The Patented Medicine Prices Review Board (PMPRB) released new Guidelines in 2009, including the new pricing tests the Board will apply for patented medicines. The new Guidelines came into effect on January 1, 2010, and the price tests will applied to patented products sold by patentees commencing in the January 1 – June 30, 2010 reporting period.

However, patentees should be mindful of the fact that, while the new Guidelines address the pricing tests, they do not specifically set out the reporting requirements that are effective as of January 1, 2010. The scope of the information that patentees are required to report to the Board has been under debate for the past few years. This debate culminated in the Board Communiqué of August 18, 2008 which stated that the previous Board policy allowing patentees some discretion in the inclusion or exclusion of benefits in the calculation of average price, first adopted in April 2000 and discussed below, would be replaced by an obligation to report all such benefits including those to third parties. All discounts and other benefits would be taken into account in calculating the average price.

The implementation of the changes set out in the Communiqué was intended to take effect with the reporting period commencing January 1, 2010. However, in July 2009, on the application of Rx&D and 18 individual patentees, the Federal Court set aside the Communiqué. The court further noted that the Board had no jurisdiction to require patentees to report benefits to persons who were not “factory gate” customers of a patentee. The Board has not issued any communication clarifying its expectations of what patentees should report effective January 1, 2010 as a consequence of the decision of the Federal Court.

The lack of direction from the Board as to its current reporting expectations is in contrast to the Board’s past practice. Indeed, in April 2000, the Board released a Communiqué addressing the reporting of compassionate programs and stating that, so as to not discourage the offering of incentive programs that would benefit patients, patentees could either include or exclude these programs from the calculation of a product’s average price, as long as the inclusion or exclusion was consistent in all reporting periods.

In a March 21, 2007 decision in the case of LEO Pharma v. Attorney General [2007] FC 309, the court held that the Board had no discretion to refuse to include discounts and free goods reported by a patentee in calculating the average price of the product at issue. The Board subsequently issued a series of Communiqués, and took the position that all discounts must be reported and must be included in the average transaction price of a product. The various Communiqués were suspended after issuance, with the Board advising in its January 2009 NEWSletter that the mandatory reporting of benefits as set out in the August 18, 2008 Communiqué would be suspended until January 1, 2010, in view of the court challenge to the Communiqué.

In its July 10, 2009 decision the Federal Court set aside the Communiqué itself as well as noting that the Board could not require the reporting of third party payments. This has left the scope of the “mandatory reporting” set out in the various Communiqués uncertain, and there is no guidance from the Board clarifying its expectations, effective January 1, 2010, for the reporting of benefits which, prior to the August 18 2008 Communiqué, were governed by the April 2000 Policy.

Given the lack of clarity, patentees should carefully consider their product portfolios to assess compliance on a going-forward basis and whether adjustments are needed. Patentees need to reconcile the Board’s earlier April 2000 policy with the Court’s decision setting aside the Communiqué of August 18, 2008, to ensure that the net pricing of their products is within the pricing tests set out in the new Guidelines.

For the decision in LEO Pharma, see:

For the decision in the Pfizer/Rx&D challenge to the Board’s Communiqué, see:

For the Board’s new guidelines, see: