ARCHIVED - Patented Medicine Prices Review Board Canada

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SECTION I - OVERVIEW

Chairperson's Message

I am pleased to present the 2007-2008 Departmental Performance Report for the Patented Medicine Prices Review Board (PMPRB).

The PMPRB's mandate is two-fold:

Regulatory - To ensure that prices charged by patentees for patented medicines sold in Canada are not excessive, thereby protecting consumers and contributing to Canadian health care.

Reporting - To report on pharmaceutical trends of all medicines, and on R&D spending by pharmaceutical patentees, thereby contributing to informed decisions and policy making.

During the past year, the PMPRB was active in fulfilling its mandate. In keeping with its regulatory role, the Board reviewed the prices of 1,178 patented drug products, including 64 new drugs that came under its jurisdiction in 2007. Two Notices of Hearing were issued under s.83 of the Patent Act. The purpose of a hearing is for the Board to determine whether a patented medicine is, or was, being sold in any market in Canada at a price that, in the opinion of the Board, is or was excessive. In addition, proceedings were initiated into the matter of Celgene Corporation and the medicine Thalomid with respect to the Board’s jurisdiction over the price of the medicine.

The Board's Excessive Price Guidelines (Guidelines), first developed in 1989 and revised in 1994, have been, and continue to be, the subject of ongoing discussions, in an effort to ensure they remain relevant and appropriate in today's modern pharmaceutical environment. Their review, an important project initiated in 2006, continued to involve intensive efforts on the part of the Board, our staff, and numerous stakeholders.

In 2007, the process included numerous face-to-face bilateral meetings with our stakeholders at which the Board heard the opinions from representatives of all three sectors of the pharmaceutical industry, i.e., innovative pharmaceutical, biotech and generic, relating to the challenges they face within the current environment. Consumer and patient advocacy groups and public and private drug plans have also participated in our consultations and have provided their views regarding affordable and sustainable access to pharmaceuticals in Canada.

In January 2008, the PMPRB released a Discussion Paper requesting feedback on proposed options for changing the Guidelines that were derived from the consultations, as well as on a range of options to address the impact of moving to the mandatory reporting of all benefits as part of the average price of a drug product. The Board has worked diligently to advance work on these fronts.

The PMPRB is committed to fairness and transparency in its role of protecting consumer interests by ensuring that prices of patented medicines in Canada are not excessive. The PMPRB will continue to provide its stakeholders with the opportunity to participate in ongoing consultation activities, which is a critically important part of the Board's efforts to reach decisions that are balanced and fair, and which will serve all Canadians effectively. The Board is also continuing to ensure open communications through its NEWSletter, its Web site and other means, as appropriate.

During 2007-2008, as part the PMPRB's reporting mandate, the New Drug Pipeline Monitor was introduced. This report provides drug plan managers and others with information relating to newly emerging drug products that are likely to have a significant impact in drug therapy and drug care. Two studies were also published relating to non-patented prescription drug prices, and the PMPRB initiated a series of new projects under the National Prescription Drug Utilization Information System (NPDUIS) which include research examining the potential impact of long-term demographic change on public drug plans, recent trends in dispensing fees reimbursed by drug plans, and methodological alternatives for measuring volumes of treatment in utilization analysis.

In conclusion, the Board continues to carry out its mandate by ensuring that patentees do not charge excessive prices for patented drugs sold in Canada and by providing timely information on Canadian pharmaceutical price trends.

The original version was signed by Brien G. Benoit, MD

Brien G. Benoit, MD
Chairperson

Management Representation Statement

I submit for tabling in Parliament, the 2007-2008 Departmental Performance Report for the Patented Medicine Prices Review Board.

This document has been prepared based on the reporting principles contained in the Guide for the Preparation of Part III of the 2007-2008 Estimates on Plans and Priorities and Departmental Performance Reports:

• It adheres to the specific reporting requirements outlined in the Treasury Board Secretariat guidance;

• It is based on the department's approved Strategic Outcome and Program Activity Architecture that were approved by Treasury Board;

• It presents consistent, comprehensive, balanced and reliable information;

• It provides a basis of accountability for the results achieved with the resources and authorities entrusted to it; and

• It reports finances based on approved numbers from the Estimates and the Public Accounts of Canada.

The original version was signed by Brien G. Benoit, MD

Name: Brien G. Benoit, M.D.
Title: Chairperson

Summary Information

Department's Reason for Existence

The Patented Medicine Prices Review Board (PMPRB) has a dual role:

Regulatory - To ensure that prices charged by patentees for patented medicines sold in Canada are not excessive, thereby protecting consumers and contributing to Canadian health care.

Reporting - To report on pharmaceutical trends of all medicines, and on R&D spending by pharmaceutical patentees, thereby contributing to informed decisions and policy making.

The PMPRB is an independent, quasi-judicial body created by Parliament as a result of revisions to the Patent Act (Act) in 1987 (Bill C-22) which increased patent protection for pharmaceuticals.

The PMPRB represents a strategic component of the federal government's policy to balance consumer protection and affordable health care with the trade and industrial development objectives of pharmaceutical patent legislation.

Subsequent revisions to the Act in 1993 (Bill C-91) further increased patent protection for pharmaceutical products by eliminating compulsory licensing. The amendments also gave the PMPRB increased remedial powers and shifted ministerial responsibility for the PMPRB to the Minister of Health. Prior to that, responsibility for the PMPRB rested with the Minister of Consumer and Corporate Affairs (now the Minister of Industry), who has overall responsibility for the Act. The Minister of Health is responsible for the pharmaceutical provisions of the Act as set out in sections 79 to 103.

Financial Resources ($ thousands)

2007-2008
Planned Spending	Total Authorities	Actual Spending
$11,475.0	$11,924.8	$7,432.41

Human Resources

2007-2008
Planned	Actual	Difference
62	50	12

Departmental Priorities

Name	Type	Performance Status
1. Compliance and enforcement	Ongoing	Successfully met
2. Report on pharmaceutical trends Information on trends in patentees' prices of patented medicines sold in Canada and on patentees' research-and-development expenditures; Reports under the National Prescription Drug Utilization Information System; and onitoring and reporting on non-patented prescription drug prices.	Ongoing	Successfully met

Program Activities by Strategic Outcome

	Expected Results	Performance Status	2007-2008		Contributes to the following priority
			Planned Spending ($thousands)	Actual Spending ($thousands)
Strategic Outcome: Prices charged by patentees for patented medicines sold in Canada are not excessive and Canadians are informed on pricing trends of medicines, as well as the R&D spending of pharmaceutical patentees.
Patented Medicine Prices Review	All patentees' prices for new and existing patented medicines sold in Canada are reviewed in a timely manner and in accordance with the PMPRB's Excessive Price Guidelines	Successfully met	$8,589.5	$5,706.5	Priority No. 1
	Canadian consumers and other stakeholders have complete and accurate information on trends in patentees' prices of patented medicines sold in Canada and on patentees' research-and-development expenditures.	Successfully met	$989.1	$945.9	Priority No. 2(a)
	Federal/provincial/territorial (F/P/T) drug plans and Canada's health system have more accurate information on prescription drug trends and cost drivers	Successfully met	$1,339.9	$545.3	Priority No. 2(b)
	F/P/T Governments and other stakeholders have critical analyses on non-patented prescription drug price trends.	Successfully met	$556.5	$234.7	Priority No. 2(c)

Overall Departmental Performance

Mandate and Jurisdiction

The PMPRB has two roles:

Regulatory: To ensure that prices charged by patentees for patented medicines sold in Canada are not excessive, thereby protecting consumers and contributing to Canadian health care.

The PMPRB is responsible for regulating the prices that patentees charge — the factory gate prices — for prescription and non-prescription patented drugs sold in Canada for human and veterinary use, to ensure that they are not excessive.

The PMPRB has no authority to regulate the prices of non-patented drugs and does not have jurisdiction over prices charged by wholesalers or pharmacies or over pharmacists' professional fees.

Reporting: To report on pharmaceutical trends of all medicines, and on R&D spending by pharmaceutical patentees, thereby contributing to informed decisions and policy making.

In addition, under section 90 of the Act, the Minister of Health has directed the Board to undertake two initiatives:

1. National Prescription Drug Utilization Information System (NPDUIS)
   In 2001, pursuant to an agreement by the federal/provincial/territorial (F/P/T) ministers of health, the Minister directed the PMPRB to conduct research into price, utilization and cost trends of prescription drugs sold in Canada. The purpose of this research is to shed light on how these drugs are being used and to determine sources of cost increases.
2. Non-Patented Prescription Drug Prices (NPPDP)
   In 2005, in consultation with his provincial and territorial colleagues, the Minister directed the PMPRB to monitor and report on prices of non-patented prescription drugs, thereby providing a credible, centralized source of information on trends in the non-patented prescription drug sector.

Issues, Trends and Challenges

Pharmaceuticals are a vital component of healthcare. The use of pharmaceuticals continues to increase worldwide, including in Canada, and represents an increasing share of total health expenditures. Understandably, sustainable access to needed medicines is an important concern of consumers, drug insurance plans and governments.

For its part, the pharmaceutical industry's ability to develop and bring to market innovative new medicines depends on the return on investment it can expect.

Innovation within the pharmaceutical industry appears to be moving toward technological improvements (i.e. new delivery technologies) and away from new breakthrough “blockbuster” drugs. As well, pricing strategies by the brand-name pharmaceutical industry suggest that global pricing is becoming increasingly important.

Associated with this is the issue of cross-border drug sales from Canada to the United States. While these sales appear to have declined, largely due to implementation of Medicare Part D, concerns about significant Canada-U.S. price differentials appear to remain. Changes in pricing and reimbursement policies in Europe are also affecting pricing strategies in Canada.

To effectively meet the challenges of an evolving pharmaceutical environment, the PMPRB increasingly seeks to understand pharmaceutical innovation and the broader environment, while still ensuring that the interests of Canadian consumers are protected.

The PMPRB has faced significant workload pressures, including:

• increased complexity of the reviews of patented drugs for human use and time required to conduct these reviews;

• an unprecedented number of hearings into apparent excessive prices; and

• the need to undertake a comprehensive review of, and hold public consultation on, the Board's Excessive Price Guidelines given recent stakeholder concerns that the Guidelines may no longer be appropriate in light of current trends and developments.

Performance Highlights

• A total of 1,178 patented drug products² for human use were under the PMPRB's jurisdiction in 2007.

• There were 64 new patented drugs products (at the level of the Drug Identification Number - DIN)³ for human use reported to the PMPRB in 2007, of which 20 medicines, representing 34 DINs, were new active substances. As of March 31, 2008, 53 new patented drugs had been reviewed. Of those, 47 were considered to be within the Guidelines while 6 were subject to ongoing investigations.

• Seven new DINs were reported for veterinary use in 2007, all of which were under review on March 31, 2008.

• The Board completed a total of four hearings, and issued two Notices of Hearing. On March 31, 2008, there were eight ongoing proceedings, including the Nicoderm matter, initiated in 1999.

• The Board approved eight Voluntary Compliance Undertakings (VCUs), including one in May 2008.
• In addition to in-depth analysis of the key pharmaceutical indices, the PMPRB published two reports under the Non-Patented Prescription Drug Prices initiative.

Sales, Prices and R&D Trends

• Sales of patented drugs in Canada increased by 3.0% to $12.3 billion in 2007. By comparison, annual growth in sales of patented drugs stood at 27.0% in 1999 and remained in double digits until 2003.
• The share of total sales accounted for by patented drugs declined to 66% in 2007, from 68.1% in 2006.
• Drugs treating the respiratory system and antineoplastics and immunomodulating agents (such as drugs used in chemotherapy) are the leading contributing drug classes to sales growth.
• Patentees' prices of patented drugs, as measured by the Patented Medicine Price Index (PMPI), decreased on average by 1% in 2007. This slight decline is attributable to falling prices paid by hospitals. Over the same period, the Consumer Price Index was at 2.1%.
• In 2007, Canadian prices were the second highest of the seven comparator countries used by the PMPRB (France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States). This ranking is attributable, in part, to currency conversion at market exchange rates. However, U.S. prices remained substantially higher than prices in Canada or any other comparator country.
• Patentees reported total R&D expenditures of $1,325 million in 2007, an increase of 9.5% over the previous year. Members of the national association of brand-name drug companies, known as Canada's Research-based Pharmaceutical Companies (Rx&D), reported R&D expenditures of $1,184 million in 2007, an increase of 24.4% over 2006.
• The R&D-to-sales ratio for all patentees increased slightly to 8.3% from 8.1% in 2006, as did the R&D-to-sales ratio for members of Rx&D (8.9% compared to 8.5% in the previous year).

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