The PMPRB: Where Are We Now and What’s Next?

The PMPRB: Where Are We Now and What’s Next?

Dara Jospé, JD/LLB, Fasken Martineau DuMoulin S.E.N.C.R.L., s.r.l., Montréal, Québec
Mathieu Gagné LLD, Fasken Martineau DuMoulin S.E.N.C.R.L., s.r.l., Montréal, Québec

ABSTRACT: There is a growing body of jurisprudence questioning the price control reasoning by the Patented Medicine Prices Review Board (“PMPRB”). It is therefore an optimal time to reflect on the status of the PMPRB’s jurisdiction and what’s next for patented medicine pricing in Canada. Since its establishment in 1987, the jurisdiction of the PMPRB has been in constant question and evolution. Up until recently, the PMPRB has pushed, and the courts have generally allowed for expansion beyond restricting jurisdiction solely to patents that afford the patentee a monopoly in the true commercial sense (i.e., market exclusivity for the medicine). But the tides seem to be turning. Through a handful of recent decision at both the federal and Quebec courts, the PMPRB’s jurisdiction may be narrowing rather than expanding. This article explored those decisions and their related impact.

SUBMITTED: 15 MAR 2022 | PUBLISHED: 23 MAR 2022

DISCLOSURE: The Fasken team led by Marc-André Fabien, Julie Desrosiers, Michael Shortt, Eliane Ellbogen, Mathieu Gagné and Dara Jospé represented Merck et al. in the Constitutional Challenge. A Fasken team led by Geoff Cowper also represented Alexion at the Federal Court of Appeal.

CITATION: Jospé, Dara and Mathieu Gagné (2022). The PMPRB: Where Are We Now and What’s Next? Canadian Health Policy, MAR 2022. ISSN 2562-9492, https://doi.org/10.54194/DBAD7639, www.canadianhealthpolicy.com

Introduction

There is a growing body of jurisprudence questioning the price control reasoning by the Patented Medicine Prices Review Board (“PMPRB”). It is therefore an optimal time to reflect on the status of the PMPRB’s jurisdiction and what’s next for patented medicine pricing in Canada.

Since its establishment in 1987, the jurisdiction of the PMPRB has been in constant question and evolution. Up until recently, the PMPRB has pushed, and the courts have generally allowed for expansion beyond restricting jurisdiction solely to patents that afford the patentee a monopoly in the true commercial sense (i.e., market exclusivity for the medicine). [[1]] The PMPRB will assert jurisdiction on a drug where there is the “merest slender thread” between a patent and the drug [[2]] and on various occasions the PMPRB has sought to exploit this doctrine, including, most recently by seeking jurisdiction over an older, off patent medicine where the claims for a patent for a new strength and formulation of the medicine were clearly limited to the new medicine and not the old. [[3]]

But the tides seem to be turning.

Since August 2019 and the enactment by the federal government of amendments to the Patented Medicines Regulations (the “Regulations”) [[4]], which seek to provide the PMPRB with additional tools to assess the price of patented medicines, the courts have taken a different approach. Through a handful of recent decision at both the federal and Quebec courts, the PMPRB’s jurisdiction may be narrowing rather than expanding. Here, we explore those decisions and their related impact.

Context

The PMPRB was initially conceived as a “consumer protection pillar”, to ensure that the prices of patented medicines sold in Canada are not excessive. However, since the advent of product listing agreements (i.e., negotiations of price and other terms between pharmaceutical companies and public drug plans), among other things, questions regarding the effectiveness of the PMPRB in carrying out its regulatory role have arisen.

As a result, back in May 2017, the Federal Government proposed changes to the way in which prices for patented drugs are regulated, as set out in the Protecting Canadians from Excessive Drug Prices consultation document. [[5]] The Federal Government then prepared, consulted on, and enacted amendments to the Regulations in an effort to modernize the patented medicine pricing framework.

The Amendments to the Regulations included:

• An update the schedule of countries used by the PMPRB for international price comparisons;
• The introduction of three new, economics-based price regulatory factors which reflect a drug’s value and Canada’s ability to pay for patented medicines; and
• A requirement for patentees to report price and revenue information net of all price adjustments such as direct or indirect third-party discounts or rebates, including notably product listing agreements (“PLAs”) (collectively, the “Amendments”).

In response to these Amendments, several legal challenges were launched.

Constitutional Challenge in Québec

In August 2019, a group of research-based pharmaceutical companies launched a constitutional challenge in Quebec Superior Court. The plaintiffs argued that the existing PMPRB regime and the Amendments were unconstitutional on the basis that the federal jurisdiction over patents does not allow the federal government to regulate drug prices in the absence of patent abuse.

In a December 2020 decision, the Quebec Superior Court struck the changes to the price and revenue reporting provisions, including the requirement to disclose PLAs, but upheld the new economic factors, the change to the comparator countries, and the existing regime. [[6]] The pharmaceutical companies appealed and the Attorney General of Canada cross-appealed.

On February 18, 2022, the Quebec Court of Appeal rendered a major, unanimous decision which partially invalidated the Amendments. [[7]] The Court upheld the change to the comparator countries. The existing regime was determined to be constitutional because of the logical, real and direct link between patents and preventing excessive pricing of medicines that could derive from patent monopoly.

Nevertheless, the Court found that the majority of the Amendments were not, in pith and substance, related to excessive pricing or abuse of patent monopoly. In particular, in addition to affirming the trial judge’s holding that it is unconstitutional for the PMPRB to regulate PLAs or require disclosure of PLA rebates, the Court struck the economic factors. In the Court’s view, these factors had little or nothing to do with the monopoly conferred by patents and were being used purely to impose significant price reductions.

Judicial Review in Federal Court

In September 2019, Innovative Medicines Canada (“IMC”) and several research-based pharmaceutical companies applied to the Federal Court for judicial review, arguing that the Amendments were ultra vires the Patent Act (i.e., acting beyond the scope of the powers and purposes provided to it by its statute.).

In June 2020, the Federal Court declared that the changes to the price and revenue reporting provisions were invalid because they were ultra vires the Patent Act. [[8]] The Court upheld the changes to the comparator countries and the introduction of the economic factors.

The Federal Court of Appeal hearing took place in early March 2022. The Court’s judgment has not yet been issued.

Judicial Review of the New Guidelines

The final PMPRB Guidelines operationalizing the Amendments were published in October 2020, a few months after the Federal Court’s judicial review decision was issued. In November 2020, IMC and several innovative pharmaceutical companies applied for judicial review of the Guidelines on the basis that they are ultra vires the Patent Act. Among the grounds for the application were that the price review process in the Guidelines includes consideration of rebates, despite the Federal Court having held that the changes to the price and revenue reporting provisions were ultra vires. A hearing date has yet to be set in this matter.

Where Are We Now? The Broader Impact

Subject to a successful appeal to the Supreme Court of Canada of the Quebec Court of Appeal decision, the provisions found to be unconstitutional by that court are no longer valid and will not come into force. This is the case regardless of the outcome of the Federal Court of Appeal decision. In other words, even if the Federal Court of Appeal were to rule that all of the Amendments were intra vires (i.e. within the powers of the Patent Act), the PMPRB cannot use the economic factors in their assessment of excessive prices or require patentees to disclose the prices of their medicines net of PLA rebates.

Beyond the strict entry into force of the Amendments, the Quebec Court of Appeal, as well as other recent decisions have made important statements about the PMPRB’s mandate which may likely have an impact on the future practices of the PMPRB.

Today, the scope of proper regulatory action by the PMPRB is limited as follows:

• The main parameters defining the federal jurisdiction over the regulation of the prices of patented medicines are namely (i) a patented medicine; (ii) the factory-gate price; and (iii) control of the effect on prices resulting from the monopoly conferred by the patent. [[9]]
• The PMPRB’s mandate is preventing abusive pricing, i.e., excessive pricing made possible by the abuse of the monopoly power given by a patent. It is not ensuring reasonable pricing, affordable medicines, or consumer protection. [[10]]
• The PMPRB is not empowered to set prices or engage in price control. [[11]]
• The PMPRB factors cannot be used to achieve optimal pricing or lowest possible pricing. [[12]]
• An excessive price is a price that exceeds the price at which medicines in the same therapeutic class are sold or, otherwise, that exceeds the price of the same medicine in countries reasonably comparable to Canada, without justification. [[13]]

In this context, the PMPRB can use reference pricing, and in particular international reference pricing, to determine whether a price is excessive. [[14]] Accordingly, although there may be a new basket of countries, the PMPRB is at best, effectively limited to its current regulatory approach.

What’s Next?

Going forward, it will be interesting to watch for the Federal Court of Appeal’s ruling on the Amendments, as well as whether any of these cases are appealed to and heard by the Supreme Court of Canada.

Moreover, whether the articulation of the PMPRB’s mandate in recent cases can provide support to patentees in the context of an excessive price investigation, Board hearings or even on judicial review remains to be seen. Certain stakeholders are expecting a new corpus of Board hearings and judicial decisions regarding how the Board may approach the review of excessive prices in Canada.

What is clear is that this uniquely Canadian patented medicine pricing saga is far from over.

References

1. PMPRB-95-D5/VIRAZOLE : IN THE MATTER OF ICN Canada Ltd. and ICN Pharmaceuticals Inc., July 26, 1996 at pp 11-12.
2. See, e.g. ICN Pharmaceuticals, Inc. v. Canada (Staff of the Patented Medicine Prices Review Board), 1996 CanLII 4089 (FCA), [1997] 1 FC 32.
3. Canada (Attorney General) v. Galderma Canada Inc., 2019 FCA 196.
4. Regulations amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements): SOR/2019-298.
5. Health Canada (2017-05-16). Protecting Canadians from Excessive Drug Prices. https://www.canada.ca/en/health-canada/programs/consultation-regulations-patented-medicine/document.html.
6. Merck Canada inc. c. Procureur général du Canada, 2020 QCCS 4541 (in French only).
7. Merck Canada inc. c. Procureur général du Canada, 2022 QCCA 240 (in French only).
8. Innovative Medicines Canada v. Canada (Attorney General), 2020 FC 725.
9. Merck Canada inc. v Procureur général du Canada, 2022 QCCA 240 at para. 191.
10. Alexion Pharmaceuticals v Canada (AG), 2021 FCA 157. See also Merck Canada inc. v Procureur général du Canada, 2022 QCCA 240 at para 243: “[F]ederal price control of patented medicines is constitutionally valid to the extent that its pith and substance is to avoid the adverse price effects of the monopoly conferred by the patent. Conversely, such control is unconstitutional when it no longer aims to control the effect on prices of the monopoly conferred by the patent.” [our translation].
11. Innovative Medicines Canada v. Canada (Attorney General), 2020 FC 725.
12. Merck Canada inc. v Procureur général du Canada, 2020 QCCS 4541.
13. Merck Canada inc. v Procureur général du Canada, 2022 QCCA 240 at para 49 [emphasis added].
14. Merck Canada inc. v Procureur général du Canada, 2022 QCCA 240 at paras 145-146, 149, 221-222. The Court of Appeal also endorsed the PMPRB’s current Guidelines as being consistent with the control of excessive pricing at para 146.