March 1, 2022
On February 18, 2022, the Quebec Court of Appeal released its decision Merck Canada Inc.c. Attorney General of Canada, 2022 QCCA 240. The decision related to the validity of both the current Patented Medicines Regulations (“Regulations”) and the 2019 amendments to the Regulations (the “Amendments”) that were set to come into force on July 1, 2022.
The Regulations and their enabling statute, the Patent Act, govern the Patented Medicines Prices Review Board (the “PMPRB”), a federal administrative body that is tasked with regulating prices of patented medicines in Canada to ensure they are not excessive.
The Amendments primarily related to three major changes:
1. Comparator Countries – in fulfilling its mandate, the PMPRB compares the drug prices of patented medicines between Canada and a certain basket of countries. The Amendments increased and changed the composition of the countries included in this basket.
2. Additional Economic Factors – under the Regulations and section 85 of the Patent Act, the PMPRB considers certain factors when determining whether the price of a patented medicine in Canada is excessive. The Amendments introduced three new economic factors to be considered when making this assessment: (1) a medicine’s pharmacoeconomic value in Canada; (2) the size of the market for a medicine; and (3) the gross domestic product in Canada and the gross domestic product per capita in Canada.
3. Additional Disclosure Requirements – the Amendments introduced new reporting requirements for patentees to report price and revenues net of all price adjustments such as third party discounts or rebates.
In the decision, the Quebec Court of Appeal upheld the current Regulations and changes to the comparator countries in the Amendments as valid but found the additional economic factors and additional disclosure requirements in the Amendments to be unconstitutional and thus invalid.
The Quebec Court of Appeal found that the current Regulations and the change to comparator countries in the Amendments are within the federal government’s jurisdiction on patents of invention and discovery under subsection 91(22) of the Constitution Act, 1867 since the current Regulations and that part of the Amendments both deal with the issue of excessive pricing that may arise from the granting of a patent monopoly.
However, the Quebec Court of Appeal found that the additional economic factors and additional disclosure requirements went beyond the power to regulate the excessive pricing resulting from a patent monopoly into a power to impose significant price reductions unconnected to a patent monopoly. This power to regulate pricing in an industry was considered by the Quebec Court of Appeal to be within a province’s jurisdiction.
As a result of this decision, new paragraphs 4(4)(a) – (b) and new sections 4.1 – 4.4 of the amended Regulations are ultra vires, invalid, and null and void.
It is presently unclear whether the federal government will seek leave to appeal to the Supreme Court of Canada.
Author: Zhiyao Chen
If you have any questions regarding this decision or the PMPRB, please do not hesitate to contact Jordan Scopa of the Goodmans IP Team.