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IP practitioners wary of patented medicine pricing amendments

Amendments to Canada’s Patented Medicines Regulations come into force July 1 — and they have already been met with two court challenges

IP practitioners wary of patented medicine pricing amendments

Canada’s new patented medicine pricing regime will come into effect on July 1; and although guidelines have not yet been released, nor the next set of consultations started, it is already controversial.  

In August, amendments to Canada’s Patented Medicines Regulations were published — the first since 1987 — and have so far been met with two court challenges.  

In early September, the patented medicines industry group Innovative Medicines Canada and 16 of its member companies filed a judicial review application in the Federal Court of Canada. The group charges that the new regulations would jeopardize “the industry’s rationale to invest in Canada and patient access to new medicines.” 

The other challenge is constitutional, initiated in the Quebec Superior Court on behalf of six pharmaceutical innovator companies.  

“Canada may be the only country in the world that applies its law so that pricing of patented medicines is controlled,” says Daphne Lainson, a partner at Smart & Biggar LLP in Ottawa, who calls the changes to the pricing regime “significant.” 

Related guidance from the Patented Medicine Prices Review Board has not yet been released, although it will be important in how the new amendments will be applied. The PMPRB takes its jurisdiction and mandate from the Patent Act, under the jurisdiction of the minister of industry, although the new amendments were developed in co-operation with input from Health Canada. 

There are three principal reforms. First, new factors were introduced to enable the PMPRB “to consider the price of a patented medicine in relation to its value and impact on the health care system,” according to Health Canada. These include an assessment of pharmaco-economic value of the medicine, i.e., the cost of a drug against its health benefit, says Lainson, who notes that the regulations say this will apply only to high-cost drugs.  

“The pharmaco-economic value is important because the board is going to be looking at reports that are published by publicly funded Canadian agencies that are presently preparing these types of analyses for the public payers,” Lainson says. 

Other factors to be considered will be market size and gross domestic product per capita in Canada, which boil down to whether Canadians can afford to pay for a certain drug. 

Second, changes to reporting requirements will mean that patentees will have to report on all their net sales information, says Lainson.  

And third, pricing for patented medicines will be benchmarked against an updated list of countries “with similar consumer protection measures, economic standing and pharmaceutical markets as Canada,” says Health Canada. The amendments will increase the current basket of countries to 12 from seven countries, drawn from member states of the Organisation for Economic Co-operation and Development. Removed from this basket will be the United States and Switzerland, where drug costs are higher.  

“Canadians pay among the highest prices for patented medicines in the world, after only the United States and Switzerland,” said Anna Maddison, senior media relations advisor for Health Canada, in a statement to Canadian Lawyer. 

“Canadians pay close to 25 per cent more than the median price that people in other developed countries pay for the same medicines,” she said. “This influences Canadians’ access to important medications and the sustainability of Canada’s health-care system.” 

Amir Attaran, Canada Chair for Pop Health and a professor cross-appointed to the University of Ottawa’s faculties of Law and Medicine, sees these amendments as designed to be in keeping with other jurisdictions.  

 “It gives rise to an interesting rebuttal to what the industry says: ‘If we enact these regulations and lower prices and we stay at the average of the lower countries in the basket, new products won’t be launched here.’ But new products are launched in countries in the lower end of basket,” he says. 

Evidence shows that lower prices do not limit access to new medicines, according to Health Canada. “Countries with lower prices than Canada have new medicines introduced within a similar timeframe as they are currently in Canada,” said Maddison. She added that price is only one of several factors that play into research and development investment decisions by the pharmaceutical industry, and many countries with lower patented medicine prices also have significantly higher levels of investment by pharmaceutical companies.  

Yet the way that the regulations were set years ago had an impact on whether some companies would launch in Canada at all, says Noel Courage, a partner at Bereskin & Parr LLP in Toronto.  

Courage says he has talked to Canadian companies that try to license in the Canadian rights to drug products, “and I've been told that they have difficulty getting these rights sometimes because the American or the European company that owns the product does not want to get involved in the Canadian pricing system because it could affect their local pricing or affect their U.S. pricing.”  

With the introduction of a stricter set of pricing criteria that is less favourable to the innovative companies that produce products, “I think that reluctance of certain companies to launch in Canada is going to be greater,” he says. 

The one overarching theme of the amendments is that “the current system contains a fair degree of unpredictability,” says Alan West, a partner in Gowling WLG's Toronto office, who practises primarily in the pharmaceutical and health-care sectors.  

“The new changes will only exacerbate that and inject more unpredictability,” he says.  

One thing that won’t change is the provision that says the guidelines are not binding on the PMPRB, West says. This creates uncertainty for a company or manufacturer that may adhere to the guidelines only to lose out in a dispute with the PMPRB.  

West also points to two of the new factors that will be considered by the PMPRB in determining whether the price of a medicine is excessive: the GDP of a country and the per capita GDP. “If the price of a drug is set in Year One, and the . . . price of oil plummets — and Canada is a petrol-exporting country — if our GDP dips, how does that affect the price of medicine in Year Two?” 

This takes pricing control away from manufacturers, says Alex Camenzind, who practises with Gowling WLG in Ottawa, as pricing becomes tied to the vagaries of the market.  

For now, the guidelines have not been released nor new consultations started, and they won’t likely be released until after the federal election dust clears. As for the two court challenges, Attaran says that neither is likely to succeed.  

The constitutional challenge from Quebec charges that the amendments to pricing regulations are ultra vires federal authority in the constitution; but this matter has been litigated before, and unsuccessfully, he says. “The courts have said because the federal government has constitutional authority in s. 9.1 . . . to make laws in relation to patents, that includes laws in relation to the pricing of patent medicine.” Nor is the contention valid that the cost effectiveness of a drug is a new criterion that distinguishes this case from all previous ones, Attaran says.  

The challenge in Federal Court, filed by the mainstream of the industry, “turns on the supposition that when Parliament legislated the Patent Act and gave the PMPRB jurisdiction to set prices, which that power was communicated to PMPRB through regulations” but that the new regulations are ultra vires the Patent Act.  

In any event, these new regulations “will be thrown into great doubt if the Conservatives take power,” Attaran says. “They’d be more prepared to have our prices go up than the Liberals are.” 

Canadians among highest payers for patented medicines 

“Canadians pay among the highest prices for patented medicines in the world, after only the United States and Switzerland Canadians pay close to 25 per cent more than the median price that people in other developed countries pay for the same medicines. This influences Canadians’ access to important medications and the sustainability of Canada’s health-care system.”
Health Canada 

What’s to blame for falling innovation? 

“Pharmaceutical R&D investment in Canada has fallen to below five per cent of sales, less than half of its level in the 1990s, even as patented medicine prices have risen during that same timeframe. This is despite significant government support through funding and grant opportunities for research and investment in Canada.” 
Health Canada 

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