In late May, the Patented Medicine Prices Review Board (the "Board") released a Discussion Guide (the "Discussion Guide") for consultations on the Board's Excessive Price Guidelines (the "Guidelines"). The purpose of the Discussion Guide is to obtain feedback on specific issues arising from the Guidelines, including ideas on possible options for change. Written feedback is due no later than AUGUST 25, 2006. It is expected that the Board will conduct face to face consultations in November, 2006.

The Board is seeking input into three specific issues arising from the Guidelines, as follows:

  • The appropriateness of the current approach to the categorization of new patented medicines;
  • The appropriateness of the current approach used to review the introductory prices of new patented medicines; and
  • Whether the Guidelines should address the direction in the Patent Act to consider "any market".

The Discussion Guide indicates that at this time, the Board has no set position on whether or not the Guidelines should be changed.

ISSUE NO. 1: The Appropriateness of the Current Approach to the Categorization of New Patented Medicines

Under the Guidelines, there are three categories for new patented drug products. Category 1 products are a new strength or dosage form of an existing medicine. Category 3 products are those that provide moderate, little or no therapeutic advantage over comparable medicines ("me too" drugs). Category 2 products are ones that provide a breakthrough or substantial improvement over existing medicines.

Under definitions in the Guidelines, a "breakthrough" is the first drug product to be sold in Canada that effectively treats a particular illness or effectively addresses a particular indication. A "substantial improvement" is a drug product that, relative to other drug products in Canada, provides substantial improvement in therapeutic effects (such as increased efficacy or major reductions in dangerous adverse reactions) or provides significant savings to the Canadian health care system.

The Discussion Guide asks three questions in relation to this issue:

  1. Are the new patented drug categories and their definitions appropriate?

  2. Is it important to distinguish a medicine that offers "moderate therapeutic improvement" from a medicine that provides "little or no therapeutic improvement"? If yes, why is it important? If not, why not?

  3. If the answer to question 2 above is yes, on what basis would a new medicine that offers "moderate therapeutic improvement" be distinguished from a new medicine that provides "little or no therapeutic improvement"?

Issue No. 2: Is the Current Approach Used to Review the Introductory Prices of New Patented Medicines Appropriate

The Discussion Guide reviews the tests the Board Staff applies to determine whether the price of a patented drug product falls within the Guidelines and is not excessive.

The Reasonable Relationship Test is used for most Category 1 drug products. The introductory price of a Category 1 drug is considered excessive if it does not bear a reasonable relationship to the average Canadian price of the other strengths of the medicine. Where the dosage regimen is different, the Therapeutic Class Comparison Test is used.

The Therapeutic Class Comparison Test is used for Category 3 drug products and some Category 1 drug products (non comparable dosage forms). The price of a new medicine is excessive if it exceeds the highest price of the therapeutically comparable drugs in Canada. When it is impossible or inappropriate to identify therapeutically comparable drugs in Canada, the Median of the International Prices Test is used.

The Median of the International Prices Test is used for Category 2 drug products and some Category 3 drug products. Under this test, the introductory price of a medicine is excessive if it exceeds the median price of the same medicine sold in the comparator countries of France, Germany, Italy, Sweden, Switzerland, the U.K. and the U.S.

Finally, the Highest International Price Comparison Test provides that in addition to the other tests, the Canadian price of a patented medicine can never be the highest relative to the prices of the same medicine in the seven comparator countries.

The Discussion Guide lists four questions in relation to these tests, as follows:

  1. Are the price tests currently used to review the prices of new medicines in the various categories appropriate for that category? Why? Why not? If not, how could these tests be amended to improve their appropriateness?

  2. If you think that medicines that offer "moderate therapeutic improvement" should be distinguished from medicines that provide "little or no therapeutic improvement" what would the appropriate new price test be?

  3. For price review purposes, "comparable medicines" are medicines that are clinically equivalent. Do you have any suggestions as to principles or criteria that should be used in determining how to identify "comparable medicines" for the purpose of inclusion in the above price tests?

  4. Under the current Guidelines, Board Staff compares the Canadian average transaction price of the new medicine to the prices of the same medicine sold in the seven countries listed in the Regulations. However, Section 85(1) of the Patent Act states that the Board should take into consideration "the prices of other comparable medicines in other countries". Should the Guidelines address this factor? If so, how could this factor be incorporated into the price tests for new medicines?

Issue No. 3: Should the Board's Guidelines Address the Direction in the Patent Act to Consider "any market"?

Section 83 of the Patent Act provides that the Board can make a finding of excessive price, and order a price reduction, in respect of the price at which a patented medicine is being sold in "any market" in Canada. However, in conducting its various price tests, the Board currently uses the average transaction price (ATP) for Canada as a whole. As a result, it is possible for different customer classes (wholesalers, hospitals, etc.) and/or different provinces/territories to pay a higher or lower price than others. The variation in the prices charged is usually modest (plus or minus 5%) but it can be as much as 25% above or below the maximum non-excessive price.

The Board asks two questions in relation to this issue, as follows:

  1. Given the price variations by provinces/territories and classes of customer, is it appropriate for the Board to only consider an ATP calculated based on the total revenues from the sales for all provinces/territories and all classes of customer? Why? Why not?

  2. If the current ATP calculation is not appropriate, should the Board review the prices to the different classes of customers and/or the different provinces and territories for all DINs? Or should this level of review be done on a case by case basis, where there is a significant variation in the prices charged?

The full text of the Discussion Guide can be accessed at: http://www.pmprb-cepmb.gc.ca/CMFiles/DisGuide-e38PCV-5232006-3894.pdf .

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