Madam Speaker, as a member of the Standing Committee on Health, we conducted a study on pharmacare in the last Parliament. With 18 years of experience in the health care field, I know how important national pharmacare is and how beneficial it would be for Canadians and Bramptonians.
I am pleased to be participate today in this important discussion on prescription drugs for Canadians. As part of budget 2018, we created the advisory council on the implementation of national pharmacare to provide independent advice to the government on how best to implement national pharmacare in a manner that would be affordable for Canadians and their families, employers and government.
Budget 2019 announced the next critical steps toward the implementation of national pharmacare. These include working with the provinces, territories and stakeholders on the creation of a Canadian drug agency, taking steps toward the development of a national formulary and creating a national strategy for high-cost drugs for rare diseases. It is important we continue with our measured and considered approach to implementation. We know that a national pharmacare program would bring cost savings to the health system.
In the meantime, the government has been working with partners on initial steps to make Canada's existing prescription drug system more efficient and responsive. This work will help with the successful implementation of a national pharmacare program.
In budget 2017, the government provided support for this commitment with an investment of $140 million over five years followed by $18.2 million each year on an ongoing basis for Health Canada, the Patented Medicine Prices Review Board and the Canadian Agency for Drugs and Technologies in Health to improve access to prescription medications, lower drug prices and support appropriate prescribing.
Drug spending in Canada is high. It has increased significantly and needs to be addressed. Drugs are now the second-largest category of spending in health care. The Canadian Institute for Health Information estimates drug spending reached over $40 billion in 2019.
Part of that spending results from an increase in the utilization of drugs resulting from the effects of both an aging population and a rise of chronic conditions. However, it is also a result of high drug prices.
Canadian prices for drugs are very high by international standards. According to the PMPRB, Canada's price regulator for patented drugs, our patented drugs prices are behind only the U.S. and Switzerland and well above the average for countries of the OECD. Indeed, OECD median prices are on average almost 20% below those in Canada.
Although the situation with respect to generic drug prices has improved in recent years, there is still room for improvement. As the PMPRB reported last year, in 2018 Canada ranked as having the 11th highest generic drug prices, just behind the United States, and, on average, OECD median generic drug prices were 15% lower than in Canada.
The government has taken action to address these challenges through targeted measures to lower drug prices and improve the affordability of prescription drugs to better protect Canadian consumers from excessive prices. The government has modernized the way prices for patented drugs are regulated.
The PMPRB was created in 1987 as a consumer protection pillar after a major set of reforms to the Patent Act. The PMPRB's mandate is to ensure that patent holders do not abuse their patent rights by charging consumers excessive prices.
Last August, the government updated the patented medicines regulations, which, together with the Patent Act, provided the PMPRB with the tools and information it needed to monitor and regulate patented drug prices in today's pharmaceutical environment. These are the most significant reforms to the regulations since their introduction in 1987.
The amendments, which come into force this July, are expected to save roughly $13 billion in the first 10 years of implementation.
Several changes were made to patented medicine regulations. The first updated the list of comparator countries. The PMPRB currently benchmarks the list prices of the patented drugs sold in Canada against the list prices in seven other countries. As the current countries used for these comparisons have some of the highest prices in the world, the benchmark fails to protect Canadians from excessive drug prices. The new regulation changes the countries that the PMPRB compares Canadian prices against. With the revision, the list of comparator countries includes a complement more like Canada economically and with similar price protections, such as Australia and the United Kingdom.
In addition to changing the list of comparator countries, there were other changes to the regulations, which help the PMPRB regulate the price for patented drugs. It is known, for example, that not all drug discoveries are alike. Some drugs represent breakthroughs that extend the lives of Canadians, while others offer a slight or no improvement over products already on the market.
While many factors go into determining a non-excessive drug price, value for money should be one of them. There must be evidence that a drug is likely to prolong life or improve the quality of life to justify a higher price tag. The amendments included new price regulatory factors, which will enable the PMPRB to ensure that the prices manufacturers charge Canadians reflects the value the drugs bring to the health care system.
Finally, the amendments also supported greater transparency in drug prices. When the PMPRB was created, prices paid in the market were similar to public list prices. Now, as a result of significant discounts and rebates to third party payers, the prices paid in the market are significantly lower than list prices. These rebates are typically negotiated in confidence with the agreement that they not be disclosed publicly. The amendments enable the PMPRB to see the actual prices being paid in Canada and not just the list prices published by the industry. Without this information, the PMPRB would be left to regulate prices on the basis of inflated prices that do not reflect the actual prices being paid in the market.
Through consultation on the changes to the regulations, Health Canada heard from a number of stakeholders including, among others, provinces and territories, industry, patient organizations and health policy experts. Changes reflected the feedback received as part of the consultation process. This suite of measures laid the groundwork for national pharmacare, and is the foundation of a system that would enable Canadians to access and afford the drugs they need.
The government is also working closely with the provinces and territories to reduce drug costs. As a member of the pan-Canadian pharmaceutical alliance, we are combining our collective buying power to make prescription drugs more affordable for public drug plans, while lowering generic drug prices for all payers. The initiative has been extraordinarily successful. The pCPA has completed 345 negotiations with the makers of patented drugs and has an additional 34 currently under way.
In 2018, the alliance also conducted negotiations on a five-year agreement with the Canadian Generic Pharmaceutical Association, providing significant savings for all Canadians who use generic prescription drugs. Through this initiative, the prices of nearly 70 of the most commonly prescribed generic drugs in Canada were reduced by 90% of the price of their brand-name equivalents. As of April 2019, the work of the pCPA had resulted in annual savings of more than $2 billion through negotiated price reduction for both patented and generic drugs.
Taken together, these two measures will have a significant impact on the affordability of drugs and represent the kind of improvement that must be made to ensure the success of national pharmacare. Last June, we welcomed the recommendation from the advisory council on the implementation of national pharmacare. These recommendations are—