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C. 12 Review of Prices of Existing Patented Drug Products
C.12.3 In the event that the actual change in the CPI is less than the forecast CPI and an apparent excessive price arises solely due to the patentee's reliance on the forecast CPI, the price will not be presumed to be excessive. The patentee is expected to comply with the actual CPI in all subsequent reporting periods, and the application of the CPI-Adjustment Methodology for the forecasted year will be based on the actual change in the CPI for that year. The result for patentees that took price increases based on the forecast inflation will be that the actual change in the CPI for the forecasted year will be used to calculate the next year's National and Market-Specific Non-Excessive Average Prices.
Schedule 9 – CPI-Adjustment Methodology
1.2 The CPI-Adjustment Methodology involves the following calculations:
Adjusting the benchmark prices of the drug product for the cumulative change in the CPI from the benchmark year to the year under review (CPI-Adjusted Price); and
Applying a cap on the maximum price increase in any one year, equal to 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.
2.5 Base CPI
Calculated as the annual average of the monthly increases in the CPI, as published by Statistics Canada, for the benchmark year. The base CPI figures are calculated annually by the PMPRB.
2.6 Forecast CPI:
The forecast CPI for the forecast year is based on the previous year's actual CPI published by Statistics Canada adjusted for the latest annual inflation projections by the federal Department of Finance. The forecast CPI is also published annually in the PMPRB's April NEWSletter.
2.7 CPI-Adjustment Factor:
The forecast CPI divided by the base CPI, rounded to three decimal places.
2.9 Cap
In any year, the price increase of a patented drug product may not exceed 1.5 times the forecast change in the annual CPI. In times of high inflation (greater than 10%), the limit will be 5 percentage points more than the forecast change in the CPI.
2.10 Example of the application of the CPI-Adjustment Methodology at the national level:
Forecast Year: Jan – Dec 2009
First sale: 1998
Benchmark Year: 2006
National Average Transaction Price in Benchmark Year: $10.00
National Average Transaction Price in 2008: $10.39
CPI-adjusted price: 1.065 (CPI-adjustment factor for 2006) x $10.00 = $10.65
Cap: 1.030 (1.5 x Forecast CPI for 2009 of 2.0%) x $10.39 = $10.70
The 2009 National Non-Excessive Average Price for the patented drug product is $10.65.
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C. 12 Review of Prices of Existing Patented Drug Products
C.12.3 In the event that the actual change in the CPI is less than the forecast CPI and an apparent excessive price arises solely due to the patentee's reliance on the forecast CPI, the price will not be presumed to be excessive. The patentee is expected to comply with the actual CPI in all subsequent reporting periods, and the application of the CPI-Adjustment Methodology for the forecasted year will be based on the actual change in the CPI for that year. The result for patentees that took price increases based on the forecast inflation will be that the actual change in the CPI for the forecasted year will be used to calculate the next year's National and Market-Specific Non-Excessive Average Prices.
Schedule 9 – CPI-Adjustment Methodology
1.2 The CPI-Adjustment Methodology involves the following calculations:
Adjusting the benchmark prices of the drug product for the cumulative change in the CPI from the benchmark year to the year under review (CPI-Adjusted Price); and
Applying a cap on the maximum price increase in any one year, equal to 1.5 times the change in the latest actual lagged CPI. In periods of high inflation (over 10%), the limit will be five percentage points more than the latest actual lagged change in the CPI.
2.5 Base CPI
Calculated as the annual average of the monthly increases in the CPI, as published by Statistics Canada, two years previous to the benchmark year. The base CPI figures are calculated annually by the PMPRB. For example, a 2010 base CPI will be used for benchmark year of 2012.
2.6 Actual Lagged CPI:
The actual lagged CPI used for the forecast year is based on the latest actual CPI published by Statistics Canada adjusted for the latest annual actual inflation also published by Statistics Canada. The actual lagged CPI is also published annually in the PMPRB's January NEWSletter. There is a lag between the year of the actual CPI used and the year it is applied to. For example, the actual lagged CPI used for the forecast year of 2015 is the actual 2013 CPI published by Statistics Canada in January 2014.
2.7 CPI-Adjustment Factor
The actual lagged CPI divided by the base CPI, rounded to three decimal places.
2.9 Cap
In any year, the price increase of a patented drug product may not exceed 1.5 times the latest change in the actual lagged CPI. In times of high inflation (greater than 10%), the limit will be 5 percentage points more than the actual change in the CPI.
2.10 Example of the application of the CPI-Adjustment Methodology at the national level:
Forecast Year: Jan – Dec 2015
First sale: 1998
Benchmark Year: 2012
National Average Transaction Price in Benchmark Year: $10.0000
National Average Transaction Price in 2013: $10.3900
CPI-adjusted price: 1.054 (assuming this is the CPI-adjustment factor for 2012) x $10.0000 (National ATP in Benchmark Yr.) = $10.5400
Cap: 1.020 (1.5 x actual lagged CPI for 2013 assumed to be 1.3%) x $10.3900 = $10.5978
The 2015 National Non-Excessive Average Price for the patented drug product is the lower of the CPI-adjusted price and Cap: $10.5400.
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