The Patented Medicines Prices Review Board (PMPRB) has seemingly courted controversy over the last six years. Through its pricing decisions and proposed regulatory amendments, the PMPRB took steps to expand its jurisdiction beyond its statutory domain. In response, the Federal and Quebec Courts of Appeal reigned in the PMPRB, confirming that its role is not "consumer protection" or "reasonable pricing;" rather it is "excessive pricing" as prescribed by the Patent Act. This article discusses recent legal controversies and the impending PMPRB Guidelines and policy.
Federal Court of Appeal reigns in PMPRB mandate
In 2017, the PMPRB determined that Alexion's SOLIRIS was priced excessively from 2009 to 2017. The PMPRB required Alexion to pay to the Government $4.2M in excessive revenues. This finding was based on the fact that the list price of SOLIRIS was higher than the lowest price in one of the seven international comparator countries. It was the first time the PMPRB had ever imposed such a requirement. In coming to this conclusion, the PMPRB stated that its mandate was related to "consumer protection" and "reasonable pricing."
Alexion sought judicial review of the PMPRB's decision but the Federal Court upheld the PMPRB's decision. The Federal Court decided that, as a specialized administrative body, it was entitled to considerable deference.
In July 2021, the Federal Court of Appeal (FCA), came to a different view. In quashing the PMPRB's decision, the FCA found that the PMPRB misinterpreted its mandate as relating to consumer protection at large. This led the PMPRB to improperly suggest that its mandate was to ensure "reasonable pricing" instead of the prevention of "excessive pricing." The FCA found that:
"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 (emphasis added)."
The FCA further criticized the PMPRB's decision which made it:
"Impossible for a reviewing court to know whether the Board has helped itself to a power it does not lawfully have. By obfuscating, the Board has effectively put itself beyond review on this point … Administrators cannot put themselves in a position where they are not accountable."
The PMPRB appealed to the Supreme Court of Canada but leave was denied. At the time of writing this article, the case remains back before the PMPRB for re-determination.
Quebec Court of Appeal reigns in amended Regulations
In 2019, the PMPRB tabled proposed new amendments to the Patented Medicines Regulations which unmistakably sought to broaden the PMPRB's reach. The proposed amendments included a new list of comparator countries, new factors to consider in assessing excessive prices, and a new price calculation. The new factors included the pharmacoeconomic value of the medicine in Canada, the market size in Canada and the gross domestic product in Canada (including per capita). The new price calculation would have required patentees to disclose confidential rebate information.
These amendments were successfully challenged by the pharmaceutical industry. In the end, only the amended list of comparator countries survived where two relatively high drug price countries were replaced in the international comparison by six lower-price countries. The primary concern with the amendments, as stated by the Quebec Court of Appeal (QCA), was "moving away from the control of excessive prices to embrace the outright control of prices (a power it does not have)." The QCA found that the proposed new price calculation exceeded federal jurisdiction as it sought to look into commercial contracts, commercialization, and sales of consumer goods. The QCA also found that:
"Under the guise of its jurisdiction over patents, the Government of Canada seeks to purely and simply regulate the prices of patented drugs in order to impose significant price reductions by introducing new factors that have little or nothing to do with the monopoly conferred by patents."
The QCA also criticized the PMPRB's amended Regulatory Impact Analysis Statement, accompanying the amendments, finding that:
"As can readily be seen, we are a long way from controlling the effects on price of the monopoly granted by a patent."
In coming to its conclusion, the QCA emphasized that section 85 defines the PMPRB's jurisdiction and sets out the factors that must be applied when assessing excessive pricing.
Suspense builds over guidelines
With clear judicial guidance restricting the PMPRB to its statutory home, the next step is for the PMPRB to update its Guidelines for making excessive price determinations. Perhaps not surprisingly, the updated Guideline have also been mired in controversy. Most recently, draft Guidelines were released for stakeholder comments by Dec. 5, 2022 and implementation on Jan. 1, 2023. However, as with prior draft Guidelines, this most recent version was shelved. Consequently, the Interim Guidance issued on Aug. 18, 2022 remains in place until further notice.
At this time, presumably the PMPRB is re-grouping to reconsider and reissue a new set of Guidelines or tweak the Guidelines that were proposed last year. No matter which path is taken, the PMPRB will need to follow the Court's directions. The Guidelines are issued pursuant to section 96(4) of the Patent Act, and therefore must be "with respect to any matter within [the PMPRB's] jurisdiction." The ambit of that jurisdiction is now plainly staked.
Of concern, the Guidelines proposed last year introduced the concept of an "investigation," with triggers that are arguably inconsistent with the FCA and QCA decisions. For example, the proposed Guidelines suggested that an "investigation" is not a determination of excessive pricing leading to the conclusion that the PMPRB would be investigating medicines that are not within its jurisdiction. The QCA confirmed that excessive price determinations cannot be arbitrary: they must be rooted in section 85 and, as such, the Guidelines should be equally circumspect.
Looking ahead, the PMPRB's course will now be charted by its new Chair, Thomas Digby, a lawyer with over 25 years of patent law experience, appointed Feb. 1, 2023. That course will be carefully scrutinized and, in that regard, it is notable that on Feb. 20, 2023, PMPRB member Matthew Herder issued a public letter of resignation criticizing the Government for not pursuing the "biggest step to lower drug prices in a generation." That same sentence was also quoted by QCA in its finding that the amended Regulations were outside of the PMPRB's mandate.