The latest on Canada’s Patented Medicine Prices Review Board: not the “All Medicine Prices Review Board”

The Patented Medicine Prices Review Board (PMPRB), established under the Patent Act, has a long history of regulating the prices of “patented medicines”. But what it means to be a “patented medicine” has been controversial. Recently, the PMPRB attempted to regulate the price of Galderma’s drug product Differin even though it was no longer covered by a patent. In Galderma Canada Inc. v Attorney General of Canada, the Federal Court of Appeal allowed Galderma’s judicial review and set aside the PMPRB’s decision, concluding that the PMPRB had acted outside its constitutional and statutory authority. The Court firmly held that the PMPRB only has jurisdiction over drug products that are covered by a patent: it does not have any jurisdiction over unpatented medicines.

What you need to know

• The PMPRB’s jurisdiction extends only to medicines that are covered by a Canadian patent. In the Court of Appeal’s colourful language, the PMPRB is not named the “‘Patented and Unpatented Medicine Prices Review Board’ or the ‘All Medicine Prices Review Board’”¹.
• Galderma held Canadian patents on two of its dermatological medicines, Differin (0.1% adapalene) and Differin XP (0.3% adapalene, sustained release). The Court confirmed that when the patent to Differin (0.1% adapalene) expired, Galderma was no longer “entitled to the benefit of the patent for [Differin],” and ceased being a “patentee” for Differin. This meant that the PMPRB ceased to have jurisdiction to regulate Differin’s price under the Patent Act².
• The fact that different formulations of a drug (that are or were subject to different patents) may be used interchangeably by patients does not affect that analysis. As the Court held, “[n]owhere does the Patent Act say that the Board can regulate an unpatented medicine just because a patented medicine might be used in its place or because it shares some unpatented properties of the patented medicine”³.
• The PMPRB provisions of the Patent Act must be interpreted to maintain the Board’s power within its constitutional limits. Consumer protection or general price regulation fall within provincial, not federal, legislative authority. As a result, Parliament could not confer that jurisdiction on the PMPRB.

Canada has until mid-February to seek leave to appeal the decision to the Supreme Court of Canada.

Background

Jurisdiction of the PMPRB

The PMPRB was created by the Patent Act and has broad-ranging powers to regulate the prices of medicines. But the Act limits its jurisdiction to those medicines that are protected by an existing Canadian patent. It does so by a series of nested definitions that are not always intuitive. Under the provisions of the Act that applied at the time this case started, the PMPRB has jurisdiction over a “patentee”, defined as “in respect of an invention pertaining to a medicine … the person being entitled to the benefit of the patent for that invention”. An invention “pertains to a medicine if the invention is intended or capable of being used for medicine or for the preparation or production of medicine”.

These definitions, cut down to their essence, seem to be focused on the question of whether anyone holds a patent that would be infringed if someone else used, prepared or produced a medicine in question. But the PMPRB has always taken an expansive view of its mandate, relying on the phrase “pertains to a medicine”, which has sometimes led to clashes with the pharmaceutical industry on the question of whether it has jurisdiction over particular products. This case arose from one of these clashes.

Differin and Differin XP

Galderma held Canadian patents on two of its dermatology medicines, Differin (0.1% adapalene) and Differin XP (0.3% adapalene, sustained release). Patents for Differin expired in 2009. The single Canadian patent for Differin XP expired in 2016. Seven years after the Differin patent expired, the PMPRB asserted that the Differin XP Patent was capable of being used for Differin, and Differin should have remained under PMPRB jurisdiction/price control even after the expiry of the Differin patent. It therefore alleged that Galderma had improperly failed to provide pricing and sales information as required under the Patent Act from 2009 to 2016. Galderma disagreed and sought judicial review.

Galderma’s saga through the courts

The Court of Appeal’s decision is the latest in the multi-year saga of proceedings challenging the PMPRB’s jurisdiction in respect of Differin⁴. When Galderma first challenged the PMPRB’s jurisdiction, the Federal Court held that the PMPRB’s decision was unreasonable because it could not explain how the patented invention related to the medicine. The Court of Appeal agreed with the lower court. However, the Court of Appeal remitted the matter back to the PMPRB on the narrow issue of whether the Differin XP patent was capable of being used for Differin, in view of any clinical similarities between the two medicines. The PMPRB accepted the Court of Appeal’s invitation and decided that it had jurisdiction over Differin because of the “clinical similarities” between Differin XP and Differin. That reconsideration by the PMPRB was initially upheld by the Federal Court, but it was ultimately set aside by the Court of Appeal in this decision.

Analysis and implications

The central legal question for the Court of Appeal was: who is and who is not a “patentee” in respect of an “invention pertaining to a medicine” under section 79 of the Patent Act? The Court held that this question had to be answered by reference not only to the language of the Act, but also to its constitutional limitations.

The PMPRB is a federal body. Its jurisdiction—derived from the federal Patent Act—is carefully circumscribed to accord with the federal constitutional power over patents in section 91(22) of the Constitution Act, 1867. The PMPRB “does not have any freestanding consumer protection or general price regulation mandate”⁵. Under the division of powers, such matters are within the provinces’ jurisdiction. Rather, the PMPRB’s mandate is to “police the prices of patented medicines to make sure that those who benefit from the market power given by patents do not abuse it”.

The Court relied on this constitutional limit to conclude that the patent for Differin XP could not be used to give the PMPRB jurisdiction over Differin. The Differin XP patent covered the use of the active ingredient in a 0.3% concentration. The Court concluded that this patent could not be “intended or capable of being used” for Differin or for its “preparation or production”, since Differin is a 0.1% concentration. The Court said that the PMPRB “cannot somehow stretch and pull” the Different XP patent to cover Differin. As a result, the patent to Differin XP does not give Galderma market power over Differin, which has, since December 2009, “been open to potential, if not actual, price competition”⁶. In concluding otherwise, the PMPRB “crashed through the constitutional, statutory and jurisprudential guardrails” on its jurisdiction⁷.

While the FCA’s prior decision on Galderma relied on “clinical similarity” this iteration of the Court distanced itself from that analysis. Instead, it confirmed that the PMPRB cannot “regulate an unpatented medicine just because a patented medicine might be used in its place or because it shares some unpatented properties of the patented medicine (here, the unpatented ingredient adapalene)”. In our view, this is a positive and long-overdue development. Considerations like “clinical similarity” distract the analysis from what the Court has now correctly identified as the key question for the jurisdictional analysis, which is whether the product the PMPRB seeks to regulate is covered by a patent.

While this case will primarily be of interest to those involved in the pharmaceutical industry, there is an interesting (if brief) discussion of the standard of review that would appeal to anyone following administrative law. While the Federal Court had found the PMPRB’s interpretation to be “reasonable”, Galderma had argued that, because of the constitutional issues, the case should be reviewed on a correctness standard instead. The Court skirted that analysis by holding that this was the type of case where correctness review and reasonableness review are indistinguishable and lead to the same result, because of an “absence of alternative options available to the administrative decision-maker on the facts of the case”. Since there was only one reasonable decision, the Court did not send the matter back to the PMPRB.

The Galderma saga may not be over yet. The Government has until mid-February to seek leave to appeal to the Supreme Court of Canada.