U.S. government can take share of Canadian drug sales under pricing deals, documents suggest

The U.S. government is poised to take a share of revenue from some pharmaceutical sales in Canada and other countries under deals drug makers struck with the Trump administration, newly disclosed documents suggest.

Since entering office last year, U.S. President Donald Trump has pursued a most-favoured-nation drug-pricing policy with more than a dozen of the world’s biggest pharmaceutical companies, with the White House demanding that prices outside the United States increase to offset lower prices in the U.S.

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Copies of two such agreements – signed by major drug makers Pfizer Inc. and Eli Lilly & Co. – show that Canada is one of eight “specified countries” targeted by the agreement, and reveal for the first time that a portion of the revenue is to be shared with the Department of Health and Human Services (HHS).

The documents were obtained by Public Citizen Inc., a U.S. consumer-advocacy group, through a freedom of information request and a lawsuit, and published online on Saturday. The documents, both dated Feb. 23, are heavily redacted, although which sections are blacked out vary between the files.

The Lilly agreement defines “specified countries” as Canada, Denmark, France, Germany, Italy, Japan, Switzerland and the United Kingdom. It contains a section titled “Return increased revenues in specified countries to American patients and taxpayers,” although the rest of the section is redacted.

The Pfizer agreement with HHS redacts the list of specified countries, but contains more detail under the equivalent section on returning revenue to American taxpayers. It says that, beginning Jan. 1, “Pfizer agrees to share with HHS [redacted] portion of the net increased net revenue that Pfizer realizes from sales of the ex-U.S. version of” a redacted list of drugs.

When asked about whether the agreements showed that the U.S. government would be taking a share of drug sales in Canada and other countries, HHS sent The Globe a link to a social-media post by White House spokesperson Kush Desai.

In a reply to a U.S. journalist making the same observation, Mr. Desai quoted past White House news releases about most-favoured-national deals that said the many drug companies would “repatriate increased foreign revenue.” The news-release excerpts do not specifically say that the U.S. government would receive some of those funds.

Neither Pfizer nor Lilly specifically answered questions about their increased global revenue, including whether they had increased Canadian prices in response to these deals. A Lilly spokesperson said the company is proud to offer lower prices on some products to some Americans.

The United States has by far the highest drug prices in the world. The most recent annual report from Canada’s Patented Medicine Prices Review Board (PMPRB) said the average U.S. list price of a drug was more than three times that of the Canadian price. Canada had the fifth-highest prices among developed nations.

Doug Clark, a former executive director of the PMPRB, noted to The Globe that the Lilly agreement defines the “MFN price” as the second-lowest international price – and he thought it unlikely that Canada would be in that position often. “The pressure is really on the countries setting the floor,” he said.

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The pharmaceutical industry has in recent years been pushing for higher prices and to shorten the time it takes to get full approval from public health insurance plans, which is among the longest in G7 countries.

The federal government struck a pharmaceutical task force this spring to help Ottawa navigate the geopolitical pressures in the industry. The task force issued a report with 39 recommendations in July. The government is expected to act on the report by the end of the year.

Innovative Medicines Canada, the main lobby group for patented drug makers, said Canada needs to make changes to be seen as a reliable market for pharmaceutical investment.

Mina Tadrous, a Canada Research Chair in real world evidence and pharmaceutical policy at the University of Toronto, said he hoped the government and drug companies would be creative in how they approached these issues. For example, Ottawa and the provinces could allow higher drug prices in return for more manufacturing footprint in Canada or more spending on research and development.

“There’s an opportunity here to be thinking more broadly about revisiting the way we value and talk about drugs in general,” he said.