IN THE MATTER OF the Patent Act R.S.C. 1985, c. P-4, as amended AND IN THE MATTER OF Sanofi-Synthelabo Canada Inc. (“Sanofi”) and the medicine “Fasturtec”

SUBMISSION OF BOARD STAFF

A. Purpose of this Submission

1. The purpose of this Submission is to provide the Board with the rationale behind the attached proposed Voluntary Compliance Undertaking (VCU) and its terms and provisions.

B. Grounds for Approving the draft VCU

2. Board Staff recommends that it is appropriate for the Board to approve the VCU for the following reasons:

a. It provides for a reduction in the price of Fasturtec to be within the Guidelines effective immediately and ensures that the price of Fasturtec will remain within the Guidelines for 2004 and while it is under the Board's jurisdiction, which is at least until 2015.

b. It benefits Canadian consumers and the healthcare system by reducing the price of Fasturtec to less than half the current average selling price and ensures that no customer in Canada shall pay a price higher than the maximum non-excessive (MNE) price in the future.

c. It respects the policies of the Board by ensuring that excess revenues received by Sanofi during the period May 21, 2002 to December 31, 2003 will be offset; in this case the offset will be achieved by payments in the form of refunds to all the customers (i.e., hospitals) that purchased Fasturtec during that period.

d. It resolves this matter on a timely basis and in a cost-effective manner. The alternative of conducting a hearing under section 83 could involve costly litigation and would delay the price reduction.

e. It reflects a VCU based on meaningful and constructive consultation and discussion between Board Staff and Sanofi.

C. Background details of proposed VCU

3. Sanofi will lower the average selling price of Fasturtec from $295 per vial to $124.7854 per vial, which is the MNE price for 2004.

This price is calculated using the median international price established for the introductory period May-December 2002 and applying the CPI factors for 2003 and 2004.

The above result occurs in the course of the application of the Guidelines. The MNE price in the introductory period establishes the benchmark price. Following this period, a patentee's average transaction price would be presumed to be excessive if it exceeds the benchmark price adjusted for changes in the Consumer Price Index.

4. This VCU reflects a negotiated solution based on open dialogue and frank discussion on behalf of both parties and incorporates elements that are consistent with the Guidelines:

• The MNE price has been established based on the median international price at the time of introduction of Fasturtec;
• Sanofi has undertaken to ensure that the price of Fasturtec will remain within the Guidelines while it is under the Board's jurisdiction.

5. Sanofi will offset excess revenues it may have received from the sale of Fasturtec by making payments to each customer that purchased the product at a price in excess of the MNE price and will provide the Board with the documentation to support the calculation of these payments. Fasturtec has been sold exclusively to hospitals and Sanofi has stated that there are 28 hospitals that have purchased the product.

6. The list price of Fasturtec is currently $295 per vial. Sanofi has advised Board Staff that it intends to maintain a list price per vial that is substantially higher than the MNE price which, from Board Staff's perspective, raises a novel and important issue: namely, the relevance of the list price in the context of the application of the Guidelines. In the present case, Sanofi has undertaken that no customer in Canada shall pay a price in excess of the MNE price. Board Staff is of the view that it is in the public interest for the Board to accept the terms of this VCU, particularly when taking into account that this product is sold only to hospitals. However, given the importance of the issue raised, Board Staff recommends that the matter of manufacturers setting a published list price which is substantially higher than the net price they charge be dealt with separately through a policy review.

7. The VCU is consistent with the Guidelines and with the provisions of the Patent Act. Board Staff submits that it is in the public interest for the Board to approve this VCU.

Dated at Ottawa this 25th day of June 2004.