Class Notes (1,100,000)
CA (650,000)
UTSC (30,000)
HLTA02H3 (200)
Lecture

Chapter 22-25 - very detailed txtbook notes!


Department
Health Studies
Course Code
HLTA02H3
Professor
Michelle Silver

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Chapter 22 – Profits first: The pharmaceutical industry in Canada
Canada’s research-based pharmaceutical companies (Rx&D) – formerly
called Pharmaceutical Manufacturers Association of Canada (PMAC)
“The pharmaceutical industry has never claimed to be motivated by
altruism, but rather by profit for survival
Eli Lilly and Benoxaprofen (Opren) shortly after drug appeared in
British pharmacies, British officials found out about the first of 8 deaths, resulting from suspected adverse
reactions to Opren that occurred between May 1 1981 & January 1982 9 months later in Canada after
coming for trials, Eli Lilly didn’t tell Canadian officials about the reported deaths
Bristol Myers Squibb and Pravastatin tried to block a study that
showed that all ‘statin’ drugs have similar effects so that it would not decrease their profits
Merck Frosst and Vioxx Drug Vioxx made for arthritic pain showed
increase in cardiovascular events such as heart attacks and strokes Refused to use patients with cardiac
problems in their trials because of this Led to thousands of heart attacks and strokes and deaths
Pharmaceutical industry is 3rd place in all industries in terms of profit
Rx&D believe that claims of high profits are an illusion created from
treating their expenditures as expenses against current income rather than capitalizing these outlays as an
investment item
Accounting rate of return could actually understate rather than overstate
the ‘real’ or economic rate of return by allowing Rx&D companies to treat research and development as an
expense, the government is granting them an indirect subsidy to fund their risk taking efforts
Industry uses the high cost of research as a justification industry
sponsored researchers claim that it costs about US $802 Million to discover and bring a new drug to the market
Also claim that their costs are recovered in only 1/3 of new products
This claim is refuted by others because they say that this estimate only
considers ‘new chemical entities’ (NCE’s) that have been developed in-house and doesn’t include drugs that
were developed conjointly with other institutions like the government, universities and other companies
Drug prices in Canada were amongst the highest in the world Patent
protection was major cause
Decision of liberal government was to extend compulsory licensing to
allow companies to receive a license to import drugs into Canada rather than having to manufacture it here
Bill C22 Gave companies introducing new drugs a minimum of
seven years and usually 10 years of protection from compulsory licensing and the introduction of generic
competition

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Bill C91 Because of NAFTA and TRIPS (Trade related aspects of
intellectual property rights) Canada completely eliminated compulsory licensing with this bill Bill S-17
then further amended this bill to extend the patents of 30 drugs which added about 40 M to Canada’s drug
prescriptions
CGPA Canadian Generic Pharmaceutical Association lobbying
arm of generic drug industry
Health products and food branch HPFB Highest governing body
for pharmaceuticals Governs drug safety, quality, and efficacy
Clientele Pluralism Situation in which state has high degree of
concentration of power in one agency but a low degree of autonomy HPFB is perfect example State
relinquishes some of its authority to the private sector actors who pursue objectives with which officials are in
broad agreement Allows industry to draft new policies, to be in charge of drug promotion
2 Governing bodies in charge of advertising 1) Pharmaceutical
Advertising Advisory board (PAAB) and 2) Code of practice from R&D Both codes suffer enforcement
problems
Private sector is now major funder of HPFB in Therapeutic Products
Directorate (TPD) which regulates drug industry This is because of downsizing by the government because
of federal deficit
Cost Recovery This is when the government cut down its funds (for
the HPFB) for example and then turned to private sector to find funds for operating
Until March 1997 government controlled the advertising of OTCs
(Over the Counter Drugs) but in April was turned over to Advertising Standards Canada This will probably
lead to loosening of standards
There is a regulation to ban the use of ‘direct-to-consumer advertising’
(DCTA) of prescription drugs But companies are pushing against this and Zyban for smoking cessation was
recently advertised to consumers and nothing happened to GlaxoSmithKline
Pharmaceutical companies invested more money as a result of Bill C22
and C91 But 40% of this money they invest were tax write-off’s anyways
Is Canada really getting a lot of benefit from R&D? From January
2000 to December 2004 112 new active substances were marketed in Canada for Human use and only 12 of
these we felt to be ‘breakthrough’ medication The rest offered little or no therapeutic benefits. And also, if
these drugs were developed elsewhere, they would have ended up in Canada anyways.
R&D industry may leave many questions untouched For example, for
reproductive health They would only fund research that would lead to a new patentable drug, ignoring
topics such as behavioural factors involved in the cause and prevention of infertility Another example
Only 2/11 largest Rx&D companies are investing in Malaria and non are investing in African Sleeping sickness

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Drug Prices
First generic competitor in Canadian market enters at a price discount of about 25-30% compared with
original product And if there are 4-5 different products, there is a difference of about 50-60%
In 1982, estimated savings to the Canadian public of at least $211 Million
Bill C22 established the Patented Medicine Prices Review Board (PMPRB) had mandate to set the
introductory price for new patented drugs and to limit the rate of rise in the price of patented medicines to the
rate of inflation However, since 1994, the prices of most drugs actually deflated
There is no relationship between changes in the ratio of drug prices and the ratio of GDP when Canada is
compared with other countries.
PMPRB compares prices with those in 7 other countries to arrive at an acceptable introductory price for
new products
PMPRB allows companies to price new drugs coming onto the market at the same price as the most
expensive therapy
Although they regulate the price of patented medicines It has now power over the cost of a prescription
I.e. After wholesaling drugs to pharmacy stores, they have no control on how much the pharmacy chooses
to sell the drug for
Average price per prescription in 2001 was $22.94
Introduction of new patented drugs ($84.36 on average) was the second most important factor in increasing
provincial expenditures on prescription drugs. Many of these new drugs barely had any therapeutic effect
than the older ones Makes compelling case to promote cost-effective therapy
Doctors, their associations and their journals are all prime objects of attention for the drug companies
One of the strategies used to increase sales is its encouragement to the medical profession to look first to
drug therapy for medical problems
2 big interactions that Rx&D make with doctors to increase sales are 1) Funding Continual education of
doctors and 2) Personal visits from detailers
Detailers sales representatives over 50% of the promotion budget is spent on salaries and expenses
related to detailing Also, more than 10% of the information given out by detailers was inaccurate The
more that doctors rely on promotion, the less rational is their prescribing
Glossary Terms:
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