FCA: PMPRB11 stands for patented medicines

The Federal Court of Appeal's decision in Innovative Medicines Canada et al. v. Canada (Attorney General), 2022 FCA 210, has laid to rest for now the question of whether a regulation establishing a new basket of comparator countries (known as PMPRB11) is invalid because it goes beyond the regulation-making power set out in the Patent Act. The Federal Court of Appeal (FCA) held that the Governor-in-Council’s decision to change the basket of comparator countries was reasonable and the regulation valid.

Please see our past bulletins on PMPRB for more information on the history of the amendments to the PMR and ongoing litigation involving PMPRB1¹.

What you need to know

• As of July 1, 2022, the Patented Medicines Regulations changed the list of comparator countries to be used by the Patented Medicines Prices Review Board (the Board) to determine whether the price of a patented medicine is excessive.
• PMPRB11 countries are Australia, Belgium, France, Germany, Italy, Japan, the Netherlands, Norway, Spain, Sweden and the United Kingdom. Now excluded are the United States and Switzerland, formerly within the basket of comparator countries.
• Reference-based pricing based on PMPRB11 countries will be one of the factors used to determine if the list price of a patented medicine is excessive in Canada.
• In its decision, the FCA remarked that section 85(1)(c) of the Patent Act provides that one of the factors the Board can consider when determining whether a patented medicine is priced excessively is “the prices at which the medicine and other medicines in the same therapeutic class have been sold in countries other than Canada”.
• Mr. Justice Stratas, writing for the FCA, applied Vavilov², and determined that the Governor-in-Council’s decision was reasonable and had a reasoned explanation.
• The FCA declined to consider the legality of additional economic factors and discounts and rebates, both of which had formerly been included in the Patented Medicines Regulations. The regulations promulgating these changes had been repealed and their legality rendered moot.
• Should Innovative Medicines Canada (IMC) wish to seek leave to appeal this decision to the Supreme Court of Canada, a leave application must be filed by February 3, 2023.

Pure price regulation? Invalid. Policing excessive pricing? Valid

The FCA quoted with approval prior judicial decisions holding that the excessive pricing provisions of the Patent Act are directed at controlling patent abuse, not reasonable pricing. The bottom line, said the FCA, is that pure pricing setting or price regulation is invalid and policing excessive pricing is valid.

The FCA agreed with the Federal Court Trial Division that the enactment of a list of 11 comparator countries, by itself, does not constitute an improper form of price control and price regulation. The enactment simply changes the collection of pricing information from seven listed countries to 11, nothing more. The FCA remarked that there is no sin in gathering information; if a sin is committed, it is when the information is improperly used.

The FCA determined that Vavilov³ applies to administrative decisions to make regulations and that the standard of review is reasonableness. It then considered whether the regulation-making power in subsection 101(1) of the Patent Act, in light of section 85 of the Patent Act and the purposes underlying that section and the Act as a whole, allowed the Governor-in-Council to reasonably enact the regulation that resulted in PMPRB11. It concluded that it did.

The Governor-in-Council’s decision to enact a regulation changing the list of comparator countries, said the FCA, is based on a reasonable interpretation of the regulation-making power in subsection 101(1) of the Patent Act. Based on an analysis of text, context and purpose, such power is relatively unconstrained. The reasonableness of such regulation is based on section 85 and the Patent Act and their purposes, as shaped by subsection 91(22) of the Constitution Act, 1867. Prior judicial decisions enhance reasonableness, the FCA said. Noting that reasonableness requires that a reviewing court discern a reasoned explanation of the decision, Mr. Justice Stratas referred to the regulation’s accompanying Regulatory Impact Analysis Statement and found there a reasoned explanation for the changes: modernization.

Should IMC wish to seek leave to appeal this decision to the Supreme Court of Canada, a leave application must be filed within 60 days, i.e., by February 3, 2023.