In preparation for the coming into force of the amended Patented Medicines Regulations (the "Regulations"), the Patented Medicine Prices Review Board ("PMPRB") has published draft guidelines (the "New Guidelines")(PDF) to replace the current Compendium of Policies, Guidelines and Procedures. Both the amended Regulations and the New Guidelines are scheduled to come into force on July 1, 2020. The PMPRB has launched a consultation on the Guidelines, with written submissions being accepted until February 14, 2020.
According to a consultation backgrounder (PDF) published by the PMPRB, the New Guidelines are necessary to operationalize the changes that will be implemented with the coming into force of the amended Regulations, as we previously reported, namely:
- Additional factors to be considered by the PMPRB when assessing whether the price of a patented medicine is excessive, including the medicine's pharmacoeconomic value and market size;
- A revised list of comparator countries to be used by the PMPRB when setting the median international price and lowest international price for a patented medicine, for the purpose of setting the maximum price of the medicine in Canada; and
- Changes to reporting requirements for patentees, including the filing of cost-utility analyses by Canadian public health technology assessment agencies (i.e. CADTH and INESSS) to be used by the PMPRB when assessing the pharmacoeconomic value of a medicine.
Risk-Based Classification of Patented Medicines
In keeping with the "risk-based approach" on pricing being implemented with the amended Regulations, the New Guidelines propose to classify patented medicines according to the risk of excessive pricing. Higher risk ("Category I") medicines will be subject to both a maximum list price and a maximum rebated price (i.e. inclusive of discounts, rebates and free goods/services provided to payers). Lower risk ("Category II") medicines will be subject to a maximum list price only.
The New Guidelines provide that a patented medicine will be classified as Category I if either (1) its 12-month treatment cost exceeds 50% of Canada's GDP per capita or (2) estimated or actual annual revenues exceed an annual market size threshold across all dosage forms and strengths (to be set initially at $25 million and adjusted at least every five years to reflect changes in the consumer price index and GDP). All patented medicines that are not Category I medicines will be classified as Category II medicines.
Unlike under the current Compendium of Policies, Guidelines and Procedures, under the New Guidelines the ceiling price for a patented medicine will not fluctuate from year to year based on the average transaction price in the previous year.
All patented medicines will be subject to a maximum list price ("MLP") representing the lower of the median international price ("MIP") and the median domestic therapeutic class comparison (the median Canadian list price of other comparable medicines identified by scientific review). Notably, the MLP cannot be set lower than the lowest international price. The New Guidelines also provide for a reassessment of the MLP for a medicine if it was based on the MIP and the MIP deviates from the MLP by more than 10% in a subsequent period.
Category I medicines will additionally be subject to a maximum rebated price ("MRP"). According to the Guidelines, patentees must ensure that a Category I medicine's net price in Canada (i.e. average transaction price per package) does not exceed the MRP. The MRP will be calculated based on the medicine's pharmacoeconomic value (a cost-benefit analysis of the medicine's impact on the Canadian healthcare system, expressed as cost per quality-adjusted life year ("QALY") and based on an initial $60,000 per QALY threshold). The MRP may be adjusted downward to account for market size (i.e. the MRP will be reduced by 10-50% if annual revenues would exceed $25 million if priced at the originally calculated MRP). The New Guidelines contemplate that the $60,000 per QALY threshold will be periodically updated to reflect changes in GDP, health care budgets, and advancements in treatment and the efficiency of delivery of health care services.
Importantly, the New Guidelines contemplate a 50% increase in the MRP for medicines that treat rare diseases (diseases found in less than 1 in 2,000 Canadians). According to the consultation backgrounder, this 50% premium is intended to account for the revenue premium currently realized by medicines for rare diseases in comparison to other medicines. Medicines for rare diseases which generate more than $12.5 million in annual revenues will be subject to a downward MRP adjustment.
If a patented medicine is approved for more than one indication, the PMPRB will set the MLP (and MRP, if applicable) based on the indication likely to have the greatest impact in terms of price. This will be the indication resulting in Category I status for the medicine (if any), or otherwise the indication treating the disease with the largest patient population.
The New Guidelines reflect the grandfathering provisions of the amended Regulations for patented medicines that were granted a DIN prior to August 21, 2019. These medicines will be subject to an MLP only, and the PMPRB's price review will be based only on the factors in place in the pre-amendment version of the Regulations. Notably, however, the MLP for grandfathered medicines will be calculated using the MIP based on the updated list of comparator countries in the amended Regulations. Medicines sold under the Special Access Program prior to August 21, 2019 (which are not assigned DINs), as well as line extensions of existing products that are granted a DIN after this date, will not be subject to grandfathering.
Patentees (and their licensees) would be well advised to consider how their medicines will be classified under the New Guidelines and the concomitant impacts on price ceilings and reporting obligations. Fasken's life sciences team has considerable expertise advising clients in the pharmaceutical industry on PMPRB matters, including patent and pricing strategy, and would be pleased to advise on submissions during the consultation.