Companies file suit in Canada challenging new rules to lower drug prices

(Reuters) – Five pharmaceutical companies said on Friday they have filed a complaint in a Canadian court challenging the constitutionality of new Canadian regulations meant to lower patented drug prices, setting up a fight with the federal government ahead of an Oct. 21 election.

The complaint was filed in Quebec’s Superior Court by the Canadian arms of U.S.-based Merck & Co and Johnson & Johnson’s Janssen Inc, Germany’s Bayer AG and Boehringer Ingelheim, and France’s Servier Inc.

The filing ratchets up a confrontation between the pharmaceutical industry and the Liberal government of Prime Minister Justin Trudeau, which has vowed to make affordability a key plank of its election campaign.

Prescription drug insurance coverage in Canada is provided through a patchwork of public and private plans, with the federal, provincial and territorial governments offering varying levels of coverage and determining what the plans and patients pay.

The new rules will save patients, employers, insurers and government drug plans money, at the expense of drug company profits in Canada. They could eventually have consequences in the United States, the world’s largest pharmaceutical market.

The regulations give new powers to the Patented Medicine Prices Review Board (PMPRB), which sets maximum drug prices. The new rules were published in an official register on Wednesday after being announced earlier this month and are to go into force on July 1, 2020.

All five firms said in separate news releases on Friday that in Canada, the 10 provinces have always had the authority to regulate the prices of medicines, not the federal government.

The new rules “will slow and limit Canadians’ access to new breakthrough medicines,” Merck Canada said in a release.

Janssen echoed Merck Canada’s concerns, adding that the provinces had already adopted policies to control costs of patented medicines.

Health Canada, Canada’s federal health department, said it could not comment given that the matter was now before the courts.

The new regulations expand the information the PMPRB can consider when setting drug price caps, among other things, giving it the ability to consider cost-effectiveness, measured in quality-adjusted life years, for the first time.

The Trump administration, which has repeatedly said that it wants to address the high cost of prescription drugs in the United States, said in July it would let U.S. states and others start pilot programs importing drugs from Canada. It has also said it may base what Medicare, the government healthcare program for the elderly, pays for certain medicines based on prices in other countries, including Canada.

Drugmakers, represented in Canada by lobby group Innovative Medicines Canada, have argued that lower prices would delay drug launches, reduce investment in life sciences and drive new drug trials out of the country.

Ottawa says other countries with lower drug prices have investment and drug access that are as good as or better than Canada’s.