The PMPRB recently released its May 27, 2011 decision relating
to ratiopharm Inc.'s sales of "ratio-Salbutamol
HFA". It canvasses a myriad of practical and substantive
issues. The five primary issues were: 1) are ss.
79 to 103 of the Patent Act constitutional; 2) is
ratiopharm a patentee; 3) did ratiopharm sell the medicine at an
excessive price; 4) could ratiopharm take into account certain
deductions that were applied in amended Form 2 filings; and,
5) what order should be made.
The first two questions were answered in the affirmative.
In the end result, excessive pricing was found, based on
non-compliance with the allowable CPI increases. Furthermore,
the rebates paid by ratiopharm to pharmacies – who were
downstream of the initial sale - were denied because of evidentiary
problems in tying the rebates to the particular ratiopharm HFA
product. Board staff were tasked with drafting an order within the
next 30 days based on the reasons.
On the question of whether ratiopharm, a generic company, was a
"patentee", the Board found that the supply arrangement
with the owner of the patent, which allowed ratiopharm to market
and sell the ratio HFA product, qualified ratiopharm as the
"patentee" for pricing purposes. To find
otherwise would allow a patentee to insert other commercial
entities in the distribution chain in a manner that would cause the
Board to lose jurisdiction over those who are actually selling the
product in Canada.
On whether the price was excessive, the Panel examined, among
other things, the issue of the relevance of the Act versus
the Guidelines and, although acknowledging that the Guidelines are
not binding, determined that in these circumstances, the Guidelines
should be followed.
The decision goes into considerable detail on the ability of
ratiopharm to include payments it had made to pharmacies (who were
not direct customers) in calculating the average price of the
product; allowing these claimed payments to be included in the
calculation would have had the effect of lowering the excess
revenues found to be owing. These deductions were denied
inclusion in the average price for lack of reliable evidence
that would have linked the payments to pharmacies (in the
form of professional allowances, continuing education and
performance enhancement programs) to the specific ratio HFA
The Board found that a patentee, in reporting the average price
at which a patented medicine is being sold or has been sold, or the
net revenue from its sale, is required to file supporting
documentation of any rebate claimed in respect of the medicine.
Patentees have the obligation to keep supporting documentation of
claimed rebates to show they are clearly, directly and verifiably
related to the medicine. The patentee was obliged to keep
records required to support reductions and rebates attributable to
"that medicine" and to file them with the
The Board held that it "need not finally assess the scope
of Pfizer at this time", (Pfizer being the
case which challenged a Communiqué of the Board, on the
basis that it had no authority to require patentees to report all
rebates and payments, including payments made to third parties who
are not parties to a sale). That said, the Panel did make a
number of comments, including an acknowledgement that "Since
Pfizer was issued, interpreting the scope of the decision
beyond the specific question that was raised in the judicial review
proceedings has caused the Board and patentees considerable
difficulty." The decision then goes on to note:
"The business reality of
the pharmaceutical industry is one that operates by providing
rebates and other payments through a chain of distribution.
Such business realities must be taken into consideration by the
Board if it is to review the true price at which patented medicines
are provided to Canadians, in accordance with its statutory
mandate, and if it is to give effect to subsection 4(4) of the
Regulations which remains in force."
Guided by the consumer
protection goals of its mandate, the Panel is of the view that if
it were required to do so, it would conclude that the
interpretation of subparagraph (4)(f)(i) and paragraph 4(4)(a) of
the Regulations set out in the Communiqué is the appropriate
one except, given the decision in Pfizer, which is binding on the
Board as regards payments that were at issue in Pfizer, i.e.
payments to the provinces."
Accordingly, the decision pronounces the Board Panel's
views on the scope of the Pfizer decision, while at the
same time, expressly saying it need not "finally assess"
the scope of that decision.
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