Voluntary Compliance Undertaking of Bayer Inc. to the Patented Medicine Prices Review Board

Voluntary Compliance Undertaking accepted July 9, 2004 (Prolastin).

1.0 Product Summary:

1.1 Prolastin 25 mg/ml in vials of 1000 mg (Prolastin) - (DIN 02204606) is a patented medicine that is marketed in Canada by Bayer Inc. (Bayer), formerly Miles Canada Inc. (Miles).

1.2 Prolastin (Alpha 1-Proteiinase Inhibitor and Alpha1-Antitrypsin Replenisher) is a drug product derived from human plasma that is indicated for a rare genetic disorder, specifically, chronic replacement therapy of individuals having congenital deficiency of alpha 1-PI (alpha 1-antitrypsin deficiency) with clinically demonstrable panacinar emphysema.

1.3 Health Canada issued a Notice of Compliance (NOC) to Bayer for Prolastin on September 19, 1988. Bayer began selling Prolastin in Canada on July 23, 1991.

1.4 The first patent pertaining to Prolastin was granted to Miles Inc., U. S. A. (Miles US) on July 23, 1991 (Canadian Patent No. 1,286,848). The most recent patent pertaining to Prolastin was also granted to Miles US on March 24, 1992 (Canadian Patent No. 1,298,032) and will expire on March 24, 2009.

2.0 Application of the Excessive Price Guidelines (Guidelines):

2.1 Prolastin was a new active substance at the time of its introduction in Canada in July, 1991. Board Staff advised Bayer that Prolastin was classified by the Human Drug Advisory Panel (HDAP) as a category 3 new drug product. Board Staff also advised Bayer that, as no comparators could be identified for purposes of conducting a Therapeutic Class Comparison (TCC) Test, the International Price Comparison (IPC) Test was used for purposes of reviewing the price of Prolastin. The Guidelines provide that, in circumstances where it is not possible or appropriate to conduct a TCC Test in relation to a category 3 new drug product, its Canadian price will be reviewed to determine whether it exceeds the median international price (MIP) of the foreign countries listed in the Patented Medicines Regulations (Regulations).

2.2 Since its introduction in Canada in July 1991, the price of Prolastin in Canada has remained within the Board´s Guidelines to the period ending December 31, 2002.

2.3 By letter dated January 27, 2003, Bayer notified the PMPRB that, effective February 3, 2003, the price of Prolastin in Canada would be increased from $138.00 per vial to $288.00 per vial.

2.4 By letter dated April 3, 2003, Board Staff informed Bayer that it had commenced an investigation into the price of Prolastin in Canada pursuant to the criteria for so doing under the Board´s Compliance and Enforcement Policy.

2.5 Under the Guidelines, the means for identifying the MIP of a patented drug product that is sold in an even number of countries is determined by calculating the simple average of the middle two countries. Prolastin is sold in all the countries listed in the Regulations excepting France. In 2003, the prices of Prolastin ranged in the comparator countries from $235.21 to $380.42 per vial. The MIP of Prolastin in 2003 has been determined to be $298.42 per vial. Although not a requirement under the Guidelines, the price in Canada is within the range of prices in the United States and is lower than the Medicare prices in the United States.

3.0 Position of the Patentee

3.1 This VCU constitutes no admission by Bayer that the price of Prolastin is or was excessive for purposes of the Patent Act.

3.2 By reason of a significant decrease in the global supply of blood plasma (from which Prolastin is derived), higher operating costs to comply with regulatory manufacturing standards, and escalating demand for Prolastin worldwide, Bayer cannot assure a continuing supply of Prolastin to Canadian patients unless it is sold at a price level that is reflective of its prices in other countries listed in the Regulations.

3.3 Despite the prevalence of rising prices for Prolastin in the other listed countries in recent years, Bayer continued to comply with the Guidelines in relation to its Canadian price until it was necessary to increase this price in early 2003, significantly, to offset costs associated with worldwide market conditions.

4.0 Terms of the VCU

4.1 For purposes of the Guidelines, the maximum non-excessive price of Prolastin in 2003 was $288.00; the average transaction price (ATP) of Prolastin in 2003 did not exceed $288.00 per vial.

4.2 Bayer undertakes to sell Prolastin in Canada during 2004, 2005 and 2006 at a price that will not exceed the lower of (a) the $288.00 MNE price in 2003 adjusted for CPI increases in 2004, 2005 and 2006 as determined in accordance with the methodology established in the Guidelines for calculating CPI-adjusted prices in those years and (b) the MIP prices in those years.

4.3 In the event that Bayer proposes to increase the price of Prolastin in any succeeding year after 2006 by more than its CPI-adjusted price as determined in accordance with the methodology established in the Guidelines, Bayer further undertakes to provide written notification to the PMPRB not less than 60 days in advance of implementing any such price increase, and to provide satisfactory written evidence in support of the rationale for any such price increase. Bayer understands that, notwithstanding any notification it may provide pursuant to this provision, the PMPRB reserves the right to commence an investigation in appropriate circumstances pursuant to its Compliance & Enforcement Policy.

4.4 Bayer further undertakes to provide a detailed breakdown of the prices prevailing in the United States for all classes of customer in 2003, as per the Regulations, and for all succeeding years during which Prolastin remains within the jurisdiction of the PMPRB, certified by a duly authorized company officer.

Signature: Original signed by

Company Officer: Philip Blake

Position: President of Bayer Inc.

Date: May 7, 2004

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