The Patented Medicine Prices Review Board ("PMPRB" or the "Board") has published Draft Guidelines for public consultation, which are intended to operationalize the August 21, 2019 amendments to the Patented Medicines Regulations ("Amended Regulations") – previously discussed here – that are set to come into force on July 1, 2020. The Board has also released a Consultation Backgrounder, as well as its slide deck from a Civil Society Forum held on December 10, 2019.
The PMPRB is accepting written submissions on the Draft Guidelines until January 31, 2020 (extended from the previous deadline of January 20). The Board anticipates that the Final Guidelines will be available in the spring of 2020. The Final Guidelines will supersede prior guidance documents and communications by the PMPRB with respect to the price review and investigations process.
Under the Patent Act, the Guidelines, once finalized, are not binding upon the Board or any patentee, but are intended to provide transparency and predictability to patentees regarding the process typically engaged by the staff employees of the PMPRB (the "Staff").
Key aspects of the Draft Guidelines include the following:
Grandfathered medicines (DIN prior to August 21, 2019)
Patented medicines that received a DIN – the unique number assigned by Health Canada to all drugs once approved – prior to August 21, 2019 (the publication date of the Amended Regulations) are categorized as "grandfathered" products under the Draft Guidelines, and would be subject to a different price review process than non-grandfathered products.
The new Section 85(1) factors under the Amended Regulations (see our previous blog here) would not apply to grandfathered products. Patented medicines sold in Canada prior to August 21, 2019 under the Special Access Program, however, are not assigned a DIN and so would therefore not be grandfathered.
Under the Draft Guidelines, the Maximum List Price for grandfathered products would be the lower of (i) the median international price across the amended list of comparator countries (the "PMPRB11") for which the patentee has provided information, and (ii) the price ceiling set under the current PMPRB Guidelines. The PMPRB11 will exclude the United States and Switzerland – both of which are higher-price jurisdictions included in the current list of comparator countries – so it is likely that many grandfathered patented medicines would nonetheless be subject to a lower Maximum List Price than is currently applicable.
Under the Draft Guidelines, non-grandfathered products would be further divided into two categories:
- Category I: A patented medicine would be classified as Category I if either (i) its 12 month treatment cost is greater than 50% of GDP per capita, or (ii) its estimated or actual market size (revenue) exceeds the annual Market Size Threshold of $25 million. The Board regards these medicines as likely to be at highest risk of excessive pricing. According to the PMPRB's Consultation Backgrounder, the Board arrived at the $25 million Market Size Threshold figure through a number of factors.1 The Draft Guidelines indicate that the Board will adjust the Market Size Threshold at least every five years to reflect changes in the CPI and GDP.
- Category II: All other patented medicines would fall into Category II.
The Draft Guidelines provide that Category I patented medicines would be subject to two price ceilings: the Maximum List Price and the Maximum Rebated Price. Category II medicines would be subject only to the Maximum List Price.
- The Maximum List Price would be equivalent to the median international list price for the PMPRB11 for which sales have been reported by the patentee. This price would initially be adjusted annually, then eventually set. Under the Draft Guidelines, if the gross publicly available Canadian ex-factory price (the List Price) for a patented medicine exceeds the Maximum List Price, then additional review or investigation by the Staff may be triggered.
- The Maximum Rebated Price would be set based on the pharmacoeconomic value of the drug and the market size for the patented medicine. This price would be calculated based upon cost-utility analyses that patentees will be required to file to the Board under the Amended Regulations where available. Under the Draft Guidelines, if the net revenue from sales of each dosage form (the Net Price) for a Category I medicine exceeds the Maximum Rebated Price, then additional review or investigation by the Staff may be triggered.
The Draft Guidelines provide that the applicable price ceilings may be reassessed to ensure they remain relevant in light of material changes in market conditions or usage, for example, if the patented medicine is approved for a new indication, if the total prevalence across all approved indications increases above 1 in 2,000, or if the cost-utility analysis is updated.
New filing requirements
The PMPRB has yet to substantively address the specific logistics for filing the new information required under the Amended Regulations. The Draft Guidelines refer to the Patentee's Guide to Reporting maintained by the Staff, but that guide has not yet been updated to reflect the new filing requirements.
Next steps to watch and Court challenges
The PMPRB is accepting written submissions on the Draft Guidelines until January 31, 2020. It is expected that the final version of the Guidelines will be published in the spring of 2020, ahead of the July 1, 2020 coming to force date of the Amended Regulations.
Alongside the consultation process, the industry and practitioners should also closely track the two legal challenges that have been launched against the Amended Regulations themselves – one in Federal Court and the other in Quebec Superior Court. These proceedings could result in suspension of the coming into force of the Amended Regulations if it is found that those amendments were beyond the scope of Cabinet to promulgate through mere regulation (as alleged in the Federal Court proceeding), or unconstitutional as ultra vires federal jurisdiction (as alleged in the Quebec proceeding). The Federal Court proceeding is set to be heard on April 27-28, 2020.
1 Specifically, the PMPRB calculated the $25 million Market Size Threshold by: (i) assuming, among other things, that spending on patenting medicines should be commensurate with anticipated annual GDP growth, and that the proportion of health care spending attributable to patented medicines should remain the same; (ii) based on those assumptions, calculating that the average annual growth in patented medicines sales should be $432 million; (iii) finding the average number of new patented medicines introduced per year from 2014-2018 to be 36; (iv) dividing $432 million by 36 to arrive at $12 million as the average annual affordability threshold per medicine; and (v) approximately doubling that figure to arrive at $25 million.
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