Medication Supply Chain

From research on a single drug molecule to clinical trials and a final product ready for patients to use, medicines take a very long time to develop. Studies estimate that this can take about 12 to 15 years, with an average per-drug cost of USD 900 million to 2 billion for research and development.1

After drug discovery and development, there are four stages in the medication supply chain. These are regulatory approvals, manufacturing, procurement and distribution, and then frontline delivery to patients after a visit to a physician to get a prescription.

This article is simplifying the process so we can look at things from a high level.

To enter the Canadian market, drug manufacturers must submit their research on a new drug product to Health Canada. During this first stage of regulatory approvals, Health Canada reviews the product’s safety, efficacy, and quality. There are several application pathways available since some new medicines, such as those for rare diseases and disorders, have unique qualities that require a specific review process.2

If a product receives approval, a number of federal, provincial, and/or territorial agencies manage drug prices and decide if they will cover the new medicine in their public drug plans, and under what terms. Private drug plans, on the other hand, can begin price negotiations with manufacturers of new medicines once they receive approval from Health Canada.

Drug manufacturers are responsible for the sourcing and storage of medicinal ingredients and final products. However, approximately 70% of our prescription drugs come from foreign manufacturers, and about 90% of the medications we produce here require ingredients and raw materials from other countries.3 As a result, changes in international policies, border restrictions, and global crises, such as what we call the three Cs: COVID-19, climate, and conflict, can disrupt the medicine supply chain and have significant impacts to the availability of all medicines in Canada, including generics. Manufacturers can also experience internal supply chain issues, such as with medicinal ingredients or packaging materials, that prevent them from shipping the finished product to Canada.

Under procurement and distribution, manufacturers can choose distributors for their medications. Hospitals and health authorities also use wholesalers, specialized group purchasing organizations, and shared service organizations to broker medications in bulk from distributors and directly from pharmaceutical companies.4 Some of the largest distribution companies in Canada are the Canadian Pharmaceutical Distribution Network and McKesson Canada, both of which serve our hospitals, community pharmacies, and clinics.

Finally, at the last stage of the supply chain, healthcare professionals prescribe, deliver, and/or administer these medications to patients.

Medication Supply Chain Video

Labour Shortages and Burnout

The COVID-19 pandemic has brought unprecedented pressures to our healthcare systems and its workforce, leading to burnout, high turnover rates, and early retirement among healthcare professionals. This has been a stressful and dire time for patients as well because it has resulted in thousands having no access to a family doctor, long wait times for surgeries and appointments, emergency room closures, shortage of hospital beds, and more. Support and services for mental health have also been significantly reduced, as have access to oncology treatments for these especially vulnerable populations.

Despite these ongoing challenges, inflation continues to rise while funding, especially for labour, remains critically low. To absorb the higher costs of goods and services with low funding and compensation, further job losses and delays or reductions in deliveries could arise. This can exacerbate medication shortages and lead to discontinued products and decreased services for patients at pharmacies and patient support programs.

Job vacancies in the healthcare and social assistance sector in 2021 nearly doubled compared to 2019, at 126,000, most of which were in hospitals, nursing, and residential care facilities.5 Those who are looking to change jobs cited stress, burnout, and mental health as their main reasons for leaving the healthcare sector. The additional burdens of the pandemic to a strained healthcare system might have led some physicians to early retirement. In Ontario, a study found that 3.1% of 12,247 practicing family physicians in the province stopped working during the first six months of the pandemic, which was twice the rate compared to previous years.6 Although the percentage may be small, the study authors estimate that this affected approximately 170,000 patients who are now without a family doctor, adding to the 10% of Ontarians who did not have one already before the study began and 1.7 million who have a family doctor older than 65 years of age. The authors conducted two analyses using de-identified data that included billing claims and demographic information. They noticed that several factors were associated with those who stopped working that might be linked to retirement, such as older age (75 years or older), having fewer than 500 patients, and fewer worked hours than other physicians. However, more research is needed to further understand the impact of the pandemic on primary care services.

Governments across Canada are well aware of the labour and resource crisis across our healthcare systems. It has been at the center of investigations in the federal government’s Standing Committee on Health since February 2022.7 The Committee continues to meet with various stakeholders to develop recommendations to address this crisis. The federal government is also making it easier for international doctors to practice in Canada, allowing them to apply for permanent residency through the express entry system and providing funds for the provinces and territories so that they can establish a way to recognize their foreign credentials.8 Discussions between the federal, provincial, and territorial governments on increasing healthcare funding are underway.

British Columbia has made some recent changes to physician salaries to take into consideration the time and resources they use in caring for patients.9 We expect other jurisdictions to follow. There have also been some advancements in increasing the scope of practice for pharmacists, on which we will elaborate in our next newsletter.

Unfortunately, as our healthcare systems are complex and multi-factorial, these efforts may not be enough on their own to address barriers in care and the medication supply chain.

Regulatory Changes

Each stage of the supply chain includes many processes that can affect the availability and accessibility of the medications we need. The costs of resources and specialized services throughout the supply chain are also part of drug prices. However, several costly changes to regulations, many of which seem redundant when compared to existing measures, are intended to drive prices even lower. This can have significant consequences to the supply chain and availability of new and existing medicines in Canada.

Canada is vulnerable to the impacts of supply chain issues. From 2017-2022, nearly 50% of all drug products in the country experienced a shortage at some point.10 The US, representing 46% of the global market and with the highest drug prices in the world, is laying the groundwork that would allow states to import Canadian drugs to benefit from our low prices.11 Yet, Canada represents only 2% of the global market for medicines.12 This means that it is in competition with other countries for pharmaceutical ingredients, attracting new medicines to the country, clinical trials (to see how drugs work), and is now at risk of losing its supply to the US.

Under the stage of regulatory approvals, there are several tough measures that push the price of a medicine lower. These include the pan-Canadian Pharmaceutical Alliance (pCPA), through which Canadian governments negotiate lower drug prices, and policies and tools used by public and private drug plans to reduce the prices of medicines. They have been successful in managing prices, as the pCPA achieved $2.58 billion in additional annual savings through their joint negotiation on product listing agreements with manufacturers and generic price reductions in 2019, a figure that is likely much higher today.13

Unfortunately, regulatory changes are once again on the horizon for the Patented Medicine Prices Review Board (PMPRB). The PMPRB is a federal quasi-judicial agency and regulator with a mandate to set the maximum prices that patented drugs can be sold in Canada and to provide annual reports on the pricing trends in the pharmaceutical industry.14 We are the only country in the world that regulates the maximum prices of drugs. The PMPRB has been around since 1987, when Canada did not have the pCPA and other policies and tools. In an effort to modernize and catch up with its peers, the PMPRB embarked on a mission to change their Guidelines in 2015 that led to the creation of proposals that were met with scrutiny from experts, healthcare professionals, patients, and other stakeholders. We did not support these draconian changes because they would further reduce our access to vital medications. Some of these changes were even struck down by court decisions.15

These pursuits have been costly and the proposed changes include large increases to the government’s operational budgets. In response to the court decisions, the PMPRB published a new draft of changes, but they continue to drive prices much lower while giving their staff more discretionary powers in investigating medicine prices (more operational overhead). Experts, including former PMPRB staff who worked on the development of its policies when the PMPRB was established, have raised alarms on these new changes.16 When the government forces the price of a medicine too low and with unclear rules on how to follow its Guidelines, it might no longer be viable for pharmaceutical manufacturers to sell their medicines in Canada. This includes both new and existing drugs, which could disappear from the Canadian market, so they will no longer be available, even if you have a private drug plan.

Outlook

The PMPRB is hosting another round of consultations regarding its latest proposal of changes. The Gastrointestinal Society continues to be actively engaged with patient organizations and the federal government on this topic, as well as efforts to address healthcare labour shortages and resources, national pharmacare, and more.

To learn more about the PMPRB and how its changes can affect our access to medications, read our PMPRB Impact Report and watch our series of short animations.


First published in the Inside Tract® newsletter issue 224 – 2022
Photo: © innu_asha84 | elements.envato.com
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2. Government of Canada. Guidance Document: The Management of Drug Submissions and Applications. Available at: https://www.canada.ca/en/health-canada/services/drugs-health-products/drug-products/applications-submissions/guidance-documents/management-drug-submissions/industry/document.html. Accessed 2022-11-07.
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13. pan-Canadian Pharmaceutical Alliance. pCPA Strategic Revitalization Summary. Available at: https://www.pcpacanada.ca/forms-and-publications. Accessed 2022-11-07.
14. Government of Canada. Patented Medicine Prices Review Board: Mandate and Jurisdiction. Available at: http://www.pmprb-cepmb.gc.ca/about-us/mandate-and-jurisdiction. Accessed 2022-11-07.
15. Alexion Pharmaceuticals Inc. v. Canada (Attorney General). Federal Court of Appeal Decisions. 2021 FCA 157.
16. Palmer NW. The Patented Medicine Prices Review Board has lots its way (again). Macdonald-Laurier Institute. Available at: https://macdonaldlaurier.ca/the-patented-medicine-prices-review-board-has-lost-its-way-again/. Accessed 2022-11-04.