The Quebec Court of Appeal released this week a significant decision on the proposed amendments to the Patented Medicines Regulations ("PM Regulations"). In Merck Canada inc. c. Procureur général du Canada, 2022 QCCA 240 (the "QCCA Decision"), the QCCA found that certain parts of the proposed amendments to the federal patented medicines pricing regime were unconstitutional.
The QCCA decision relates to proposed amendments to the PM Regulations (the "Proposed Amendments") to include new price regulatory factors, an updated schedule of comparator countries and new patentee information reporting requirements. If the Proposed Amendments were enacted, the pharmaceutical industry has estimated that their losses could be over $26 billion and would have a chilling effect on research and development in Canada.
The QCCA found the following aspects were constitutional:
- Current Patent Act sections 79 to 103 dealing with the regime for controlling excessive prices for patented medicines.
- Current PM Regulations.
- Proposed Amendments to remove Sweden, Switzerland, the UK and the US from the list of "comparator countries" the PMPRB uses to set prices, and to add Australia, Belgium, Japan and the Netherlands.
The QCCA found the following were aspects were unconstitutional:
- Proposed Amendments to include three additional economic factors in PMPRB decisions on whether prices charged are excessive: pharmacoeconomic value, market size and GDP.
- Proposed Amendments requiring patentees to disclose price and revenue information net of all price adjustments, which could include confidential agreements with private and public insurers such as Product Listing Agreements ("PLAs").
New Comparator Countries – Constitutional
The Proposed Amendments seek to amend the list of comparator countries to add new countries and to exclude the US and Switzerland. This was found by the QCCA to be constitutional because the purpose of this amendment is to ensure the price charged for patented medicines in Canada is competitive with prices in comparable foreign countries and prevention of "excessive" pricing in Canada is within the jurisdiction of the federal government and the PMPRB.
New Economic Factors – Unconstitutional
The Proposed Amendments seek to introduce three new economic factors, including:
- Pharmacoeconomic value.
- Market size in Canada.
- GDP and GDP per capita in Canada.
These economic factors were rejected by the QCCA as unconstitutional because they impose arbitrary and significant price reductions on patented medicines in Canada based solely on affordability. Importantly, these factors will apply to prices already determined not to be excessive. The QCCA found that because the purpose of the economic factors was to reduce prices so that patented medicines are more affordable and nothing more, this was outside the jurisdiction of the federal government and the PMPRB.
Additional Disclosure Requirements – Unconstitutional
The Proposed Amendments seek to require patentees to report price and revenues net of all adjustments, i.e., disclose their confidential rebates and other agreements with insurers (e.g., PLAs), as well as other information related to the new economic factors. This was also rejected by the QCCA as unconstitutional because the purpose of these provisions is to significantly reduce prices rather than to control excessive prices which is not the role of the federal jurisdiction and the PMPRB.
What Does This Mean For the Pharma Industry in Canada?
This is a important win for the pharmaceutical industry in Canada, confirming that the government's attempt to impose arbitrary price reductions on patented medicines prices is unconstitutional. The federal government has 60 days to seek leave to appeal the decision to the Supreme Court of Canada. Currently, the Proposed Amendments are scheduled to come into force on July 1, 2022. In light of this significant decision, we expect that this date may be revisited.
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