Worldwide: Patented Medicines Regulations: The Problem Is Not In Collecting The Data, But In How You Use It!

2022 has seen several big changes to the Patented Medicines Regulations under the Patent Act, which came into force on July 1. These changes have already resulted in significant contention, both in terms of the practice guidelines issued by the Patented Medicines Price Review Board (PMPRB) which were intended to reflect the new Regulations, as we previously reported, as well as in terms of successful constitutional challenges to the new Regulations in Federal and Quebec Courts. It was recently the turn of the Federal Court of Appeal (FCA) to consider whether provisions in the new Regulations are constitutional, by also considering the PMPRB's mandate to combat excessive prices on patented medicines.

The Issue

This decision is an appeal of the earlier constitutional challenge at the Federal Court. At the previous judicial review, several parties including Innovative Medicines Canada (the appellants), challenged the validity of several provisions of the new Regulations, including the new list of comparator countries used by the PMPRB in its price calculations.

The Federal Court determined that this aspect of the new Regulations is constitutional.

The appeal originally challenged three determinations made by the Federal Court, but the Government dropped the other two proposed amendments to the Regulations. At the time of this decision, the only issue before the FCA was whether the changes to the list of comparator countries are constitutionally valid, as deemed by the Federal Court. The changes to the list of comparator countries are illustrated in Table 1, below, wherein countries removed from the list are shown with strikethrough and countries added to the list are shown in bold.

Table 1: Comparator Countries

The Arguments

The appellants argued that the Government acted unreasonably when making these changes by selecting certain countries to advance an agenda or a purpose contrary to the purpose of the excessive price provisions of the Patent Act and of the Act itself. Specifically, they alleged that the Government was "improperly pursuing the purpose of regulating or controlling prices or setting reasonable prices" in general (paragraph [17]), rather than policing excessive pricing stemming from the abuse of a patent monopoly. In support of this, the appellants presented, among other things, a letter from the Minister of Health which speaks of lowering high drug prices, improving affordability and accessibility of drugs, and modernizing the PMPRB's regulatory framework.

The Government argued that the changes to the list of comparator countries were undertaken to modernize the tools the PMPRB uses to detect excessive pricing. The list had not been changed since 1994, and the Government argued that the markets had changed in the intervening period causing the list to become dated. The Government stated that for the new list, it selected the 11 countries most comparable to Canada according to the following factors:

1. their measures to constrain free-market pricing,
2. their economic standing, and
3. their market characteristics.

With respect to the United States and Switzerland, which were removed from the list, the Government argued that unlike Canada, these countries do not have measures regulating free-market pricing of patented drugs, and therefore were bad comparators.

The Outcome

The FCA agreed with the Federal Court and determined that the changes to the list of comparator countries are constitutional.

The FCA relied on its recent analysis from Alexion Pharmaceuticals Inc v Canada (Alexion), which also dealt with the purpose of the excessive price provisions of the Act and of the Act itself, as we previously reported. The FCA stated at paragraph [49] in Alexion that "[o]ver and over again, authorities have stressed that the excessive pricing provisions in the Patent Act are directed at controlling patent abuse, not reasonable pricing, price-regulation or consumer protection at large". While the FCA reaffirmed this purpose of excessive pricing provisions of the Act at paragraph [19] of the present decision, the FCA did not agree with the appellants that the changes to the list of comparators were made for, or had the effect of, regulating prices generally.

Rather, the FCA agreed with the reasoning of the Federal Court, which determined that "the sin is not in the gathering of information; if a sin is committed, it will be later when the information is improperly used" (paragraph [24]). The Court stated that the changes to the list of comparator countries amounted only to a change in the pricing information collected. The collection of this information helps the PMPRB to determine whether the price of a patented medicine is excessive. The Court cautioned that if, however, the Board uses this information to regulate or control prices or to set reasonable prices generally, rather than to police excessive pricing specifically, then a judicial review of those specific PMPRB decisions may be warranted.

The FCA also agreed with the Federal Court in determining that the Government acted reasonably in making these changes to the list of comparator countries. In response to the evidence presented by the appellants, the Court noted that a natural consequence of effectively dealing with excessive pricing is to reduce the overall cost of medicines, and thus an overall cost savings resulting from the amendments does not necessarily mean that these savings are the substance of the changes.

As stated by the Court, motive, policy, and politics behind a regulation should not be confused with the regulation's substance.

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