FCA sends Differin pricing matter back to PMPRB

The Canadian Federal Court of Appeal (FCA) has released an important decision in Canada (Attorney General) v. Galderma Canada Inc. (Galderma), affirming the lower court’s approach in assessing whether the Patented Medicine Prices Review Board (PMPRB) has jurisdiction over a drug product sold in Canada.

What is Canada’s PMPRB?

The PMPRB is an administrative board established by the Patent Act with a mandate to protect Canadians from excessive drug pricing. The PMPRB controls the introductory price at which a medicine (drug product) is launched and limits the annual price increases manufacturers of patented drugs can apply. Patentees are required to report applicable patents, and file sales information so the PMPRB can monitor for excessive pricing as long as the product is considered to be a patented medicine. If it is determined the average price for a patented medicine is too high, a patentee must make a payment to PMPRB to set off the excessive revenues that were generated.

In order for the PMPRB to have jurisdiction over a medicine sold in Canada, there must be a patent that “pertains” to the medicine. Under the Patent Act, 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. Case law has established that the term “pertains” must be interpreted broadly in order for the consumer protection mandate of the PMPRB to be respected. PMPRB is not required to perform a claim construction analysis as would be done in a patent infringement proceeding. Instead, a patent will pertain to a medicine when there is a “mere slender thread” of nexus between the invention described in a patent and the medicine sold in Canada.

Facts of Galderma

The facts of Galderma relate to two medicines: Differin (a formulation of adapalene in a concentration of 0.1%) and Differin XP (a sustained release 0.3% formulation). Patents coving Differin had been reported to PMPRB by the manufacturer, Galderma Canada Inc., up until their expiry in 2009. A different patent had been reported in respect of Differin XP, which expired in 2016. PMPRB staff believed the later patent to the 0.3% formulation should have been reported in the post-2009 period for Differin, even though Differin is a 0.1% formulation of adapalene. After a hearing was conducted, PMPRB concluded the later patent pertained to the medicine Differin and ought to have been reported, such that Differin would have been under price control until 2016.

Lower Court Ruling

Galderma sought judicial review of the PMPRB’s ruling before the Federal Court, where the Court held that PMPRB made two critical errors in its decision.

First, the Federal Court ruled that the focus of the analysis on whether a patent "pertains" should be a determination of whether the invention in the patent pertains to the medicine. The court observed that since the PMPRB had used the terms "patent" and "invention" interchangeably in its decision, it was not clear to the Court that the PMPRB was aware these terms had distinct meanings under the Patent Act. The Court ruled the PMPRB did not identify the invention in the later patent and failed to consider whether the 0.3% extended release formulation disclosed in the later patent was intended or capable of being used for the original 0.1% Differin medicine. Thus, PMPRB wrongly focused on considerations other than the actual invention disclosed in the patent.

Second, while the Court agreed with the PMPRB that the proper analysis is to review the "face of the patent" when deciding whether an invention pertains to a medicine, this review requires that patent be reviewed as a whole. This would include the claims, description, and described scope of the invention. The Court found the PMPRB failed to review the later patent "holistically" and therefore erred in concluding the later patent covered more than a 0.3% extended release formulation. Thus, it was unreasonable for PMPRB to conclude that on its face the later patent pertained to Differin.

Federal Court of Appeal decision

The Federal Court decision was appealed to the FCA, which affirmed the lower court’s approach to patent review, and agreed the PMPRB had erred in its assessment of the patented invention.

The FCA held it was unreasonable for PMPRB to limit its analysis to only selected portions of the patent. The FCA noted that to discharge PMPRB’s mandate of regulating the prices of patented medicines, it must have a sufficient understanding of the invention of a patent. While this does not require the review to go beyond the “face of the patent”, PMPRB must read the patent as a whole, not just certain introductory phrases. The FCA found that PMPRB unreasonably limited its review to the abstract and an introductory paragraph in reaching its conclusion and failed to consider the critical parts of the patent—in particular, the claims.

Second, the FCA agreed with the lower court in that PMPRB did not determine the invention of the patent. Instead, it limited its reading to a cursory examination of whether the patent related exclusively to a 0.3% adapalene formulation. Upon reviewing various parts of the description, including the background of invention, the objective of the patent, various formulations and examples, and benefits of the invention, as well as the claims, the FCA concluded that the invention of the patent is a 0.3% adapalene formulation used in treating dermatological conditions such as common acne. As such, PMPRB’s finding that the patent does not relate exclusively to a 0.3% adapalene formulation is erroneous and unreasonable.

In determining whether the patent pertains to the medicine, the FCA provided further clarification on what the “medicine” is and what “pertain” entails. On appeal, the Attorney General argued that the medicine in issue is adapalene, not Differin, and further argued this was the position taken by PMPRB. The FCA disagreed with this position and observed that PMPRB in its decision repeatedly referred to Differin, the commercial preparation, as the medicine to which the patent pertains, not adapalene, the active ingredient. The FCA reasoned that, in view of PMPRB’s mandate and to give rise to the question of excessive pricing, the medicine would have to be the commercial preparation that was sold in Canada at the relevant time. As such, it was reasonable for PMPRB to conclude in its decision that the medicine is Differin.

The FCA clarified the test to determine whether an invention pertains to a medicine is set out at subsection 79(2) of the Patent Act. The question to ask is whether the “invention is intended or capable of being used for medicine or for the preparation or production of medicine”, not whether there is the “merest slender thread” of a connection. The FCA further clarified that the expression “merest slender of thread” was used in jurisprudence as a metaphor for the idea that the connection between an invention and a medicine may be tenuous, not a test designed to replace or substitute the statutory definition of “pertain”.

Back to the board

Taken together, the FCA reasoned that if PMPRB’s decision rested solely on its erroneous and unreasonable conclusion that the patent does not relate exclusively to a 0.3% adapalene formulation, then its decision should be quashed. However, it was unclear to the FCA whether PMPRB’s decision may have been influenced by other factors that were referred to in PMPRB’s decision. The FCA observed that there had been evidence before PMPRB regarding clinical similarities between Differin and Differin XP. The question of what kind of clinical similarities would support a finding that the invention of a patent pertains to, or was intended or capable of being used for that medicine, was not addressed by the FCA and remains to be answered.

As such, the matter is not yet concluded and has been returned to PMPRB for redetermination based on a proper understanding of the patented invention provided by the FCA. The FCA returned the matter to PMPRB and invited it to consider what clinical similarities between Differin and Differin XP would support a finding that a patented invention was intended or capable of being used for that medicine. It commented that PMPRB must complete its inquiry on the basis of a proper understanding of the invention of the patent (i.e., the one the FCA provided in its decision). Namely, that the invention is the use of 0.3% concentration of adapalene for the treatment of dermatological disorders. The FCA also determined that the medicine is the commercial formulation, rather than the active ingredient.

Implications

This decision elevates the threshold required to be met by PMPRB in establishing a connection between a patented invention and a commercialized medicine.

The FCA decision affirms the approach to patent review and provides further clarification to jurisprudence in determining whether the invention of a patent pertains to a medicine. The decision shows that while the connection between an invention and a medicine may be tenuous, the “merest slender thread” is not a test designed to supplant the statutory test of “pertain”.

This article was originally published by Patent Lawyer Magazine.

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