ensuring that prices for patented drugs remain fair and reasonable. Understanding how the PMPRB operates, especially how it categorizes therapeutic benefits and regulates pricing, is essential for pharmaceutical companies and stakeholders navigating the Canadian market. Understanding the framework also provides insights for developing your global value dossier for other markets. Moreover, this understanding on a global scale may be instrumental for the sequencing of markets and performing an insightful risk-assessment in business development and market access. This post explores the PMPRB’s origins, its therapeutic benefit categories, pricing frameworks, and how these elements influence global pharmaceutical strategies.

The Origins & Purpose of the PMPRB

The PMPRB was established in 1987 under the Patent Act as a federal quasi-judicial body. Its primary role is to protect Canadian consumers by ensuring that prices of patented medicines are not excessive. This came about due to concerns that pharmaceutical companies were charging high prices for new patented drugs, which could limit access and strain public healthcare budgets.

The PMPRB does not set drug prices directly but reviews and regulates them after they enter the market. It balances the need to encourage pharmaceutical innovation with the public interest of affordable access to medications.

How New Drugs Receive Therapeutic Benefit Categories

When a new pharmaceutical drug enters the Canadian market, the PMPRB assigns it a therapeutic benefit category. This classification influences the price ceiling for the drug. The categories reflect the drug’s improvement over existing therapies and are based on clinical evidence submitted by manufacturers.

The main therapeutic benefit categories are:

• Slight or No Improvement  

• Moderate Improvement  

• Substantial Improvement  

• Breakthrough Status

  
  

Criteria for Each Category

• Slight or No Improvement: The drug offers minimal or no additional therapeutic benefit compared to existing treatments. It may have similar efficacy or safety profiles but does not significantly improve patient outcomes.

  
  

• Moderate Improvement: The drug provides a noticeable but not dramatic improvement in efficacy, safety, or convenience. This could mean better symptom control or fewer side effects.

  
  

• Substantial Improvement: The drug shows clear and meaningful benefits over current options. This might include improved survival rates, better quality of life, or significant reduction in adverse effects.

  
  

• Breakthrough Status: Reserved for drugs that address an unmet medical need with major clinical benefits. These drugs often represent a new class of treatment or a significant advancement in therapy.

I have been working on drug pricing since I was a brand manager understanding the implications of justifying a drug price based on clinical efficacy, cost effectiveness and whether it addresses an unmet need. I believe that the PMPRB's Patented Medicine Prices Review Board serves as a logical, rational framework which dispels the notion of excessive prices. Moreover, the PMPRB assesses and regulates drug pricing after launch based on the consumer price index and other variables. Should a pharmaceutical manufacturer over price pharmaceuticals they are monitored and regulated. Excess funds must be paid back. All PMPRB procedures and regulations must be reported on an ongoing basis by pharmaceutical manufacturers. It is important to note, under these regulations a pharmaceutical manufacturer cannot hide excessive prices. Should a company try to conceal to drive revenues, there are consequences and moderate to severe penalties. For this reason having skillful people on a team for market access, pricing, government & public affairs is crucial to avoid potential scandals or naive understandings of the reporting requirements.

The Patented Medicine Prices Review Board (PMPRB) reported that 2% of all new patented medicines introduced in Canada from 2010 to 2019 were categorized as breakthroughs. 

The Patented Medicine Prices Review Board (PMPRB) reports that 2% of all new patented medicines introduced in Canada from 2010 to 2019 were categorized as breakthroughs. How you drive a "breakthrough status" for a new drug requires a highly skilled, innovative, systems thinking approach to marketing and market access. The PMPRB assesses the therapeutic benefit of new patented medicines, categorizing them as slight/no improvement, moderate improvement, substantial improvement, or breakthrough. 

Having worked in marketing, sales management and market access, I have learned that it is crucial that the CEO understand the Canadian market. Obtaining a premium price for a new drug may be a goal, however, we must be rational and use logic in assessing the levels of premium pricing attainable to ensure the medicine meets the unmet clinical need and population needs. It is also important that a premium price may restrict market access and hinder revenues over time.

Therefore, a revenue model must be developed that assesses different pricing categories and optimum revenues attainable with a profit and loss (P&L) analysis. Depending on the profit margins and market access specifically place in therapy a lower price may generate more desirable revenue targets. This insightful positioning may overthrow a competitor's position in the market. Sometimes obtaining a market share of over 80% based on a better pricing strategy may be a more astute strategy. Revenue, profitability and market share must be addressed in the risk-assessment for different price points for commercial success.

These are the therapeutic benefit categories within which drug pricing is established. The framework removes emotion and establishes rationality and logic when launching new pharmaceutical drugs. I use this framework in establishing the value of a medicine for a given market before developing the global or domestic value dossier for Health Technology Assessment. It is like a litmus test pre-launch which forces logic upon the decision-maker.

I employ this structured method of analysis to determine a medicine's value for a specific market before creating the global or domestic value dossier for Health Technology Assessment. It acts as a pre-launch litmus test, compelling the decision-maker to apply logic.

PMPRB Therapeutic Benefit Breakdown (2010-2019) 

Therapeutic Benefit Category	Percentage of New Patented Medicines (2010-2019)
Slight or No Improvement	83%
Moderate Improvement	12%
Substantial Improvement	3%
Breakthrough	2%

More recent PMPRB annual reports, such as the 2023 PMPRB Annual Report, provide general statistics on new medicines but do not explicitly break down the percentage of new drugs with "breakthrough status" on a yearly basis in the same format as the 2019 report's aggregate data. 

What It Takes to Obtain Breakthrough Status

Achieving breakthrough status is challenging and requires strong evidence. The PMPRB evaluates several factors:

• Unmet Medical Need: The drug must target a condition with limited or no effective treatments. This could be a rare disease or a serious illness where current therapies fail.

  
  

• Clinical Efficacy: The drug must demonstrate significant improvement in clinical outcomes through rigorous trials. This includes better survival, symptom relief, or disease modification.

  
  

• Cost-Effectiveness: While not the sole factor, the drug’s value relative to its cost is considered. A breakthrough drug may justify a higher price if it reduces other healthcare costs or improves patient productivity.

  
  

Manufacturers must submit detailed clinical data and pharmacoeconomic analyses to support their claims. The PMPRB reviews this information carefully before granting breakthrough status, which allows for a higher price ceiling reflecting the drug’s value.

Using the PMPRB Framework as a Global Pricing Guide

The PMPRB’s structured approach to categorizing therapeutic benefits and controlling prices offers a useful model for other markets. It has stood the test of time. For this reason many payers worldwide view Canada with high regard as Canada has been able to regulate drug prices effectively. Countries with emerging regulatory systems can adapt this framework to assess whether drug prices are justified based on clinical value.

For example, a breakthrough drug in Canada might be priced significantly higher than generic alternatives or drugs with slight improvement. This pricing reflects the innovation and benefits it brings. Other countries can use similar categories to benchmark prices and negotiate better deals. All negotiations must dispel emotion for them to be rational and effective in producing desirable outcomes for a population and/or market.

This framework encourages transparency and consistency in pricing decisions, helping governments and payers avoid overpaying for drugs that do not offer meaningful benefits.

Pricing "Breakthrough Drugs" Compared to Generics and Other Comparators

Breakthrough drugs often command premium prices due to their substantial clinical benefits and the unmet needs they address. In contrast, generic drugs are priced much lower because they are bioequivalent copies of existing medicines without additional therapeutic benefits.

The PMPRB sets maximum prices for patented drugs based on their therapeutic category. For breakthrough drugs, the price ceiling is higher to reflect their value. For drugs with slight or no improvement, prices must be closer to existing therapies or generics.

This system ensures that prices align with the drug’s contribution to patient care and health system savings, preventing excessive charges for minor improvements.

How Pharmaceutical Manufacturers Use the PMPRB Framework in Global Market Strategies

Pharmaceutical companies can leverage the PMPRB framework when planning global launches. Understanding how Canada classifies and prices new drugs helps manufacturers sequence their market entries strategically.

For instance, a drug expected to receive breakthrough status in Canada may be launched first in markets with similar pricing models to maximize returns. Conversely, drugs with moderate or slight improvements might be introduced in markets with less stringent price controls or where competition is less intense.

Using the PMPRB’s categories as a benchmark, companies can tailor their clinical development and pricing strategies to meet different countries’ expectations and regulatory requirements. I have used this framework to introduce rationality and logic in getting teams to agree on risks associated with drug pricing for domestic and global markets understanding the notion of "affordability" for negotiations.

Regulation of Drug Prices and Reporting Timelines by the PMPRB

The PMPRB requires manufacturers to report sales and pricing information within 30 days of the end of each calendar quarter. This timely reporting allows the board to monitor prices and sales volumes continuously.

If a drug’s price exceeds the maximum allowable price based on its therapeutic category and comparator drugs, the PMPRB can take action. This may include ordering price reductions or requiring manufacturers to provide justification for the price.

The board also reviews price increases annually to ensure they remain within acceptable limits. Excessive pricing can lead to investigations and penalties and even scandals if a manufacturer conceals excessive prices.

This regulatory process promotes accountability and helps maintain affordable access to patented medicines in Canada. It can also introduce logic and rationality in the current debate on drug prices worldwide.

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