Price Regulation of Patented Medicines in Canada

1
Price Regulation of Patented Medicines in Canada

• Presentation to the First Pan-American Seminar on
  the Economic Regulation of Pharmaceuticals
• Brasília, Brazil
• March 17, 2009

2
Outline

• Introduction
• Division of Responsibilities for Health Care and
  Pharmaceuticals in Canada
• Patented Medicine Prices Review Board (PMPRB)
• Origins
• Mandate
• Jurisdiction
• Price Regulation
• Guidelines Review
• Reporting on Key Trends

3
Health Care System

• Federal
• Canada Health Act (principles of public
  administration, comprehensiveness, universality,
  portability, and accessibility)
• Canada Health Transfer (24 billion in cash and
  13.6 billion in tax transfers in 2009-10)
• Health services to special populations (e.g.,
  First Nations, veterans)
• Provincial
• Administration and delivery of insured primary
  health care through physicians and hospitals
• Public health insurance plans and some
  supplemental health benefits
• Shared
• Public health (health promotion and prevention)

4
Pharmaceuticals

• Federal
• Health Canada reviews the safety, efficacy and
  quality of drug products and approves them for
  sale and use under the Food and Drugs Act
• Patented Medicines Prices Review Board (PMPRB)
  ensures prices of patented medicines sold in
  Canada are not excessive
• Provincial
• Provision of public drug plan benefits to
  provincial populations
• Administration of provincial drug formularies
• Shared
• Canadian Agency for Drugs and Technologies in
  Health (CADTH) conducts Common Drug Review (CDR)
• Evidence-based clinical and pharmacoeconomic
  reviews of new drugs and new indications for old
  drugs results in recommendation on listing

5
PMPRB Origins

• Created in 1987 as part of reforms to the
  federal Patent Act
• Consumer protection pillar
• Price controls to balance enhanced patent
  protection
• Industry commits to invest 10 of sales in
  research and development
• Arms-length body in the Federal Health
  Portfolio
• 5 person independent panel of Governor-in-Council
  appointees
• Accountable to Parliament through the federal
  Minister of Health
• Minister can seek policy advice but cannot
  interfere in decisions of the Board
• Quasi-judicial tribunal
• Remedial orders provided for in the Patent Act
  carry the force of the Federal Court

6
PMPRB Mandate

• Regulatory To ensure that prices charged by
  manufacturers for patented medicines are not
  excessive, thereby protecting consumers and
  contributing to the Canadian health care system.
• Reporting To report on pharmaceutical trends and
  on the RD spending by pharmaceutical patentees,
  thereby contributing to informed decisions and
  policy making.
• Key Principles Openness, fairness, transparency,
  timeliness, efficiency

7
PMPRB Jurisdiction

• Authority to review prices charged by patentees
  (factory-gate price) for
• Prescription and non-prescription patented drugs
  sold in Canada to wholesalers, hospitals,
  pharmacies or others, for human and veterinary
  use
• The price of each patented drug product,
  including each strength of each dosage form, sold
  in Canada, at the level of the Drug
  Identification Number (DIN).

8
PMPRB Jurisdiction

• No authority over
• Prices of non-patented drugs
• Prices charged at the retail level to individual
  consumers
• Setting prices

9
PMPRB Legislated Pricing Factors

• Patent Act sets out factors to be considered by
  the Board in determining whether a medicine is
  being or has been sold at an excessive price
• The price of the medicine
• The prices of other medicines in the same
  therapeutic class
• The prices of the medicine and other medicines in
  the same therapeutic class in countries other
  than Canada and,
• Changes in the Consumer Price Index

10
Patented Medicines Regulations

• Identify the specific reporting requirements of
  patentees
• Set out the seven comparator countries used in
  the price review France, Germany, Italy, Sweden,
  Switzerland, United Kingdom and United States
• Price and sales in Canada to be filed for each
  class of customer (hospital, pharmacy,
  wholesaler, other) in each province and territory

11
Excessive Price Guidelines

• Under the Act, the Board can establish price
  guidelines
• In consultation with the provinces, consumers and
  the industry
• Used by Board Staff to conduct price
  reviews/investigations
• Provide transparency and predictability to
  patentees and other stakeholders
• Not binding on Board in a hearing

12
Scientific Review

• Purpose To determine
• The primary indication/use of the new medicine,
  and dosage regime
• The category (i.e., breakthrough/substantial
  improvement provides modest, little or no
  improvement over other medicines for same
  indication line extension)
• Therapeutically comparable medicines, and their
  respective comparable dosage regimes

13
Price Review

• Application of price tests
• Reasonable Relationship
• Association between strength of the medicine and
  price
• Therapeutic Class Comparison
• Price of the drug compared to that of clinically
  equivalent drugs sold in same therapeutic class
  at non-excessive price
• International Price Comparison
• Price of the drug compared to that of the same
  dosage form and strength of the drug sold in
  countries listed in the Patented Medicines
  Regulations
• Highest International Price Comparison
• Canadian price cannot be the highest in the world
  (i.e., 7 comparator countries)

14
Introductory Price Review
Drug Categorization
15
Price Increases for Existing Drugs

• Consumer Price Index (CPI) adjustment
  methodology allows the lower of
• Price three years ago adjusted for cumulative
  change in the CPI
• 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

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Investigations

• Where price appears to exceed the Guidelines,
  patentee given opportunity to make further
  written submissions to substantiate price
• Meetings of patentee and Board Staff take place
  to discuss material submitted
• May result in revisiting of science (i.e.,
  appropriate comparators)

17
Possible Outcomes of Investigations

• Price not excessive and investigation closed
• Price determined to be excessive under the
  Guidelines
• Patentee given opportunity to provide a Voluntary
  Compliance Undertaking (VCU) to reduce its price
  and repay excess revenues
• OR
• Board Staff refers the matter to the Chairperson,
  who 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

18
Separation of Investigation and
Decision-MakingFunctions

• Conflict Wall between Board Staff and
  Board/Panels
• Essential to ensure Board remains unbiased
• Board never informed of status of investigations
  of particular drugs
• Chairperson decides whether to call Hearing
• 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

19
Hearings

• 11 hearings initiated since January 2006
• Adderall XR Airomir1 Apotex Concerta
  Copaxone Penlac Quadracel and Pentacel
  Risperdal Consta1 Strattera Thalomid / Celgene
  Zemplar1
• One older ongoing hearing (Nicoderm), initiated
  in 1999
• 1 Resolved through VCUs

20
Voluntary Compliance Undertakings (VCUs)

• 47 VCUs approved to-date price reductions and
  offset of excess revenues
• Over 33M in total since 1993
• In 2007 and 2008, a total of nine VCUs
• Three were submitted in the context of a hearing
• Airomir payment of excess revenues of
  485,498.58
• Risperdal Consta price reduction and payment of
  excess revenues of 4,386,172.99
• Zemplar price reduction and payment of excess
  revenues of 58,741.67
• One following the issuance of a Board Order
• - Dovobet 870,425.68 (for 2006 period)
• Denavir offset excessive revenues of 61,021.80
• Forteo offset excessive revenues of 333,629.25
• Lantus price reduction and payment of excess
  revenues of 694,239.50
• OctreoScan price reduction and payment of excess
  revenues of 387,181.87
• Vaniqa payment of excess revenues of 70,860.59

21
Current Guidelines Review

• Initiated in 2005 due to changing environment
• Developments within the pharmaceutical industry
  globalization, mergers, partnerships
• Changes in nature of new patented medicines
  fewer breakthroughs, more incremental innovation
• High (over 90) but declining voluntary
  compliance with current Excessive Price
  Guidelines
• Third party reports to PMPRB of significant price
  increases
• Shifting regimes in Canada and internationally
• Health Canada progressive licensing
• Certain Provinces-Territories changes in
  legislation, reimbursement and listing agreements
• Internationally U.S. Medicare, Part D UK move
  away from PPRS

22
Objectives of Review

• To ensure that Excessive Price Guidelines remain
  relevant and appropriate
• Concerns since 2006 regarding
• Categorization of new medicines dont adequately
  reflect incremental innovation
• Introductory prices seen as cost-driver
• The review has involved extensive consultation
  with the PMPRBs stakeholders
• Consumer groups, industry, and federal and
  provincial health ministries

23
Review Considerations

• In reviewing / amending the Guidelines, the
  Board must consider
• Consistency with the statutes
• Public / consumer interest focus
• Impact on patentees
• Transparency and predictability
• Overall timeliness

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Key issues being considered

• Clarification of mandate
• Four levels of therapeutic improvement and
  associated price tests
• Any market price reviews (national, class of
  customer, province and territory) at and
  following introduction
• DIP methodology following elimination of benefits
• Clarifying policy on acceptable measures and
  timelines for offsetting excess revenues
• Appropriate use of prices of generic drugs in
  price tests
• Publication of prices

25
Next Steps

• Release of revised Notice and Comment document in
  late March 2009
• Final round of consultations with industry,
  provincial and territorial governments, consumer
  groups in April 2009
• Board decisions on revised Guidelines in May 2009
• Publication of proposed Guidelines and outreach
  with stakeholders in June 2009
• Implementation of new Guidelines in July 2009

26
Reporting Mandate

• Annual Report
• Pursuant to sections 89 and 100 of the Patent Act
• Provided to Minister of Health on May 31 for
  tabling in House
• Includes overview of
• PMPRB activities
• Price trends patented and all medicines
• RD expenditures by patentees
• National Prescription Drug Utilization
  Information System (NPDUIS) Reports
• Non-Patented Prescription Drug Prices (NPPDP)
  Reports
• Quarterly NEWSletter and PMPRB Web site

27
Highlights from Annual Report 2007

• Sales of patented drugs increased by only 3 to
  12.3 billion
• Smallest increase since 1994
• Patented drugs account for 66 of all drug sales
  in Canada
• At an aggregate level, patented drug prices in
  Canada decreased by 0.1 decrease at hospital
  level offset increases at pharmacy and wholesaler
  levels
• In relation to comparator countries, Canadian
  prices at 1.01 of the Medial International Price
  (MIP)
• RD-to-sales ratio in Canada up to 8.3 (all
  patentees) and 8.9 (RxD members)

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Prices in Comparator Countries

• Five of the seven comparator countries saw price
  increases in 2007 only Switzerland and France,
  like Canada, experienced a small decline
• In 2007, Canadian prices appeared to be slightly
  higher than all countries except the US, a main
  cause expected to be the appreciating Canadian
  dollar
• As a result, foreign Median International Prices
  dipped slightly below those in Canada for the
  first time since 1993

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RD Expenditure in 2007

• Patentees reported total RD expenditures of
  1.32 B in 2007, an increase of 9.5 from 2006
• The RD-to-sales ratio increased
• All patentees 8.3 - up from 8.1 in 2006
• RxD members 8.9 - up from 8.5 in 2006

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Contact Information

• Gregory Gillespie
• Director, Policy and Economic Analysis
• Patented Medicine Prices Review Board
• Box L40, 333 Laurier Avenue West, Suite 1400
• Ottawa, Ontario, Canada, K1P 1C1
• Tel [phone]
• gregory.gillespie_at_pmprb-cepmb.gc.ca