On December 1, 2017, the Federal Government published proposed changes to the Patented Medicines Regulations, representing the first major update to the Regulations in more than 20 years. The proposed legislative changes are accompanied by a Regulatory Impact Analysis Statement (“RIAS”) and follow the Protecting Canadians from Excessive Drug Prices Consultation Document, as previously reported, and the associated consultation with stakeholders and interested parties.
These proposed amendments to the Regulations are intended to provide the Patented Medicine Prices Review Board (“PMPRB”) with additional tools to control the prices of patented drugs.
As previously reported, the PMPRB has been rethinking its mandate as questions have surfaced regarding the effectiveness of a federal pharmaceutical price regulator in Canada: While the PMPRB was initially conceived as a "consumer protection pillar", to ensure that the prices of patented medicines sold in Canada are not excessive while increasing R&D in Canada, the PMPRB asserted that the effectiveness of its regulatory role was increasingly being questioned due to the increasing prices of patented drugs, decreasing pharmaceutical R&D in Canada and provincial drug cost containment measures, including, for example, product listing agreements.
In this context, the Federal Government has proposed the following regulatory changes:
1. Proposed Changes
There are five elements included in the proposed amendments.
i) Introduce new Price Regulatory factors
Introduce three (3) new, economics-based price regulatory factors to enable the PMPRB to ensure non-excessive prices that reflect value and Canada’s willingness and ability to pay for patented medicines.
These three (3) factors are:
- pharmacoeconomic value of the drug in Canada,
- market size for the drug in Canada and other countries, and
- Gross domestic product (“GDP”) in Canada and GDP per capita in Canada.
ii) Update the schedule of comparator countries
Update the schedule of countries used by the PMPRB for international price comparisons (now the PMPRB 7) to include countries with similar consumer protection priorities, economic wealth and marketed medicines as Canada.
The proposed schedule lists Australia, Belgium, France, Germany, Italy, Japan, the Netherlands, Norway, South Korea, Spain, Sweden and the United Kingdom (“PMPRB12”), while removing Switzerland and the United States from consideration.
According to the RIAS, including a larger number of countries in the schedule would make price tests less sensitive to the influence of countries with prices that are high or low, and reduce the impact where price and sales information is delayed or not available.
iii) Reduce Reporting Requirements for OTC and Generic Drugs
Reduce reporting obligations for patented veterinary, over-the-counter (OTC) and generic medicines (i.e. those authorized for sale by the Minister of Health through an Abbreviated New Drug Submission (ANDS)), including notably those that may contain a controlled substance, or are a radiopharmaceutical and/or a biologic.
The stated rationale for this reduced reporting is based on the fact that these products pose a lower risk of asserting market power and charging excessive prices. Consequently, according to the PMPRB, this reporting reduction would enable the PMPRB to focus on medicines at higher risk of excessive pricing. It appears that the complaints-based system of oversight for patented generic drugs proposed in the Consultation Document is no longer included.
iv) Update Reporting Requirements for Patented Medicines
Set out the information reporting requirements to enable the PMPRB to operationalize the new price regulatory factors.
Patentees would be required to report new information to the PMPRB to support the new pharmacoeconomic value and market size factors. However, patentees would not be required to report on information related to GDP and GDP per capita, as this information would be obtained from Statistics Canada.
v) Report all discounts and rebates (PLAs)
Requiring patentees to report price and revenue information net of all price adjustments such as direct or indirect third party discounts or rebates, including notably product listing agreements. This would ensure that the PMPRB is fully informed of the actual prices for patented medicines in Canada and enhance the relevance and impact of domestic price comparisons.
The proposed amendments to the drug pricing framework have the potential to significantly impact the business of patentees in Canada. According to the cost-benefit statement: Lost revenues to industry are estimated to be $8.6 billion present value over 10 years.
Although the RIAS provides that it is not anticipated that these amendments would generate adverse impacts on industry employment or investment in the Canadian economy, it admits that when the current regulatory framework was first conceived 30 years ago, policy makers believed that patent protection and price were key drivers of medicine research and development (R&D) investment.
Given the potential wide-reaching impact of the proposed changes, innovative drug companies may be highly motivated to participate in the Government’s consultation on these proposed amendments to the drug pricing regime in Canada. The Fasken Life Sciences team has extensive experience in this area and is available to consult with stakeholders interested in responding to the Proposed Regulations.
The Proposed Regulations are expected to come into force on January 1, 2019.
Comments may be provided by February 14, 2018.