UPDATE: On April 14, 2022, the Minister of Health announced that the federal government will not proceed with amendments to the Patented Medicines Regulations introducing new pharmacoeconomic factors and requiring that price and revenue information be reported net of all adjustments. The federal government will proceed with amendments establishing a new basket of comparator countries, with a coming-into-force date of July 1, 2022. For more information, see our Life Sciences Bulletin on the Minister’s announcement.
In December 2021, the Patented Medicine Prices Review Board (the “PMPRB”) and the Minister of Health issued two updates regarding the Regulations Amending the Patented Medicines Regulations (the “Amendments”) and the new PMPRB Guidelines (the “New Guidelines”). These notably include a further deferral of the coming-into-force date of the Amendments. The updates, along with the Federal Court of Appeal’s (“FCA”) July 2021 decision in Alexion Pharmaceuticals Inc v Canada (Attorney General), 2021 FCA 157 (“Alexion”), may have important implications for pharmaceutical patentees in Canada as they implement or revise their pricing strategy for 2022 and beyond.
December 2021 Updates
First, on December 17, 2021, the PMPRB announced that it had decided not to proceed with three amendments to the New Guidelines proposed in July 2021. The three proposed amendments were a change in the definition of “Gap medicines” to reflect the then-current coming-into-force date of the Amendments (January 1, 2022), replacing references to the “PMPRB11” comparator countries with the term “Schedule Countries”, and the international price tests for Grandfathered medicines and their line extensions. These proposed amendments were subject to a consultation period between July 15 and August 31, 2021, and the stakeholder submissions are now available online.
Second, on December 23, 2021, the Minister of Health announced that the coming-into-force of the Amendments would be further deferred, from January 1, 2022 to July 1, 2022. The New Guidelines, which operationalize the amendments, are expected to come into effect on the same date as the Amendments.
Given the decision not to amend the definition of Gap medicines to include medicines for which a DIN was assigned on or after August 21, 2019 and prior to January 1, 2022 and first sold in Canada prior to January 1, 2022 (and barring future amendment to the definition to reflect the new coming-into-force date), a medicine first sold in Canada on or after July 1, 2021 would be considered a New Medicine under the New Guidelines. Under the New Guidelines, the applicable price test for New Medicines is a maximum list price (“MLP”) set at the median international price (“MIP”). Nevertheless, at present and until the Amendments come into force, these medicines are still subject to the Compendium of Policies, Guidelines and Procedures or the “Old Guidelines”. Under the Old Guidelines, the applicable price test for any medication depends on the level of therapeutic improvement (i.e. whether it is a breakthrough drug, has substantial, moderate or slight to no improvement) and can involve therapeutic class comparisons and/or international price comparisons.
Thus, although patentees might have expected and even waited to launch their medications as “New Medicines” to be subject to a MIP test, patentees are asked to grapple with the Old Guidelines to ensure compliance and avoid an investigation by the PMPRB. If the MLP of their medicine then changes under the New Guidelines, upon the coming-into-force of the Amendments, patentees may be forced to change their price.
This ever-changing pricing landscape and unpredictability may make price setting strategy and negotiations with payers challenging.
In this context, recent case law may be enlightening.
The Alexion Decision
In particular, in Alexion, the FCA defined the PMPRB’s mandate as “preventing abusive pricing, i.e., excessive pricing made possible by the abuse of the monopoly power given by a patent” (para 11). This proper purpose is contrasted with the improper purpose of price control and ensuring “reasonable pricing” (see paras 27, 49–51). General price control is not a part of the balance struck by the provisions of the Patent Act which represents a balance between incentivizing innovation and protecting against abuse of the statutory monopoly (see paras 40, 50, 56). An application by the Attorney General for leave to appeal the decision to the Supreme Court of Canada is currently pending. A Fasken litigation team represented Alexion Pharmaceuticals Inc. in this matter before both the Federal Court and Federal Court of Appeal.
See also how the Superior Court of Quebec’s decision regarding the constitutionality of the PMPRB may further support this line of reasoning.
Whether the articulation of the PMPRB’s mandate in these cases can provide support to patentees in the context of an excessive price investigation or hearing, including for Grandfathered or Gap medicines, or for New Medicines caught between the old and new regimes, remains to be seen.
For advice on how these developments may influence your product pricing strategy, please contact the Fasken PMPRB team.
