Canada: First PMPRB Decision Dismissing Allegations of Excessive Pricing

Last Updated: April 20 2010
Article by Graham Ragan

The Patented Medicine Prices Review Board ("PMPRB") recently released its decision in the matter of Hoechst Marion Roussel Canada Inc. and the medicine NIOCODERM, a nicotine patch which assists those who are attempting to quit smoking; it is to be publicly posted on the PMPRB website today. This matter, which originally commenced by Notice of Hearing in 1999, was scheduled to be only the second full hearing before the PMPRB (ICN had been the first). However, as a result of procedural and interlocutory issues the merits of the matter were not heard until 2009. In its decision, the Panel held that NICODERM has not been sold at excessive prices. The Panel held that NICOTROL, a higher priced non-patented nicotine patch, should have been included in the therapeutic class and should have set the Maximum Non-Excessive (MNE) price for NICODERM. This marks the first time since the PMPRB's creation in 1987 that a Hearing Panel has rejected outright the allegations of excessive pricing made by Board Staff.

Board Staff's primary allegation in this case was that the price of NICODERM was excessive when compared to HABITROL, the only other patented nicotine patch available at the date of the first patented sale of NICODERM. NICODERM had entered the Canadian market before receiving its patent and before HABITROL. Board Staff relied on the price of HABITROL as determined by a Voluntary Compliance Undertaking (VCU) entered into between the PMPRB and HABITROL's manufacturer. HABITROL's VCU price had been based on the price of NICORETTE GUM. Both NICOTROL and NICODERM had been excluded from HABITROL's therapeutic class for price comparison as Board Staff considered them to be excessively priced. In the NICODERM case, the Human Drug Advisory Panel had identified NICOTROL and HABITROL as members of NICODERM's therapeutic class, yet Board Staff again excluded NICOTROL from the price comparison as its price was believed by Board Staff to be "excessive".

The patentee argued that the price of NICODERM was not excessive on several grounds, including that NICOTROL should have been included in NICODERM's therapeutic class for price comparison purposes. The patentee argued that, as held in an interlocutory Board Panel decision in the ADDERALL XR case, Board Staff could not simply apply the Guidelines to deem the price of a non-patented medicine to be excessive and therefore exclude a non-patented comparator. The patentee argued that in the case of a non-patented comparator product, the onus was on Board Staff to establish through evidence that the price was excessive before excluding it as a comparator product. The patentee also argued that it was inappropriate for Board Staff to rely on the VCU price of HABITROL as this was an artificial price, negotiated solely with that manufacturer.

In its decision, the Panel adopted the reasoning from the ADDERALL XR interlocutory decision and held that unless it is convinced otherwise by Board Staff, an unpatented medicine in the therapeutic class should not be excluded for price comparison purposes. The Panel recognized that for non-patented medicines there is no statutory monopoly and the presumption of market power that follows from a statutory monopoly is the premise of the Guidelines. This premise does not apply to non-patented medicines and the PMPRB cannot presume that the price of such medicines is excessive based on the application of its Guidelines. The onus is on Board Staff to lead evidence to justify a conclusion that the price of a non-patented comparator product is excessive.

The Panel noted that while Board Staff responded, in argument, by asserting that at the relevant time NICOTROL was a prescription medicine and thus not subject to market competition, they had put no evidence on the record to support that position. The Panel held that the proposition that the prescription status of NICOTROL created market conditions that gave its manufacturer the ability to sell NICOTROL at excessive levels was not self-evident nor one that the Panel considered to fall within its inherent expertise (it should be noted that the non-patented comparator in issue in ADDERALL XR was also a prescription medicine). As a result, the Panel concluded that NICOTROL should have been included in NICODERM's therapeutic class for price comparison purposes. Accordingly, the Panel held that as NICODERM had been priced below the price of NICOTROL throughout the period of review no excessive pricing had taken place.

One of the four Panel members issued a dissent, finding that Board Staff was entitled to exclude NICOTROL from price comparison if its price was deemed excessive by application of the Guidelines and without further evidence.

The Panel also made comments on two other issues although recognizing that neither was necessary given its primary finding that there was no excessive pricing of NICODERM. On the first issue, the off-setting of excess revenues, the Panel reiterated the views of earlier PMPRB Panel decisions that a patentee must maintain the price of a patented medicine at non-excessive levels on an annually averaged basis. On the second issue, the Panel accepted that Board Staff is entitled to rely on the VCU price of a patented product to set the MNE for other members of the therapeutic class. The Panel held that a VCU is not a negotiated price and that in accepting a VCU, the Chairperson or hearing panel must be satisfied that the MNE is in compliance with the Patent Act. Therefore, the Panel held that it is reasonable for Board Staff to rely on a VCU price when conducting therapeutic class price comparisons.

Interlocutory Matters Considered

While it is almost exactly 11 years since the Notice of Hearing was issued in this case, some significant decisions have been made in various interlocutory proceedings. First, the Board Panel held that the patentee was not the patentee in respect of the earliest patent alleged to give the Board jurisdiction. While the Panel was unanimous that the patent in issue pertained to NICODERM, a majority, the Chair dissenting, held that the patent fell outside the licence agreement with the manufacturer.

Second, the Federal Court of Appeal upheld lower court decisions that Board Staff had no right to appear on a judicial review application commenced by the patentee. As Board Staff has no legal interest separate from that of the Board itself, it is also precluded from seeking the aid of the Court in respect of Board decisions that are contrary to the position advanced by Board Staff. The Federal Court of Appeal also upheld lower court decisions that the denial of distinct participation rights to Board Staff did not enlarge the limited rights of the Board itself in a judicial review application.

The Federal Court also decided that the Board enjoyed no jurisdiction over unissued patent applications.

The net effect of the various interlocutory proceedings and decisions was to substantially reduce, though not eliminate, the excess revenues alleged by Board Staff. The final decision held that there were no excess revenues. As noted above, this is the first time that a Board Panel has made such a determination after the conclusion of a hearing.

For a copy of the decision, see: - Merits-Reasons - D10 - April 9 2010.pdf

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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