The Canadian Patented Medicine Prices Review Board was recently reined in by the Federal Court of Appeal (FCA) in a case involving the Alexion drug Soliris.1 The Court held that the Board must stay within its mandate of preventing excessive pricing. The Board does not have the power to pursue a more general mandate of ensuring reasonable pricing, price-regulation, or consumer protection at large. As well, the Board's decision was unreasonable by making an unprecedented departure from its Compendium of Policies, Guidelines, and Procedures ("the Guidelines") to require that the price of Alexion's drug Soliris be lower than that of all seven comparator countries. The Board decision was quashed, and the case was sent back to the Board for redetermination.
In its initial decision, the Board found that Alexion priced Soliris excessively and ordered Alexion to forfeit excess revenues earned between 2009 and 2017. In making this decision, the Board relied upon the list price of Soliris being higher than the price in one of the seven countries used for comparison purposes. In other words, the price of Soliris had to be lower than all seven comparator countries. This was the first time the Board had ever imposed that requirement. Alexion applied for judicial review to the Federal Court.2
The FCA stressed in its decision that case law establishes that the excessive pricing provisions in the Patent Act are directed at controlling patent abuse, and not reasonable pricing, price regulation, or consumer protection at large.3 The FCA rejected the Board's arguments that the case law and certain statements in Parliamentary debates established a "consumer protection" or "reasonable" pricing mandate for the Board.
In making its initial Soliris decision, the Board considered the price of Soliris on provincial budgets, the fact that the price of Soliris had been under scrutiny in other jurisdictions, and that Soliris was priced lower in the United States. The FCA found that the Board did not, in a satisfactory manner, explain why these reasons were relevant to "excessive" pricing under section 85 of the Patent Act, indicating that the Board exceeded its statutory powers by pursuing a general price regulation mandate.
Further, the FCA took issue with the Board's explanation for its significant and unprecedented departure from the Guidelines. The Board justified this departure by citing "unique circumstances", but it did not specify what those circumstances were to an extent satisfactory to the FCA. The Board noted that a report from the United Kingdom criticized the price of Soliris as potentially unreasonable and that while Canadian prices for drugs were generally lower than those in the United States, Soliris in Canada exceeded the price in the United States at some points. The FCA described these reasons as "thin and impoverished", stating that "it is not enough to allude vaguely to 'unique circumstances' and then just name two circumstances that do not appear to be unique and that fall short of logically supporting the sort of significant, unprecedented departure from the Guidelines the Board took here".
The FCA also found that the Board failed to provide an adequate explanation for its inconsistent decision to use, under section 85 of the Patent Act, the lowest international price of the seven comparator countries as the benchmark to determine if a price is excessive, and then under section 83 of the Patent Act to order a remedy based on the highest international price.
The Federal Court of Appeal granted Alexion's application for judicial review, quashed the Board's decision, and remitted the matter to it for redetermination. The FCA concluded by stating that on redetermination, the Board is free to make whatever decision seems appropriate based on a reasonable interpretation of the legislation, but cautioned that in making its decision, the Board must ensure that a reasoned explanation is discernable on the key issues.
The Board still has the opportunity to request leave to appeal to the Supreme Court of Canada. Alternatively, the Board may just redecide the case in the manner required by the FCA. In the meantime, this case strengthens the position of innovator drug companies that are undergoing pricing review and negotiations with the Board. We will monitor the effect of this case on the Board's interpretation of its mandate, as well as any implications for the Board's draft new guidelines and regulations that the federal government continues to postpone.
1 Alexion Pharmaceuticals Inc. v Canada (Attorney General)  FCA 157.
2 In the Federal Court, Justice Gleeson dismissed Alexion's application, finding that the Board's decision was reasonable because it was entitled to significant deference. Following the Federal Court's dismissal of the appeal, the Supreme Court of Canada released the seminal decision concerning the substantive review of administrative decisions, Canada (Minister of Citizenship) v Vavilov, 2019 SCC 65, 441 D.L.R. (4th) 1 [Vavilov], which held that the presumption of reasonableness is to be the standard of review applicable to any substantive administrative decisions. The FCA reviewed the Board's decision under the Vavilov standard.
3 The FCA stated that the PMPRB excessive pricing provisions may be constitutionally suspect as outside the power of the federal government if they were aimed at reasonable pricing, price-regulation, or consumer protection at large, they would be constitutionally suspect.
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