|
 Patented
Medicine Prices Review Board's Jurisdiction Limited to
Factory-Gate Prices of Patented Medicines
Tanya Weston
The Federal Court released a decision that impacts the authority of
the Patented Medicine Prices Review Board (the “Board”) in
respect of a patentee’s reporting requirements.
More particularly, the Federal Court has held that the
Board does not have the authority to look beyond the factory
gate price of a patentee’s product when assessing whether a
patentee’s product is excessively priced.
The Board is
a quasi-judicial body established under the
Patent Act
to regulate the prices that patentees can charge for patented
medicines in Canada. The Board monitors the pricing of
patented medicines through reporting obligations of the
patentee as defined in subsections 4(1)(f)(i) and 4(4) of the
Patented Medicines Regulations (the “Regulations”).
In August of 2008, the Board released a “Stakeholder
Communiqué” that, in effect, considerably expanded the reporting
requirements on patentees. Under subsection
4(1)(f)(i)
of the Regulations a patentee must provide the Board
with information in respect of “the average price … in which
the medicine was sold by the patentee … to each class of
customer.” Under subsection
4(4) of the Regulations, when calculating the average
price of a patented medicine the Board must include
“rebates,
discounts, refunds, free goods, free services, gifts or any
other benefit of a like nature”. According to the
Communiqué,
“rebates” was interpreted by the Board as including
rebates/payments made to third parties.
Subsequent to
the release of the Communiqué, two judicial review
applications were commenced.
By order
of a prothonotary, the two applications were heard together.
At
issue before the Federal Court in both applications was
whether subsections 4(1)(f)(i) and 4(4) of the Regulations
authorized the Board to require patentees to report rebates/
payments made to third parties in respect of patented
medicines for inclusion in the calculation of the average
price for the medicine’s sales.
In the
instant case, the provinces are characterized as third parties
in situations where they have
entered into negotiated agreements with patentees to list a
patented medicine on a provincial formulary at a specified
price. In this scenario, payments may be made by the patentee
as consideration for the province’s agreement to list the
patentee’s product on the provincial formulary.
In rendering
its decision, the Federal Court noted that the
federal
jurisdiction conferred by the Patent Act is limited to
the regulation of the “factory-gate” prices of patented
medicines. The industry would generally understand
“factory-gate” to refer to the transaction between the
patentee and the “first” purchaser of the product in question.
Moreover, the Act and Regulations clearly
contemplate a sale by a patentee to a customer. For example,
subsection 4(1)(f)(i) of the Regulations specifically
states that a patentee must provide the Board with information
in respect of “the average price … in which the medicine was
sold by the patentee … to each class of customer.”
Accordingly, even if payments made to the provinces by a patentee
in respect of a patented medicine could be characterized as a
“refund”, a “discount” or “any other benefit of a like
nature,” the provinces could not be characterized as the
patentee’s customer in the true sense of the word, and as
contemplated by subparagraph 4(1)(f)(i).
The Federal
Court noted that this interpretation “is
consistent with the constitutional limitation on the Board’s
ability to look beyond the factory-gate price of patented
medicines, to consider contractual arrangements involving
patentees and entities further down the distribution chain.”
Printer Friendly Version
Back to December
2009 Newsletter
|
