Good afternoon. I am very pleased to have my first opportunity to appear before you as Chairperson of the Patented Medicine Prices Review Board to discuss Main Estimates and, undoubtedly, a number of other issues of interest to Committee Members relating to pharmaceutical pricing and pharmaceuticals in Canada.

It has been almost two years since the last appearance by the PMPRB before this Committee at which time the Board was represented by the then-Acting Chair, Mr. Réal Sureau.

With me today is Barbara Ouellet, the Executive Director of the PMPRB. Following my opening remarks, I will be pleased to answer any questions you may have.

At the outset, permit me to provide a bit of context concerning the role and mandate of the PMPRB. Established by Parliament in 1987 under the Patent Act, the PMPRB is currently part of the Health Portfolio. However, as a quasi-judicial, independent body, it carries out its mandate at arm´s-length from the Minister of Health.

The PMPRB has a dual role which includes both regulatory and reporting responsibilities. In terms of the first of these, the PMPRB reviews the prices of more than 1000 existing patented medicines already under our jurisdiction to ensure that they are not excessive. At present, the PMPRB is also completing its review of 100 new medicines which came under the Board´s jurisdiction in 2006.

As part of the PMPRB´s regulatory responsibilities, the Staff carries out investigations in cases where non-compliance has been identified. Over the past 18 months, the PMPRB has issued eight Notices of Hearing into the prices of patented medicines which appear to be excessive. The Board Staff is currently involved in some additional 33 ongoing investigations.

The second part of our mandate is our reporting role. The PMPRB reports annually to Parliament, through the Minister of Health, on its activities and on pharmaceutical trends relating to all medicines. We also report on the R&D spending by pharmaceutical patentees.

In addition to these reporting responsibilities, under Section 90 of the Patent Act, the Minister of Health has the authority to direct the PMPRB to inquire into any other matter. Under this provision, the Minister has twice directed the Board to carry out additional initiatives. First, in 2001, federal, provincial and territorial Ministers of Health announced the launch of the National Prescription Drug Utilization Information System. Working in partnership with the Canadian Institute for Health Information (CIHI), the PMPRB is responsible for conducting analyses of price, utilization and cost trends for prescription drugs.

Some examples of our current activities in this area include an Analytical Report on Pharmaceutical Trends, a study to forecast pharmaceutical costs,
the development of a methodology and reporting guidelines to assist the pharmaceutical industry in meeting requirements of federal, provincial and territorial drug plans for more transparent budget impact analyses, and the monitoring of new drugs in the pipeline that are expected to potentially have an important impact on drug therapy and drug plan budgets.

Second, in November 2005 this role was expanded further when the federal Minister of Health, on behalf of all F-P-T Ministers of Health, directed the Board to report on prices of non-patented prescription drugs. This new responsibility, in support of the National Pharmaceuticals Strategy (NPS), has resulted in two reports issued by the PMPRB to date. These are: Canadian and Foreign Price Trends and, Trends in Canadian Sales and Market Structure. In April of this year, a third study on the market of new off-patented drugs will be released. This report tracks market developments for drugs immediately following their patent expiry. The fourth report of the quarterly series will focus on non-patented single source drug prices.

I would like to focus for a moment on a couple of matters reflected in the Main Estimates which demonstrate the evolving nature of the environment in which the PMPRB finds itself and how this is affecting our work. Figures for 2007-2008, along with those for the previous fiscal year 2006-2007, show that the total PMPRB budget has increased from $6.5 million to $11.5 million. It would not be unreasonable to ask why such a substantial change has occurred.

There are several factors that have contributed to this budgetary increase. These additional funds were allocated to the PMPRB to enable the Board to conduct an increased number of public hearings to determine whether certain patented medicines are or were being sold in any market in Canada at prices that, in the opinion of the Board, are or were excessive. In addition, these funds were needed to enable the Board to undertake a comprehensive review of and public consultation on its Excessive Price Guidelines. These Guidelines, although not binding on the Board and on the patentees, provide clear, predictable and transparent information on how the prices of patented medicines will be reviewed and have historically greatly facilitated voluntary compliance in setting prices that are not excessive.

With respect to the matter of public hearings, it is perhaps worth recalling, as I mentioned earlier, that I have taken decisions to issue eight Notices of Hearing in the last 18 months. By way of comparison, this number is equal to the total of the Notices of Hearing issued by the Board going back to its inception in 1987 through to 2005. Of those previous eight, one full hearing was held, five were resolved through Voluntary Compliance Undertakings, while two others are pending.

I would add that this relatively recent increase in the number of Notices of Hearing may not necessarily represent a longer term trend but is a departure from the previous history of the Board. It is simply the reality currently being faced by the PMPRB as it seeks to ensure that patentees´ prices for all patented medicines sold in Canada are not excessive.

One could speculate on the reasons for an increase in hearings – for example, the shift in the drug pipeline away from blockbuster new chemicals to more incremental innovations. In part because of notices from third parties about price increases, after a period of considerable price stability, and our own experience with a shift toward more hearings, the Board is currently undertaking a comprehensive review of the its Excessive Price Guidelines.

This review has involved a process through which we are seeking to address complex and wide-ranging issues. It is not a process that can be accomplished quickly or by cutting corners. Analysis has required a phased-approach that reflects the broad scope of the review itself.

The primary purpose of the review is to ensure that the PMPRB´s Excessive Price Guidelines appropriately reflect the Board´s interpretation of the price determination factors set out in the Patent Act and that the Board´s price review process remains relevant and responsive to the current pharmaceutical environment. At the same time, we must make every effort to make certain that this review is carried out in a manner which is transparent and effective, and that encompasses opportunities for input from all interested stakeholders.

This is a significant, important and timely review. It addresses issues that go to the heart of price determination. Here are two examples, to name a few,

The categorization of new drugs, which some stakeholders feel may no longer adequately recognize the current type of innovation in the pharmaceutical environment.
The Price tests used to determine if the price of a patented medicine is excessive or not. Concerns have been expressed that these tests, at one extreme, may not result in appropriate price premiums for the value of the drug in question, and, at the other, are a major source of cost driver for public drug plans.

From our core regulatory and reporting functions, to our expert analytical support for F/P/T Ministers of Health, to major undertakings such as the review of the Excessive Price Guidelines, the PMPRB in engaged in a broad range of activities that ultimately touch the lives of all Canadians. We are committed to carrying out these responsibilities in a manner that is transparent, effective and accountable. In this spirit, we appreciate the opportunity to appear before this Committee.

On behalf of the Board, I would be pleased to respond to any questions Members may have on the broader spectrum of pharmaceutical issues as this may relate to our role and mandate.

Thank you!