CPI-Based Price-Adjustment Factors for 2014

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 Compendium also sets 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 in its NEWSletter.

The following table provides CPI-adjustment factors for 2014. These factors were based on forecasts of annual CPI-inflation rates (provided by Finance Canada) of 1.3% and 2.0% for 2013 and 2014, respectively, as well as the actual 2012 CPI-inflation rate of 1.5%. (See Government of Canada, Budget 2013: Jobs, Growth and Long-Term Prosperity, March 21, 2013, Table 2.1.)

These figures imply (1) a maximum allowable cumulative price increase between 2011 and 2014 of 4.9% for patented drug products with Canadian sales in 2011 (that is, products whose “benchmark year” is 2011); (2) a maximum allowable cumulative price increase between 2012 and 2014 of 3.3% for products whose first Canadian sales occurred in 2012; and (3) a maximum allowable cumulative price increase between 2013 and 2014 of 2.0% for products whose first Canadian sales occurred in 2013.

In addition, the forecast inflation rate of 2.0% for 2014 implies a year-over-year price increase cap (applicable to all drug products, regardless of benchmark year) of 3.0% (= 1.5 x 2.0%) for 2014.