Canada: Recent Pricing Issues In Canada

In Canada, pricing of pharmaceuticals is affected primarily in two contexts: under the federal price control scheme, and as a result of pricing on provincial formularies. In the case of the latter, provinces agree to a formulary price for medications, but negotiate agreements on volume discounts and other incentives from manufacturers in return for the listing.

Federal: The Patented Medicine Prices Review Board

In recent years, the PMPRB focused on resolving old matters with no new hearings since 2009, and no new notice of hearings issued in 2011. The trend has been that a growing number of issues are resolved by Voluntary Compliance Undertaking (VCU); effectively, a form of settlement (see Figure 1).

Two decisions were released since our update in the 2011 Current Issues publication: the COPAXONE and ratio-SALBUTAMOL decisions.

The COPAXONE decision, issued on February 23, 2012, was a redetermination of an earlier matter, which had been remitted back to the Board by the Federal Court of Canada (2009 FC 1155) and was the only matter considered by the Board in 2011. The Federal Court had determined in 2009 that in the earlier decision, the Board Panel had paid "lip service" to assessing the factors required to be assessed in any allegation of excessive pricing, but in the end had only applied the factor set out in section 85(1)(d), the CPI factor. In the redetermination decision, the Board again applied the CPI factor and found excessive pricing, although, the reasons seem to be primarily CPI-focused again, with mention that COPAXONE was the lowest priced medicine relative to its therapeutic comparators. An application for judicial review of that redetermination was

Source: PMPRB's website. "Decisions" relate to decisions on merits only (interlocutory proceedings excluded); "Hearings" reflect first date in Notice of Hearing only.

filed in Federal Court on March 20, 2012 seeking a directed verdict that the Board Panel re-determine the matter on the basis the allegations of excessive pricing be dismissed.

In the ratio-SALBUTAMOL decision, released on May 27, 2011, the court found the price to be excessive. In doing so, it canvassed a myriad of practical and substantive issues including that ratiopharm was a patentee (even if a generic company) under the Patent Act. Supply agreements with an innovator were suffi cient to make it a patentee; to find otherwise would allow a patentee to insert commercial entities in the distribution chain to avoid Board jurisdiction. In considering the supremacy of the Act versus the Guidelines, it found this was not a case to deviate from the Guidelines. One significant issue was the attempt by ratiopharm to reduce the Board's calculation of the average selling price (and consequently, excess revenues) by including deductions to the trade, but these were denied inclusion based upon lack of evidence. A common thread throughout the decision is the liberal interpretation of the statute: that the words cannot be interpreted strictly in accordance with commercial law principles; that the purpose of the Act was consumer protection; and, that the Board's mandate was to ensure Canadians have access to patented medicines that are reasonably priced.

Provincial: Market Access Issues

The provinces play a significant role in market access for those products covered by the provincial formularies. Many provinces are taking a closer look at health-care expenditures, and in recent years some have made efforts to address generic pricing. There have also been efforts to obtain pricing discounts and other incentives from manufacturers. Many of these changes are being effected on a policy basis, rather than through legislative change. A growing phenomenon in recent years is the prevalence of product listing agreements. Under these agreements, a province may obtain concessions from a manufacturer for the listing of a product on the provincial formulary.

In Ontario, we note a curious provision in the regulations under the Ontario Drug Benefi t Act (O. Reg. 201/96, subsection 11(8)), brought into force in July 2011, relating to generic pricing. It permits a generic drug product to obtain a higher than otherwise permitted price on the formulary in cases where a generic manufacturer has challenged a patent. This provision has yet to be interpreted as it applies only to generic products that apply for the Ontario formulary on or after April 1, 2012. It will be interesting to see how this is applied in practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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