Backing-Out Formulas for Foreign Price Verification

The Patented Medicines Regulations require patentees to report the ex-factory prices at which they sell their products in any of the seven comparator countries specified in the Regulations. It is critical that patentees accurately report foreign prices because of the role they play in the price tests that the PMPRB applies when conducting its price reviews, as well as in the PMPRB's reporting on pharmaceutical price trends. If patentees were to overstate foreign prices, this could lead the PMPRB to accept Canadian prices that are excessive in light of actual market conditions, to the detriment of Canadian consumers.

PMPRB staff routinely uses price information obtained from national formularies to validate the foreign prices patentees submit, in a process called Foreign Price Verification (FPV). This process typically involves a series of calculations needed to remove markups and certain taxes embedded in formulary prices. Beginning with the manufacturer, the drug product may be sold to a wholesaler or directly to a pharmacy or hospital. As the drug travels through the distribution chain, the price may be marked up several times. In some countries, formulary prices also include a value added tax (VAT).

In the countries that the PMPRB considers in its price reviews (i.e., France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States), the PMPRB recognizes certain sources as providing the best publicly available information from which to identify wholesale, pharmacy and retail ex-factory prices. In some cases, these prices are “backed out” using regulated markups and taxes.

Because the policies of foreign reimbursement plans can change from one year to the next, PMPRB staff, in consultation with appropriate officials in the comparator countries, reviews recognized sources and backing-out formulas each year. These sources and formulas are then published on the PMPRB website in January of each year and apply to that entire calendar year.

Formulas for Foreign Price Verification