Key Takeaways from Ongoing PMPRB Litigation

UPDATE: On April 14, 2022, the Minister of Health announced that the federal government will not proceed with amendments to the Patented Medicines Regulations introducing new pharmacoeconomic factors and requiring that price and revenue information be reported net of all adjustments. The federal government will proceed with amendments establishing a new basket of comparator countries, with a coming-into-force date of July 1, 2022. For more information, see our Life Sciences Bulletin on the Minister’s announcement.

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This article provides an update on each of these cases and highlights the growing body of jurisprudence questioning the PMPRB’s price control reasoning.

Context

The Amendments to the Patented Medicines Regulations include:

• An update to the schedule of countries used by the PMPRB for international price comparisons;
• The introduction of three economics-based price regulatory factors (pharmacoeconomic value, market size, and gross domestic product); and
• Changes to the price and revenue reporting provisions which would require patentees to provide this information net of all adjustments such as third-party discounts or rebates, including product listing agreements (“PLAs”).

After several deferrals, the Amendments and the PMPRB Guidelines operationalizing the Amendments are scheduled to come into force on July 1, 2022. See our 2022 PMPRB Outlook for Pharmaceutical Patentees in Canada for a discussion of the implications of these deferrals for pharmaceutical patentees.

Quebec Court of Appeal decision in Merck Canada inc.

In August 2019, a group of research-based pharmaceutical companies launched a constitutional challenge in Quebec Superior Court. The plaintiffs argued that the existing PMPRB regime and the Amendments were unconstitutional on the basis that the federal jurisdiction over patents does not allow the federal government to regulate drug prices in the absence of patent abuse.

In a December 2020 decision, the Superior Court struck the changes to the price and revenue reporting provisions, including the requirement to disclose PLAs, but upheld the new economic factors, the change to the comparator countries, and the existing regime (2020 QCCS 4541). See our bulletin on the Superior Court decision. The pharmaceutical companies appealed and the Attorney General of Canada cross-appealed.

On February 18, 2022, the Quebec Court of Appeal rendered a major, unanimous decision which partially invalidated the Amendments (2022 QCCA 240; available in French only). The existing regime was determined to be constitutional because of the logical, real and direct link between patents and preventing excessive pricing of medicines that could derive from patent monopoly. Nevertheless, the Court found that the majority of the Amendments were not, in pith and substance, related to excessive pricing or abuse of patent monopoly.

In addition to affirming the trial judge’s holding that it is unconstitutional for the PMPRB to regulate PLAs or require disclosure of PLA rebates, the Court struck the economic factors. In the Court’s view, these factors had little or nothing to do with the monopoly conferred by patents and were being used purely to impose significant price reductions.

The Court upheld the change to the comparator countries.

Having dealt with each of the issues on appeal, the Court summarized its analysis by stating that the PMPRB’s mandate does not extend to pure price control:

[243] In summary, federal regulation of the price of patented medicines is constitutional to the extent that it has as its pith and substance to prevent the negative effects on prices of the monopoly granted by a patent. Conversely, federal regulation is unconstitutional to the extent that it no longer seeks to control the [negative] effect of the patent monopoly on prices.

(our translation)

A Fasken team led by Marc-André Fabien, Julie Desrosiers, Michael Shortt, Eliane Ellbogen, Mathieu Gagné and Dara Jospé represented the appellants in this matter.

For a detailed summary of the Quebec Court of Appeal decision, see our recent bulletin.

Judicial review of the Amendments in Federal Court

In September 2019, Innovative Medicines Canada (“IMC”) and several research-based pharmaceutical companies applied to the Federal Court for judicial review, arguing that the Amendments were ultra vires the Patent Act.

In June 2020, the Federal Court declared that the changes to the price and revenue reporting provisions were invalid because they were ultra vires the Patent Act (2020 FC 725). The Court upheld the changes to the comparator countries and the introduction of the economic factors.

In the decision, Justice Manson found that the PMPRB’s “mandate to control prices is only engaged where it finds a patentee has abused its monopoly by charging excessive prices.”

For more detail, see our bulletin summarizing the decision.

IMC and the pharmaceutical companies appealed the decision and the Attorney General of Canada cross-appealed. The appeal and cross-appeal will be heard on February 28 and March 1, 2022.

Judicial review of the Guidelines in Federal Court

The final PMPRB Guidelines operationalizing the Amendments were published in October 2020, a few months after the Federal Court’s judicial review decision was issued.

In November 2020, IMC and several research-based pharmaceutical companies applied for judicial review of the Guidelines on the basis that they are ultra vires the Patent Act. Among the grounds for the application were that the price review process in the Guidelines includes consideration of rebates, despite the Federal Court having held that the changes to the price and revenue reporting provisions were ultra vires.  

A hearing date has yet to be set in this matter.

Key Takeaways

There is significant alignment between the Quebec Court of Appeal and Federal Court decisions as to the PMPRB’s proper mandate. Indeed, both decisions emphasize the distinction between preventing excessive pricing as a result of patent abuse and price control generally.

With this distinction in mind, it is an optimal time for patentees to reconsider their approach to pricing. The Fasken team is available to discuss the possible implications of these cases on your pricing strategy.

Going forward, it will be interesting to watch for the Federal Court of Appeal’s ruling on the Amendments, as well as whether any of these cases are appealed to the Supreme Court of Canada.

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