The Patented Medicine Prices Review Board (PMPRB) has issued a discussion paper outlining a series of options to address the implications of the Federal Court of Canada decision in the LEO Pharma case. In the Board's view, LEO Pharma requires changes in the practices used by the PMPRB regarding the calculation of the Average Price of a patented medicine for both filing and price review purposes. (See Drug Pricing & Reimbursement @ Gowlings, Issue 1, Nos. 6, 7, and 10.)

The discussion paper represents the next stage in consultations between the Board and its stakeholders on this issue. The Board has taken the view that the Federal Court interpreted the Patented Medicines Regulations, 1994 (Regulations) to require patentees to include all discounts, rebates and other benefits in the calculation of the Average Price of the medicine for price review purposes. This interpretation reverses a previous policy of the Board and has attracted considerable criticism from patentees and other stakeholders. In particular, they believe that it discourages patentees from supplying drugs at low or no cost for compassionate purposes. In addition, they have expressed concern with the Board's position, announced at the same time, that patentees ought to report payments to governments that have been negotiated in regard to public drug programs.

The discussion paper outlines eight options including some options to amend the Regulations and others to amend the Excessive Price Guidelines. The Board has not indicated a preference for any of the options.

None of the options presented by the Board include a return to the previous policy which gave patentees the flexibility to either include or exclude benefits provided under compassionate release programs and other special programs in the calculation of the average price, provided that they did so on a consistent basis. As some of the options appear to be directed towards establishing more elaborate rules that would apply to all patented medicines in future, it will be important for stakeholders and the Board to fully assess their implications.

The six regulatory options can be summarized as follows:

  • Apply the Board's interpretation of the LEO Pharma decision as set out in its April 2007 Newsletter;
  • Amend the Regulations to specifically exempt the reporting of payments to third party payers (including public drug plans);
  • Amend the Regulations to exclude some or all "free goods" from the Average Price;
  • Amend the Regulations to change "free services" to "services (free or partially subsidized)" in the Average Price;
  • Amend the Regulations to exclude "gifts" from the Average Price; and
  • Amend the Regulations to permit the Board, in a hearing, to exclude benefits provided for the purpose of lowering the patentee's liability for excessive pricing.

The two options for changes to the guidelines would address situations where the Average Price in one year declines due to a new or increased benefit. In the first option, the MNE price in the year following the price decline would be the highest previous non-excessive Average Price. The second option offers a variation on the first by providing that the MNE price may be the higher of introductory MNE price and the highest previous non-excessive Average Price if the Average Price declines due to a new or increased benefit.

The second option is intended to address situations where sales in the introductory period include some discounts or free goods. Under both options, the Board considers that some constraint on one-year price increases would be appropriate.

The Board has asked stakeholders to submit comments on the discussion paper to the Secretary of the Board by March 3, 2008.

For a copy of the PMPRB Discussion Paper, Options for Possible Changes to the Patented Medicines Regulations, 1994 and the Excessive Price Guidelines, please visit: