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
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
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
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.
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