On December 5, 2022, the Federal Court of Appeal (“FCA”) issued its long-awaited decision in Innovative Medicines Canada v. Canada (Attorney General), 2022 FCA 210. The Court upheld the government’s new “basket” of comparator countries, which the Patented Medicine Prices Review Board (“PMPRB”) is to consider in determining whether the price of a patented drug is “excessive”.

In the underlying application, Innovative Medicines Canada (“IMC”) challenged amendments to the Patented Medicines Regulations, arguing that they went beyond the scope of Cabinet’s regulation-making power under the Patent Act. Initially, in addition to the new basket of comparator countries, IMC had also challenged the three new pharmacoeconomic factors and a new way to calculate the price of medicines (net of discounts and rebates). The Federal Court found that the new way to calculate price went beyond Cabinet’s power, but otherwise upheld the new amendments (see 2020 FC 725). This decision was the subject of the appeal.

During pendency of the appeal, the new pharmacoeconomic factors and the new way to calculate price (which were subject to separate court challenges) were found unconstitutional by the Quebec Court of Appeal as going beyond federal jurisdiction, which does not have power over general price control (see our blog here). However, the new basket of comparator countries was not found unconstitutional, and remained the sole live issue for the present appeal.

From 1994 until the amendments at issue in this case, the comparator countries were Germany, France, Italy, Sweden, Switzerland, the United Kingdom and the United States (the “PMPRB7”). The new amendments, which came into force on July 1, 2022, changed the comparator countries to Australia, Belgium, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden and the United Kingdom, growing the list of countries to eleven (the “PMPRB11”). Importantly, the United States and Switzerland were removed from the list. The removal of these two countries was justified by the Governor-in-Council on the basis that, unlike Canada, these two countries do not have measures regulating the free-market pricing of patented medicines.[1]

The FCA placed little weight on arguments by IMC that the regulations were enacted for the improper purpose of reducing the price of medicines generally in order to deliver health care savings. Although “lowering of the overall cost of medicines, thereby resulting in savings to the public purse, is a natural consequence of the amendments”, the FCA found that it was not the pith and substance of the amendments.[2] Rather, the FCA found that the purpose of the new basket of comparator countries was to police excessive pricing of patented medicines.

Accordingly, the FCA dismissed the appeal, upholding the PMPRB11 basket of comparator countries. As we have noted (see our blog here), the PMPRB is currently consulting on new guidelines implementing the PMPRB11. We will continue to provide updates on this important and emerging issue.