In separate announcements issued this week, the Patented Medicine Prices Review Board (PMPRB) has ended months of consultation and speculation by announcing that it will implement a policy change, first reported in its April 2007 NEWSletter, to require that patentees report all rebates and discounts, including payments made to third parties, in their filings on the prices of patented medicines. This policy change, described in a Stakeholder Communiqué issued on August 18, 2008, was followed by proposals to amend the PMPRB's Excessive Price Guidelines issued in a consultation package for Notice and Comment on August 20, 2008.

The requirement to report third party payments has been the subject of criticism from the pharmaceutical industry and others. In January 2008, the Board published eight options to address the issue, including a specific option to amend the Patented Medicines Regulations to exempt the reporting of payments to government drug programs and other third party payers. Many stakeholders, including the Provinces of Ontario and British Columbia and members of the pharmaceutical industry, made written submissions in support of that option. The Board does not address those submissions in its announcements this week, but in an accompanying Backgrounder, it states that the Regulations do not give it the discretion to exempt patentees from any reporting requirement.

Although the Board has not invited further submissions on the reporting issue, it has invited written submissions on the consultation package on proposed changes to the Guidelines. This package, which represents the culmination of a consultation process going back more than two years, proposes the most sweeping changes to the PMPRB's Guidelines in its 20 year history.

One of the proposed changes is intended to address the impact of reporting benefits as set out in the Communiqué. The Board states that it does not want "to unduly create a disincentive to the offering of benefits to customers" and proposes certain changes to the CPI Guidelines for existing patented drugs. Adopting, in part, recommendations of a working group of stakeholders, it proposes a "de-linking" of the maximum non-excessive (MNE) price and average transaction price (ATP) in exceptional circumstances. This proposal would address the circumstances where there appears to be an excessive price increase due solely to the termination of a benefit. Patentees would be required to provide evidence to the PMPRB staff of the cancellation or reduction in uptake of the benefit.

The PMPRB has not addressed another working group recommendation on "de-linking" which would have allowed an average price to increase to the original MNE price in future years. In this case, the Board is concerned about potential price increases and has invited further submissions.

Among the other significant changes to the Guidelines proposed by the Board are:

  • Replacing the current three categories of new drugs with four "levels of therapeutic improvement". The effect is to create a new moderate improvement category with a more flexible price test of the higher of the highest price in the therapeutic class comparison or the midpoint between that price and the median international price;
  • Introduction of criteria for reviewing prices in "any market" which, among other things, will have the effect of requiring that the introductory price of a new patented medicine to each class of customer and in every province and territory not exceed the national introductory MNE price. For existing drugs, the Board will review prices in any market on a case-by-case basis where price variability in different markets appears to be an issue.

On other issues, the Board has decided to establish a general Guideline on international therapeutic class comparisons but not as primary test; it may be used as a mechanism for dispute resolution. The Board will not establish new Guidelines for re-setting the MNE price nor for assessing the costs of making and marketing a medicine.

All of the proposed changes in reporting requirements and the Excessive Price Guidelines would be effective as of January 1, 2009. The PMPRB has not provided any proposals for transitional provisions for existing drugs or drugs which may currently be in the review process.

The announcements by the PMPRB this week will create significant changes in the regulatory regime for patented medicine pricing and will increase the requirements for patentees to track and report price information. On reporting, the Board has emphasized that the required information must relate to "sales" of a patented medicine, but it has not provided more guidance on how patentees should interpret the relevant provisions of the Regulations.

The new policy on the reporting of rebates; the proposals for Guidelines changes; and the interrelationship of these changes, are complex and will require patentees to conduct a more detailed assessment of their implications both as they effect current products and also as they will impact pricing rules in future.

Stakeholders have until October 6, 2008 to make written submissions to the Board on the consultation package.

For copies of the PMPRB's Stakeholder Communiqué and the Notice and Comment Consultation Package, please visit: http://www.pmprb-cepmb.gc.ca/english/view.asp?x=808