In a much anticipated decision which will likely have a substantial impact on the pharmaceutical industry in Canada, Justice Picard upheld the existing law governing the Patented Medicines Pricing Review Board (PMPRB) but found the amendments partially invalid. In particular, she struck the provisions regarding disclosure of confidential rebates negotiated with insurers through product listing agreements ("PLAs") but upheld the change to the comparator countries and the economic factors.
In August 2019, the federal government enacted amendments to the Patented Medicine Regulations which:
- Update the schedule of countries used by the PMPRB for international price comparisons;
- Introduce three (3) new, economics-based price regulatory factors which reflect a drug's value and Canada's ability to pay for patented medicines; and
- Require patentees to report price and revenue information net of all price adjustments such as direct or indirect third party discounts or rebates, including notably product listing agreements (collectively, the "Amendments").
These Amendments, which will come into force on January 1, 2021, were challenged by the pharmaceutical industry first at the Federal Court through a judicial review and most recently, at the Superior Court of Quebec in a constitutional challenge.
As previously discussed, the Federal Court found compelled disclosure and review of third party rebates ultra vires the Patent Act but upheld the other Amendments.
On December 18, 2020, Justice Picard ruled on the constitutional challenge.
The Constitutional Challenge
Here, the plaintiffs attacked both the existing PMPRB regime as well as the Amendments as unconstitutional arguing that the federal patent power does not allow the federal government to regulate drug prices, even if "excessive", unless there is patent abuse. Only the provincial governments are constitutionally empowered to regulate prices.
The Court's Decision
The Existing PMPRB Regime
The Court found that the Patent Act and existing regulations were constitutional stating that the price control of patented medicines in order to prevent them from being sold at excessive prices, has a logical, real and direct link with patents and does not unreasonably infringe on provincial powers.
The Court declined to consider any evidence of the practical and legal effects of the law (including how the PMPRB actually applies the law) and maintained that only Parliament's intention matters. Further, the Court concluded that it cannot intervene on the means chosen by Parliament in order to achieve an objective which is otherwise constitutionally valid; a novel federal argument.
According to the Court, the pith and substance of the Amendments similarly lies in increased control of the price of patented medicines but through additional tools, in order to ensure prices are reasonable, especially for drugs sold at very high prices.
Moreover, Justice Picard found that the analysis of the constitutionality of the Amendments must be distinguished from their implementation based on non-binding guidelines. She held that insofar as the Amendments can be applied constitutionally; in order to avoid excessive prices (by setting ceiling prices), rather than in order to fix prices (which would not be acceptable), their constitutionality should be recognized regardless of what the PMPRB Guidelines may provide.
In this context the Court:
UPHELD the Economic Factors
According to the Court, the addition of the economic factors: (pharmacoeconomic value, market size, and gross domestic product), seems relevant since these elements can shed additional light on whether the prices of drugs are excessive.
UPHELD the Change to the Comparator Countries
The Court found the same to be true for the change in the list of comparison countries, which it held is not static and can evolve, even if the changes were motivated purely by a desire to lower prices.
However, in upholding these measures, Justice Picard pointed out that they cannot be used to achieve optimal pricing or lowest possible pricing, since this would be unconstitutional: "If the implementation of this analysis [using the new factors] is merely an indirect way of carrying out pure price control or setting the prices as low as possible, without regard to the existence of excessive prices, this will not be acceptable" (at para. 401, our translation).
The Superior Court held that it could not take account of the effects of the Amendments in its constitutional analysis, even though it found these effects "unfortunate and troubling". Justice Picard did suggest that a judicial review of a PMPRB Board decision would be the appropriate forum to challenge the implementation of these Amendments, notably if their use goes beyond excessive price control.
STRUCK the Disclosure of Product Listing Agreements
The Court did however find that the new requirement to disclose PLAs was a direct incursion into a field of provincial jurisdiction:
 In effect, general jurisdiction over health matters, including questions of cost and efficiency, administration of hospitals, provincial drug insurance plans, and the regulation or control of prices and profits fall within the purview of provinces. They effectively negotiate reasonable prices for prescription drugs covered by public plans (including through pharmacoeconomic studies, setting up the pCPA and negotiating a listing agreement that may result in a reduced list price or even discounts and other special terms and conditions that occur downstream, often several months or years after ex-factory sale by the manufacturer.)
 ... the disclosure of confidential rebates to the PMPRB and the substantial price reductions that would follow in the private market would have the perverse effect of limiting the size of the rebates that provincial public drug insurance plans could obtain. (our translation)
Accordingly, the Court struck down this part of the Amendments holding that any attempt to regulate rebates would be improper. Justice Picard found that it was not just disclosure of rebate information that was problematic, but the very idea of regulating rebates.
The Court ordered that this conclusion have immediate effect despite any possible appeal, since it was concerned that disclosure of PLA rebates would cause irreparable harm.
Based on this decision as well as the Federal Court's decision in InnovativeMedicines Canada v. Canada (Attorney General), ("IMC decision") there are now two cases holding that the PMPRB may not have access to PLA data. The federal government would need to reverse both of these decisions before the PMPRB can do otherwise.
As previously discussed, the elimination of compelled disclosure of third-party rebates may have a greater practical effect on the PMPRB than what immediately meets the eye, since without this information, a large part of the PMPRB's planned regulatory approach under the Amendments would no longer be possible. In particular, it remains questionable how the PMPRB can assess the Maximum Rebated Price ("MRP") without access to third party rebates.
Both the industry plaintiffs as well as the federal government may appeal this decision.
The IMC Decision has also been appealed to the Federal Court of Appeal and a challenge to the PMPRB Guidelines has been launched.
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