CPI-Based Price-Adjustment Factors for 2013

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 April NEWSletter.

The following table provides CPI-adjustment factors for 2013. These factors were based on forecasts of annual CPI-inflation rates of 2.1 % and 2.0% for 2012 and 2013, respectively, as well as the actual 2011 CPI-inflation rate of 2.9%. CPI inflation rates are provided by Finance Canada (see Government of Canada, Budget 2012: Jobs, Growth and Long-Term Prosperity, March 29, 2012, Table 2.1).

These figures imply (1) a maximum allowable cumulative price increase between 2010 and 2013 of 7.2% for patented drug products with Canadian sales in 2010 (that is, products whose “benchmark year” is 2010); (2) a maximum allowable cumulative price increase between 2011 and 2013 of 4.1% for products whose first Canadian sales occurred in 2011; and (3) a maximum allowable cumulative price increase between 2012 and 2013 of 2.0% for products whose first Canadian sales occurred in 2012.

In addition, the forecast inflation rate of 2.0% for 2013 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 2013.