In an important decision released on July 29, the Federal Court of Appeal strongly criticized a decision of the Patented Medicine Prices Review Board (the Board) relating to Alexion's SOLIRIS product.

Soliris is a breakthrough treatment for two rare and life-threatening blood related disorders. The Board previously found Alexion's price for Soliris to be excessive contrary to section 85 of the Patent Act. In doing so, the Board deviated from its Guidelines and imposed an unprecedented "lowest international price comparison (LPIC) test", which required Soliris to be priced lower than any comparator country's listed price. This decision was upheld by the Federal Court and a further appeal was taken to the Federal Court of Appeal.

Shortly after the Federal Court decision, the Supreme Court of Canada rendered its seminal decision relating to judicial review in Canada (Minister of Citizenship and Immigration) v Vavilov.

The Federal Court of Appeal first reviewed the impact of Vavilov, noting that a reviewing panel was no longer required to engage in an "antithetical" review whereby a wide variety of steps should be taken to uphold the administrator's decision. As the Federal Court of Appeal noted, this "coopering-up" of a decision required the reviewing panel to pick up the pen and re-draft the reasons, rather than review their legitimacy. However, post-Vavilov, this is no longer the case. Instead, the Federal Court of Appeal stressed that the sole job before them was to determine if there was a sufficiently reasoned explanation in support of the Board's decision.

With respect to the Board's approach to SOLIRIS, the Federal Court of Appeal found that the Board's reasons fell significantly short of the mark. In fact, the Federal Court of Appeal went further and strongly suggested that the Board went beyond its statutory mandate, engaging in the regulation of what it viewed to be reasonable prices for medicines, rather than its proper mandate of determining whether a medicine's price was "excessive":

[11] As well, the reasoned explanation provided by the Board—such as it is—raises real concerns about its substantive reasonableness in some respects. In particular, certain words the Board used suggest that it went beyond its permissible statutory mandate by regulating the reasonableness of pricing, rather than preventing abusive pricing, i.e., excessive pricing made possible by the abuse of the monopoly power given by a patent.

The Federal Court of Appeal stressed that the jurisdiction of the Board is bound by its enabling statute, in this case section 85 of the Patent Act. The Board's role is to determine if a medicine is being "sold at an excessive price", nothing more. Notably, its role is not to set what it views as a "reasonable" price for a medicine, a task the Federal Court of Appeal highlighted would not only be outside its jurisdiction but additionally be "constitutionally suspect."

The Federal Court of Appeal also stressed the importance of the Board's Guidelines. As the Guidelines are not themselves law, they must be consistent with a reasonable interpretation of section 85 of the Patent Act. While departure from the Guidelines is permissible, the result must still be within the bounds of section 85, and the Board must provide a reasoned explanation for the departure.

One of Alexion's key submissions was that in adopting and applying the LPIC test (thereby deviating from its Guidelines), the Board strayed outside of its jurisdiction by determining whether the pricing was "reasonable" as opposed to whether it was "excessive". The Federal Court of Appeal stressed this submission as "the most central concern" when reviewing an administrative decision. The Federal Court of Appeal criticized the Board for not addressing Alexion's submission, and instead providing only a cursory and conclusory statement that the submissions of the parties were considered in rendering its decision. To the Federal Court of Appeal this was (at best) an obfuscatory approach to administrative decision making, rendering the decision impossible to properly review.

Though it stopped shortly of a firm determination, the Federal Court of Appeal clearly suggested that the Board strayed well beyond its jurisdiction and engaged in price regulation as opposed to determining whether a medicine's price was excessive. This was clearly contrary to the Board's jurisdiction, as established in a long line of jurisprudence:

[49] Over and over again, authorities have stressed that the excessive pricing provisions in the Patent Act are directed at controlling patent abuse, not reasonable pricing, price-regulation or consumer protection at large: [    ] …. In one authority, the Supreme Court loosely and occasionally speaks of these provisions having a consumer protection purpose and cites some politicians' speeches to that effect: [   ]  But it ties that purpose to the specific need to prevent patent abuse: [    ]   Were the excessive pricing provisions of the federal Patent Act aimed at reasonable pricing, price-regulation or consumer protection at large, they would be constitutionally suspect:  [    ]  [citations omitted].

The Federal Court of Appeal concluded that the Board disregarded most of the foregoing authorities and instead plucked a single, out-of-context statement to interpret its mandate as relating to consumer protection at large. In doing so, the Board failed to address its mandate as limited to determining "excessive" pricing, which the Federal Court of Appeal stressed is not equivalent to "reasonable" pricing. The decision was remitted to the Board for reconsideration.

The Federal Court of Appeal's caution over the Board's jurisdiction is important when applied to the now further delayed amendments to the Board's Guidelines, and therefore the Board's approach to determining "excessive" pricing. The most recent proposed changes would appear to be more in the line of consumer protection and the setting of the Board's view of a "reasonable price", rather than determining whether the medicine's pricing is excessive. This suggests that not only did the Board approach the question of excessive pricing incorrectly with respect to SOLIRIS, but that the proposed changes to the Guidelines are a further attempt to broaden its mandate into the regulation of a medicine's price more generally. As noted by the Federal Court of Appeal, price regulation is beyond the Board's jurisdiction (as well as that of the Federal Government), and the Board is solely tasked with determining if a medicine is priced "excessively".

With the upcoming changes to the Guidelines, this decision may foreshadow increasing challenges to PMPRB decisions. A finding that a price is outside the Guidelines does not automatically mean that the pricing is improper if the Guidelines seek to determine a "reasonable" rather than "excessive" price. There logically is room between an "excessive" price and what the Board views as a "reasonably regulated" price. In particular, a price may still be a reasonable price even though it is higher than the Guidelines if the Guidelines seek to set a reasonable price under the guise of consumer protection.

Considering the further delayed implementation of these changes by the PMPRB, it will be interesting over the next few years to see whether the Board keeps within its legislative jurisdiction and tasks itself solely with determining "excessive" pricing, or if it again tries to administer consumer protection and regulate pricing of medicines in Canada.

Should you have any specific questions about this article or would like to discuss it further, you can contact the authors or a member of our Life Science Group.