“We are living through a scientific renaissance — from vaccines to oncology to cell and gene therapy — and it’s vital that regulators evolve with the science so that patients don’t have to wait years to benefit.”
- Emma Walmsley, CEO of GSK
“While accelerated approval ensures early access to drug for patients, the uncertainty of clinical benefit can lead to widespread use of drugs later shown to have an unfavourable benefit-risk profile… which later may be withdrawn.”
- JCO Oncology Practice, 2025
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
- Lewis Carroll, Alice in Wonderland
Introduction
In Canada, it takes 52 months, on average, for a new drug to be publicly reimbursed after it has been approved for sale. This is almost a year longer than the average in other OECD countries and dead last in the G7. The sluggishness of the Canadian system is well known at this point, but the underlying causes are poorly understood. Recent efforts to close the gap with other countries and “fast track” patient access to eligible new medicines, however well intentioned, are superficial at best. To put it in medical terms, they seek to treat symptoms of the dysfunction but offer nothing approximating a cure.
Unless and until Canada is prepared to emulate the approach in other countries that offer accelerated access to new medicines with the understanding the price will vary based on evidence of how well the drug performs in the real world, there is no possibility of closing the gap with them. Anything short of this is magical thinking, and disingenuous to patients who hear “fast track” and understandably think it means a new way of negotiating drug prices that is inherently more streamlined and effective. As the father of modern management theory, Peter Drucker, said “There is nothing so useless as doing with great efficiency something that should not be done at all”.
Thinking FAST and slow
Frustrated with the lack of progress at the pan-Canadian level, where prices for new drugs are negotiated on behalf of all provincial, territorial and federal public drug plans, earlier this month, on October 8, 2025, the Government of Ontario announced the launch of the Funding Accelerated for Specific Treatments (FAST) program. As is evident from its tortuously contrived acronym, FAST is intended to speed up the public reimbursement of certain new cancer drugs in Ontario by up to a year. It is one of several measures that have been adopted by different levels of government in recent years to ostensibly accelerate patient access to promising new prescription medicines. To date, the impact of these earlier initiatives has been negligeable, and it is unlikely that this latest development will yield markedly different results. This is because none of these measures are rationally connected to the phenomenon that is driving the ever-lengthening lag time in Canada between the market authorization of new drugs and the actual access to them by patients who are covered by Canada’s mishmash of public drug programs, as will be explained.
From blockbuster to nichebuster
The last several decades have seen a veritable revolution in the nature and type of new medicines that are coming to market. The “blockbuster era” of the 1990s and early 2000s was dominated by small-molecule drugs designed to treat high-prevalence, chronic conditions, like hypertension, high cholesterol, depression and pain, that affected tens of millions of people and could be managed (not cured) with the daily ingestion of an oral medication of some kind. The annual treatment costs of these drugs on a per patient basis were not prohibitively expensive, even for some of the uninsured population, but gobbled up great swaths of pharmaceutical expenditure because of their scale. Think Lipitor, the cholesterol drug, which became the best-selling prescription drug in history, peaking at roughly US $12–13 billion in annual sales for Pfizer in the mid-2000s.
Fast forward to today and the pharmaceutical market is increasingly dominated by very high-cost drugs, many of which are made from living cells or organisms and treat much less common conditions. These drugs, which can cost upwards of hundreds of thousands per year or even millions of dollars per treatment now account for over one third of spending in public drug plans, despite being used by only 2-3 percent of beneficiaries. Unlike decades past, there is no impending wave of competing generic versions of these drugs poised to ease their strain on the health system.
The dramatic shift towards high-cost drugs for rare diseases in recent years is the offshoot of U.S. policies from the 1980s onward, especially the Bayh-Dole Act and the Orphan Drug Act, which created powerful incentives for industry and academia to focus on rare and genetic conditions. These measures successfully spurred innovation in neglected areas but, without corresponding pricing or reimbursement reforms, also laid the groundwork for today’s high-cost, low-volume drug model.
Not your grandma’s chemo
The innovation that has resulted from this shift in research focus has translated into major therapeutic breakthroughs in a number of disease states, and relieved untold suffering for the patients who are able to access them. Cancer treatment in particular is steadily migrating from broad, toxic chemotherapy to highly targeted and personalized approaches that harness the body’s own biology. Immunotherapy drugs have turned once-deadly cancers such as melanoma into chronic, often controllable diseases; CAR-T cell therapies can actually cure some previously untreatable forms of blood cancer. In the ultra-rare disease space, “one-and-done” gene therapies have transformed clinical outcomes in Spinal Muscular Atrophy, a debilitating and often fatal neuromuscular disease of infancy, and for Inherited Retinal Dystrophies, which causes progressive vision loss from childhood.
These notable successes have lent considerable weight to longstanding arguments from the pharmaceutical industry that regulators and payers need to develop new pathways to expedite patient access to promising new therapies. These arguments gained new currency during the early days of the pandemic, when the world held its breath for the industry to conjure up a completely new type of vaccine at breakneck speed, a technological tour de force indistinguishable from magic for the most of us.
Emboldened by the success of HIV/AIDS activism in the 1980s and 1990s that led to creation of the FDA’s accelerated-approval and compassionate-use pathways, patient advocacy groups have joined forces with industry in calling for early access programs in rare and high-unmet-need diseases. The joint influence of these two powerful groups has led to a considerable overhaul over the past two decades in how drugs are reviewed for market authorization to facilitate the conditional approval of drugs that show early promise of efficacy. Canada’s regulatory framework for new drugs has been steadily evolving in that direction over that same period but the emphasis on faster market entry has been turbocharged since the Covid-19 pandemic, especially in oncology, rare diseases, and cell/gene therapies.
However, it is one thing to conditionally approve a new drug based on incipient evidence that it might be more effective than placebo, it is quite another to figure whether and how much to pay for it. This is an exceedingly difficult exercise at the best of times, even when the drug has completed all three phases of the clinical trial process and there is head-to-head evidence of how it compares to the current standard of care, which is rare. Before exploring that thought further, it is necessary to explain the basics of how a drug goes from market approval in Canada to actual reimbursement by a public drug plan.
The united federation of drug authorities
For good or ill, Canada is a federation, with a constitutional division of powers between the federal government and the provinces and territories. In terms of how this manifests itself in the pharmaceutical context, there are four government entities or authorities that have a hand in getting a new drug from market approval to public reimbursement.
The first step in the process involves the federal government, specifically Health Canada, receiving and reviewing all the scientific evidence provided by the manufacturer of the new drug to demonstrate its safety and efficacy. Approval of the new drug takes the form of a Notice of Compliance (NOC), or in the case of drug that has an incomplete clinical dossier, an NOC with conditions (NOC/c).
The second step is for Canada’s Drug Agency (CDA), an awkwardly named pan-Canadian organization, to look at the drug’s effectiveness (how well the drug is expected to work in the real world) and if it offers value for money and to then make a recommendation on this basis to the federal, provincial (except Quebec) and territorial drug plans on whether to reimburse it.
If the drug receives a positive recommendation from CDA, the third step is for the pan-Canadian Pharmaceutical Alliance (pCPA) a not-for-profit corporation established by the federal, provincial (including Quebec) and territorial drug plans, to negotiate a common price for all the drug plans to pay for it.
The fourth and final step is for the public drug plans to begin reimbursing the drug on the basis of the deal negotiated by the pCPA.
If this four-step process seems needlessly segmented and somewhat repetitive, recall the point about Canada being a federation. Indeed, if one digs deeply enough into any enduring problem in the Canadian body politic, the fact of it being a federation is almost always a big part of the explanation. In this instance, however, that is only part of the problem, and one that can be overcome with the right vision, political will and the proper incentives.
Efficacy vs. cost effectiveness
While efficacy and effectiveness sound like they mean much the same thing, in the context of pharmaeuticals, they are actually quite different. Efficacy looks at whether the drug works under ideal, controlled conditions. Health Canada assesses efficacy mainly through evidence generated by randomized clinical trials (RCTs). These are lengthy studies where patients are carefully selected, randomized, monitored, and given the drug exactly as intended. They are designed to answer the very narrow question as to whether the drug produces the desired biological or clinical effect compared to a placebo when used exactly as tested. If the evidence shows that it does, and that the benefits outweigh the risks (i.e. side effects) Health Canada will issue an NOC.
Effectiveness looks at how well the drug is expected to work in the real world. CDA (and its sister agencies in other countries) look beyond clinical trial conditions to ask whether it is likely that the drug will work for real patients in the messy world of everyday healthcare. It also looks at how the drug compares to existing therapies and whether the difference between them is worth the added cost. If the CDA believes that the drug delivers a health benefit at an acceptable cost, it will recommend that the public drug plans pay for it. It then falls to the pCPA to attempt to negotiate a price for the drug that is acceptable to both its member drug plans and the manufacturer.
Health technology assessment
At this point you may be wondering how on earth the CDA can rely on efficacy data generated in a highly controlled clinical setting where the drug is compared to placebo and extrapolate how it will perform in a real world setting against the existing treatment options that make up the standard of care. The answer is “health technology assessment” (HTA). HTA is a methodology that emerged in the 1970s as a way of evaluating whether new medical innovations were truly beneficial, not just better than placebo. It has since evolved into a global discipline that helps health systems decide which drugs offer real value for patients and taxpayers. In most high-income countries, HTA is a key input in determining which drugs to reimburse and how much to pay for them.
HTA is a uniquely esoteric field that sits at the intersection of medicine, social science, ethics, statistics and economics. It is exceedingly difficult to describe but can be crudely boiled down to four basic components. First, it gathers up all the scientific information about a drug’s efficacy, which for new drugs is mainly drawn from RCTs but can also come from less cogent sources. Second, it considers all the ways in which real-world variables, such as different patient types (old, young, very sick, less sick), interactions with other medicines, and how faithfully patients are likely to adhere to treatment over time, might affect whether the drug can replicate its trial results in a complex and chaotic health system. Third, it enters all this information into computer models that simulate large patient cohorts and estimate how the drug might influence their changing health states over time. Finally, assuming these simulated patients gain additional health benefits compared to existing treatments, it calculates how much more it will cost the health system to achieve those gains based on the manufacturer’s asking price.
The final output of this process that matters most to payers is how much the drug costs to deliver one additional year of perfect health to the system, expressed in quality-adjusted life years (QALYs). QALYs are a deceptively difficult concept to grasp. They are a way of combining the length and quality of life into a single number. They help answer not just how much longer the treatment will help people live but also how enjoyable or not that extra time be. In simple terms, one QALY equals one year of life in perfect health. HTA agencies use various methods to rate how good or bad different health states are — from 0 (death) to 1 (perfect health), the details of which are beyond the scope of this article. You’re welcome.
To put it in more practical terms, imagine a drug that results in a sick person living one additional year, but that person spends all that extra time in the same vegetative state they were in before treatment. That year of extra life wouldn’t amount to a full QALY but only a fraction of one because the quality multiplier in the equation would be very close to zero (e.g. 1 year of life x 0.1 quality = 0.1 QALY). Now imagine another drug that adds two extra years of life to that same patient, and their health is improved to where it is about half as good as what is considered to be a perfect health state. Two years of additional life at 50% of full health would roughly add up to one QALY (2yrs x 0.5q = 1 QALY).
Given finite health budgets, decision-makers must weigh the value of new interventions against existing ones. The QALY provides a common metric to compare how efficiently resources generate health gains. Expressing results as a “cost per QALY gained” allows for direct comparison across disease areas and reveals opportunity costs. For example, if a new cancer therapy costs $150,000 per QALY while a diabetes program achieves the same health gain for $50,000 per QALY, funding the former implies forgoing two QALYs that could have been realized elsewhere in the system.
To put the whole HTA concept in more relatable terms, consider your household budget. Let’s say you have $1,000 left at the end of the month in disposable income. You could use it to either upgrade your fridge, buy a new TV or rent an Airbnb in the big city for a weekend. If your ultimate goal was to maximize your own happiness and you knew that that a dollar spent on travel produced two times as much additional happiness as a dollar spent on a TV and three times as much as a new fridge, it should facilitate your decision making process over how to allocate that money (pro tip: spend the money on a dog if happiness is your goal). The QALY enables health systems to do the same thing. If they spend a large share of their limited funds on a drug that costs a great deal more per QALY than other drugs they are already paying for they may have to delay hiring nurses, replacing aging equipment, or funding other treatments that could improve and extend more people’s lives for the same money. The purpose of HTA tries to make those trade-offs visible and explicit.
HTA: science or voodoo? Yes
It should be obvious from the above description that HTA is an assumption-laden methodology and that its most important output – the QALY gain– is only as reliable as the vast inputs, objectivity and expertise of the people overseeing its calculation. It is also constantly evolving, particularly on the social science side of the equation. HTA agencies like the CDA grapple daily with difficult ethical questions like whether and how much more society is prepared to pay for a QALY delivered by a very high-cost drug for a rare debilitating disease with high childhood mortality, or for a late stage cancer drug that gives terminal patients a few additional months of not so great life. The needle on this question is constantly moving, as more of these extremely high-cost gene and cell therapies enter the market. Many HTA purists, mainly in academia, take a dim view of this phenomenon and claim that changes of this kind are motivated by the desire to reverse engineer positive reimbursement recommendations for a growing class of exorbitantly priced drugs the system simply can’t afford. If an agency like CDA keeps saying no to drugs patients are clamouring for, it may not be able to withstand the political pressure for the government to abandon HTA altogether.
Why you had to read all this boring crap
Now that you understand how new drugs are evaluated for efficacy, effectiveness, value for money, and go from market approval to reimbursement, you can appreciate how challenging it is for negotiators to figure out how much to pay for them. That challenge has been ratcheted up to an almost impossible degree by the recent changes to the system that are intended to fast track drugs with even less evidence of efficacy.
It should be noted that there is a very strong rationale for not holding these drugs to the same RCT standard as other that has nothing to do with the commercial interests of their manufacturers. For drugs targeting very small or severely ill patient populations, large scale trials are often impractical or ethically problematic. When the stakes are life or death and alternatives are few, a strong signal from a Phase II study, like a reduction in tumour size, or an improvement in progression-free survival, may be deemed sufficient to justify conditional or accelerated approval. The problem is that there is no way of yet knowing whether these early signals will ultimately translate into clinical outcomes and result in real world patients living better and/or longer lives, which is the whole ballgame. For every new drug that delivers on its early promise by way of better clinical outcomes in the real world, there are legions more that do not, often with gruesome side effects for the desperate patients who received them.
As mentioned, the Government of Ontario’s October 8th announcement about the launch of FAST is further to several other like-minded initiatives that have been undertaken by different levels of government to speed up the public reimbursement of new drugs. The first such initiative, which has been in place for some time but has seen renewed emphasis since the pandemic, is the NOC/c regulatory review process mentioned earlier, which allows promising drugs that only have phase II clinical data to enter the market, on the condition that the manufacturer provide confirmatory phase III data to Health Canada within a set timeframe.
The second is the Time Limited Recommendation (TLR) initiative which was introduced by the CDA in mid 2023. TLR is a special pathway that is intended to be complimentary to Health Canada’s NOC/c approval process. It provides for the possibility that these same drugs receive a a provisional recommendation for public reimbursement from CDA, once again on the condition that the manufacturer will return to the agency with follow up phase III data.
In turn, in the spring of 2024, the pCPA announced the establishment of the Temporary Access Process (pTAP) which provides its own special accelerated pathway for drugs that have received an NOC/c from Health and and a positive TLR recommendation from CDA. Not surprisingly, just a few days before Ontario unveiled the FAST program, the pCPA posted changes to pTAP on its website that would see it begin price negotiations with manufacturers while their drugs are still under review by CDA in the TLR process. This is new in the sense that, operationally, the pCPA would typically await the completion of the CDA’s HTA review before initiating talks with a manufacturer.
Why “not surprisingly”? The pCPA has been under tremendous pressure lately from Premier Ford of Ontario to expedite its negotiations with manufacturers and close the yawning gap between Canada and other G7 countries. As current chair of the Council of the Federation, he has made this objective a top priority. However, improvement in this area has been hard to come by. The pCPA is a consensus driven organization that has to manage the competing health priorities of 14 different members. The terms of every negotiation have to be agreed to by all the participating drug plans, which is inherently time consuming, and even if members could agree to sign over autonomy to pCPA staff to set these terms independently, the organization lacks the resources to operationalize a change of this magnitude. As matters stand, most pCPA negotiations are led by one of the drug plan leads from a member province or territory, who are resource constrained in their own right. This is simply not an organization that is set up for swift, bold changes to its modus operandi. Furthermore, there is wariness among the provincial and territorial governments towards any policy initiative designed to advance the national interest if it originates at the federal level, which it usually does. Recall that Quebec is a member.
This is unfortunate because the pCPA is a good news story that Canadians should rightly feel proud of and in many other respects is a rare exemplar of functional federalism. It was not so long ago that each province and territory negotiated drug prices mono a mono with drug manufacturers. It is to the great credit of the Council of the Federation that premiers recognized their joint interest in forming a consortium to negotiate collectively with drug manufacturers. However, that consortium is only as strong as its weakest link, and right now that link is its biggest member with the greatest purchasing power, Ontario. Premier Ford’s announcement of the FAST pathway is a go it alone approach to cancer drugs that bodes ill for the future of the pCPA.
One of the reasons that presumably led to this development is the rather lacklustre uptake of the TLR and pTAP initiatives since their inception in 2023 and 2024 respectively. Despite the proliferation of NOC/c drugs coming down the pike, only two have opted in to the TLR and pTAP pathway thus far. And while these two drugs, Epkinly and Enhertu, did reach the public reimbursement phase faster than average, there is nothing inherently different about the pCPA’s pTAP process that would entice other drug manufacturers to follow suit. Instead of adopting a new negotiation framework that lets manufacturers know what QALY or price thresholds they will need to meet to quickly reach a deal with the public drug plans, the essence of pTAP is just faster service standards for each phase of the negotiation. In other words, the pCPA is saying it will fast track these drugs by negotiating faster. But there are two sides to a negotiation and pTAP does nothing to facilitate agreeing on a price, which, let’s face it, is the biggest source of delay in most negotiations. This is a textbook example of the phenomenon described in the earlier quote from Peter Drucker about doing the wrong thing more efficiently. In the long run, pTAP in its current form is destined to fail. Moving up the beginning phase of the negotiation, as was recently announced, is an improvement, but substantively it remains a negotiation like any other.
So what’s the solution, smart guy?
This shift toward earlier, evidence-light approvals is transforming the work of payers and HTA agencies worldwide. Instead of evaluating mature clinical data of efficacy, which is already hard enough, they are increasingly being called upon to make funding decisions on not much more than a wing and a prayer. This is especially problematic in Canada because once payers do decide to fund one of these promising new therapies, they must arrive at a once-and-for-all price without any possibility of renegotiation based on how the drug ends up performing in the real world. Moreover, in Canada, once a drug is reimbursed by a public drug plan, there is no mechanism for discontinuing funding it if it turns out to be a dud. As we shall see, neither of these two things is true in most other countries that are much faster at public reimbursement.
To illustrate the absurdity of this approach, consider an analogy that should resonate with many Canadians. Imagine you are the helicopter-parent of a university aged son or daughter who has gotten a job tree planting for the summer in a remote area of the country where communication is only possible via satellite phone. Planters can only call home once a week from basecamp, but you are anxious for your child’s well being and want more regular access to them. You find out that there is a new satellite phone provider that is reputed to have shown strong results in beta testing but has only recently commercialized its product. You sign on for a monthly subscription despite the nosebleed price of $500 per month because, well, you are a helicopter-parent. However, once your child is on site, it turns out the service is highly unreliable. Calls are routinely dropped and when they are not the connection is so poor you can barely make out your child complaining to you about the black flies. In the end, the only reasonably intelligible conversation you can have with them is that once-a-week call from base camp. Would you continue to pay the $500 a month charge or would you expect a substantial discount, failing which you simply cancel your subscription? For most people, the answer should be fairly obvious.
In countries that have succeeded at speedier reimbursement of promising new drugs with less evidence, they have come to the same obvious realization that it makes no sense to agree to a set in stone price out of the gate, or to continue reimbursing the drug when it fails to live up that promise in the real world. The way in which they do this is by negotiating deals that provide for a provisional reimbursement or price for the drug that will be revisited over time, as the health system gathers relevant real-world data (RWD) on the patients who are taking it. These types of deals are called Managed Entry Agreements (MEA). They tie the continued reimbursement of the drug to the actual clinical outcomes the drug demonstrably achieves once it’s been released into the wild for a specified time and sufficient information becomes available about how effective it is. Some MEAs tie both the reimbursement and the future price of the drug to evidence of its clinical outcomes. Others just tie the future price. An MEA that is mainly price-based is called an outcomes-based agreement (OBA). To be clear, all OBAs are MEAs but not all MEAs are OBAs.
Real-world evidence
So how is it that these other countries are able to reach deals of this kind and Canada is not? The answer lies in our respective capacities to collect, analyze and process real-world evidence (RWE). RWD, mentioned above, refers to the raw information about a patient’s health and health care delivery that’s collected outside of traditional RCT’s. Examples include electronic medical records, patient or disease registries, insurance claims and pharmacy databases. RWE is the analyzed and interpreted form of that data from which clinical insights are derived.
In countries like the UK, Italy, Sweden, Denmark, New Zealand and Italy, their pricing and reimbursement systems are forward-looking. They use RWE to answer the question “does the drug actually deliver the promised value in our health system?” In Canada, our systems look backwards at the trial data to ask “does the drug appear to work, how well compared to alternatives, and at what cost?”
This is not to say that Canada doesn’t consider RWE at all. The CDA has policy guidance on it. However, it is used predominantly to ascertain efficacy prior to reaching a deal with the manufacturer. It is also accorded very little weight compared to trial data because it is prone to bias in that context. However, when RWE is being used to measure hard clinical endpoints in the real world (i.e. how much a patient’s health is improving, or not) in order to determine how well a drug stacks up to its efficacy claims, bias is much less of a factor and can be effectively addressed.
Economic forecasting has been jokingly likened to a guy driving blindfolded on a busy street while someone in the backseat barks directions at him based on what he is seeing through the car’s rear window. When you think about it, this is not unlike what is happening in Canada whenever a new drug with an incomplete or uncertain clinical dossier comes before the pCPA for negotiation, regardless of pathway. This is not a criticism of the smart, hard working and well-intentioned people doing this tremendously challenging work on behalf of public payers. It’s an indictment of a calcified, fragmented system that is failing patients and taxpayers by not being honest with itself about the heavy lifting that is necessary to truly fix the problem.
The UK way of shortening delay through MEA
The UK has long been a pioneer in HTA, including being one of the few countries to make the reimbursement of a new drug dependent on it meeting certain explicit cost-per-QALY thresholds. It also allows higher thresholds for drugs that treat patients with very limited life-expectancy or who are suffering from severe, rare diseases. MEAs are made possible by the close coordination between the National Health Service (NHS) and the National Institute for Health and Care Excellence (NICE), the UK’s equivalent to CDA. When a new drug is approved but there’s still uncertainty about how well it will work or whether it’s worth the cost, the NHS may only agree to pay for it through an MEA.
Under the UK’s Cancer Drug Fund, drugs are given temporary funding when NICE deems their early evidence promising but uncertain. The manufacturer must agree to a data collection plan that identifies the key uncertainties and addresses them by gathering relevant evidence. Typically, this consists of observational and outcomes-focused RWE from such RWD sources as cancer registries, electronic health records and special datasets conceived for this purpose. After two years, NICE will reappraise the drug to determine whether it should receive permanent funding and what a cost-effective price would be in line with its cost-per-QALY thresholds.
This approach works because the UK has a single, national health system that links patient care, data, and reimbursement decisions under one roof. NICE defines what success looks like, the NHS supplies the real-world data, and drug companies share in the financial risk if results fall short. With national datasets that cover most patients and strong rules for data sharing, the UK can make these agreements practical and credible, giving patients faster access to new drugs while ensuring the health system pays only for treatments that truly deliver.
Canada, by contrast, has a fragmented system where each province runs its own drug plan and health databases. There’s no unified national infrastructure for collecting or analyzing RWD, and privacy rules differ across jurisdictions. Health Canada, CDA and the pCPA aspire to coordinate policy and price reviews but don’t have the shared operational tools to run MEAs at scale. Without a national framework for linking patient outcomes to payment, Canada remains limited to small pilot projects, like TLR and pTAP, rather than fully functioning outcome-based reimbursement systems. Canada is a federation.
When in Rome…
This doesn’t mean that Canada can’t reorient its pricing and reimbursement system to emphasize RWE and OBA-type agreements. Italy is also a federation, made up of no less than 20 different regions that are self-governing to varying degrees and has had a robust OBA framework in place for several years now.
When a new drug with uncertain evidence is approved for reimbursement in Italy, its national medicines agency, AIFA, and the manufacturer negotiate a commercial agreement that ties payment directly to patient’s real-world outcomes. These arrangements can take several forms. Most are “pay for performance” or “payment by results”, but the common feature is that the manufacturer shares the financial risk. If the drug fails to achieve predefined clinical outcomes, AIFA can require partial or full reimbursement. This system is built on a network of mandatory electronic registries that track every patient receiving certain high-cost or innovative therapies.
Unlike the UK’s Cancer Drugs Fund, where RWE is gathered to inform later reassessment, Italy’s model integrates data collection and reimbursement in real time. The registries continuously generate outcome data used for payment reconciliation and periodic performance reviews rather than for a separate re-appraisal of cost-effectiveness. In this way, Italy treats uncertainty as a permanent feature of healthcare delivery, and manages it through ongoing, outcome-linked payments rather than conditional coverage followed by formal re-evaluation. The approach is operational, transactional, and embedded in the reimbursement process itself, ensuring that the public payer only pays for what works while maintaining continuous access to promising therapies.
Although Italy’s constitution gives the regions primary responsibility for organizing and delivering healthcare, the national government, through AIFA, retains exclusive authority over pricing, reimbursement, and market access for medicines. AIFA’s decisions are thus binding on all 20 regions. They establish whether a drug is reimbursed nationally and under what contractual terms. AIFA centrally manages the system of patient-tracking registries, a digital infrastructure that every regional health authority and hospital prescribing a covered drug must use. When a physician prescribes an AIFA-registered drug, the prescription is entered into the registry, which automatically enforces the agreed conditions of use, monitors patient outcomes, and tracks eligibility for reimbursement or refunds. Because participation in the registry is a precondition for the drug’s reimbursement, compliance by regional health care practitioners and institutions is effectively mandatory. AIFA’s registries thus act as the enforcement backbone that binds together Italy’s fragmented governance structure, allowing the country to execute complex OBAs nationwide even within a decentralized health system.
Mind the gaps
The reasons Canada is currently unable to operationalize OBAs through forward-looking reliance on RWE are essentially threefold: 1) an authorities gap; 2) a data gap; 3) an incentives gap.
Authorities
As previously explained, in Canada, no single national body has the legal or operational authority to both negotiate prices and mandate data collection or performance monitoring across all provinces and territories. HTA and price negotiation are performed pan-nationally but reimbursement decisions and contracts remain provincial. The pCPA negotiates on behalf of its member jurisdictions but has no authority to enforce data-sharing requirements or to administer outcome tracking once a deal is signed. In practice, this means that even if a manufacturer and the pCPA agreed to link payment to real-world outcomes, there is no single entity that can legally compel the provinces, health systems, or hospitals to collect or report the required evidence uniformly.
Data
Unlike the UK or Italy, Canada lacks a unified, interoperable data infrastructure that could capture and link clinical outcomes, utilization, and cost data across jurisdiction. Provincial data systems (like Ontario’s ICES, Alberta’s AHS, or Quebec’s RAMQ datasets) vary widely in the nature and extent of data they collect and subject to privacy and governance restrictions that make cross-jurisdictional collaboration and aggregation extremely difficult. There is also no standard national platform for RWE collection comparable to Italy’s AIFA registries. As a result, even if an OBA were negotiated, the data needed to verify whether outcomes were achieved could not be collected or analyzed consistently at the pan-Canadian level.
Incentives
Finally, there is little structural incentive for any single actor in Canada’s system to take on the added complexity and administrative cost of implementing OBAs. For payers, OBAs require investment in data systems and staff capacity for uncertain financial returns. For manufacturers, they introduce payment risk and delay revenue recognition. For provinces and territories, they offer no immediate budgetary advantage over conventional confidential rebates. Since current pCPA negotiations already yield significant price reductions through simple, volume-based rebates, the marginal value of moving to performance-linked payment is viewed as not worth the added coordination burden. Without aligned incentives, financial, political, and reputational, the system defaults to the simpler, static pricing model.
In short, the obstacles in Canada against the forward-looking use of RWE are both conceptual and structural. The authority gap means no one can impose national OBAs; the data gap means no one can measure them; and the incentives gap means no one is sufficiently motivated to try. Overcoming these obstacles won’t be easy, but it’s not impossible either. Alternative efforts to fast-track new drugs are far easier but offer a band-aid solution at best.
Close the gaps
Authority
Much like the Bible, Canada’s founding constitution was written long ago by learned men who were much more enlightened than the clueless knuckle draggers we are today. Given that an amendment to either document stands about an equal chance of succeeding nowadays, there is nothing more to be done about the division of powers in this country. However, that still leaves plenty of room for creative solutions within existing systems. Nowhere in the Constitution Act, 1867 does it say anything about the CDA or the pCPA, and yet both are duly constituted pan-Canadian agencies that originated through intergovernmental agreement. If the federal, provincial and territorial governments can delegate price negotiation to an entity like the pCPA, there is nothing to prevent them from agreeing to be bound by terms negotiated at the pan-Canadian level that go beyond price and require the kind coordination and RWE generation necessary to operationalize an OBA.
Since its 2023 incorporation as a federally registered not-for-profit corporation, the pCPA now has independent legal status. This means it can enter into contracts, hold funds, and act as a legal entity distinct from any individual government. Under Canadian intergovernmental law, provinces and territories may delegate administrative or procurement-related functions to a jointly created body like the pCPA, provided the delegation is explicit and the governments retain ultimate policy oversight. This principle already underpins the existing delegation of price negotiation authority.
Extending that delegation to include negotiation and execution of OBAs would therefore be legally feasible, subject to two conditions:
1. Explicit intergovernmental authorization.
The participating jurisdictions would need to formally amend the pCPA’s founding agreements and mandate to specify that it may negotiate and enter into conditional or performance-linked reimbursement contracts on their behalf. The scope, limits, and approval processes for such agreements would have to be clearly defined, such as through standardized OBA templates or predefined parameters approved by all members.
2. Provincial fiscal compliance.
Each province and territory would need to ensure that its own financial administration and procurement laws permit such delegation. Because OBAs may create contingent liabilities or deferred payment obligations, some jurisdictions might require prior Treasury Board or ministerial authorization before allowing a third-party agent to bind them.
Neither of these conditions seems insurmountable. As is typically the case with big system change, we have the brain power and tools to do it, we just lack the political will, for now anyway.
Data
Although the pCPA’s new corporate status gives it legal standing to negotiate and execute contracts, it still lacks access to the health outcome data needed to operationalize OBAs. In Canada, health data are fragmented across provincial ministries, cancer agencies, hospitals, and registries. No single entity has lawful authority to link patient-level utilization data with outcomes such as survival or disease progression. That fragmentation prevents any central body from verifying whether contractual outcome triggers have been met.
To enable the pCPA to perform that function, provinces and territories would need to modify their privacy and health-information frameworks to recognize the pCPA (or an analytic partner acting on its behalf) as an authorized recipient or processor of de-identified outcome data. This could be done through statutory amendments, regulatory designations, or ministerial orders allowing limited disclosure of specified data for the purpose of administering OBAs. Each jurisdiction would also need to ensure its financial administration rules permit contingent or performance-linked payments verified through such evidence.
In parallel, participating governments would need to build a shared technical and governance infrastructure to allow standardized, privacy-compliant outcome tracking. This would likely take the form of a federated data model that enables the pCPA to query harmonized outputs without transferring raw data across borders. Together, these legal and structural reforms would allow a new intergovernmental agreement to give the pCPA both the authority and the operational means to manage OBAs on behalf of participating drug plans.
Incentives
As mentioned above, for payers, the administrative burden of designing, monitoring, and reconciling complex agreements often outweighs the potential short-term savings, especially when budgets are already fixed and rebates can be achieved more simply through traditional volume-based price deals. For manufacturers, OBAs can introduce uncertainty and delayed revenue recognition without offering faster or broader market access in return.
At the system level, this lack of incentive alignment reflects a broader cultural and institutional bias toward cost containment rather than value optimization, not to mention a philosophical aversion to placing greater emphasis on RWE in HTA analysis. Canadian reimbursement structures do not yet reward innovation in contracting or evidence generation; health ministries are rarely credited for piloting novel models, while any perceived risk of budgetary overrun attracts scrutiny. To close this gap, governments would need to create explicit policy levers and incentives, such as dedicated OBA pilot funds, more predictable negotiations where manufacturers have advance notice of pricing thresholds for different types of drugs (as in the UK) and expedited formulary listings for participating manufacturers.
Without such carrots (or corresponding sticks), the path of least resistance will continue to be time consuming and poorly informed volume-based rather than easier-to-reach conditional agreements where the price is a function of how well the drug performs in the real world.
Two roads diverged and I…
To give effect to the above ideas, there are two conceivable paths forward. The first would require strong leadership and mandate-level prioritization at the federal level. The federal government is said to be eager to advance nation-building projects, with a particular emphasis on infrastructure that strengthens Canada’s autonomy. Rallying the provinces and territories to adopt a bold, new approach for accelerating patient access to cancer and rare disease drugs across the country would seem to fit nicely into this paradigm — a health system moonshot of sorts. The federal government would have to be put its money where its mouth is of course, with billions of dollars earmarked for modernizing and interconnecting disparate health databases across the country and providing the necessary resources to the pCPA to not only negotiate on behalf of jurisdictions but to oversee and coordinate the OBA terms and conditions post negotiation. As always, money talks and provincial and territorial buy in will depend on how much the feds are willing to fork out to this end. If it is convinced that the system will work, the pharmaceutical industry would also certainly be on board, as they’ve been clamouring for MEA and OBA type agreements in Canada for years. Faster access to markets in Canada should go some way to incentivizing a reversal in the outflow of biopharmaceutical R&D investment in this country over the past two decades or more.
The second would see Ontario move forward with its go-at-it-alone approach by piloting an OBA along the above lines intra-provincially to demonstrate its feasibility to other pCPA members. These two paths are not mutually exclusive but a successful pilot in Ontario could just as well spell the end of pan-Canadian price negotiation as inspire a revolution in how it’s conducted.
Final thoughts
While media coverage of Canada’s relatively poor performance in moving drugs from market approval to public reimbursement suggest that the government is solely to blame for this phenomenon, a recent study from the National Prescription Drug Utilization Information System (NPDUIS) found that the single biggest contributor to this delay in Canada is due to manufacturers not filing their HTA submissions with the CDA in a timely fashion, despite rules that allow them to do so in parallel with Heath Canada’s NOC process. While drawn-out price negotiations were also a factor, they were not the main factor, so the industry has its own work to do in addressing the problem. That said, there is no doubt a more receptive pricing and reimbursement system that’s as innovative in fast tracking promising new drugs as the drugs themselves would go a long way to resolving both issues.
Believe it or not, the foregoing analysis and recommendations vastly oversimplify many concepts and practices in our drug pricing and reimbursement system. They do so for the sake of making the issues and potential solutions intelligible to interested Canadians who are not necessarily experts in these matters. The author begs the indulgence of those experts to cut him some slack for any perceived shortchanging of the virtuous work they do day after day in the service of Canadian patients and taxpayers. As is usually the case, it is the system that needs changing, not the noble and dedicated people toiling within it.
Another fine piece of drug policy writing from DC. Nice pic of pooch too.
Hi Doug. This is a very nice thoughtful piece. A couple of questions. 1) Do you have any idea how the Italian system is working in practice? 2) Is the German system an OBA and is it similar to the UK Cancer Drug Fund? Thanks Joel