Canada: PMPRB Decision Addresses Inclusion Of Rebates On A Product's Average Price

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 product. 

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 Board. 

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.

The decision can be found at: (

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