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									  Update from the Patented
Medicine Prices Review Board

                        Presented by
              Barbara Ouellet, Executive Director
              Janssen Ortho’s Board of Directors
                        April 27, 2007
                 Summary of Presentation

   PMPRB Overview and Mandate
   Regulatory Mandate
        Parameters
        Patent Pertaining
        Period of Jurisdiction
        Pricing Factors in the Patent Act
        Patented Medicines Regulations, 1994
            Purpose
            Calculation of ATP
                 – Federal Court Decision on Free Goods
            Proposed Regulatory Changes

   Steps in Review Process
   Board’s Review of Excessive Price Guidelines

                     PMPRB Overview

 Created in 1987 as “consumer protection” pillar
  of drug patent law reform
 Arms-length agency – now in health portfolio
      No involvement in federal policy-making

 Quasi-judicial tribunal
      Remedial orders provided for in the Patent Act enforceable in the Federal

 Structure and budget
      5 part-time Board members
      62 employees
      2007-08: Budget $11.6 million
                Two-Fold Mandate

 Regulatory - To protect consumers and contribute to
  Canadian health care by ensuring that prices charged by
  patentees (“ex-factory” prices) for patented medicines sold
  in Canada are not excessive

 Reporting - To contribute to informed decisions and
  policy-making by reporting on pharmaceutical trends and on
  R&D spending by pharmaceutical patentees

Regulatory Mandate

       Parameters of Regulatory Mandate

 PMPRB ensures introductory prices, and price
  increases, for patented drugs sold in Canada
  not excessive
 Does not set prices for patented drug
      FPT drug plans negotiate actual formulary listing prices

 Price does not need PMPRB approval before
  patented drug is sold in Canada
      But, patentee encouraged to seek advisory assistance on price
       compliance with Excessive Price Guidelines (Guidelines) prior to first
       sale, and prior to any price increase
                  Parameters (cont’d)

 Patent pertain
     Federal Court of Appeal Decision in ICN Pharmaceuticals Inc. v. Canada
      (Staff of Patented Medicine Prices Review Board) [1997] 1 F.C. 32
         Need a “…nexus between the patent and the medicine”
         “…no requirement that the patent actually be used”
         “…Board‟s jurisdiction extends not only to patents which contain
          product claims (a claim for the medicine itself) but also patents which
          contain „process‟ and „use‟ claims”
         “…one does not have to, and ought not, go beyond the face of a
          patent to establish the required nexus”
         “…because of the broad scope of the
          terms „pertaining to‟ and „pertains to‟ …
          the nexus can be one of the merest slender thread”

                  Parameters (cont’d)

 Jurisdiction
     Once patent issued, price review retroactive back to date of first sale, as
      long as after date patent “laid open”
  •   Board policy to review price during pre-grant period first announced in
      January 1995 Bulletin
         “Board may find that a patented medicine has been sold at an
          excessive price before the patent was issued and make a remedial
  •   Panel Decision on Pre-patent Motion in Adderall XR and Concerta matters
         Motion dismissed; Board will consider pricing during
          the laid open period
         Presently the subject of a
          Judicial Review in the Federal Court

         Pricing Factors in Patent Act

 Sub-section 85(1) shall be taken into account
  in determining whether a medicine is being or
  has been sold at an excessive price in any
  market in Canada:
   (a) the prices at which the medicine has been sold in the relevant market;
   (b) the prices at which other medicines in the same therapeutic class
   have been sold in the relevant markets;
   (c) the prices at which the medicine and other medicines in the same
   therapeutic class have been sold in countries other than Canada;
   (d) changes in the Consumer Price Index; and
   (e) such other factors as may be specified in any regulations made for
   the purposes of this subsection

     Pricing Factors in Patent Act (cont’d)

 If the Board is unable to make a determination
  using ss. 85(1) factors, the Board may take into
   (a) the costs of making and marketing the medicine; and
   (b) such other factors as may be specified in any regulations
   made for the purposes of this subsection or as are, in the
   opinion of the Board, relevant in the circumstances

       Patented Medicines Regulations, 1994

 Set out price and sales information filing
  obligations of patentees pursuant to sections 80
  and 81 of Patent Act
      Details of various information to be filed, and
      Deadlines for filing

  Calculation of Average Transaction Price

 Regulations specify ATP shall be the actual price after
  any reduction given as a promotion or in the form of
  rebates, discounts, refunds, free goods, free services,
  gifts or any other benefits of a like nature, and after
  deduction of federal sales tax
 April 2000 NEWSletter article
      Board policy on compassionate release programs, trial
       prescription programs and expenditure limitation agreements
       between manufacturer and public drug plan
      All information to be reported, but patentee could choose to
       include/exclude from ATP as long as consistent over time

              Federal Court Ruling on
    Board’s Decision in Matter of LEO Pharma Inc.
              and the price of Dovobet

   Board had excluded free goods from ATP calculation
   Judge ruled free goods must be included in calculating ATP
    because Regulations say “the actual price after any reduction
    given as …, free goods…shall be used.” [emphasis added]
   Regulations do not differentiate compassionate free goods,
    from other free goods
   April 2007 NEWSletter will advise all patentees:
        To report all information required by Regulations
        This includes any discounts or reductions required by P/T legislation
         such as Ontario‟s Bill 102 and Quebec‟s Bill 130
        Beginning with the reporting period ending June 30, 2007, any and all
         reductions or like benefits will be included in the calculation of the ATP
        This applies even if free goods were previously excluded

           Proposed Regulatory Changes

 Purpose of changes - increase efficiency
  and timeliness of price review
 Proposed amendments:
     Product Monograph or similar information
     Identification as to whether human drug is Prescription or OTC
         OTC and Vet drugs moving to complaints-based price review
     Date of First Sale
     First day‟s sales/prices, 30 days later
     Type of “reduction” (as per ss. 4.(4) and 4.(5) of Regs)
     Electronic filing requirement
     Minor word changes
Steps in Review Process

                  Scientific Review –
            Categorization of New Medicines

 Category 1
    •   Line extension – comparable dosage form of an existing medicine
 Category 2
       First drug product available in Canada that treats effectively a
        particular illness or addresses effectively a particular indication
        (breakthrough); OR
       Substantial improvement in therapeutic effect (such as increased
        efficacy or major reductions in dangerous adverse reactions) or
        significant savings to the Canadian health care system
 Category 3
    Non-comparable dosage form of an existing medicine or new
        chemical entity - Moderate, little or no therapeutic advantage
        over existing medicines
         Conducting the Scientific Review

 Purpose – To determine:
     the primary indication/use of the new medicine, and dosage
     the category into which it fits
     whether there are any therapeutically comparable medicines,
      and their respective comparable dosage regimes


   Drug Information Centres (DICs)
     • Have clinical expertise, and knowledge of drugs (including
       radiopharmaceuticals, veterinary drugs)
     • Responsible for searching and summarizing available information on
       clinical trials related to the new drug
   Board Scientific Staff
     • Have drug evaluation experience and clinical training
     • Responsible for summarizing all scientific information for cat 1
       drugs, and any information additional to that found by the DICs for
       cat 2s and 3s
   Human Drug Advisory Panel (HDAP)
     • Experts in drug evaluation and clinical pharmacology
     • Responsible for deciding on drug categorization and comparators
       mainly for non-cat 1 drugs

           Therapeutic Class Comparison

   Starting point is 4th level of the WHO Anatomical,
    Therapeutic, Chemical (ATC) Classification System
   Drugs must be clinically equivalent in addressing the
    approved indication for the drug under review
   Off-label comparator may be included where there is
    evidence of use as part of standard therapy
   Any drug in the fourth level may be excluded as
    appropriate (e.g. different indication/use, different adverse
    risk profile)

                         Introductory Price Review*

    Category 1 Drug Products
      •  Reasonable Relationship Test (RR) – compares price of new drug to prices
         of existing drugs with comparable dosage forms
    Category 2 Drug Products - Higher of:
       Therapeutic Class Comparison (TCC) test – up to highest price of
         therapeutic comparators; or
       International Price Comparison (IPC) test – up to median of prices of the
         new drug in the seven comparator countries**
    Category 3 Drug products
      •  Therapeutic Class Comparison (TCC) test
    For all drugs: Canadian price can’t be the highest of 7 comparator

*    Clinically equivalent drug may be removed from the price tests if PMPRB has reason to believe its price is excessive
**   Comparator Countries: France, Germany, Italy, Sweden, Switzerland, U.K., U.S.
         Summary of the
    Introductory Price Review

        Drug Categorization

        Excessive price tests
      (RRT, TCC, MIPC, HIPC)

Maximum non-excessive price (MNE)

            Patentee's price
within/outside the PMPRB Guidelines?
               Price Review for Existing Drugs
                   (not new to the market)

 Consumer Price Increase (CPI) adjustment
      Lower of:
            Price three years ago adjusted for cumulative change in the
             CPI; or
            One year “cap” – equal to 1.5* times the forecast change in the
             annual CPI
 Again, Canadian price can never be the highest
  among comparator countries
      Even if allowed by CPI methodology
   * In periods of high inflation (over 10%), limit is 5% more than the forecast change in CPI
      Summary of the
Existing Drug Price Review

       Apply CPI Methodology
      Lower of 3 year cumulative CPI
             or one year cap

  Determine if Cdn price highest of
        international prices

            Patentee's price
within/outside the PMPRB Guidelines?

                 Investigation Criteria

    New Drug Products               Existing Drug Products
• Introductory price is 5% or     • Price is 5% or more above the
more above the maximum non-       maximum non-excessive price
excessive price;                  and there are cumulative excess
      OR                          revenues of $25,000 or more;
• Excess revenues in the                OR
introductory period are $25,000   • Cumulative excess revenues
or more;                          are $50,000 or more;
      OR                                OR
• Complaints with                 • Complaints with
significant evidence              significant evidence
             Investigation Process

 Board Staff reviews regulatory data and
  patentee’s submission
 Patentee advised of the results
 Patentee given opportunity to make further
  written submissions to substantiate price
 Often, meetings of patentee and Board Staff
  take place to discuss material submitted

   Possible Outcomes of Investigations

1) Price not excessive and investigation closed
2) Price excessive under the Guidelines
   •   Patentee given opportunity to provide a Voluntary
       Compliance Undertaken (VCU) (i.e., to comply with the MNE
       price and agree to repay excess revenues)
         •   Requires approval of Board Chairperson
   • Board Staff refers the matter to the Chairperson
         •   Decides whether it is in the public interest to issue a
             Notice of Hearing
 Note: Even if hearing called, Board Staff still
  available to negotiate VCU on a parallel track
  with the Hearing process
            Separation of Investigation and
              Decision-Making Functions

   “Wall” between Board Staff and Board/Panels
      Essential to ensure Board remains unbiased
      Board never aware of investigation details of particular drugs
   Chairperson decides whether to call Hearing/may also be on Hearing
      Federal Court Decision - Hoechst Marion Roussel Canada Inc. v.
       Attorney General of Canada 2005 FC 1552:
          Of the view that Board ought to be granted a “considerable degree
           of flexibility” in respect of its procedural requirements
          Found that natural justice and procedural fairness respected
      Structure also upheld by the Federal Court in Dovobet matter
   Board Staff and Patentees both “parties” before Hearing Panel
      Any communication by one party to the Board served on the other
       party at the same time

               Process for Board Hearings

   Basis for Arguments:
       Board Staff‟s Statement of Allegations
       Patentee‟s Response
       Board Staff‟s Reply
   Hearing conducted according to Board Rules
   In public unless specific, direct, substantial harm
    to Patentee
   Interveners:
       Statutory right of Minister of Industry and P/T Ministers of
       Others may apply to the Board for leave to intervene

       Process for Board Hearings (cont’d)

 Pre-Hearing Conference
     Motions of Disclosure and Confidentiality
     Applications for leave to intervene
     Production of Documents
     Any other matters
 Hearing
     On January 31, 2007, Board issued Direction concerning
      scheduling of hearings
          Will consult with parties when practicable
          Conversely, parties, counsel and witnesses expected to be
           available on scheduled hearing dates

    Board’s Review of
Excessive Price Guidelines

                Board’s Review of
            Excessive Price Guidelines

 Ss. 96 (4) of Patent Act permits Board to issue guidelines
     Used by Board Staff to conduct price reviews/investigations
    Provide transparency and predictability to patentees and other
 Not binding on Board or patentee in a Hearing
    But, Federal Court ruled Board can use Guidelines in a hearing
      for rationale, approach or methodology in considering price
      factors (ICN Pharmaceuticals Inc.; Leo Pharma Inc.)
 Ss. 96(5) requires Board to consult with the FPT Health
  Ministers, consumers and the pharmaceutical industry
 Last major changes made in 1994

Changing Pharmaceutical Environment

 Fall 2004: PMPRB heard from third parties about significant
  number of price increases for patented medicines
 Concerned potential signal of departure from considerable
  price stability over previous decade
 Decided to consult – Discussion Paper on Drug Price
  Increases 2005
 Stakeholders said more concerned about introductory
      Intro prices seen as a drug cost driver
      Categorization of medicines doesn‟t acknowledge incremental innovation
      Concern of some regions/customers about price variations across
          Discussion Guide – May 2006

 Purpose:
     Obtain written feedback on specific elements of the
      Guidelines: nature/extent of problem? possible changes?
 Focus on three key issues:
     Appropriateness of current categorization of medicines
     Appropriateness of current introductory price tests
     Whether/how Board should review “any market” and not just
      average transaction price across Canada
 Varied Responses:
     Stakeholder views highly polarized on key issues
     Other matters raised
                    Consultation Meetings
                       November 2006

 5 Multi-stakeholder meetings, involving:
     Consumer groups
    Provinces/territories, and federal government
    Industry (Pharmaceutical Patentees, Biotech, Generic)
    Others – e.g. academic/research experts, health care
     organizations, professional groups, private insurers
 Purpose:
        Building on Discussion Guide, to get collective views on problems
        To create dialogue about pros and cons of changes
   Discussion Topics:
        Guiding principles; categories of medicines; “any market”;
   Summaries of discussions posted on Web site                              34

 Stakeholder representation not always balanced
  due to ability of invitees to participate
 Collegial sharing of views
 Wide and sometimes divergent range of opinions:
     Continued polarity on issues such as:
          Whether or not, and how, to categorize new medicines
          Whether or not, and when, to “re-bench”
     Other issues less contentious
          E.g. general agreement PMPRB should review price at “relevant
           market” on case-by-case basis, when appropriate
     Discussions tended to stray into other areas of concern
      not on the agenda
          E.g. price tests                                            35
                          Next Steps

 Board had preliminary discussion of individual
  perspectives of what each heard in December
 Board Staff has incorporated input from
  Discussion Guide, Consultations and other
  sources to refine the “problem statement,” group
  concerns into issue areas, and identify further fact-
  finding work
 Next Steps will be announced in April 2007
  NEWSletter, including:
      The range of issues being considered; and
      The nature of the next phase of stakeholder consultations

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