CPI-Adjustment Factors for 2012

The Patent Act specifies the factors to be used by the PMPRB in determining whether the price of a patented drug product sold in Canada is excessive. One of these factors is the Consumer Price Index (CPI). The Board´s Compendium of Policies, Guidelines and Procedures requires the cumulative increase in a product´s price over any three-year period be no more than the increase in the CPI over the same period. The Guidelines also set a cap on year-over-year price increases equal to one and one-half times the CPI-inflation rate for the year in question.

To allow patentees to set prices in advance, the Board´s CPI-Adjustment Methodology provides for the calculation of the CPI-adjustment factors based on forecast changes in the CPI. The Board informs patentees of these CPI-adjustment factors each year through its NEWSletter.

The following table provides CPI-adjustment factors for 2012. These factors were based on forecasts of annual CPI-inflation rates of 2.4% and 2.1% for 2011 and 2012, respectively, as well as the actual 2010 CPI-inflation rate of 1.8%. CPI-inflation rates are provided by Finance Canada (see Government of Canada, Budget 2011: A Low-Tax Plan For Jobs and Growth, March 22, 2011, Table 2.1).

These figures imply: (1) a maximum allowable cumulative price increase between 2009 and 2012 of 6.4% for patented drug products with Canadian sales in 2009 (that is, products whose “benchmark year” is 2009); (2) a maximum allowable cumulative price increase between 2010 and 2012 of 4.6% for products whose first Canadian sales occurred in 2010; and (3) a maximum allowable cumulative price increase between 2011 and 2012 of 2.1% for products whose first Canadian sales occurred in 2011.

In addition, the forecast inflation rate of 2.1% for 2012 implies a year-over-year price increase cap (applicable to all drug products, regardless of benchmark year) of 3.2% (= 1.5 x 2.1%) for 2012.