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06 January 2023
As we bid farewell to 2022 and ring in 2023, many of us look to the new year for a fresh start. Aside from commencement of our new year’s resolutions, the dawn of 2023 also heralds significant policy shifts in the landscape for international reference pricing (IRP) – or at least, it was meant to do so.
In two such cases, notably in Canada and South Korea, the transition from IRP of yesteryear to IRP of 2023 has been marked by some unexpected, last-minute twists and turns. The implications for the life sciences industry have the potential to be significant and, as always, the devil is in the detail.
Further postponement of guidelines compounds uncertainty in Canada
In Canada, amendments to the Patented Medicines Regulations have been stalled now for years. Originally meant to come into force on 1 January 2020, these changes would have been arguably the largest shake up to the country’s IRP framework since inception.
The amendments – which, amongst other things, would see the United States and Switzerland excised from the reference basket, and new markets including Australia and Japan added in – have been the subject of legal challenges right out of the gate. Since that time, the amendments have been streamlined and postponed multiple times in something of a dizzying saga, in which outbreak of the pandemic also played a role. Finally, in July 2022, changes came into effect – in theory.
In the interim, the Patented Medicine Prices Review Board (PMPRB), that body tasked with price regulation, had overhauled its guidelines, but this was done prior to a reworking of the amendments. With those guidelines now outmoded, the agency kicked off development of, and consultation on, a draft of newly proposed guidelines, the finalisation of which was due to occur by end of 2022 in time for implementation on 1 January 2023. In the meantime, the PMPRB announced that it would adopt a “status quo” approach to enforcement of its mandate.
What this “status quo” approach has meant in practice is that new medicines launching in the interim have been free from price investigations. Launched products have also avoided scrutiny, provided their national average transition price has not exceeded the most recent price deemed to be non-excessive under existing guidelines.
In December 2022, with policy wonks, industry and other observers anxiously counting down release of the final guidelines, the sudden departure of the Acting Chair of the PMPRB came as an eleventh-hour surprise. Shortly thereafter, the PMPRB confirmed that implementation of the guidelines will be postponed, and that the interim guidance published in August 2022 (the “status quo” approach) will remain in effect until further notice. Needless to say, this not only extends but further intensifies the uncertainty surrounding the future of Canadian pricing regulations.
For the time being, it seems prudent that industry forecasting and modeling continue to be based around the most recent guidelines which, until very recently, were undergoing consultation. If those guidelines come into force as originally drafted, then going forward, prices of new medicines launching in Canada will be deemed excessive if they exceed the median price among the so-called PMPRB11 countries (to wit, Australia, Belgium, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, Sweden, and the United Kingdom). From this perspective, one of the main thrusts of the original amendments has been preserved, inasmuch as removal of two markets known for relatively high list prices – the US and Switzerland – will proceed. Although dependent on launch sequencing and relative prices in the newly added markets, in theory this change serves to drag down the upper cap on achievable Canadian list prices which do not fall foul of the criteria around excessive pricing.
South Korea: The A7 become the A8
When Canada originally proposed amendments to the PMPRB reference basket, South Korea was among those markets pegged for inclusion. This prompted an outcry from industry and other stakeholders, with this market long alleged to deploy overly-stringent pricing policies. Many concerns were raised about the potential harms – both to patient access to medicines and Canada’s homegrown pharmaceutical industry – such a policy could engender. In the end, South Korea was stripped from the final PMPRB 11.
In November 2022, South Korea in turn announced various changes to its pricing framework, among which expansion of its IRP reference basket to include Australia and, in something of a plot twist, Canada. This change too was slated to go into effect on 1 January 2023.
Historically, South Korea has referenced prices in the so-called “A7” countries (France, Germany, Italy, Japan, Switzerland, the UK and the US), although prices from a larger basket of markets are known to figure in negotiations. With the proposed addition, this collection of countries would expand to become the “A9”, making their prices influential for certain products applying for reimbursement in South Korea.
The proposed inclusion of Australia was met with particular resistance by industry and other stakeholders. In an eleventh-hour twist of its own, South Korea’s Health Insurance Review and Assessment Service (HIRA) announced towards the end of December that Australia would be jettisoned, effectively transforming the “A9” into the “A8”, with Canada (nearly – but ultimately not – including South Korea in its own IRP reform) to be the only addition. The text went into effect on 1 January 2023 as planned, with a revision striking out reference to Australia issued very quickly thereafter.
Ever more intertwined, ever more nuanced
If there is one key takeaway from the twists and turns characterising the IRP landscape, it is that change is the only constant. As we head into 2023, we see global referencing relationships grow ever more intertwined, different IRP policy components become ever more nuanced in how they apply to different categories of products or under specific conditions. For industry, staying abreast of these developments, and unravelling the nuances, is key to launch strategy and pricing management.
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