The Federal Court has dismissed an application for judicial review by Alexion Pharmaceuticals Inc. (Alexion) in relation to a decision of the Patented Medicine Prices Review Board (PMPRB). The PMPRB had decided the drug Soliris (eculizumab) had been priced excessively on the basis of the lowest international price comparison (LIPC) test, a methodology not described in the PMPRB’s guidelines.
What you need to know
- In the context of a hearing, the decision affirms both the Board Staff and the PMPRB may depart from the published guidelines when considering the appropriate pricing thresholds for patented medicines sold in Canada. Board Staff can apply one test in determining an initial price and then apply a different test at an excessive price hearing.
- Judicial review of PMPRB decisions is challenging, given the standard of review of curial deference to specialized tribunals. The PMPRB’s decision was reviewed by the Federal Court against a standard of reasonableness.
- This adoption of a LPIC test is significant in the context of the proposed regulations in which a reformulation of the basket of comparator countries has been reconstituted. Under the LIPC test, there will be a move away from comparative reference-based pricing and a race to the bottom—to the lowest price available in the world.
- The Federal Court’s reference to “costs and rate of return” may signal a justification of the LIPC test. These factors go to determining whether the price of a drug is reasonable. If so, a drug price can hardly be said to be excessive.
- Alexion subsequently filed an appeal to the Federal Court of Appeal on June 21.1
Reasons for dismissal
The Federal Court dismissed Alexion’s grounds of review on June 12. Its reasons dealt with the noteworthy issues outlined below.
The panel found Soliris had been priced excessively on the basis of the LPIC test, a methodology not described in the PMPRB’s guidelines, but one introduced before the PMPRB hearing panel. Prior to the PMPRB hearing, Board Staff had adopted a median international price comparison (MIPC) test—appropriate for breakthrough drugs like Soliris, according to the PMPRB’s guidelines—but had based its excessive pricing allegations on exchange rate fluctuations.
The Federal Court held that the PMPRB had the discretion to use the LIPC test and that such a test was consistent with the Patent Act and not unreasonable. The Federal Court said the PMPRB “…is not required to apply any defined test. In other words, there is no correct test” and drug pricing is considered by the PMPRB on a case-by-case basis having regard to the statutorily prescribed factors in light of the circumstances of the drug before it.
Factors considered (and those not)
The Federal Court remarked on the willingness of Alexion to supply the U.S. market at a lower price than the Canadian price and found the PMPRB’s view (that the U.S. price suggested the Canadian price may be excessive) was a reasonable conclusion.
The Federal Court noted that this finding of fact was an error: the Canadian price was in fact 20% lower than the U.S. price. However, it noted evidence that, on average, medicines are 220% more expensive in the U.S. than in Canada. The PMPRB had given no weight to Alexion’s conduct in not increasing (and, in fact effectively decreasing) the price of Soliris since its introduction, concluding that Alexion’s conduct was of little assistance in answering the excessive pricing question. Again, the Federal Court determined that was a reasonable approach.
Alexion pointed out to both the PMPRB and the Federal Court that the actual price of Soliris had not changed since its introduction in Canada. Any perceived pricing changes had resulted from fluxes in currency exchange rates that were beyond Alexion’s control. While the PMPRB accepted that currency exchange fluctuations were beyond the control of a patentee, its view was that Alexion was aware of the exchange rate issues—noting the guidelines provide that currency exchange fluctuations are the responsibility of the patentee—and that Alexion could have amended its Canadian pricing accordingly. The Federal Court held that the PMPRB’s decision was not unreasonable.
Product listing agreements
Alexion attempted to rely on rebates given to provincial health insurance plans (to reduce the effective average price of Soliris). Alexion’s confidential product listing agreements (PLAs) with these provincial bodies were provided to PMPRB in the course of the hearing through subpoenas by Board Staff. The PMPRB held that these rebates would not be taken into account for the purpose of considering excess revenues because provinces that have received payments from Alexion under a PLA are not “customers” of Alexion and ineligible in determining the average transaction price at which Solaris was sold. The Federal Court agreed with the PMPRB and rejected any reliance by the patentee on the rebates paid pursuant to PLAs, concluding that PMPRB’s refusal to consider provincial rebates was not unreasonable:
It was open to the Panel to conclude, as it did, that provinces that have received payments from a patentee pursuant to a PLA are not customers… On this basis, it was reasonable for the Panel to conclude that discount payments to the provinces were not to be taken into account in determining the average transaction price.
Reasonable rate of return
The PMPRB had considered that the U.K. price of Soliris (LIPC test) was appropriate because it was indicative of the price that the patentee was prepared to recoup in a market. On appeal, the Federal Court noted, over the objection of the patentee, “there was evidence before the Panel to the effect that the price in one comparator jurisdiction can provide a reasonable perspective on costs and rate of return in another.”
This decision was made under the current Patented Medicines Regulations. Under proposed Regulations (published in draft at the time of writing), the PMPRB would be given a wider latitude to consider other factors if the proposed amendments become law. You can read a discussion of these in “Proposed PMPRB Regulations published for comment.”
1 Federal Court of Appeal Court File No. A-237-19.
To discuss these issues, please contact the author(s).
This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.
For permission to republish this or any other publication, contact Janelle Weed.
© 2021 by Torys LLP.
All rights reserved.