In a decision of the Patented Medicine Prices Review Board, released June 30, 2011, the Board decided that generic drug companies who sell patented products through agreements with a patentee are required to report sales and pricing information. The Board was asked to consider an application from Board Staff seeking an order requiring generic company, ratiopharm, to provide the Board with the information and documents required by the Patented Medicines Regulations. These provisions require “patentees” to provide to the Board certain information regarding sales, pricing, revenues and research and development expenditures.

The central issue in the case was whether ratiopharm could be considered a “patentee” for products it sold under supply agreements with other companies who were the patent-holders for the products in question. Board Staff took the position that any pharmaceutical distributor that has an agreement to purchase a medicine from a patent-holder and resell it to others, and who holds its own Notice of Compliance (NOC) for the medicine, ought to be considered a “patentee” for the purposes of the Act and the Regulations. Board Staff argued that, for 14 of its products, ratiopharm fell under this definition.

ratiopharm argued that it was not entitled to exercise any patent rights in relation to the patents at issue because the innovative companies specifically, by agreement, retained all patent rights. Thus, ratiopharm simply occupied a position in the distribution chain of the medicines and could not be considered a “patentee.”

The Board Panel relied heavily on its decision in the ratio-Salbutamol decision dated, May 27, 2011, a case which was decided by the same panel.  An application for judicial review of that decision was filed in the Federal Court, on June 27, 2011.

The Board Panel concluded that it was not necessary for a company such as ratiopharm to manufacture a medicine or hold a patent pertaining to the medicine in order to be subject to the jurisdiction of the Board. The Board Panel held that a person is subject to the jurisdiction of the Board if it is entitled to “any rights in relation to” a patent pertaining to a medicine that is sold in Canada.

The Board Panel reasoned that, while the exercise of market power was not a precondition to the Board’s jurisdiction, the potential for market power that arises from the monopoly conferred by a patent is at the root of the Board’s mandate. The Board Panel held that, because a patent-holder is exercising market power when it decides whether or not to supply ratiopharm with a medicine, ratiopharm’s right to sell that medicine is a right to which ratiopharm is entitled “in relation to” the pertaining patents.

The Board Panel considered it significant that ratiopharm held its own NOCs for the medicines. Although it is possible for a person to hold an NOC without being entitled to any rights in relation to a patent, the Board held that a person who holds an NOC and is entitled to rights in relation to a patent occupies the same position with respect to the Board’s mandate as the patent holder.

The Board Panel justified its conclusion by considering the consequences of ratiopharm’s position. According to the Board Panel, distributors in ratiopharm’s position must be considered patentees; otherwise, the Board’s mandate could easily be defeated by strategic alterations in the distribution structure for a medicine. The Board concluded that its interpretation of the term “patentee” was necessary to avoid “unregulated pricing.”

For 12 of the medicines at issue, the Board concluded that ratiopharm was required to file Form 1 (medicine identification information) and Form 2 (sales and pricing information). For 2 medicines, the Board required ratiopharm to file further information in order to allow the Board to establish whether ratiopharm was a patentee with respect to those medicines.

The Board’s decision can be found at: http://www.pmprb-cepmb.gc.ca/cmfiles/decisions/ratiopharm-merits-reasons-d3-june-30-2011.pdf