PMPRB Notice and Comment, December 2015

Proposed changes for comment by January 29, 2016:

Introduction

The PMPRB strives to make its price review process open and transparent to all stakeholders and is committed to a regulatory framework that is relevant, responsive and appropriate.

As part of the Board's ongoing commitment that the framework continues to have a positive impact for consumers, while recognizing the value that innovative medicines offer to patients, the Board intends that:

1. the Compendium of Policies, Guidelines and Procedures ("Guidelines") be responsive, in an appropriate timeframe, to relevant developments; and
2. Canadian consumers are protected from the potential abuse of market power.

An internal examination of the Guidelines was conducted to identify incremental changes that could be made which meet these criteria, resulting in the following proposed changes for comment:

• Reasonable Relationship Test (Schedule 4) Amendment
• List Price relative to Maximum Average Potential Price (MAPP) Verification (Section C.11) Amendment

Board Staff seeks stakeholder comments on the proposed changes. Based on stakeholder feedback, further consultation may be undertaken on the proposed text in the Guidelines, as well as on operational/transitional details, prior to final adoption and implementation.

Initiative #1: Reasonable Relationship Test Amendment

Proposal for Consideration: When applying the Reasonable Relationship (RR) Test, if the new drug and the comparable drug product(s) are owned by the same patentee, that Board Staff would use the non-excessive National Average Transaction Price of the comparable drug product(s) when establishing the Maximum Average Potential Price for the new strength of the patented drug product. If the new drug and the comparable drug product(s) are owned by different patentees, then Board Staff would continue with the current practice of using the lowest of the six publicly available sources to establish the Maximum Average Potential Price.

Background: Schedule 1 of the pre-2010 Guidelines defined the price of the relevant comparator for the Reasonable Relationship Test as the “price/unit of the critical comparable DIN,” that is, the National Average Transaction Price (N-ATP). The 2010 Guidelines, by contrast, state that the relevant price is “the lowest public price from these sources for each of the drug products identified for comparison purposes”, where “these sources” refer to the AQPP, IMS Health, McKesson Canada, ODB, PPS Pharma, and RAMQ.

As publicly available list prices may vary by customer class and/or region, the current practice of using the lowest of the six publicly available list prices has in rare instances created a situation in which a non-excessive comparable drug product may have an N-ATP greater than the lowest of the six public sources.

While the six publicly available sources are valid units of regulatory concern for the Board, the lowest price is not necessarily representative of the price paid by all Canadian consumers on average. As such, Board Staff believe that it is appropriate to use the non-excessive N-ATP for price comparison purposes whenever this can be feasibly done without violating patentee confidentiality.

The proposed approach is essentially a return to that taken in the pre-2010 Guidelines; however, by retaining the public price approach, the proposed amendment will maintain the advantage of predictability and consistency for patentees in cases where the N-ATP cannot be used due to data confidentiality considerations or where the comparator drug is not patented. During consultations for the 2010 Guidelines, patentees raised the concern that the use of a comparator’s N-ATP to establish the MAPP breached data confidentiality. By limiting the application of this approach to cases of common ownership, this problem is eliminated.

In cases where an N-ATP cannot be used in conducting the Reasonable Relationship Test, Board Staff will ensure fair treatment of all patentees by maintaining the current practice of using the lowest of the six publicly available price sources in a predictable and consistent manner.

An analysis by Board Staff indicates that this change would affect very few DINs and have a negligible impact. In 2014, the Reasonable Relationship Test was applied to 46 new DINS. In seven cases (16%) the N-ATP of the comparator was greater than the lowest publicly available price; however, the difference was less than 2% for all of these cases.

When applying the Reasonable Relationship Test, using the N-ATP of the comparator instead of the lowest of the six publicly available prices prioritizes use of the N-ATP while reducing regulatory burden without adversely affecting the PMPRB’s mandate to protect consumer interests.

Initiative #2: List Price Relative to Maximum Average Potential Price (MAPP) Verification (Section C.11) Amendment

Proposal for Consideration: That an addition be made to section C.11 “Review of Prices of New Patented Drug Products at Introduction” that requires patentees to ensure that domestic list prices for new drugs are below the Maximum Average Potential Price.

Background: In the PMPRB context, domestic ex-factory gate “list price” can be defined as the publicly available prices found in the AQPP, IMS Health, McKesson Canada, ODB, PPS Pharma, and RAMQ price sources. To date, Board Staff have not systematically evaluated whether the Canadian list price (also known for filing purposes as the “Block 5” price) of a new drug exceeded the MAPP. Historically, at introduction there was limited difference between the N-ATP and list prices; however, due to the proliferation of non-transparent pricing and market segmentation pricing strategies evident in both domestic and international markets, Board Staff has identified the need to ensure that list prices are not excessive.

For instance, since 2010, the ratio of the list prices submitted by patentees to the Board (the domestic “Block 5” price) to the N-ATP has increased from 1.054 to 1.093 for all drugs. That is, on average, consumers paying the list price are paying 9.3% more than those paying the N-ATP.

While the exact share of the Canadian population paying the list price is unknown, it is clear that it represents a sizeable share of the market: 20% of Canadian prescription drug expenditures are made without insurance coverage, and public and private payers do not always have negotiated rebates in place for all drugs, even new drugs. Furthermore, the rebates negotiated by public and private payers are often structured in reference to the list price, giving it an important influence on the price paid by all Canadian consumers. As the pricing structure of the Canadian pharmaceutical sector becomes increasingly opaque, it is clear that in order to defend consumer interests, the Board must ensure not only that the National Average Transaction Price and Market-Specific Average Prices of new drugs are not excessive, but that list prices of new drugs (according to the above definition) are not excessive.

An impact assessment performed by Board Staff indicates that the immediate impact of this change on patentees would be minor. Of the 101 patented drugs that entered the Canadian market in 2014, 25 had submitted Block 5 prices greater than the MAPP (by an average of 5.7%); however, only nine of these drugs had Block 5 prices more than 5% greater than the MAPP, and of those nine, all but one were already outside the Guidelines based on the N-ATP. As such, this change, if it had been in place in 2014, would only have resulted in a single additional investigation. Furthermore, the Board does not foresee this amendment as increasing the filing requirements of patentees. Board Staff already collects these prices for new drugs as a component of their introductory price verification.

Despite its modest impact, Board Staff believes this change is timely and demonstrates its intent to use all tools at its disposal to defend the interests of Canadian consumers, and to limit the risk of price discrimination as much as possible.

For new drugs entering the Canadian market, list prices found in the AQPP, IMS Health, McKesson Canada, ODB, PPS Pharma, and RAMQ will be presumed to be excessive if they exceed the Maximum Average Potential Price.