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Canada Market Access Briefing

The document provides an overview of the Canadian pharmaceutical market, highlighting several key trends that will affect pharmaceutical manufacturers. The Canadian market, while smaller than some other countries, still ranks among the top 10 globally in drug spending. Launching a drug in Canada can be profitable if manufacturers understand the specific nuances of the market, such as Canada's complex reimbursement system with both public and private insurance. Health technology assessments play an important role in reimbursement decisions. Manufacturers must tailor their reimbursement and launch strategies to the target payer market, whether public or private plans. Health economic evidence is also becoming increasingly important for market access, pricing, and contracting in Canada.

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Canada Market Access Briefing
3 Pharmaceutical manufacturers often overlook the Canadian market, sometimes treating it as an extension of their US operations. However, although growth lags that of some smaller emerging economies, sales in Canada's pharmaceutical market still rank number 9 in the global top 10, close to Spain and the UK (see Table).1 Canada’s drug pricing system is also less restrictive than many European markets and includes a strong private sector. In many cases, launching a drug in Canada can be profitable, provided the manufacturer understands the specific nuances of the market and prepares accordingly. The Canadian market is also changing, with several trends that will affect pharmaceutical manufacturers. Key trends include the transition to a pan- Canadian process for reimbursement price negotiations; generally decreased access to physicians, accompanied by increasing importance of healthcare provider groups; movement toward greater reliance on health economic evidence; reevaluation of generics pricing regulations; the introduction of subsequent entry biologics (SEBs, the Canadian term for biosimilars); and resistance to high-cost biologics and drugs for rare diseases. This briefing paper provides an overview of the key aspects of the current Canadian pharmaceutical market and highlights some recent developments as well as their implications for pharmaceutical manufacturers. Country 2013 Rank $ (Mil), 2012 $ (Mil), 2013 Growth (Y/Y %) USA 1 326,892 339,694 4% Japan 2 112,067 94,025 -16% China 3 81,698 86,774 6% Germany 4 42,333 45,828 8% France 5 36,674 37,156 1% Brazil 6 29,112 30,670 5% Italy 7 26,231 27,930 6% UK 8 21,635 24,513 13% Canada 9 21,877 21,353 -2% Spain 10 19,935 20,741 4% Table. Top 10 Global Pharmaceutical Markets, Spending (2012-2013)1 recision Advisors believes that there are profitable opportunities in the Canadian market for pharmaceutical manufacturers who understand and prepare for the nuances of the Canadian healthcare system P Launching a drug in Canada can be profitable, provided the manufacturer understands the specific nuances of the market and prepares accordingly.
4 Canada’s reimbursement system is complex and decentralized The Canadian healthcare system is a hybrid of both public and private health coverage, with elements of both single payer and private insurance models. Decision making, funding, and provision of care are decentralized, consisting of 13 separate provincial and territorial plans as well as national plans and private insurance (see Figures 1 and 2). The public system is responsible for the funding and delivery of essential medical care as well as drug coverage for the elderly (over 65 years) and the poor. Private supplemental insurance, paid mainly through employers, covers prescription drugs (other than those covered as part of hospital services), dental care, allied medical care, and disability. Decision making by these various organizations is independent, and can result in variability among provincial agencies and private insurers in terms of pricing and policy. This mosaic of entities responsible for coverage and delivery of care means that pricing, coverage, and reimbursement decisions of pharmaceuticals are often complex. However, by understanding and aligning a drug’s target demographics and value proposition with the market’s payers and decision makers, pharmaceutical manufacturers can optimize revenues and profits. “At the end of the day, you get a nationwide agreement but still execute it provincially. Every province is different.” – Canadian Market Access Advisor NEWFOUNDLAND AND LABRADOR PRINCE EDWARD ISLAND Figure 1. Map of Canadian provinces indicating major health technology assessment (HTA) bodies Institute of Health Economics (IHE) Canadian Agency for Drugs and Technologies in Health Common Drug Review (CADTH CDR) Institut National d'Excellence en Santé et en Services Sociaux (INESSS) Ontario Health Technology Advisory Committee (OHTAC) Health Technology Assessment Committee (HTAC)
5 Private sector drug coverage comprises nearly 60% of prescription drug spending Although public sector coverage comprises approximately 70% of overall Canadian health spending,2 nearly 60% of prescription drug spending comes from the private sector, including both private insurance and out-of-pocket spending by consumers (see Figure 3).3 Furthermore, more than two-thirds of private insurance coverage is managed by 3 insurers. In addition, within private insurance plans, approximately 70%-75% of these are “open access,” ie, have few coverage restriction.4 A number of open plans use prior authorizations and copays to manage some cost impact; however, access to these plans is generally quick and without price negotiations or contracting. The remaining plans are “managed care.” These plan designs typically use a more comprehensive clinical and economic review, use tiering and formularies, and sometimes match funding decisions by the provinces. Moreover, some of the managed plans are now considering price contracting as a means to control program costs. Private, open insurance plans are particularly attractive for pharmaceutical manufacturers due to their relatively free pricing and speed to access the benefit plan. This is especially the case if their product is used in a therapeutic area that is predominantly prescribed to a younger, employed demographic. Figure 2. Overview of Canadian public sector healthcare governance and responsibilities n National level: Health Canada is responsible for national public health (eg, Public Health Agency, National Microbiology Laboratory, compliance and enforcement). The Department of Finance is responsible for overseeing federal transfer payments to the provinces and territories n Provincial level: Provinces administer funds, define provincial priorities (in alignment with national priorities), and set fee schedules for healthcare services n Regional level: Local healthcare financing and administration ensure that provincial priorities are met. Healthcare delivery is coordinated by regional health authorities n Local level: Primary care clinics and office-based specialists are privately owned facilities that are reimbursed based on fee schedules set by the provincial Ministry of Health – Hospitals are not-for-profit, publicly owned corporations – Hospital outpatient clinics are funded as part of the hospital budget and may receive supplemental funding from the region or provincial Ministry of Health Federal Government Determines national policies/priorities/budget Provincial Government Applies federal policies/priorities/budget and prescribes health services Regional Health Authority Allocates resources and assigns services Local Healthcare Providers Delivers healthcare services in alignment with policy, priorities, and annual budget Patient Outcomes
6 Figure 3. Prescription drug spending by source of finance, private sector breakdown SSF $1.1 3.8% Federal $0.6 2.0% Provincial $10.6 35.8% Insurers $10.1 34.5% Out-of- pocket $7.0 23.9% Private Sector $17.1 58.4% Prescribed Drug Expenditure, by Source of Finance, Canada, 20133 Public Sector $12.2 41.6% 28.5% 25.5% 24% 22% Others Great West Life Manulife Financial Sun Life Share of Lives Covered4 $ billion Similarly, although the public sector is fragmented into 13 provinces and territories, approximately 90% of the population lives in the 4 most populous provinces (Ontario, Quebec, British Columbia, and Alberta) with drug spending dominated by these 4 provinces (see Figure 4).5 The first level of analysis for developing a Canadian reimbursement strategy is to examine this breakdown relative to the drug to be launched. If it will be prescribed predominantly in-hospital, to the elderly (over 65 years), or to the very poor, the focus will be on the public sector. If not used in-hospital and the target demographic is mainly employed people and/or their families, the focus will be on the private insurers. In either case, the majority of coverage will be obtained through 3 or 4 entities, either public or private. In practice, many drugs need to target both the public and private sectors, and there are additional considerations beyond just the general demographics. Before discussing some of these nuances, it is important to review the process by which coverage of health technologies, including drugs, is assessed. Social Security Funds (SSFs) include healthcare spending by workers’ compensation boards and the premium component of the Quebec Drug Insurance Fund.
7 Figure 4. Prescription drug spending by source of finance, public sector breakdown5 Rx Drug Expenditure, 2013a Rx Drug Expenditure, 2012b Out-of- pocket 24% Insurance 34% Public 42% British Columbia Others Alberta Quebec Ontario Social Security Funds, 3.8% Federal, 2.0% Provincial 35.8% 11.5% 9.1% 12.0% 23.9% 43.5% HTAs play an important role in the reimbursement process Canada has one of the most sophisticated HTA systems in the world. HTAs are becoming increasingly important in the Canadian environment and can be conducted at the national, provincial, or local hospital level (see Figure 5),6 as well as by the larger private insurers. However, provincial HTAs are usually most important to achieve funding. These assessments are often conducted in parallel and include evidence provided by the manufacturer. It is important to note that the national HTA process, via the Common Drug Review (CDR)3 and pan-Canadian Oncology Drug Review (pCODR) is advisory only; final coverage decisions are made by the individual provinces and insurance companies, which also conduct their own HTAs. Typically, there is a domino effect, in that the first movers often influence the others. However, variations in coverage often occur because of differences in the demographics and economics of each entity’s covered population, as well as via negotiations with manufacturers. Just 4 provinces account for approximately 90% of prescription drug spending “There’s a strong patient voice here [in HTAs], depending on the TA, and a strong role for patient voice in the CDR. They want to see patient input, so it’s important to develop those relationships with [patient] associations early.” – Canadian Market Access Advisor a Forecast. b Actual; forecast not provided in 2014 CIHI database.
8 Figure 5. HTAs in Canada6 Reimbursement and launch strategies must be tailored to the target payer market Each drug market is different – each launch strategy must be crafted to create a value proposition that accounts for the demographics and structures of the Canadian healthcare landscape, the epidemiology of the target condition, and who the expected payers are. In some cases, a drug need not access the public sector at all. For example, most migraine sufferers tend to be younger, working age, and typically have access to a benefit plan. A manufacturer can still come in with a higher price than the market National n The Canadian Agency for Drugs and Technologies in Health (CADTH) is a national HTA agency that evaluates medications and some new medical technologies (including diagnostics) and makes recommendations based on clinical and economic value. The Common Drug Review (CDR) is the mechanism for pharmaceuticals n HTA evaluations conducted by CADTH are not directly linked to provincial government reimbursement decisions Local and Provider Levels n Hospitals may review published studies or information submitted by manufacturers, but they do not routinely conduct systematic HTAs Provincial n Provincial ministries of health may use provincial HTA agencies and/or ad hoc committees, in addition to or instead of CADTH, to evaluate new therapies based on clinical and economic value and make recommendations n Ontario, Quebec, Alberta, and British Columbia use provincially based HTA agencies to aid in decision making Ontario Health Technology Advisory Committee (OHTAC) Quebec: Institut National d’Excellence en Santé et en Services Sociaux (INESSS) British Columbia: Health Technology Assessment Committee (HTAC); or Centre for Health Services and Policy Research (CHSPR) Alberta: Institute of Health Economics (IHE); or Health Technology Assessment Innovation (HTAI) n Health technology assessments (HTAs) are becoming increasingly important in Canada n In Canada, HTAs can be conducted at the national, provincial, or local hospital levels. Provincial HTAs are usually most important to achieve funding
9 and get the open plans to cover 70%-75% of the 19.5 million people with access to private insurance. Marketing can help. Biogen IDEC’s Amevive® , a biologic treatment for psoriasis, did relatively poorly in the United States but did well in Canada. It targeted a population of mostly younger, privately insured patients via a strong marketing campaign to dermatologists. Canadian sales were 25% of those in the United States, which has nearly 10 times the population. The remaining privately insured managed plans use a variety of methodologies similar to those in the United States to control drug costs. One approach private insurers (eg, Sun Life) are starting to use as an affordable third tier option for their customers is a hyper-managed/generics-first plan, outsourced (or subcontracted) to the Reformulary Group.7 Reformulary offers generics as first tier and then approaches pharmaceutical manufacturers directly to negotiate a price deal, get a better listing, or get more favorable criteria. In the public sector, value outside the drug can be influential. The Inspired COPD Outreach Program is a good example of how a manufacturer has been able to gain favorable coverage and maintain premium pricing by adding value beyond the drug itself. Boehringer Ingelheim (BI), following a pilot program with a clinic in Nova Scotia, partnered with the Canadian Foundation for Healthcare Improvement (CFHI) to provide funding and support to enable providers to implement an approach to reduce emergency room visits, hospital admissions, and days in hospital among participating patients with chronic obstructive pulmonary disease (COPD).8 BI’s support for this program has enabled it to maintain premium pricing of its COPD medications along with favorable marketing and PR. For public and private payers alike, the value proposition should also include incentives for providers. These generally fall into 2 categories – quality of care and financial. As Canadian providers are private businesses, they are motivated to make money (increased revenues or cost savings). They are also evaluated on quality performance metrics, which affects them financially. Overall, the more the manufacturer is able to create a value proposition that addresses all stakeholders – patients, payers, and providers – the better able they will be to gain favorable coverage and pricing. Effective marketing can help, of course, but unless key stakeholder relationships are developed early on and informed by a deeper understanding of each stakeholder’s economics, marketing can be an uphill battle. This understanding starts with health economics. For public and private payers alike, the value proposition should also include incentives for providers.
10 Health economics is becoming increasingly important to marketing, market access, pricing, and contracting As in other markets, access to individual physicians is becoming increasingly restricted. Marketing and sales are moving to a B2B model as physicians are accessed via group purchasing organizations (GPOs) and integrated HCP groups rather than individually via sales reps. These groups are looking directly at their budget, finances, and quality performance metrics (which affect how they are paid). Similarly, payers examine budget impact and cost savings when negotiating contracts and pricing. The key to avoiding downward pricing pressure, or maintaining premium or parity pricing, is to develop a value proposition in terms of overall budget impact or cost savings. As discussed in the BI example, that value may be outside the drug. Preparing a drug for launch today requires developing some level of health economic modeling with consideration of stakeholder impacts, as well as developing key stakeholder relationships in advance, whether the primary target payer is in the public sector, private insurer, or both. For the public sector, health economic analysis is becoming particularly important as pricing and contracting is moving toward a national process. Contract negotiation processes are changing In the past, public sector contract negotiations were conducted separately and confidentially with each province. The only exception was Quebec, which has had a requirement that all contracted pricing decisions be disclosed publicly. With the exception of Quebec, this has meant that manufacturers needed to conduct multiple simultaneous negotiations, but also that it was possible to secure favorable deals. A new agreement among the provinces has resulted in the establishment of a pan- Canadian pricing negotiation process, the pan-Canadian Pharmaceutical Alliance (pCPA), formerly known as the pan-Canadian Pricing Alliance.9 Soon to be based in Ontario, the pCPA conducts joint provincial/territorial negotiations for brand name drugs in Canada. All brand name drugs coming forward for funding through the national review processes CDR or pCODR are now considered for negotiation through the pCPA. The current structure is that one province will negotiate on behalf of all the others. Effectively, there will be one negotiation rather than several, with certain provinces taking the lead in certain areas of specialty (eg, oncology in Ontario and British Columbia, rare diseases in Alberta and Ontario). “There is a move to health economics, to bring stakeholder discussions and influence earlier…health economics is becoming far more aggressive, with the biggest growth on the market access side, and less on government relations…whereas commercial sales teams have shrunk.” – Manager, Canadian Market Access, Pharmaceutical Company
11 The pCPA is still in the process of being established, with little clarity yet on rules and procedures. Furthermore, Quebec has announced that it will join in the national negotiation scheme. Historically, Quebec has followed a separate review and funding process and it still remains unclear how its participation in the pCPA will affect the national process in practice. It is also important to note that each province executes the national agreement separately, including aspects such as formulary access, utilization agreements, volume discounts, claims adjudication, handling of expensive drugs, distribution, and time to listing. These pathways need to be mapped out for each province, at least for more complex agreements. In other respects, negotiation processes remain the same. The goal in negotiation with payers is to avoid restrictions and negative price pressure by showing value to the overall budget. With HCP formularies and the retail channel, the goal is to get a listing and, if possible, a preferential listing (eg, with volume rebates). With HCPs, the key in negotiations is to show 1 of 2 things: either make/save money or improve quality. The top quality metrics are wait times, length of stay, readmission, and infection rates. With retail, a typical negotiation tool is to use rebates along with some other value-add, such as a pharmacist education program. Biosimilars (SEBs) are just beginning to enter the market One of the more recent developments in the Canadian market, as in other markets, is the introduction of biosimilars – known as SEBs in Canada.10 These are new biologic drugs designed to be similar to their branded original reference drugs, also known as bio-originals, or reference biologics. In 2010, Health Canada unveiled its regulatory guidance for the entry of SEBs into the Canadian market (see Figure 6).11 The introduction of SEBs presents unique regulatory and reimbursement challenges. Unlike the more common, small-molecule drugs, biologics generally exhibit high molecular complexity and are sensitive to changes in manufacturing practices. Since SEBs are not considered to be therapeutically or pharmaceutically equivalent to the reference biologic drug, Health Canada does not support the automatic substitution of an SEB for its reference product. “It’s all changing now…traditionally, it was a price negotiation, but is now evolving where manufacturers spend more resources building their value proposition with stakeholders – patient advocacy groups, physicians – to demonstrate why payers should keep prices at a premium, or not restrict access.” – Manager, Canadian Market Access, Pharmaceutical Company
12 Figure 6. Current environment for SEBs10,11 To date, 2 SEBs have been authorized in Canada: Sandoz’s Omnitrope® (somatropin) in April 2009 (pre-dating Health Canada’s guidance document) and Hospira’s Inflectra® (infliximab) in January 2014 (Remsima™ was subsequently withdrawn from the CDR). On December 19, 2014, the Canadian Drug Expert Committee (CDEC) recommended that Inflectra (infliximab SEB) be listed in accordance with the Health Canada–approved indications for the treatment of rheumatoid arthritis, ankylosing spondylitis, plaque psoriasis, and psoriatic arthritis, if the following conditions were met: ■■ For use in patients for whom infliximab is considered to be the most appropriate treatment option ■■ List in a manner similar to Remicade® Hospira had sought approval for 6 indications but received only the above 4. Inflectra was not approved for use in Crohn’s disease and ulcerative colitis. Although it is approved in Europe for these indications, extrapolation of these indications in Canada was not recommended because of differences between Inflectra and Remicade, n The Canadian Generic Pharmaceutical Association estimates that, in 2010, biologic drugs accounted for 14% of the Canadian pharmaceutical market, costing the Canadian healthcare system $3 billion n In 2010, Health Canada unveiled its regulatory guidance for the entry of SEBs into the Canadian market n The introduction of SEBs presents unique regulatory and reimbursement challenges. Unlike the more common, small-molecule drugs, biologics generally exhibit high molecular complexity and are sensitive to changes in manufacturing practices n Since SEBs are not considered to be therapeutically or pharmaceutically equivalent to the reference biologic drug, Health Canada does not support the automatic substitution of an SEB for its reference product CADTH published an “environmental scan” related to SEBs in January 2014 Health Canada’s definition of an SEB A subsequent entry biologic is “a biologic drug that enters the market subsequent to a version previously authorized in Canada, and with demonstrated similarity to a reference biologic drug. An SEB relies in part on prior information regarding safety and efficacy that is deemed relevant due to the demonstration of similarity to the reference biologic drug and which influences the amount and type of original data required.”
13 the reference product. Once granted marketing authorization for one or more of the reference indications, an SEB may seek a formulary listing and coverage by the provincial and private insurance plans. The introduction of SEBs offers the potential to reduce healthcare costs by introducing competition into the biologic drugs market. Although this is likely to be true in the long run, the cost savings in the short-term may be limited because of slow uptake by physicians and lack of interchangeability (prescriptions are still filled as written). Currently, Canadian payers expect discounts to be in the range of 20%-25% off the price of the branded products.12 Slow uptake by physicians reflects strong familiarity and comfort with the branded products and poor understanding among physicians about SEBs reinforced by marketing messages from the manufacturers of the branded products. Over the next several years, as more SEBs enter the market and physicians become familiar with and educated about SEBs, overall costs to the system should decrease. Nevertheless, payers are approaching SEBs somewhat cautiously as they do not want to move too far ahead of their constituents (physicians and patients). As they put processes in place, most payers are in reactive mode, handling submissions on a case-by-case basis and developing their processes as they do so. With the introduction of Inflectra and a pipeline of other SEBs, we expect most Canadian HTAs and payers to have established processes in place over the next 1-2 years. Conclusions To compete in the Canadian market, pharmaceutical manufacturers need to do their homework, develop key relationships early, and build their value proposition with key stakeholders. Understanding target demographics in relation to the payer landscape is a first step in tailoring a payer strategy. In some cases, it is possible to enter the market successfully even with no public coverage and without negotiations (such as by targeting the under 65 and employed population with open plans). In addition, health economic modeling and stakeholder mapping is important as part of developing the value proposition. That value proposition may entail showing benefits outside the drug itself, and for providers (physicians and pharmacists) as well as payers, it’s not just about price. Finally, forge key relationships early. It’s not sufficient to “bring in some medical science liaisons from the United States.” It’s necessary to develop relationships with key stakeholders, whether these are payers, physicians, or patient advocacy groups, via representatives who know the Canadian market. “SEBs are in early development in Canada and require acceptance from physicians and patients, and the degree of cost savings remains to be determined.” – Canadian PBM
14 Precision Advisors supports pharmaceutical manufacturers in their strategic decisions, product launch planning, and market access needs Precision Advisors is a full-service consulting and advisory firm. Capabilities to assist pharmaceutical, device, and diagnostics manufacturers include ■■ Corporate and business/franchise strategy ■■ Product and portfolio strategy ■■ Launch preparation, planning, and execution support ■■ Market access expertise ■■ Health economic assessment support, including HEOR and payer value proposition development ■■ Advanced analytics Contact For more information, contact Michael D. Jacobson, PhD Principal, Strategy Precision Advisors 55 Cambridge Parkway, 300E Cambridge, MA 02142 Tel: 617-299-3010 michael.jacobson@precisionformedicine.com Larry Blandford, PharmD Executive Vice President, Managing Partner Precision Advisors 55 Cambridge Parkway, 300E Cambridge, MA 02142 Tel: 502-939-9862 larry.blandford@precisionformedicine.com
15 1. IMS, accessed via statista.com. 2. Canadian Institute for Health Information: Healthcare Cost Drivers: The Facts, 2011. https://secure.cihi.ca/free_products/health_care_cost_ drivers_the_facts_en.pdf. Accessed January 22, 2015. 3. National Health Expenditure Database, 2013, Canadian Institute for Health Information. 4. Patient Access Solutions Inc.; Equitus Consulting. 5. National Health Expenditure Database, 2014, Canadian Institute for Health Information. Guidelines for the economic evaluation of health technologies: Canada [3rd Edition]. Ottawa: Canadian Agency for Drugs and Technologies in Health; 2006. 6. Canadian Institute for Health Information. Exploring the 70/30 Split: How Canada’s Health System Is Financed, 2006. https://secure.cihi.ca/ free_products/FundRep_EN.pdf. Accessed January 22, 2015. 7. Reformulary Group. http://www.reformulary.com/index_en.php. Accessed January 22, 2015. 8. Canadian Foundation for Healthcare Improvement. INSPIRED Approaches to COPD: Improving Care and Creating Value. http://www.cfhi-fcass. ca/Elearning/spreading-healthcare-innovations-initiative/inspired-approaches-to-copd. Accessed January 22, 2015. 9. The pan-Canadian Pharmaceutical Alliance. http://www.conseildelafederation.ca/en/initiatives/358-pan-canadian-pricing-alliance. Accessed January 22, 2015. 10. Ndegwa S, Quansah K. Subsequent Entry Biologics — Emerging Trends in Regulatory and Health Technology Assessment Frameworks [Environmental Scan, Issue 43, ES0284]. Ottawa: Canadian Agency for Drugs and Technologies in Health; 2014. www.cadth.ca/media/pdf/ ES0284_SEBs_es_e.pdf. Accessed January 22, 2015. 11. Guidance for Sponsors: Information and Submission Requirements for Subsequent Entry Biologics (SEBs). Ottawa: Health Canada; 2010. 12. Precision Advisors payer interviews. Conducted October-December 2014. References Acknowledgment The authors wish to acknowledge contributions from the following individuals who assisted in preparing the content for this paper: Larry Arshoff, Stephen Hull, and Matt Reifenberger of Hull Associates LLC; and Robert Kulik of Patient Access Solutions Inc.
2 Bethesda Metro Center, Suite 850 Bethesda, MD 20814 +1 240.654.0730 office precisionformedicine.com © 2015. All rights reserved.

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Canada Market Access Briefing

  • 1.
  • 3.
    3 Pharmaceutical manufacturers oftenoverlook the Canadian market, sometimes treating it as an extension of their US operations. However, although growth lags that of some smaller emerging economies, sales in Canada's pharmaceutical market still rank number 9 in the global top 10, close to Spain and the UK (see Table).1 Canada’s drug pricing system is also less restrictive than many European markets and includes a strong private sector. In many cases, launching a drug in Canada can be profitable, provided the manufacturer understands the specific nuances of the market and prepares accordingly. The Canadian market is also changing, with several trends that will affect pharmaceutical manufacturers. Key trends include the transition to a pan- Canadian process for reimbursement price negotiations; generally decreased access to physicians, accompanied by increasing importance of healthcare provider groups; movement toward greater reliance on health economic evidence; reevaluation of generics pricing regulations; the introduction of subsequent entry biologics (SEBs, the Canadian term for biosimilars); and resistance to high-cost biologics and drugs for rare diseases. This briefing paper provides an overview of the key aspects of the current Canadian pharmaceutical market and highlights some recent developments as well as their implications for pharmaceutical manufacturers. Country 2013 Rank $ (Mil), 2012 $ (Mil), 2013 Growth (Y/Y %) USA 1 326,892 339,694 4% Japan 2 112,067 94,025 -16% China 3 81,698 86,774 6% Germany 4 42,333 45,828 8% France 5 36,674 37,156 1% Brazil 6 29,112 30,670 5% Italy 7 26,231 27,930 6% UK 8 21,635 24,513 13% Canada 9 21,877 21,353 -2% Spain 10 19,935 20,741 4% Table. Top 10 Global Pharmaceutical Markets, Spending (2012-2013)1 recision Advisors believes that there are profitable opportunities in the Canadian market for pharmaceutical manufacturers who understand and prepare for the nuances of the Canadian healthcare system P Launching a drug in Canada can be profitable, provided the manufacturer understands the specific nuances of the market and prepares accordingly.
  • 4.
    4 Canada’s reimbursement systemis complex and decentralized The Canadian healthcare system is a hybrid of both public and private health coverage, with elements of both single payer and private insurance models. Decision making, funding, and provision of care are decentralized, consisting of 13 separate provincial and territorial plans as well as national plans and private insurance (see Figures 1 and 2). The public system is responsible for the funding and delivery of essential medical care as well as drug coverage for the elderly (over 65 years) and the poor. Private supplemental insurance, paid mainly through employers, covers prescription drugs (other than those covered as part of hospital services), dental care, allied medical care, and disability. Decision making by these various organizations is independent, and can result in variability among provincial agencies and private insurers in terms of pricing and policy. This mosaic of entities responsible for coverage and delivery of care means that pricing, coverage, and reimbursement decisions of pharmaceuticals are often complex. However, by understanding and aligning a drug’s target demographics and value proposition with the market’s payers and decision makers, pharmaceutical manufacturers can optimize revenues and profits. “At the end of the day, you get a nationwide agreement but still execute it provincially. Every province is different.” – Canadian Market Access Advisor NEWFOUNDLAND AND LABRADOR PRINCE EDWARD ISLAND Figure 1. Map of Canadian provinces indicating major health technology assessment (HTA) bodies Institute of Health Economics (IHE) Canadian Agency for Drugs and Technologies in Health Common Drug Review (CADTH CDR) Institut National d'Excellence en Santé et en Services Sociaux (INESSS) Ontario Health Technology Advisory Committee (OHTAC) Health Technology Assessment Committee (HTAC)
  • 5.
    5 Private sector drugcoverage comprises nearly 60% of prescription drug spending Although public sector coverage comprises approximately 70% of overall Canadian health spending,2 nearly 60% of prescription drug spending comes from the private sector, including both private insurance and out-of-pocket spending by consumers (see Figure 3).3 Furthermore, more than two-thirds of private insurance coverage is managed by 3 insurers. In addition, within private insurance plans, approximately 70%-75% of these are “open access,” ie, have few coverage restriction.4 A number of open plans use prior authorizations and copays to manage some cost impact; however, access to these plans is generally quick and without price negotiations or contracting. The remaining plans are “managed care.” These plan designs typically use a more comprehensive clinical and economic review, use tiering and formularies, and sometimes match funding decisions by the provinces. Moreover, some of the managed plans are now considering price contracting as a means to control program costs. Private, open insurance plans are particularly attractive for pharmaceutical manufacturers due to their relatively free pricing and speed to access the benefit plan. This is especially the case if their product is used in a therapeutic area that is predominantly prescribed to a younger, employed demographic. Figure 2. Overview of Canadian public sector healthcare governance and responsibilities n National level: Health Canada is responsible for national public health (eg, Public Health Agency, National Microbiology Laboratory, compliance and enforcement). The Department of Finance is responsible for overseeing federal transfer payments to the provinces and territories n Provincial level: Provinces administer funds, define provincial priorities (in alignment with national priorities), and set fee schedules for healthcare services n Regional level: Local healthcare financing and administration ensure that provincial priorities are met. Healthcare delivery is coordinated by regional health authorities n Local level: Primary care clinics and office-based specialists are privately owned facilities that are reimbursed based on fee schedules set by the provincial Ministry of Health – Hospitals are not-for-profit, publicly owned corporations – Hospital outpatient clinics are funded as part of the hospital budget and may receive supplemental funding from the region or provincial Ministry of Health Federal Government Determines national policies/priorities/budget Provincial Government Applies federal policies/priorities/budget and prescribes health services Regional Health Authority Allocates resources and assigns services Local Healthcare Providers Delivers healthcare services in alignment with policy, priorities, and annual budget Patient Outcomes
  • 6.
    6 Figure 3. Prescriptiondrug spending by source of finance, private sector breakdown SSF $1.1 3.8% Federal $0.6 2.0% Provincial $10.6 35.8% Insurers $10.1 34.5% Out-of- pocket $7.0 23.9% Private Sector $17.1 58.4% Prescribed Drug Expenditure, by Source of Finance, Canada, 20133 Public Sector $12.2 41.6% 28.5% 25.5% 24% 22% Others Great West Life Manulife Financial Sun Life Share of Lives Covered4 $ billion Similarly, although the public sector is fragmented into 13 provinces and territories, approximately 90% of the population lives in the 4 most populous provinces (Ontario, Quebec, British Columbia, and Alberta) with drug spending dominated by these 4 provinces (see Figure 4).5 The first level of analysis for developing a Canadian reimbursement strategy is to examine this breakdown relative to the drug to be launched. If it will be prescribed predominantly in-hospital, to the elderly (over 65 years), or to the very poor, the focus will be on the public sector. If not used in-hospital and the target demographic is mainly employed people and/or their families, the focus will be on the private insurers. In either case, the majority of coverage will be obtained through 3 or 4 entities, either public or private. In practice, many drugs need to target both the public and private sectors, and there are additional considerations beyond just the general demographics. Before discussing some of these nuances, it is important to review the process by which coverage of health technologies, including drugs, is assessed. Social Security Funds (SSFs) include healthcare spending by workers’ compensation boards and the premium component of the Quebec Drug Insurance Fund.
  • 7.
    7 Figure 4. Prescriptiondrug spending by source of finance, public sector breakdown5 Rx Drug Expenditure, 2013a Rx Drug Expenditure, 2012b Out-of- pocket 24% Insurance 34% Public 42% British Columbia Others Alberta Quebec Ontario Social Security Funds, 3.8% Federal, 2.0% Provincial 35.8% 11.5% 9.1% 12.0% 23.9% 43.5% HTAs play an important role in the reimbursement process Canada has one of the most sophisticated HTA systems in the world. HTAs are becoming increasingly important in the Canadian environment and can be conducted at the national, provincial, or local hospital level (see Figure 5),6 as well as by the larger private insurers. However, provincial HTAs are usually most important to achieve funding. These assessments are often conducted in parallel and include evidence provided by the manufacturer. It is important to note that the national HTA process, via the Common Drug Review (CDR)3 and pan-Canadian Oncology Drug Review (pCODR) is advisory only; final coverage decisions are made by the individual provinces and insurance companies, which also conduct their own HTAs. Typically, there is a domino effect, in that the first movers often influence the others. However, variations in coverage often occur because of differences in the demographics and economics of each entity’s covered population, as well as via negotiations with manufacturers. Just 4 provinces account for approximately 90% of prescription drug spending “There’s a strong patient voice here [in HTAs], depending on the TA, and a strong role for patient voice in the CDR. They want to see patient input, so it’s important to develop those relationships with [patient] associations early.” – Canadian Market Access Advisor a Forecast. b Actual; forecast not provided in 2014 CIHI database.
  • 8.
    8 Figure 5. HTAsin Canada6 Reimbursement and launch strategies must be tailored to the target payer market Each drug market is different – each launch strategy must be crafted to create a value proposition that accounts for the demographics and structures of the Canadian healthcare landscape, the epidemiology of the target condition, and who the expected payers are. In some cases, a drug need not access the public sector at all. For example, most migraine sufferers tend to be younger, working age, and typically have access to a benefit plan. A manufacturer can still come in with a higher price than the market National n The Canadian Agency for Drugs and Technologies in Health (CADTH) is a national HTA agency that evaluates medications and some new medical technologies (including diagnostics) and makes recommendations based on clinical and economic value. The Common Drug Review (CDR) is the mechanism for pharmaceuticals n HTA evaluations conducted by CADTH are not directly linked to provincial government reimbursement decisions Local and Provider Levels n Hospitals may review published studies or information submitted by manufacturers, but they do not routinely conduct systematic HTAs Provincial n Provincial ministries of health may use provincial HTA agencies and/or ad hoc committees, in addition to or instead of CADTH, to evaluate new therapies based on clinical and economic value and make recommendations n Ontario, Quebec, Alberta, and British Columbia use provincially based HTA agencies to aid in decision making Ontario Health Technology Advisory Committee (OHTAC) Quebec: Institut National d’Excellence en Santé et en Services Sociaux (INESSS) British Columbia: Health Technology Assessment Committee (HTAC); or Centre for Health Services and Policy Research (CHSPR) Alberta: Institute of Health Economics (IHE); or Health Technology Assessment Innovation (HTAI) n Health technology assessments (HTAs) are becoming increasingly important in Canada n In Canada, HTAs can be conducted at the national, provincial, or local hospital levels. Provincial HTAs are usually most important to achieve funding
  • 9.
    9 and get theopen plans to cover 70%-75% of the 19.5 million people with access to private insurance. Marketing can help. Biogen IDEC’s Amevive® , a biologic treatment for psoriasis, did relatively poorly in the United States but did well in Canada. It targeted a population of mostly younger, privately insured patients via a strong marketing campaign to dermatologists. Canadian sales were 25% of those in the United States, which has nearly 10 times the population. The remaining privately insured managed plans use a variety of methodologies similar to those in the United States to control drug costs. One approach private insurers (eg, Sun Life) are starting to use as an affordable third tier option for their customers is a hyper-managed/generics-first plan, outsourced (or subcontracted) to the Reformulary Group.7 Reformulary offers generics as first tier and then approaches pharmaceutical manufacturers directly to negotiate a price deal, get a better listing, or get more favorable criteria. In the public sector, value outside the drug can be influential. The Inspired COPD Outreach Program is a good example of how a manufacturer has been able to gain favorable coverage and maintain premium pricing by adding value beyond the drug itself. Boehringer Ingelheim (BI), following a pilot program with a clinic in Nova Scotia, partnered with the Canadian Foundation for Healthcare Improvement (CFHI) to provide funding and support to enable providers to implement an approach to reduce emergency room visits, hospital admissions, and days in hospital among participating patients with chronic obstructive pulmonary disease (COPD).8 BI’s support for this program has enabled it to maintain premium pricing of its COPD medications along with favorable marketing and PR. For public and private payers alike, the value proposition should also include incentives for providers. These generally fall into 2 categories – quality of care and financial. As Canadian providers are private businesses, they are motivated to make money (increased revenues or cost savings). They are also evaluated on quality performance metrics, which affects them financially. Overall, the more the manufacturer is able to create a value proposition that addresses all stakeholders – patients, payers, and providers – the better able they will be to gain favorable coverage and pricing. Effective marketing can help, of course, but unless key stakeholder relationships are developed early on and informed by a deeper understanding of each stakeholder’s economics, marketing can be an uphill battle. This understanding starts with health economics. For public and private payers alike, the value proposition should also include incentives for providers.
  • 10.
    10 Health economics isbecoming increasingly important to marketing, market access, pricing, and contracting As in other markets, access to individual physicians is becoming increasingly restricted. Marketing and sales are moving to a B2B model as physicians are accessed via group purchasing organizations (GPOs) and integrated HCP groups rather than individually via sales reps. These groups are looking directly at their budget, finances, and quality performance metrics (which affect how they are paid). Similarly, payers examine budget impact and cost savings when negotiating contracts and pricing. The key to avoiding downward pricing pressure, or maintaining premium or parity pricing, is to develop a value proposition in terms of overall budget impact or cost savings. As discussed in the BI example, that value may be outside the drug. Preparing a drug for launch today requires developing some level of health economic modeling with consideration of stakeholder impacts, as well as developing key stakeholder relationships in advance, whether the primary target payer is in the public sector, private insurer, or both. For the public sector, health economic analysis is becoming particularly important as pricing and contracting is moving toward a national process. Contract negotiation processes are changing In the past, public sector contract negotiations were conducted separately and confidentially with each province. The only exception was Quebec, which has had a requirement that all contracted pricing decisions be disclosed publicly. With the exception of Quebec, this has meant that manufacturers needed to conduct multiple simultaneous negotiations, but also that it was possible to secure favorable deals. A new agreement among the provinces has resulted in the establishment of a pan- Canadian pricing negotiation process, the pan-Canadian Pharmaceutical Alliance (pCPA), formerly known as the pan-Canadian Pricing Alliance.9 Soon to be based in Ontario, the pCPA conducts joint provincial/territorial negotiations for brand name drugs in Canada. All brand name drugs coming forward for funding through the national review processes CDR or pCODR are now considered for negotiation through the pCPA. The current structure is that one province will negotiate on behalf of all the others. Effectively, there will be one negotiation rather than several, with certain provinces taking the lead in certain areas of specialty (eg, oncology in Ontario and British Columbia, rare diseases in Alberta and Ontario). “There is a move to health economics, to bring stakeholder discussions and influence earlier…health economics is becoming far more aggressive, with the biggest growth on the market access side, and less on government relations…whereas commercial sales teams have shrunk.” – Manager, Canadian Market Access, Pharmaceutical Company
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    11 The pCPA isstill in the process of being established, with little clarity yet on rules and procedures. Furthermore, Quebec has announced that it will join in the national negotiation scheme. Historically, Quebec has followed a separate review and funding process and it still remains unclear how its participation in the pCPA will affect the national process in practice. It is also important to note that each province executes the national agreement separately, including aspects such as formulary access, utilization agreements, volume discounts, claims adjudication, handling of expensive drugs, distribution, and time to listing. These pathways need to be mapped out for each province, at least for more complex agreements. In other respects, negotiation processes remain the same. The goal in negotiation with payers is to avoid restrictions and negative price pressure by showing value to the overall budget. With HCP formularies and the retail channel, the goal is to get a listing and, if possible, a preferential listing (eg, with volume rebates). With HCPs, the key in negotiations is to show 1 of 2 things: either make/save money or improve quality. The top quality metrics are wait times, length of stay, readmission, and infection rates. With retail, a typical negotiation tool is to use rebates along with some other value-add, such as a pharmacist education program. Biosimilars (SEBs) are just beginning to enter the market One of the more recent developments in the Canadian market, as in other markets, is the introduction of biosimilars – known as SEBs in Canada.10 These are new biologic drugs designed to be similar to their branded original reference drugs, also known as bio-originals, or reference biologics. In 2010, Health Canada unveiled its regulatory guidance for the entry of SEBs into the Canadian market (see Figure 6).11 The introduction of SEBs presents unique regulatory and reimbursement challenges. Unlike the more common, small-molecule drugs, biologics generally exhibit high molecular complexity and are sensitive to changes in manufacturing practices. Since SEBs are not considered to be therapeutically or pharmaceutically equivalent to the reference biologic drug, Health Canada does not support the automatic substitution of an SEB for its reference product. “It’s all changing now…traditionally, it was a price negotiation, but is now evolving where manufacturers spend more resources building their value proposition with stakeholders – patient advocacy groups, physicians – to demonstrate why payers should keep prices at a premium, or not restrict access.” – Manager, Canadian Market Access, Pharmaceutical Company
  • 12.
    12 Figure 6. Currentenvironment for SEBs10,11 To date, 2 SEBs have been authorized in Canada: Sandoz’s Omnitrope® (somatropin) in April 2009 (pre-dating Health Canada’s guidance document) and Hospira’s Inflectra® (infliximab) in January 2014 (Remsima™ was subsequently withdrawn from the CDR). On December 19, 2014, the Canadian Drug Expert Committee (CDEC) recommended that Inflectra (infliximab SEB) be listed in accordance with the Health Canada–approved indications for the treatment of rheumatoid arthritis, ankylosing spondylitis, plaque psoriasis, and psoriatic arthritis, if the following conditions were met: ■■ For use in patients for whom infliximab is considered to be the most appropriate treatment option ■■ List in a manner similar to Remicade® Hospira had sought approval for 6 indications but received only the above 4. Inflectra was not approved for use in Crohn’s disease and ulcerative colitis. Although it is approved in Europe for these indications, extrapolation of these indications in Canada was not recommended because of differences between Inflectra and Remicade, n The Canadian Generic Pharmaceutical Association estimates that, in 2010, biologic drugs accounted for 14% of the Canadian pharmaceutical market, costing the Canadian healthcare system $3 billion n In 2010, Health Canada unveiled its regulatory guidance for the entry of SEBs into the Canadian market n The introduction of SEBs presents unique regulatory and reimbursement challenges. Unlike the more common, small-molecule drugs, biologics generally exhibit high molecular complexity and are sensitive to changes in manufacturing practices n Since SEBs are not considered to be therapeutically or pharmaceutically equivalent to the reference biologic drug, Health Canada does not support the automatic substitution of an SEB for its reference product CADTH published an “environmental scan” related to SEBs in January 2014 Health Canada’s definition of an SEB A subsequent entry biologic is “a biologic drug that enters the market subsequent to a version previously authorized in Canada, and with demonstrated similarity to a reference biologic drug. An SEB relies in part on prior information regarding safety and efficacy that is deemed relevant due to the demonstration of similarity to the reference biologic drug and which influences the amount and type of original data required.”
  • 13.
    13 the reference product.Once granted marketing authorization for one or more of the reference indications, an SEB may seek a formulary listing and coverage by the provincial and private insurance plans. The introduction of SEBs offers the potential to reduce healthcare costs by introducing competition into the biologic drugs market. Although this is likely to be true in the long run, the cost savings in the short-term may be limited because of slow uptake by physicians and lack of interchangeability (prescriptions are still filled as written). Currently, Canadian payers expect discounts to be in the range of 20%-25% off the price of the branded products.12 Slow uptake by physicians reflects strong familiarity and comfort with the branded products and poor understanding among physicians about SEBs reinforced by marketing messages from the manufacturers of the branded products. Over the next several years, as more SEBs enter the market and physicians become familiar with and educated about SEBs, overall costs to the system should decrease. Nevertheless, payers are approaching SEBs somewhat cautiously as they do not want to move too far ahead of their constituents (physicians and patients). As they put processes in place, most payers are in reactive mode, handling submissions on a case-by-case basis and developing their processes as they do so. With the introduction of Inflectra and a pipeline of other SEBs, we expect most Canadian HTAs and payers to have established processes in place over the next 1-2 years. Conclusions To compete in the Canadian market, pharmaceutical manufacturers need to do their homework, develop key relationships early, and build their value proposition with key stakeholders. Understanding target demographics in relation to the payer landscape is a first step in tailoring a payer strategy. In some cases, it is possible to enter the market successfully even with no public coverage and without negotiations (such as by targeting the under 65 and employed population with open plans). In addition, health economic modeling and stakeholder mapping is important as part of developing the value proposition. That value proposition may entail showing benefits outside the drug itself, and for providers (physicians and pharmacists) as well as payers, it’s not just about price. Finally, forge key relationships early. It’s not sufficient to “bring in some medical science liaisons from the United States.” It’s necessary to develop relationships with key stakeholders, whether these are payers, physicians, or patient advocacy groups, via representatives who know the Canadian market. “SEBs are in early development in Canada and require acceptance from physicians and patients, and the degree of cost savings remains to be determined.” – Canadian PBM
  • 14.
    14 Precision Advisors supportspharmaceutical manufacturers in their strategic decisions, product launch planning, and market access needs Precision Advisors is a full-service consulting and advisory firm. Capabilities to assist pharmaceutical, device, and diagnostics manufacturers include ■■ Corporate and business/franchise strategy ■■ Product and portfolio strategy ■■ Launch preparation, planning, and execution support ■■ Market access expertise ■■ Health economic assessment support, including HEOR and payer value proposition development ■■ Advanced analytics Contact For more information, contact Michael D. Jacobson, PhD Principal, Strategy Precision Advisors 55 Cambridge Parkway, 300E Cambridge, MA 02142 Tel: 617-299-3010 michael.jacobson@precisionformedicine.com Larry Blandford, PharmD Executive Vice President, Managing Partner Precision Advisors 55 Cambridge Parkway, 300E Cambridge, MA 02142 Tel: 502-939-9862 larry.blandford@precisionformedicine.com
  • 15.
    15 1. IMS, accessed viastatista.com. 2. Canadian Institute for Health Information: Healthcare Cost Drivers: The Facts, 2011. https://secure.cihi.ca/free_products/health_care_cost_ drivers_the_facts_en.pdf. Accessed January 22, 2015. 3. National Health Expenditure Database, 2013, Canadian Institute for Health Information. 4. Patient Access Solutions Inc.; Equitus Consulting. 5. National Health Expenditure Database, 2014, Canadian Institute for Health Information. Guidelines for the economic evaluation of health technologies: Canada [3rd Edition]. Ottawa: Canadian Agency for Drugs and Technologies in Health; 2006. 6. Canadian Institute for Health Information. Exploring the 70/30 Split: How Canada’s Health System Is Financed, 2006. https://secure.cihi.ca/ free_products/FundRep_EN.pdf. Accessed January 22, 2015. 7. Reformulary Group. http://www.reformulary.com/index_en.php. Accessed January 22, 2015. 8. Canadian Foundation for Healthcare Improvement. INSPIRED Approaches to COPD: Improving Care and Creating Value. http://www.cfhi-fcass. ca/Elearning/spreading-healthcare-innovations-initiative/inspired-approaches-to-copd. Accessed January 22, 2015. 9. The pan-Canadian Pharmaceutical Alliance. http://www.conseildelafederation.ca/en/initiatives/358-pan-canadian-pricing-alliance. Accessed January 22, 2015. 10. Ndegwa S, Quansah K. Subsequent Entry Biologics — Emerging Trends in Regulatory and Health Technology Assessment Frameworks [Environmental Scan, Issue 43, ES0284]. Ottawa: Canadian Agency for Drugs and Technologies in Health; 2014. www.cadth.ca/media/pdf/ ES0284_SEBs_es_e.pdf. Accessed January 22, 2015. 11. Guidance for Sponsors: Information and Submission Requirements for Subsequent Entry Biologics (SEBs). Ottawa: Health Canada; 2010. 12. Precision Advisors payer interviews. Conducted October-December 2014. References Acknowledgment The authors wish to acknowledge contributions from the following individuals who assisted in preparing the content for this paper: Larry Arshoff, Stephen Hull, and Matt Reifenberger of Hull Associates LLC; and Robert Kulik of Patient Access Solutions Inc.
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    2 Bethesda MetroCenter, Suite 850 Bethesda, MD 20814 +1 240.654.0730 office precisionformedicine.com © 2015. All rights reserved.