You Can't Win Them All

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Bill 102 comes close to satisfying stakeholders

Making everyone happy with Bill 102 is proving tricky for the Ontario government, despite the widespread feeling that something needs to be done to fix the current system.

The Transparent Drug System for Patient Act, known as Bill 102, was tabled in April to address the rising cost of prescription drugs and complex system of pricing and drug regulation that did not encourage transparency, innovation or
competition.

The new legislation promises to reduce the cost of drug benefits to Ontario taxpayers, employers and patients by designating more generic drugs as “interchangeable” with brand name drugs, and requiring more transparency in the drug-approval (and rejection) process, as well as the drug-reimbursement system.

At stakeholder hearings, the bill attracted strong opposition from some, mixed reviews from key professional groups and industry representatives, and criticism for the way in which the government handled the drafting process. Ironically, there does not seem to have been a transparent process for writing legislation designed to increase transparency.

Amendments were tabled in June and seemed to tip the balance of support in favour of the bill among most industry players, despite the continued objections from major pharmaceutical and biotech companies who felt the proposed bill was being rushed into law without adequate and informed discussion among the stakeholders. Nevertheless, the amended Bill 102 was passed in late July. Stakeholders are now being asked to review the published regulations before the new law takes effect on October 1.

An Evolving Debate
The crux of the debate appears to be based on the complaint that research-based pharmaceuticals and biotech companies cannot remain economically viable once drug patents expire, at which time the same drug can be manufactured by other companies as generics and sold at a lower cost. This position argues that by undermining the viability, stability and profitability of pharmaceutical and biotech companies, new businesses will not be attracted to Ontario.

Speaking at the hearings sponsored by the Standing Committee of Social Policy, Toronto Biotechnology Initiative (Toronto, ON) president Grant Tipler stated that "aspects of Bill 102 raise serious questions about the commitment of the government of Ontario to encourage a biotech sector as a centerpiece of its innovation strategy. This doesn’t bode well for the provincial government that has gone to great lengths recently to promote an agenda of innovation and research."

However, the rising cost of drugs seems to have forced the government's hand to address laws and loopholes that favour brand name drugs and restrict access to generics—a situation some perceive as unfairly limiting competition, keeping prices high and profit margins protected at the expense of employers who provide drug benefits to employees and self-
paying patients.

From the opposite end of the spectrum, the generic drug industry has weighed in with its own definition of the problem that challenges the common perception that drug discovery is the sole province of big pharma and that generic drug companies are undermine innovation rather than contribute to it.

Speaking at the Economic Club of Toronto on June 1, Jim Keon, president of the Canadian Generic Pharmaceutical Association (CGPA) (Toronto, ON), maintained that "on average, generic drug companies are spending close to 15 per cent of their revenues on research and development.” Keon noted that this is nearly twice as much as that spent by brand-name companies.

"The reason for this," he continued, "is because, unlike most brand-name drugs, which are shipped into Canada and Ontario, virtually all generic drugs sold in Canada are made in Canada."

One might argue, as Keon and others do, that the economic impact of Bill 102 could be salutary, but not in the direction of large, international pharmaceuticals and biotech companies.

CGPA maintains that current regulations restricting the interchangeability of generic drugs for brand name drugs have been exploited by large pharmaceutical companies to avoid generic competition by making small changes to a product that provide no added benefit for patients. The effect is to extend patent protection beyond 20 years by creating a "new medication" just before the time generic drug companies would be permitted to produce and market the drug. The regulations anticipate that during the 20 years of patent protection (and therefore price protection), the company would have recouped the research and development costs associated with the drug and been able to turn a profit.

According to Keon, allowing loopholes that prolong this protection and create a market monopoly actually hurt the economy.
"This approach completely ignores the critical role that competition plays in encouraging innovation, not only in the pharmaceutical sector, but in all sectors of our economy," he says.

John Fulton, executive vice-president at Biolyse Pharma Corp. (St. Catharines, ON), is hoping that Bill 102 will level the playing field for smaller companies.
Biolyse has been struggling to get its cancer drug paxlitaxel onto the Ontario Drug Formulary despite worldwide success and listings on all other provincial formularies. Fulton maintains that the price of the similar, but more expensive, Taxol® (made by Bristol-Myers Squibb Co. (New York, NY)), is kept high in Ontario by the lack of competition.

Biolyse is currently developing an innovative way to produce a generic version of Tamiflu®—a drug developed by F. Hoffman-La Roche Ltd. (Basel, Switzerland)—that could be mass produced and exported to developing nations to treat a flu epidemic. Under new federal regulations, drugs such as this can be copied by generic manufacturers and sold to impoverished nations before their patent expires. According to Fulton, Bill 102’s provision for an executive officer to create a transparent process for drug approval should help to support this kind of innovation in Ontario.

Amendment Creates Structure For Collaboration
There is widespread agreement that the best outcome from the stakeholder hearings was an amendment to the bill, tabled on June 6, that recognized the potential economic impact of the legislation and addressed the very real question of innovation and research investment in Ontario.

Specifically, there is praise for the government’s decision to establish a working group that connects the biopharmaceutical industry with the Ministries of Health and Long-Term Care, Research and Innovation and Economic Development and Trade. As part of the proposed changes to its comprehensive drug strategy, this group will promote increased research and investment in the province and balance cost containment with economic development. This will have an impact on regions that rely on the biopharma sector for a healthy economy.

Ross McGregor, president and CEO of the Toronto Region Research Alliance (TRRA) (Toronto, ON) finds this government initiative particularly promising for the Greater Toronto Area since continued growth in knowledge-based jobs is such a critical element of the area's wider research enterprise.

"TRRA had a different role from the other stakeholders in this debate," he says. "Our involvement was based on our concern that the only objective being met was that of cost containment. While that is obviously a great challenge to the government, we felt it was more complicated than that. The impact on economic development, particularly investment in research and development in the pharmaceutical community, was a perspective that needed to be heard."

"The Toronto region is the third largest pharma cluster in North America, and we thought that this kind of legislation couldn’t afford to look at the issue through the single lens of cost containment because the impact on the wider industry would be very significant," McGregor says. "The role of our organization was to soften the legislation's impact on the industry. Ideally, the three ministries would have worked together in the crafting of the legislation, but now this working group has a mandate to examine the opportunities for research and development investment for the pharmaceutical community and how it links with cost containment."

McGregor says that, historically, there has been a "silo mentality" among government departments in Ontario.
"Economic development and R&D has always been given short shrift. Beginning with the premier, there now it seems to be a drive for the provincial government to get more serious about innovation," he says.

As part of its contribution to the stakeholder meeting, Canada's Research-Based Pharmaceutical Companies (Rx&D) (Ottawa, ON), outlined "principles for partnership" to highlight a means for government, health professionals and industry to move forward as a joint venture, rather than in competing silos.
The proposal calls for the integration of the province’s "innovation agenda" to get everyone pulling in the same direction. It also insists on a patient perspective: "improved access to new medicines, respect for the doctor/patient relationship and a primary focus on improved outcomes for patients."

Rx&D’s principles for partnership underlines the dilemma for the government: how to fix the problem of high drug costs without creating another. Rx&D's position—that Bill 102, as initially tabled, fell short of what was good for the health-care system, for patients or for innovation-became the basis for the amendment that established the tri-ministerial working group to address the problem more holistically. The plea for partnership appears to have been heard.

The Challenge Ahead
Some are still concerned that the bill, as passed, and particularly the regulations that have since come down to stakeholders for review, do not support the goal of transparency.

Jeff Connell, director of public affairs at CGPA, called the regulations "convoluted, confusing, unworkable," and wonders if the government really has the political will to get it right.

"When the bill was first proposed it was straightforward. It aimed to reduce drug prices and eliminate rebates. With the amendment tabled on June 6 there was obviously some backpedalling by the government in response to public pressure, but the consequence has been anything but transparency," he says.

According to Connell, there is now a hodgepodge of rules that are difficult to interpret and are different for public and private sectors, leaving generic companies wondering how they can possible comply and avoid penalties since they cannot possibly know and control for all the variables.
"It puts our industry in an impossible position," he says. "How are we supposed to compete in such an uncertain environment? Our industry needs consistent rules across the board that apply to all jurisdictions . . . even the reporting requirements are unclear, so the goal of transparency has been completely undermined."

McGregor remains cautiously optimistic.
"As a result of the reaction to Bill 102, the government appears to be more sensitive to the need to collaborate on a broader economic approach. The two essential elements are in place: the three crucial ministries are working together and industry as at the table."

He believes that senior officials of all three ministries became more attune to their complementary agendas during the Bill 102 process. "I sense real (political) will to work together with industry," he says.