On September 1, 2016, the Patented Medicine Prices Review Board (the “PMPRB” or the “Board”), Canada’s independent quasi-judicial patented drug price watchdog, implemented an amendment (the “Amendment”) to section C.11 “Review of Prices of New Patented Drug Products at Introduction” of the Compendium of Policies, Guidelines and Procedures (the “Guidelines”)1. The Amendment brings an incremental but important change to the Guidelines, of which patentees in the pharmaceutical, biotechnology, and healthcare industries should be aware.
1. The Amendment
The Amendment updates the Guidelines, a set of non-binding guidance as to how the PMPRB is to exercise its authority and how the public is to comply, with respect to domestic list prices of new drugs. Under the Amendment, patentees must ensure that such prices are less than the Maximum Average Potential Price (the “MAPP”), as established by the appropriate introductory price test(s). Otherwise, the PMPRB will initiate an investigation. The text of the Amendment, found under the new section C. 11.14, reads:
C.11.14 Notwithstanding other elements of section C.11, the prices from sources identified in subsection C.11.13 for a new patented drug product shall not exceed the Maximum Average Potential Price (MAPP) established by appropriate introductory price test(s). If a price from these sources is found to exceed the MAPP, it would trigger an investigation by Board Staff. The first step of this investigation would be to confirm with patentees whether any sales have taken place at this price. If it can be positively ascertained by Board Staff that such sales have taken place, an investigation will proceed as described elsewhere in the Guidelines.
According to the PMPRB, the Amendment is necessary to prevent the proliferation of opaque pricing and market segmentation pricing strategies in Canadian and international markets from excessively raising list prices.2 In support of this, the PMPRB pointed to the fact that the ratio of the list prices patentees submit to the PMPRB to the National Average Transaction Price (the “N-ATP”) has increased from 1.054 to 1.093 for all drugs since 2010, meaning that consumers paying the list price are paying on average 9.3% more than those paying the N-ATP.3
2. The Impact
The PMPRB anticipates that the amendment will have a modest impact. According to the PMPRB:
Of the 101 patented drugs that entered the Canadian market in 2014, 25 had submitted Block 5 prices greater than the MAPP (by an average of 5.7%); however, only nine of these drugs had Block 5 prices more than 5% greater than the MAPP, and of those nine, all but one were already outside the Guidelines based on the N-ATP. As such, this change, if it had been in place in 2014, would only have resulted in a single additional investigation.4
Nevertheless, the PMPRB expects that the Amendment will enhance consumer protection with respect to price discrimination.
3. The Significance
The Amendment to the Guidelines is significant because it comes amidst a broader PMPRB initiative to “modernize and simplify its regulatory framework.”5 As discussed in more detail here, the PMPRB is currently undergoing a public consultation process in which it has asked stakeholders and members of the public to comment on a number of aspects of reform related to PMPRB policies and guidelines.
We will keep you posted on the consultation and reform process as it continues.