On February 3, 2011, the Patented Medicine Prices Review Board (the Board) released its decision dated January 31, 2011, regarding Penlac, a drug manufactured by sanofi-aventis. Penlac is used in the treatment of onychomycosis, a common fungal nail infection. The Board’s decision deals with three primary issues.

First, the Board considered the interaction between the Patent Act, which sets out the Board’s jurisdiction to determine drug prices, and the Board’s internal Guidelines, which are intended to implement the Act. The Board agreed with sanofi-aventis that the Guidelines are just that – guidelines, and the Board ought not follow them rigidly. Rather, the Board held that its duty is to “determine whether the medicine is priced excessively within the terms of section 85 of the Act,” and to the extent that the Guidelines implement section 85, they should be followed. However, “If the Guidelines do not result in an appropriate implementation of section 85 of the Act, the panel must depart from the

Guidelines.” Despite this conclusion, the Board ultimately reached a result that was essentially a mechanical application of the Guidelines.

The second and pivotal issue before the Board was the method for establishing a “therapeutic class.” One of the metrics the Board uses to determine a Maximum Non-Excessive Price (MNE) is the prices of medicines in the same therapeutic class. In this respect, the Board agreed with sanofi-aventis that clinical equivalence is the influential factor in compiling a therapeutic class. The Board also agreed that the two primary factors in the determination of clinical equivalence is the safety and efficacy of the comparator drugs.

The Board was faced with two possible comparator drugs for Penlac: Lamisil and Sporanox. Both of these drugs are systemic drugs, while Penlac is a topical lacquer.

The Board agreed with sanofi-aventis that a difference in dosage form does not necessarily prevent two drugs from being clinically equivalent. The Board’s decision on clinical equivalence turned on effectiveness. The clinical data that the Board relied on showed that Lamisil was more effective than Sporanox, which, in turn, was more effective than Penlac. Even though the effectiveness ratio between the three drugs was 81%:65%:32% for Lamisil, Sporanox and Penlac respectively, the Board ultimately concluded that Penlac was not effective enough to be considered clinically equivalent to the two systemic drugs.

The Board’s finding on relative effectiveness depended heavily on the recommendation of the Human Drug Advisory Panel (HDAP) to Board staff prior to the commencement of the Hearing. HDAP had recommended that Penlac not be included in the same therapeutic class as Lamisil and Sporanox. However, as sanofi-aventis argued, in a previous therapeutic class recommendation, HDAP recommended a therapeutic class that included smoking cessation therapies with efficacies as divergent as those of Penlac and the systemic medicines, as all therapies were accepted and prescribed treatments for the disease. Without elaborating, the Board held that it was unable to draw any conclusions from this submission that were relevant to the case before it.

The Board also discounted the fact that Penlac has a considerably favourable side-effect profile to both Lamisil and Sporanox. At the hearing, sanofi-aventis argued that the two factors of safety and efficacy ought to be examined in tandem, that is, that relative reductions in efficacy between two drugs can be offset by relative gains in safety. Although the Board saw the logic in this argument, it ultimately declined to follow it.

The third issue was how the Board applied its Median International Price Comparison (MIPC). Because Penlac did not fit into an established therapeutic class, the Guidelines directed the Board to use international prices to determine an MNE price for Penlac. The MIPC test stipulates that the MNE price for a drug in Canada is the median price of a specified set of comparator countries. This price test normally allows a drug manufacturer to charge a premium Canadian price because drug prices tend to be lower in Canada than internationally. The issue in this case was that sanofi-aventis sold Penlac at a lower price outside Canada.

The MIPC test is intended to allow the manufacturer to charge a “premium” price for its medicines because, where there are no comparator drugs in the same therapeutic class, a manufacturer is providing a drug to which Canadians would not otherwise have access. In this case, the Board applied the MIPC test, with the result that Penlac was considered to be overpriced. The Board seemed to be influenced primarily by Penlac’s effectiveness in comparison to the proposed comparator drugs. However, other than the extent to which it is useful in compiling a therapeutic class, effectiveness is not a factor which the Board is expressly authorized to consider when making a pricing determination under section 85 of the Act.

The Board stated that the Guidelines might be changed to allow the lowest international price to set the Canadian MNE in situations like Penlac’s or that the Board was free to decline to follow the Guidelines . However, the Board concluded that, because these points were not canvassed during the hearing, the Board would leave these considerations for future cases. In this case the Board applied the MIPC test as set out in the Guidelines to reach a determination that Penlac was excessively priced.

Finally, the Board offered a brief dismissal of sanofi-aventis’ argument that Board Staff had not satisfied its onus of proof, particularly in respect of the appropriateness of applying the Guidelines MIPC test without explanation or argument to determine excessive pricing on the facts of this case. The Board simply held that the implementation of the Guidelines MIPC test was an appropriate implementation of the Act.

The Board ordered sanofi-aventis to repay the excess revenues as calculated by Board staff.