The Effect of Evidence-Based Drug Coverage Policies on Pharmaceutical R&D: A Case Study from British Columbia Effet, sur la R&D pharmaceutique, des politiques d’assurance-médicaments fondées sur des preuves : une étude de cas de la Colombie-Britannique

Background: To manage public expenditures in the mid-1990s, British Columbia implemented evidence-based drug coverage policies, including " reference pricing. " Industry lobbied against the province' s policy, arguing that reference pricing harms patients and that it is inconsistent with federal and provincial legislation. Researchers and the courts have studied and rejected industry' s claims. However, industry also threatened to halt R&D investment in British Columbia and continues to so threaten other provinces contemplating evidence-based drug coverage policies. The purpose of this study is to review evidence regarding these threats. Methods: Provincial-level R&D data for 1988–2006 were used to analyze the impact of BC PharmaCare' s policies on pharmaceutical R&D in British Columbia. We used statistical analyses to determine whether the province' s policies affected BC-based R&D as expressed in two ways: (1) as inflation-adjusted expenditure per capita in British Columbia and (2) as the ratio of expenditure per capita in the province over expenditure per capita in the rest of Canada. Results: Evidence-based drug coverage policies had no statistically significant negative effects on BC-based pharmaceutical R&D. BC R&D was slightly above expected trends in 1997 and slightly below expected trends in 1998 and 1999 (though not statistically significantly in either case). From 2001 to 2003, BC R&D was (statistically significantly) above expected trends. Conclusions: While they are part of the politics of the pharmaceutical sector, claims and threats regarding connections between coverage policy and location of R&D investment are not borne out in British Columbia' s experience. This is likely because, as suggested by business and economic literature, firms locate R&D based on the expected cost-to-firm and productivity of the R&D investment itself. Prudent policy would therefore manage pharmaceutical expenditures using evidence-based policies and pursue scientific and economic development goals through direct and strategic government investment in local scientific capacity.