Frequently Asked Questions, Patentees

Table of Contents

What is the Patented Medicine Prices Review Board (PMPRB)?

Created in 1987 under the Patent Act as an independent quasi-judicial tribunal, the PMPRB limits the prices set by patentees for all patented medicines, new and existing, sold in Canada, under prescription or over the counter, to ensure they are not excessive.

What are the role and mandate of the Patented Medicine Prices Review Board?

As an independent quasi-judicial body, the PMPRB carries out its mandate independently of other organizations such as Health Canada, which approves drugs for safety and efficacy, and public drug plans, which approve the listing of drugs on their respective formularies for reimbursement purposes.

The PMPRB has a dual role:

  • Regulatory: To ensure that prices charged by patentees for patented medicines sold in Canada are not excessive.
  • Reporting: To report on pharmaceutical trends of all medicines and on the R&D spending by pharmaceutical patentees.

What is a medicine?

Any substance or mixture of substances made by any means, whether produced biologically, chemically, or otherwise, that is applied or administered in vivo in humans or in animals to aid in the diagnosis, treatment, mitigation or prevention of disease, symptoms, disorders, abnormal physical states, or modifying organic functions in humans and or animals, however administered. For greater certainty, this definition includes vaccines, topical preparations, anaesthetics and diagnostic products used in vivo, regardless of delivery mechanism (e.g. transdermal, capsule form, injectable, inhaler, etc.). This definition excludes medical devices, in vitro diagnostic products and disinfectants that are not used in vivo.

What is a patented medicine?

A patented medicine is a drug to which a Canadian patent pertains. A patent provides exclusive rights to the patent holder to use the invention for the duration of the patent.

When does a patent pertain?

The Patent Act gives the PMPRB jurisdiction over a "patentee of an invention pertaining to a medicine." for more information, see the July 2006 issue of the PMPRB NEWSletter.

What is a patentee?

As defined by subsection 79(1) of the Patent Act - "the person for the time being entitled to the benefit of the patent for that invention (pertaining to a medicine) and includes, where any other person is entitled to exercise any rights in relation to the patent other than under a license continued by subsection 11(1) of the Patent Act Amendment Act, 1992, that other person in respect of those rights".

What is a former patentee?

A patentee is referred to as a former patentee once the relevant patents for a particular drug product expire.

What type of medicine does the PMPRB regulate?

The PMPRB regulates the patentees' prices of patented medicines sold in Canada to ensure that they are not excessive. The regulation of the medicine for safety and efficacy is the responsibility of Health Canada under the Food and Drugs Act and Regulations.

The PMPRB reviews the "factory-gate" price, i.e., the price at which the patentee sells the patented medicine to wholesalers, hospitals and pharmacies and others. The PMPRB does not have jurisdiction over prices charged by wholesalers or retailers nor over pharmacists' professional fees.

The PMPRB regulates the price of each patented drug product, including each strength of each dosage form of a patented medicine. This is normally the level at which Health Canada assigns a Drug Identification Number.

The PMPRB's jurisdiction includes patented medicines marketed or distributed under voluntary licenses.

What are the patentees' filing requirements?

Patentees have filing requirements under the Patented Medicines Regulations. For more information, patentees can also consult the Patentees' Guide to Reporting.

The filing requirements are:

Intention to sell: Pursuant to section 82(1) of the Patent Act, patentees are required to inform the PMPRB of an intention to sell a patented medicine in a new market in Canada and date on which the patentee intends to offer the medicine for sale.

For more information, please consult the Compendium of Policies, Guidelines and Procedures section A.7.2

Medicine Information Sheet (Form 1):
Under the Patented Medicines Regulations, a patentee is to file information on patented drug products for which a Notice of Compliance (NOC) has been issued by Health Canada, or which are being offered for sale in Canada. Form 1 is to be submitted for each patented drug product within seven days of it being issued a NOC or being offered for sale in Canada, whichever comes first.

Information on the Identity and Prices of the Medicine (Form 2):
Under the Patented Medicines Regulations, a patentee is to file a Form 2 for each drug product for which at least one patent related to the medicine pertains. Form 2 is to be filed:

No later than thirty (30) days after the first day of sale in Canada of the new drug product

Then, semi-annually:

  • July 30, for the period of January 1 to June 30
  • January 30, for the period of July 1 to December 31

Revenues and Research and Development Expenditures (Form 3):
Under section 88 of the Patent Act, a patentee of an invention pertaining to a medicine is required to provide to the PMPRB expenditure information on scientific research and experimental development. Form 3 is to be filed:

  • 60 days after the end of the reporting year, i.e. before March 1.

What is the price review process for patented drug products sold in Canada?

The PMPRB reviews pricing information on an on-going basis to ensure that the prices comply with the Patent Act and does so for the duration of the patent.

Following the scientific review, the PMPRB reviews the price of the drug to determine if it is within the Guidelines, based on the factors established in the Patent Act.

When Board Staff finds that the price of a patented drug appears to exceed the Guidelines, and where the criteria for commencing an investigation is met, Board Staff will conduct an investigation to determine the facts.

An investigation may result in one of the following situation's:

  • the closure of the file, where it is concluded that the price was within the Guidelines;
  • a Voluntary Compliance Undertaking (VCU) by the patentee to reduce the price and take other measures to comply with the Guidelines; or
  • a public hearing to determine if the price is excessive and, if so, the issuance of a remedial order by the Board.

Does the PMPRB have any kind of power or authority to reduce prices?

If, after a public hearing, the Board finds that a price is excessive, it may order the patentee to reduce the price and take measures to offset up to double excess revenues it may have received. The offset of excess revenues may be achieved through additional price reduction or a payment to the Government of Canada.

What happens to the money paid to the Government of Canada?

Under the Patent Act, the Minister of Health can make arrangements with provincial counterparts to distribute the money. The PMPRB has no authority with respect to the distribution of funds collected under a VCU or Board Order.

Can the PMPRB delay or block the sale of a drug in Canada?

No. If the PMPRB finds that the price of a patented medicine is excessive, it can order a price reduction.

The PMPRB does not have the authority to prevent the sale of a patented medicine based on its price nor to remove it from the market.

What is the PMPRB's role with respect to research and development (R&D)?

The PMPRB has no authority to regulate R&D. The PMPRB's mandate is to report on R&D expenditures as reported by patentees. With the adoption of the 1987 amendments to the Patent Act, Canada's Research Based Pharmaceutical Companies (Rx&D) made a public commitment that the brand name pharmaceutical industry would increase its annual R&D expenditures as a percentage of sales to 10% by 1996.

Do patentees have any obligations regarding research and development?

Under section 88 of the Patent Act, a patentee of an invention pertaining to a medicine is required to provide to the PMPRB expenditure information on scientific research and experimental development. Revenues and Research and Development ExpendituresForm 3 is to be filed:

  • 60 days after the end of the reporting year, i.e. before March 1.

The PMPRB also has a reporting role. What does that entail?

The PMPRB reports annually to Parliament on its activities, on price trends of patented medicines and all medicines and on R&D expenditures as reported by pharmaceutical patent-holding companies.

Furthermore, in 2001, federal/provincial/territorial ministers of Health announced the establishment of the National Prescription Drug Utilization Information System (NPDUIS). The PMPRB, in collaboration with the Canadian Institute for Health Information (CIHI) has been mandated to provide analyses of price, utilization and cost trends so that Canada's health system has more comprehensive, accurate information on how prescription drugs are being used and on sources of cost increases.

How does the PMPRB calculate the CPI-Adjusted Price

With a view to promoting compliance with the legislation and the Guidelines, and in order to ensure predictability, the Guidelines set out a methodology for forecasting changes in the CPI and calculating the CPI-adjusted price. In summary, the Guidelines limit price increases to changes in the CPI, calculated over a three-year period. In the event that this formula would allow an increase in one year greater than the annual increase in the CPI the Guidelines also limit the annual increase to 1.5 times the increase in the forecast CPI.

Schedule 9 of the Compendium of Policies, Guidelines and Procedures states that the price of an existing medicine during the year under review will be presumed to be excessive if it exceeds the benchmark price of the DIN adjusted for the cumulative change in the CPI from the benchmark year to the year under review.

For patented drugs first marketed in Canada more than three years prior to the forecast period, the benchmark year is the calendar year three years preceding the forecast period. For example, for 2011, the corresponding benchmark year is 2008. The usual practice is to calculate the average of the prices at which a drug product was sold to all classes of customers in all provinces during the period under review.

Annual CPI-adjustment factors are published annually in the January NEWSletter and on the website. The CPI-Adjustment Methodology is available in Schedule 9 of the Compendium of Policies, Guidelines and Procedures.

If a patented drug product is not listed on the HC Patent register, is it under the PMPRB jurisdiction?

Patented drug products are under the PMPRB jurisdiction whether or not they are listed on the HC Patent Register.

The two jurisdictions are independent:

  • Health Canada (HC) derives its jurisdiction over the HC Patent Register listing requirements from the subsection 55.2(4) of the Patent Act and section 4 of the Patented Medicines (NOC) Regulations.
  • In contrast, the PMPRB derives its jurisdiction from sections 79 through 103 of the Patent Act.

If a patented drug product is sold under SAP, does it fall under the PMPRB jurisdiction?

Yes, it does. See Supreme Court decision in Celgene Corp. v. Canada, January 20, 2011.

[10] …Because its (PMPRB) mandate includes protecting Canadians from excessive prices that may be charged for patented medicines, it concluded that sales "in any market in Canada" include sales of medicine that are regulated by Canadian law, that will be delivered and used in Canada, and where the cost of medicine will be borne by Canadians. Since the SAP is a Canadian law, Celgene's sales under this programme are included in this mandate.

Patented drug product
Does it have a NOC? Is the product sold? Should a Form 1 be submitted? Should a Form 2 be submitted?
yes yes yes yes
no yes yes yes
yes no yes no
no no no no

What may happen if a patentee does not file Form 1 or Form 2 information as required or submits false information?

Compendium of Policies, Guidelines and Procedures Section A.8

  • Board Staff advises the patentee in writing that it is in failure to file (FTF) and the patentee is given 7 days to send missing information
  • Failing this, Board Staff seeks a Board Order from the Chairperson requiring patentee to file information within a time specified in the Board Order
  • Failing this, the Board may refer the matter to the Attorney General of Canada to determine if summary conviction proceedings should be commenced under subsection 76.1(1) of the Act

Patent Act

76.1 (1) Every person who contravenes or fails to comply with section 80, 81, 82 or 88 or any order made thereunder is guilty of an offense punishable on summary conviction and liable

(a) in the case of an individual, to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding six months or to both; and

(b) in the case of a corporation, to a fine not exceeding twenty-five thousand dollars.

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