Canada: Federal Government Publishes Amendments Significantly Altering Canada's Patented Medicines Pricing Regime

On August 21, 2019, the Government of Canada published amendments to the Patented Medicines Regulations that set out the long-awaited framework applicable to the price regulation of patented drugs in Canada. The amendments will come into force on July 1, 2020, and the text can be found here.

Below is a brief background on the Patented Medicine Prices Review Board (the "PMPRB" or the "Board"), four key changes to the Regulations, including differences from the originally proposed text, and developments to watch for regarding the amendments.

1. Background on the PMPRB

The PMPRB is a quasi-judicial body established in 1987 under the Patent Act with the mandate of ensuring that prices charged for patented medicines sold in Canada are not excessive.

Under the Patent Act, the PMPRB has authority to determine whether the price for a patented drug is "excessive." In making that determination, the Board must take into consideration the following factors:

  1. the prices at which the medicine has been sold in the relevant market;
  2. the prices at which other medicines in the same therapeutic class have been sold in the relevant market;
  3. the prices at which the medicine and other medicines in the same therapeutic class have been sold in countries other than Canada;
  4. changes in the Consumer Price Index; and
  5. such other factors as may be specified in any regulations made for the purposes of this subsection.

The Regulations currently do not specify any "other factors" under the Patent Act that the Board is required to consider. Once in force, however, the amendments will add three new factors, as well as put an obligation on patentees to provide related information to the Board.

2. Four Key Changes to the Revised Pricing Framework

I) New Factors to Determine Whether a Drug Price is "Excessive"

The PMPRB will consider the following additional factors in determining whether the price for a patented drug is "excessive":

  1. the medicine's pharmacoeconomic value in Canada;
  2. the size of the market for the medicine in Canada; and
  3. the gross domestic product in Canada and the gross domestic product per capita in Canada.

These new factors provide the PMPRB the ability to assess economic value, number of patients, and country wealth in making pricing determinations. These new factors, however, will not apply to any medicines that received a drug identification number ("DIN") before publication of the amendments, i.e., August 21, 2019. This exemption — which was not present in the initial proposed text published on December 2017 — is intended to provide a degree of continuity for existing medicines, according to the regulatory impact analysis statement accompanying publication of the amendments.

Notably, the factors as worded in the initial proposed text were also more expansive in scope, including consideration of information on other medicines in the same therapeutic class in Canada and the market size for the medicine in countries other than Canada. Those aspects are not present in the final text of the amendments.

II) New Disclosure Requirements for a Medicine

Patentees will be required to provide the PMPRB with information related to the new factors, including:

  • Pharmaeconomic value: Patentees will be required to provide the PMPRB with any cost-utility analyses they receive from a publicly funded Canadian organization. The Canadian Agency for Drugs and Technologies in Health is one such organization that conducts these analyses in making reimbursement recommendations to Canada's public drug insurance plans.
  • Market size: Patentees will be required to provide the PMPRB with estimates for projected use of their medicine in Canada, e., the total quantity expected to be sold.

As with the new factors themselves, the new reporting requirements for related information will not apply to medicines that received a DIN before August 21, 2019.

III) New Requirement to Report Price and Revenue Net of Adjustments

Patentees will be required to provide the PMPRB with the actual price or revenue obtained by the patentee that accounts for any adjustments made by any party that directly or indirectly purchases or reimburses the medicine. This is intended to account for any rebates or discounts given to third party insurers, such as provincial drug plans. According to the regulatory impact analysis statement, this price and revenue information will be used by the Board to facilitate compliance with the lower price ceilings expected to result from application of the three new factors.

IV) New Pricing Comparator Countries

The new framework significantly amends the schedule of the countries that the Board is required to use to compare the price of a drug sold internationally. This revision replaces historically higher price countries (United States and Switzerland) with six new countries (Australia, Belgium, Japan, Netherlands, Norway, and Spain), while France, Germany, Italy, Sweden, and the United Kingdom remain on the list of comparator countries. South Korea was removed from the final schedule after being included in the initial proposed text. According to the regulatory impact analysis statement, this removal was in response to concerns raised during stakeholder consultation that South Korea had lower market access and outlier prices below the OECD median.

3. Further Developments to Watch

Despite some substantive differences from the earlier published proposed text, such as noted above, the final text of the published amendments generally tracks what was expected based on the original proposed text released in December of 2017.

In terms of next steps, the PMPRB has announced that it will issue revised draft Guidelines this fall to operationalize these amendments, including how it will apply the new economics-based factors. The draft Guidelines will be an important tool to predict how the PMPRB will interpret and implement the amended Regulations.

We will be monitoring these developments.

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