August 6, 2021
In Alexion Pharmaceuticals v Canada (Attorney General), 2021 FCA 157, a recent decision that is a tour de force, and which has even garnered attention from mainstream media, the Federal Court of Appeal (“FCA”) quashed a decision of the Patented Medicine Prices Review Board (the “PMPRB”).
In its reasons, the FCA emphasized that the PMPRB’s mandate is strictly limited to preventing abusive pricing of patented medicines and does not extend to general consumer protection or price regulation. In addition, the FCA provided strict guidance to the PMPRB regarding how to properly fulfill its narrow statutory mandate, including how to provide complete and proper reasons for its decisions in the future.
The PMPRB determined that Alexion priced Soliris (eculizumab) excessively and ordered Alexion to forfeit excess revenues between 2009 and 2017. The primary basis for the PMPRB’s decision was that the Canadian list price (and not the genuine net price) for Soliris was higher than the price in one of the seven other countries used for comparison purposes. In other words, the PMPRB required the Canadian list price to be lower than all seven comparator countries.
Alexion sought a judicial review by the Federal Court, which was dismissed on the basis that the PMPRB’s decision was reasonable and was owed significant deference (2019 FC 734). Alexion appealed to the FCA.
The Federal Court of Appeal’s Decision
The FCA granted the judicial review, quashed the PMPRB’s decision and sent the matter back to the PMPRB for redetermination in accordance with its reasons. As described below, the FCA provided a number of guiding principles regarding the powers of the PMPRB and its behaviour when rendering decisions.
The PMPRB’s statutory mandate
The PMPRB’s statutory mandate is strictly limited to preventing abusive pricing (i.e., excessive pricing made possible by the abuse of the monopoly power given by a patent) and does not extend to regulating the reasonableness of pricing, general price regulation or consumer protection. The PMPRB is not permitted to rely on stray phrases from past court decisions regarding the scope of its mandate to enlarge its powers beyond preventing abusive pricing.
Any PMPRB decision must start with section 85 of the Patent Act and the specific five factors provided therein (i.e., the price in Canada; the prices of other medicines in Canada in the same therapeutic class; the prices in other countries; changes in the Consumer Price Index; and other factors specified in regulation) to assess whether a medicine has been sold at an excessive price in Canada. If and only if the PMPRB is unable to determine if the price is excessive based on these five factors is it permitted to also consider the costs of making and marketing the medicine and any other factors that it considers relevant.
The PMPRB’s guidelines
The PMPRB’s guidelines must be consistent with section 85 and, if the PMPRB departs from its own guidelines, such departure must be reasonable, consistent with section 85 and accompanied by a reasoned explanation for the departure.
Here, the guidelines suggested that the highest (rather than the lowest) international price was the key comparator. Where the PMPRB departs from longstanding practices, established internal authority, or guidelines, it bears the burden of explaining that departure in its reasons and that explanation must be coherent and relatively detailed.
The PMPRB’s consideration of extraneous factors, without explanation
That a medicine is very expensive and has a large impact on health care budgets, without more, is entirely irrelevant to assessing whether the price is excessive within the meaning of section 85 of the Patent Act. The effect of the pricing of a medicine on provincial budgets is not, without a reasoned explanation, relevant to assessing whether a price is excessive.
The fact that the price of a medicine is under scrutiny in other jurisdictions or the subject of negative commentary in other jurisdictions is not, without a reasoned explanation, relevant to assessing whether a price is excessive.
Canadians are not entitled to the lowest price being paid in any of the comparator countries and are not entitled to pay a lower price than that offered in the United States.
The proper approach to remedies for excessive pricing
When ordering a remedy for excessive pricing pursuant to section 83 of the Patent Act, the PMPRB is required to provide a reasoned explanation for that remedy that is consistent with the text, context and purpose of that section and its own reasons for finding that the price was excessive.
Here, the remedy ordered related to the highest international price but the basis for the finding of excessive pricing related to the lowest international price, which rendered the remedy entirely arbitrary.
Any remedy pursuant to section 83 of the Patent Act should reflect the net revenues actually received for the medicine in Canada and not simply Canadian list prices, otherwise the patentee would be paying back revenues that it never actually received.
The FCA has sent the PMPRB a very clear message that, if it strays from its narrow statutory mandate or fails to provide detailed, complete and cogent reasons for its decisions in the future, those decisions will be the subject of careful and exacting judicial review. Innovative pharmaceutical companies now know that pursuing an application for judicial review is a viable and reasonable option if faced with problematic decisions of the PMPRB, including regarding jurisdiction and excessive pricing.