Case: Sandoz Canada Inc. v. Canada (Attorney General)                 

Nature of case: Judicial review of decision of PMPRB

Date of decision: May 27, 2014

Case: Ratiopharm Inc. v. Canada (Attorney General)

Nature of case: Judicial review of decision of PMPRB

Date of decision: May 27, 2014

Summary

On May 27, 2014 the Federal Court released two decisions considering the jurisdiction of the Patented Medicine Prices Review Board (PMPRB) over the pricing of generic medicines, and held that there is no such jurisdiction on the facts of the two cases at hand.  The decisions are notable as they address issues of the constitutionality of the provisions of the Patent Act relating to the PMPRB, and comment upon the scope of PMPRB jurisdiction, including the degree to which it has a consumer protection mandate.

In each of the cases for Sandoz Canada Inc. (“Sandoz”) and Ratiopharm Inc. (“Ratiopharm”), the PMPRB had concluded that the generic companies sold products that were patented, and as such, came within the definition of a “patentee”.  In the case of Sandoz, a subsidiary of Novartis AG, the PMPRB concluded that it had jurisdiction to require reporting of sales and pricing information, which Sandoz disputed.  In the case of Ratiopharm, the PMPRB concluded that it had jurisdiction, and found that Ratiopharm had calculated excess revenues at over $65 million.  Judicial review of the decisions was sought.

Each of Sandoz and Ratiopharm had alleged that the provisions of the Patent Act relating to the PMPRB’s jurisdiction were unconstitutional and ultra vires the federal power.  The Court found that neither Sandoz nor Ratiopharm was a “patentee” within the meaning of the Act, and found that the Board had no jurisdiction over the companies on the facts at issue. The Court also found that the impugned provisions of the legislation fell under the federal jurisdiction over patents and was thereby constitutional.  Rather than sending matters back to the Board for redetermination, the Court referred the matters back to the Board with a direction that it find that each of the companies is not a “patentee”.

Issues

In each case the Court addressed three issues:

  1. The standard of review of the PMPRB's decision;
  2. Whether the generic company is a “patentee”; and
  3. Whether the legislation was unconstitutional.

Decision

In respect of standard of review, in both cases the Court held that the PMPRB should be held to a standard of "reasonableness" on its decision regarding its jurisdiction; on the question of constitutionality, the standard of review is correctness.

On the matter of whether the PMPRB had jurisdiction over the pricing of Sandoz and Ratiopharm’s drug products, the Court made several notable findings in common in the two decisions.  Justice O’Reilly held that,

“[i]t is clear that the relevant provisions of the Act were enacted out of concern that patent holders could take undue advantage of their monopolies to the detriment of Canadian consumers.  They “address the ‘mischief’ that the patentee’s monopoly over pharmaceuticals during the exclusivity period might cause prices to rise to unacceptable levels… Accordingly, the Board should confine its role to reviewing the prices charged by patent holders, who benefit from a time-limited monopoly, to determine whether those prices are excessive.”1   

The Court went on to find that the Board has “no overall jurisdiction” to regulate the price of generic versions of patented medicines.  And that,  “to expand the definition [of ”patentee”] to include generic companies who neither hold patents nor enjoy monopolies would expose the legislation to an attack on constitutional grounds”.  Further, the Court commented, “that approach should be avoided”.2  In both cases, the Court found that neither Sandoz nor Ratiopharm were in a position of holding the exclusive benefits and rights that inure to patent holders.

Of interest is the Court’s comment that “[w]hile the Board began by correctly identifying the purpose of the legislation and the leading cases on the issue (ICN Pharmaceuticals Inc and Celgene), in my view, it placed too much emphasis on the “consumer protection purpose” of the legislation …  That purpose is served solely by reviewing the prices at which patent holders sell patented medicines to determine whether, by virtue of their monopolies, those prices are too high.  The legislation is not aimed at protecting consumers from high drug prices generally, and the Board’s role certainly does not extend that far.”3

With respect to the issue of constitutionality, both companies’ claimed that the provisions of the Patent Act are beyond federal jurisdiction over patents and encroach on provincial jurisdiction over Property and Civil Rights. The Court commented that the Board’s remedial and punitive powers, and the Board’s ability to impose monetary remedies and penalties did not alter the basic purpose of the legislation, and that the Patent Act provisions, properly interpreted, fall within federal jurisdiction over patents of inventions and are constitutional.  

Link to decisions

Sandoz Canada Inc. v. Canada  (Attorney General), 2014 FC 501

Ratiopharm Inc. (now Teva Canada Limited) v. Canada (Attorney General), 2014 FC 502