After several rounds of drafts and comments, Canada’s Patented Medicines Prices Review Board (PMPRB) has published its final Guidelines that detail the price review process, price tests and investigation considerations that will be used by the PMPRB staff to operationalize the reporting requirements of the Patented Medicines Regulations.
What you need to know
- The Guidelines are not law but are used and heavily relied upon by PMPRB staff when assessing whether the price of a patented medicine is excessive1.
- The Guidelines will take effect on January 1, 2021, in alignment with the coming into force of the amendments to the Patented Medicines Regulations (new regulations) which were published on August 21, 2019.
- The price review process outlined in the Guidelines is substantially similar to the process that was set forth in the draft version of the Guidelines described in our previous bulletin. A few items to highlight:
- Investigations related to Maximum Rebated Price (MRP). The Guidelines continue to include the concept of a Maximum Rebated Price (MRP) but an investigation would not be triggered solely due to non-compliance with MRP and absent a complaint.
- Grandfathered medicines. Once a Maximum List Price (MLP) has been established for Grandfathered medicines (being those that were issued a Drug Identification Number prior to August 21, 2019) and for Line Extensions of Grandfathered medicines, the MLP may be re-set to the Highest International Price (HIP) of the PMPRB11 countries if the HIP is lower than the current MLP for two consecutive reporting periods.
- COVID-19-related updates. The Guidelines include brief commentary on treatment of COVID-19 related medicines, indicating that absent a complaint, these medicines would not be subject to price review as long as they remain on the Health Canada List of Drugs for Exceptional Importation and Sale or other lists published pursuant to the Interim Order Respecting the Importation, Sale and Advertising of Drugs for Use in Relation to COVID-19.
After receiving a great deal of feedback and comments, the PMPRB has now finalized the Guidelines with relatively few updates compared to the draft versions. For New Medicines, the Guidelines continue to distinguish between Category I medicines, which are those with high treatment costs or large market size, and Category II medicines, which are subject to fewer reporting requirements. The Guidelines also maintain the concept of Grandfathered Medicines, Line Extensions and Gap Medicines. Grandfathered Medicines are those issued a DIN prior to August 21, 2019 while Gap Medicines are those issued a DIN on or after August 21, 2019 but that are sold prior to January 1, 2021. All medicines are subject to an MLP and the test for establishing the MLP for each category is unchanged from the draft version.
MRP and price assessments
Given the recent Federal Court ruling in Innovative Medicines Canada v. Canada (Attorney General), which struck the portion of the new regulations relating to the reporting of rebates offered to third parties as beyond the scope of the government’s regulation-making authority2, the Guidelines have been updated to address MRP. The final Guidelines continue to refer to MRP and set out how MRP will be calculated for high-cost and high-market size medicines. However, unlike the draft Guidelines, the final Guidelines indicate that MRP would be calculated for information purposes, and an investigation will only be commenced if a patentee fails to comply with MLP requirements.
The Guidelines also state that in the event an investigation is triggered, which could be due to a non-compliant MLP or as a result of a complaint made to PMPRB, then MRP may be considered by PMPRB staff in “deciding next steps”. So, although the Federal Court decision held that PMPRB cannot mandate the reporting of third-party rebates, providing this information “voluntarily” may be a consideration in PMPRB staff’s proposed enforcement action. Recall that if PMPRB staff asserts that the price of a medicine is excessive, failing voluntary action by the patentee to lower the price and/or pay back excess revenues, a hearing before the PMPRB could be commenced.
The Federal Court decision is under appeal, and a second proceeding relating to the constitutionality of the PMPRB regime is before a Québec provincial court. While the Guidelines are “final for now”, the Guidelines may change as the courts continue to weigh in on the appropriate bounds of price control.
The Guidelines recognize that the pricing of COVID-19 patented medicines requires special consideration but provide few details on how assessments will be performed for these products. Vaccines and other therapeutics for treatment of COVID-19 are expected to be approved by Health Canada under an Interim Order—a route that allows for the expedited approval outside of the typical new drug submission (NDS) pathway. The Interim Order is temporary, and authorizations issued under the Interim Order are expected to be transitioned to the NDS pathway.
The Guidelines indicate that while a medicine is being sold under an Interim Order authorization, its price will not be subject to review or investigation unless there is a complaint from the federal or a provincial health minister. Given that COVID-19 medicines will for the most part be sourced by the federal government via negotiated purchase agreements, it is unlikely that a complaint would be made.
Once the Interim Order has expired, the medicine’s price will be reviewed by PMPRB staff “based on the prevailing international and domestic list prices, and not on the introductory discounted prices in Canada”. While this statement is helpful in acknowledging that many manufacturers will be initially offering COVID-19 therapies at highly reduced prices to combat the pandemic, the eventual price review of these products could still be complex given that MLP is based on international price comparisons and jurisdictions may be under emergency orders for varying times.
It is also interesting to note that all vaccines will only be subject to complaints-based investigations. Under the previous guidelines, generics, biosimilars and veterinary medicines were not required to undergo price review and would only be assessed if there were a complaint. Vaccines have now been moved to this category, presumably in recognition of the fact that most vaccine products are subject to government tendering and therefore unlikely to be sold at an “excessive” price.
Other changes to the Guidelines
The final Guidelines also include the following changes:
- The Guidelines address the fact that a medicine’s market size and comparators may change and allow for an increase in the MRP to the MLP in specified situations.
- The Pharmacoeconomic Value Threshold (PVT), which is a consideration in calculating the MRP, was changed from $150/ QALY to $100K / QALY for therapeutic criteria level IV medicines (slight or no improvement relative to other medicines sold in Canada).
- Re-assessments for the price of Grandfathered and Line Extension medicines is limited to situations where the HIP is lower than the prevailing MLP.
Other technical and administrative updates have been made to Guidelines. The PMPRB is expected to release updated versions of its reporting templates soon, which will provide patentees with further information on how to report under the new regulations.
The new regulations will come into force on January 1, 2021, and patentees will be expected to report in accordance with the Guidelines moving forward. PMPRB has indicated that it will conduct several outreach sessions in November and December to assist patentees in the transition to the new Guidelines.
1 The Guidelines state that they are not binding on Staff, the Chairperson, Hearing Panels or patentees (See paragraph 5).
2 Such as government or private drug plans that do not purchase drug products directly but that reimburse/cover the cost of drug products.
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.