IN THE MATTER OF the Patent Act, R.S.C. 1985, c. P-4, as amended AND IN THE MATTER OF Abbott Laboratories, Limited, (the “Respondent”) and the medicine “Zemplar”

Statement of Allegations of Board Staff

Introduction

1. This Statement of Allegations results from an investigation by Board Staff into the price of Zemplar, a patented medicine sold in Canada by Abbott Laboratories, Limited (“Abbott Laboratories”). Zemplar is sold in Canada as a 5ìg/mL solution for injection (DIN 02266202). According to publicly available information in 2007, Abbott Laboratories sells Zemplar in Canada at a price of $30.23 per mL. (Attachment 1)

The Medicine

2. Zemplar is indicated for the prevention and treatment of secondary hyperparathyroidism associated with chronic renal failure. (Attachment 2) It is a synthetic vitamin D analogue, paricalcitol. Paricalcitol is a new active substance.

3. Health Canada issued a Notice of Compliance for Zemplar to Abbott Laboratories on March 31, 2005. (Attachment 3) Abbott Laboratories began selling Zemplar under the Special Access Program (“SAP”) on January 1, 1999.

The Patent

4. Canadian Patent No. 1,333,616 pertains to Zemplar. (Attachment 4) This patent was granted to Wisconsin Alumni Research Foundation, U.S.A. on December 20, 1994 and will expire on December 20, 2011.

5. Abbott Laboratories is, for the purposes of the Patented Medicine Prices Review Board (“Board”), considered the Canadian patentee.

The Regulatory Filings

6. Abbott Laboratories failed to report its price and sales information, for Zemplar, for the period January 1, 1999 to December 31, 2004, within the specified time set out in the Patented Medicines Regulations, 1994 (“Regulations”). However, on June 7, 2005, Abbott Laboratories filed its price and sales information for Zemplar for all periods, and has since continued to file its price and sales information, in accordance with the Regulations.

Factors Set Out in Subsection 85(1) of the Patent Act

7. Subsection 85(1) of the Patent Act (“Act”) sets out the factors the Board shall take into consideration in determining whether a medicine is being or has been sold at an excessive price in any market in Canada:

In determining under section 83 whether a medicine is being or has been sold at an excessive price in any market in Canada, the Board shall take into consideration the following factors, to the extent that information on the factors is available to the Board:

a) the prices at which the medicine has been sold in the relevant market;

b) the prices at which other medicines in the same therapeutic class have been sold in the relevant market;

c) the prices at which the medicine and other medicines in the same therapeutic class have been sold in countries other than Canada;

d) changes in the Consumer Price Index; and

e) such other factors as may be specified in any regulations made for the purposes of this subsection.

8. In accordance with the factors set out in subsection 85(1) of the Act, the Board, following considerable deliberation and consultation with all stakeholders pursuant to subsection 96(5) of the Act, published the

Board's Compendium of Guidelines, Policies and Procedures (“Guidelines”). Although the Guidelines are not binding on the Board, Board Staff submits that it is appropriate, in the case at bar, for the Board to give due consideration to its Guidelines to establish an approach and methodology in applying the factors set out in subsection 85(1) of the Act, to determine if Zemplar is being or has been sold at an excessive price in Canada.

Applicable Guidelines for HDAP Review

9. Following the procedures outlined in the Guidelines for new active substances, Board Staff referred Zemplar to the Human Drug Advisory Panel (“HDAP”) for its review. The HDAP was asked for its recommendation as to the categorization of the medicine, the appropriate comparable medicines, and comparable dosage regimens for the comparable medicines, if any.

A. Category

10. Section 3 of Chapter 3 – Scientific Review Procedures (“Scientific Review Procedures”) provides the following guidance with respect to determining categorization for a new drug product:

3.1 A Category 1 drug product is a new DIN of an existing dosage form of an existing medicine, or a new DIN of another dosage form of the medicine that is comparable to the existing dosage form as per Schedule 7.

3.2 A Category 2 drug product is one that provides a breakthrough or substantial improvement. It is a new DIN of a non-comparable dosage form of an existing medicine or the first DIN of a new chemical entity.

3.3 A Category 3 drug product is a new DIN of a non-comparable dosage form of an existing medicine or the first DIN of a new chemical entity. These DINs provide moderate, little or no therapeutic advantage over comparable medicines. This group includes those new drug products that are not included in Category 2 above.

11. In a report dated August 16, 2005, the HDAP recommended that Zemplar be classified as a Category 3 new drug product, as it provides moderate, little or no therapeutic advantage over comparable medicines. (Attachment 5)

B. Comparable Drug Products

12. With respect to the selection of comparable drug products, Section 9 of the Scientific Review Procedures provides as follows:

9.1 Comparable drug products are selected by identifying both comparable medicines and comparable dosage forms.

9.2 Comparable medicines are clinically equivalent in addressing the approved indication that is anticipated to be the primary use of the new drug product under review. The PMPRB refers to the World Health Organization (WHO) Drug Utilization Research Group's Anatomical Therapeutic Chemical Classification System (ATC) as the starting point for the selection of comparable medicines.

9.3 Comparable medicines will typically be those identified under the ATC classification system at the sub-class level above the single chemical substance. This will normally be the fourth sub-class level. If the appropriate comparable medicines are not identified at this level, then the PMPRB may choose from the next higher sub-class or another subclass. In some instances, it may be appropriate to select from the fifth or single chemical substance level. Selection criteria will include the indication and therapeutic use, and could include other factors such as mode of action, spectrum of activity or chemical family.

9.4 The PMPRB may omit from the comparison a chemical substance or a drug product of the same ATC therapeutic class as the drug product under review if, in the panel's or Board Staff's opinion, it is not clinically equivalent or is unsuitable for comparison. For example, drug products with primary uses other than to address the indication anticipated to be the primary use of the drug product under review may be omitted from the comparison. Similarly, the PMPRB may choose to add products from other ATC classes if they are clinically equivalent for the appropriate indication to the drug product under review.

9.5 For each comparable medicine identified, drug products of the same or comparable dosage form as the drug product under review will generally be selected. Schedule 7 lists the comparable dosage forms that the PMPRB uses to identify comparable drug products.

13. Based on the scientific information available to the HDAP at the time of its review and the above Scientific Review Procedures, the HDAP recommended parenteral calcitriol (Calcijex) as the most appropriate comparator for Zemplar.

14. Comparators were limited to those available on the Canadian market at the date of first sale of Zemplar on January 1, 1999. Furthermore, oral vitamin D analogues were not considered appropriate comparators as they are not comparable dosage forms according to Schedule 7 of the Board's Guidelines.

C. Comparable Dosage Regimens

15. With respect to the selection of comparable dosage regimens, Section 10 of the Scientific Review Procedures provides as follows:

10.1 The dosage regimen recommended for comparison purposes will normally not be higher than the maximum of the usual recommended dosage taking into account relevant clinical variables. The most appropriate strength of the medicine will be chosen for a particular dosage regimen.

10.2 Generally, a dosage regimen based on a course of treatment will be applicable to acute indications, while a per-day regimen (based on maintenance dose) will be applicable to chronic situations.

10.3 Board Staff and the panels may rely on product monographs, credible scientific literature, expert advice or any combination thereof to facilitate their recommendations of the maximum of the usual recommended dosage relevant clinical variables, clinically equivalent effects and other matters relating to price measurement.

16. Based on the above Scientific Review Procedures, the HDAP recommended the following comparable dosage regimens: (Attachment 5)

The Maximum Non-Excessive (“MNE”) Price for Zemplar

A. Price of Zemplar in Canada

17. Subsection 85(1) (a) of the Act requires the Board to take into consideration the prices at which the medicine has been sold in the relevant market.

18. In accordance with section 5 of Chapter 1- Excessive Price Guidelines (“Excessive Price Guidelines”), Board Staff calculated the Average Transaction Price (“ATP”) of Zemplar in Canada for the benchmark period (January 1999 to June 1999) and for each subsequent year to be as follows:

B. Prices of Other Medicines in Canada in the Same Therapeutic Class as Zemplar

19. Subsection 85(1) (b) of the Act requires the Board to take into consideration the prices at which other medicines in the same therapeutic class have been sold in the relevant market.

20. The Excessive Price Guidelines set out the appropriate price test for a Category 3 new drug product as follows:

8.5 Category 3 New Drug Products

In addition to the Guideline applicable to all patented drug products detailed in Section 7, the introductory price of a Category 3 new drug product will be presumed to be excessive if it exceeds the prices of all of the comparable drug products based on a Therapeutic Class
Comparison Test (Schedule 2)

8.7 Unless the introductory price of the new DIN is outside the Guidelines, it will establish the benchmark price. If the introductory price exceeds the Guidelines, the maximum non-excessive price will establish the benchmark price. Thereafter, the price will be reviewed using the test applicable to existing DINs.

21. Section 2 of Schedule 2 of the Guidelines further sets out the methodology for determining the prices of comparators when conducting a Therapeutic Class Comparison (“TCC”) Test in accordance with subsection 8.5 of the Excessive Price Guidelines (“domestic TCC Test”), as follows:

Ordinarily, the introductory price of the new drug product and the Ontario Drug Benefit Formulary price of the comparable drug products, if available, will be used for the comparison. If the ODB price is not available, or the PMPRB considers it inappropriate, other prices may be used for the comparison. For example, when an identified comparable drug product is patented and marketed by the same patentee as the drug product under review, the comparable drug product's average price based on the patentee's submission to the PMPRB (or, if outside the Guidelines, its maximum non-excessive price) may be used for the comparison.

22. Based on the HDAP's recommendation that Calcijex is the most appropriate comparator for Zemplar, Board Staff conducted a domestic TCC Test in accordance with subsection 8.5 of the Excessive Price Guidelines and section 2 of Schedule 2 of the Guidelines. The results are as follows: (Attachment 6)

23. The domestic TCC Test indicated that the introductory price of Zemplar of per mL exceeded the MNE price of per mL, by more than 65% for the period January 1999 to June 1999. As such, the MNE price of Zemplar for the period January 1999 to June 1999 established the benchmark price, in accordance with subsection 8.7 of the Excessive Price Guidelines.

C. International Price Comparison (“IPC”)

24. Subsection 85(1) (c) of the Act requires the Board to take into consideration the prices at which the medicine has been sold in countries
other than Canada.

(i) Highest of International Prices

25. The Excessive Price Guidelines set out the appropriate price test for a Category 3 new drug product as follows:

7.1 The price of a new or existing patented drug product will be presumed to be excessive if it exceeds the prices of the same medicine sold in all countries listed in the Regulations. These prices will be determined using the International Price Comparison Test described in Schedule 3.

26. Schedule 3 of the Guidelines further sets out the methodology for using the IPC Test to determine whether or not the price of the drug product is excessive:

2.1 Whenever possible, the price of the drug product under review will be compared with the simple average of the ex-factory prices of the same strength and dosage form for each country listed in the Patented Medicines Prices Regulations (the Federal Republic of Germany, France, Italy, Sweden, Switzerland, the United Kingdom and the United States)

27. In accordance with subsection 7.1 of the Excessive Price Guidelines and subsection 2.1 of Schedule 3 of the Guidelines, Board Staff conducted an IPC Test. The ATP of Zemplar in Canada, (Attachment 7) and the publicly available ex-factory prices of Zemplar in the countries listed in the Regulations, (Attachment 8) filed by the patentee, for the introductory period, are as follows:

28. The IPC Test indicated that during the introductory period, Zemplar was sold in one country (United States) listed in the Regulations and Canada had the lowest price.

ii) International TCC

29. Subsection 85(1)(c) of the Act also requires the Board to take into consideration the international prices of other medicines in the same therapeutic class as Zemplar (“international TCC Test”), a factor not addressed in the Guidelines.

30. Board Staff submits that the application of an international TCC Test ought to be consistent with all factors set out in subsection 85(1) of the Act.

31. Board Staff submits that in conducting an international TCC Test the following criteria must be satisfied:

a) The comparators in an international TCC Test must be those identified in the domestic TCC Test; and

b) The price of the drug under review will be deemed excessive if it exceeds the median of the international TCC Test.

32. In accordance with the above criteria, Board Staff conducted an international TCC Test for Zemplar. The results are as follows: (Attachment 9)

33. The international TCC Test indicated that the introductory price of Zemplar of per mL exceeded the median of the international TCC price of $17.9393 per mL by more than 50% for the period January 1999 to June 1999.

D. Consumer Price Index (CPI)

34. Subsection 85(1) (d) of the Act requires the Board to take into consideration changes in the CPI.

35. The Excessive Price Guidelines set out the appropriate CPI-Adjustment Methodology to be applied to all existing drug products, as follows:

9.1 In addition to the Guidelines applicable to all patented drug products detailed in Section 7, the price of an existing DIN will be presumed to be excessive if it exceeds the benchmark price of the DIN adjusted for the cumulative change in the Consumer Price Index (CPI) from the benchmark period to the pricing period under review (CPI-adjusted price). Schedule 4 provides detailed definitions and examples of the PMPRB's CPI-adjustment methodology.

9.2 Regardless of the above, and in addition to the Guidelines applicable to all patented drug products detailed in Section 7, one-year price increases in the current pricing period may not exceed 1.5 times the forecast change in the annual CPI. In periods of high inflation (over 10%), the limit will be five percentage points more than the forecast change in the CPI.

36. Board Staff reviewed the price of Zemplar, as an existing drug product, for the period January 2000 to December 2000, and for each subsequent year, by applying the Board's CPI-Adjustment Methodology, in accordance with the Excessive Price Guidelines.

37. Upon review, it was determined that the prices of Zemplar in Canada, during the period January 2000 to December 2006 continued to exceed the MNE prices: (Attachment 7)

Other Factors

38. Subsection 85(1) (e) of the Act requires the Board to take into consideration such other factors, as may be specified in any regulations made for the purposes of this subsection. There are currently no such regulations.

Conclusion

39. On October 19, 2006, Board Staff informed Abbott Laboratories that its investigation revealed that the price of Zemplar exceeded the Excessive Price Guidelines since it was introduced in Canada in January 1999. (Attachment 10) Furthermore, the price of Zemplar has since continued to exceed the MNE price.

40. Board Staff respectfully submits that, when considering the applicable factors in subsection 85(1) of the Act, there are grounds for the Board to conclude that, pursuant to section 83 of the Act, Abbott Laboratories is selling or has sold the medicine known as Zemplar in any market in Canada at prices which are or were excessive.

Order Requested

41. Board Staff seeks the issuance of an Order as against Abbott Laboratories, the terms of which would be as follows:

a) The MNE prices of Zemplar in Canada for the period January 1, 1999 to December 31, 2006, inclusive, shall be as follows:

b) The MNE prices of Zemplar in Canada in future years shall be calculated in accordance with the Guidelines;

c) In accordance with subsection 83(1) of the Act, Abbott Laboratories shall cause the maximum price at which it sells Zemplar in Canada to be reduced to the MNE price effective on or before 30 days from the date of the Board's Order;

d) In accordance with subsection 83(2) of the Act, Abbott Laboratories shall offset the amount of excess revenues estimated to have been derived by Abbott Laboratories from the sale of Zemplar at excess prices from January 1, 1999 until the date on which the price reductions referred to in paragraph c) above comes into effect:

i. With respect to the period from January 1, 1999 to December 31, 2006, Abbott Laboratories shall pay to Her Majesty in right of Canada, within 30 days of the date of the Board's Order, an amount equal to the amount set out in Attachment 7; and

ii. With respect to the period from January 1, 2007, to the date on which the price reduction referred to in paragraph c) come into effect, Abbott Laboratories shall pay to Her Majesty in right of Canada, a further amount equal to the amount of the excess revenues estimated by the Board to have been derived by Abbott Laboratories from the sale of Zemplar at excessive prices and make the payment within 30 days of receipt of a notification from the Board of its estimate of excess revenues based on the information filed in response to paragraph e) below.

e) Abbott Laboratories shall, within 30 days of the date of the Board's Order:

(i) Notify federal/provincial/territorial ministers of health or their representatives and all customers of the price decrease as required by the Board's Order (a copy of which shall be included in such notifications) and the effective date of such a price decrease;

(ii) Submit copies of the above-noted notifications and any other notice to the Board; and

(iii) Provide to the Board information concerning the quantity of Zemplar sold and either the average price per package or the net revenue from sales of Zemplar in Canada, in the same form as required by subsection 4(1) of the Regulations for the period January 1, 2007 to the date on which the price reductions referred to in paragraph c) come into effect.

Other

42. Board Staff reserves the right to make such other allegations and submissions and introduce other additional documents as Board Staff may advise and the Board may permit.

43. Pursuant to section 86 of the Act, a hearing shall be held in public unless the Board orders otherwise. Board Staff submits that any hearing conducted by the Board into the price of Abbott Laboratories should be held in public and, subject to the orders of the Board, all information and documents filed should form part of the public record.

Dated at Ottawa this 27th day of June 2007.

Borden Ladner Gervais, LLP
The Chambers
Suite 1100, 100 Queen Street
Ottawa, Ontario K1P 1J9

Tel: (613) 787-3521
Fax: (613) 230-8842

Guy Pratte
E-mail: gpratte@blgcanada.com

Nadia Effendi
E-mail:neffendi@blgcanada.com

List of Attachments