IN THE MATTER OF the Patent Act, R.S.C. 1985, c. P-4, as amended
AND IN THE MATTER OF ratiopharm Inc., (the “Respondent”) and the medicine “ratio-Salbutamol HFA”

STATEMENT OF ALLEGATIONS OF BOARD STAFF

INTRODUCTION

1. This Statement of Allegations results from an investigation by Board Staff into the price of ratio-Salbutamol HFA (“ratio-Salbutamol”) (DIN 02244914), a patented medicine sold in Canada by ratiopharm Inc. (“ratiopharm”).

THE MEDICINE

2. ratio-Salbutamol is a new DIN of an existing dosage form of an existing bronchodilator medicine (salbutamol sulphate) which relieves chest tightness and wheezing caused by spasms or narrowing in the small air passages of the lungs. (Attachment 1)

3. Health Canada issued a Notice of Compliance (“NOC”) to Altimed Pharma Inc. (“Altimed”), a division of Technilab Pharma Inc.(“Technilab”), for Alti-Salbutamol HFA, DIN 02244914, on October 26, 2001. Board Staff is not aware that Alti-Salbutamol HFA was sold in Canada. In 2002, ratiopharm acquired Technilab. Following this Manufacturer name change Health Canada issued an NOC to ratiopharm for ratio-Salbutamol under the same DIN on July 16, 2002. (Attachment 2)

4. ratio-Salbutamol is considered an “authorized generic” of a drug product which was originally manufactured, marketed and sold by GlaxoSmithKline under the brand name Ventolin HFA.

THE PATENTS

5. Canadian Patents Nos. 2,125,667 (“the ‘667 patent”) and 2,125,665 (“the ‘665 patent”) pertain to ratio-Salbutamol. (Attachment 3) These patents were granted to Glaxo Group Ltd., UK on June 13, 2000 and June 12, 2001 respectively, and will both expire on December 4, 2012.

6. ratiopharm is, for the purposes of the Patented Medicine Prices Review Board (“PMPRB”), considered the Canadian patentee.

REGULATORY FILINGS

7. ratiopharm failed to report its price and sales information, for ratio-Salbutamol, for July 1, 2002 to December 31, 2005, within the specified time set out in the Patented Medicines Regulations, 1994 (the “Regulations”). However, on September 29, 2006, ratiopharm filed its price and sales information for ratio-Salbutamol for all periods, and has since continued to file its price and sales information, in accordance with the Regulations.

APPLICABLE GUIDELINES

Category

8. 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.

9. Based on the above Scientific Review Procedures, Board Staff categorized ratio-Salbutamol as a Category 1 new drug product as it represents a new DIN of an existing dosage form of an existing medicine that is comparable to the existing dosage form.

The Maximum Non-Excessive Price for Ratio-Salbutamol at Introduction

10. Chapter 1 – Excessive Price Guidelines (“the Guidelines”) sets out the tests applicable to the introductory price of category 1 new drug products as follows:

8.3 Category 1 New Drug Products

In addition to the Guideline applicable to all patented drug products detailed in Section 7, the introductory price of a Category 1 new drug product will be presumed to be excessive if it does not bear a reasonable relationship (“RR”) to the average price of other DINs of the same medicine in the same or comparable dosage forms (Schedule 1).

When the above methodology is not considered adequate or appropriate, Board Staff may conduct a Therapeutic Class Comparison Test (Schedule 2) to determine if the introductory price of the new DIN is excessive. This could be relevant if, for example, the new DIN has a therapeutic use or dosage regimen that differs materially from the other DINs of the same or comparable dosage forms of the medicine.

While the introductory price of a Category 1 DIN will normally be compared against DINs of the same patentee, Board Staff may consider it appropriate in some instances to include DINs of other patentees. (For example, another voluntary licensee of the same patent as that pertaining to the new drug product, or a patentee marketing a drug product containing the same active ingredient as the new drug product but for which a different patent pertains.)

11. As per subsection 8.3 of the Guidelines, Board Staff conducted an RR Test comparing the price of ratio-Salbutamol to other salbutamol sulphate products being sold in Canada during its introductory period. The results of the RR test indicated that the introductory price of ratio-Salbutamol of per 0.1 mg/dose (“per dose”) was within the Guidelines for the introductory period July 2002 to December 2002 and established the drug's benchmark price for review in subsequent reporting periods. (Attachment 4)

12. The Guidelines also state that the International Price Comparison (IPC) Test for new and existing drug products will be applied 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.

13. Since ratio-Salbutamol is an authorized generic, Board Staff reviewed the publicly available international prices of Ventolin HFA when applying the IPC Test. The results indicated that, during the introductory period, ratio-Salbutamol did not exceed the highest available ex-factory price of Ventolin HFA sold in the foreign countries listed in the Regulations.

The Maximum Non-Excessive Price of an Existing Drug Product

14. The Guidelines also set out the appropriate price tests for an existing drug product as follows:

9.1 In addition to the Guideline 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 Guideline 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.

15. Board Staff reviewed the price of ratio-Salbutamol by applying the PMPRB's CPI-adjustment methodology as set out in the Guidelines. The price of ratio-Salbutamol was found to be outside the Guidelines commencing January 1, 2004 to December 31, 2004 and has remained outside the Guidelines for all subsequent periods:

* Benchmark price as ATP did not exceed MNE

16. Board Staff further reviewed the publicly available international prices of Ventolin HFA as part of the existing drug product IPC Test. The results indicated that ratio-Salbutamol did not have the highest publicly available ex-factory price when compared to the international prices of Ventolin HFA. (Attachment 5)

17. According to publicly available information, ratiopharm was selling ratio-Salbutamol at a price of $4.64 per inhaler ($0.0232 per dose) in 2003 and 2004 and at a price of $7.73 per inhaler ($0.0386 per dose) from 2005 to 2007. (Attachment 6)

18. By letter dated March 9, 2007, Board Staff advised ratiopharm that it had commenced an investigation into the price of ratio-Salbutamol on the basis that, as of 2004 the price of ratio-Salbutamol appeared to exceed the Guidelines. (Attachment 4)

19. Board Staff has since completed its investigation and the price of ratio-Salbutamol continues to be excessive.

Excessive Pricing

20. Subsections

83(1) and 83(2) of the Patent Act state that: 83. (1) Where the Board finds that a patentee of an invention pertaining to a medicine is selling the medicine in any market in Canada at a price that, in the Board's opinion, is excessive, the Board may, by order, direct the patentee to cause the maximum price at which the patentee sells the medicine in that market to be reduced to such level as the Board considers not to be excessive and as is specified in the order.

(2) Subject to subsection (4), where the Board finds that a patentee of an invention pertaining to a medicine has, while a patentee, sold the medicine in any market in Canada at a price that, in the Board's opinion, was excessive, the Board may, by order, direct the patentee to do any one or more of the following things as will, in the Board's opinion, offset the amount of the excess revenues estimated by it to have been derived by the patentee from the sale of the medicine at an excessive price:

(a) reduce the price at which the patentee sells the medicine in any market in Canada, to such extent and for such period as is specified in the order;

(b) reduce the price at which the patentee sells one other medicine to which a patented invention of the patentee pertains in any market in Canada, to such extent and for such period as is specified in the order; or

(c) pay to Her Majesty in right of Canada an amount specified in the order.

21. It is the position of Board Staff that ratiopharm has been selling ratio-Salbutamol in Canada since 2004 at a price per dose which exceeded the MNE price calculated in accordance with the PMPRB's CPI-Adjustment Methodology. To date, ratiopharm has failed and/or refused to submit a Voluntary Compliance Undertaking to adjust the price of ratio-Salbutamol.

22. Therefore, it is respectfully submitted that there are grounds for the Board to conclude pursuant to section 83 of the Patent Act that ratiopharm is selling or has sold the medicine known as ratio-Salbutamol in any market in Canada at a price which is or was excessive.

OTHER

23. 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.

24. Pursuant to section 86 of the Patent 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 ratio-Salbutamol 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.

ORDER REQUESTED

25. Board Staff seeks the issuance of an Order pursuant to section 83 of the Patent Act as against ratiopharm, the terms of which would be as follows:

a) The maximum non-excessive price of ratio-Salbutamol in Canada for the period January 1, 2004 to December 31, 2007 inclusive shall be as follows:

b) The maximum non-excessive price of ratio-Salbutamol in Canada in future periods shall be calculated in accordance with the Guidelines.

c) In accordance with subsection 83(1) of the Patent Act, ratiopharm shall cause the maximum price at which it sells ratio-Salbutamol in Canada to be reduced to the maximum non-excessive price effective on or before 30 days from the date of the Board's Order.

d) In accordance with subsection 83(2) of the Patent Act, ratiopharm shall offset the amount of excess revenues estimated to have been derived by ratiopharm from the sale of ratio-Salbutamol at an excessive price from January 1, 2004 until the date on which the price reduction referred to in paragraph c) above comes into effect:

i) With respect to the period from January 1, 2004 to December 31, 2007, ratiopharm 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, 2008 to the date on which the price reduction referred to in paragraph c) comes into effect, ratiopharm 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 ratiopharm from the sale of ratio-Salbutamol at an excessive price 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) ratiopharm 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 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 ratio-Salbutamol sold and either the average price per inhaler or the net revenue from sales of ratio-Salbutamol in Canada, in the same form as required by subsection 4(1) of the Regulations for the period January 1, 2008 to the date on which the price reduction referred to in paragraph c) comes into effect.

Dated at Ottawa this 9th day of July, 2008.

Fasken Martineau DuMoulin LLP
Suite 1300, 55 Metcalfe Street
Ottawa, Ontario, K1P 6L5

Tel: (613) 236-3882
Fax: (613) 230-6423

David Wilson E-mail: dwilson@fasken.com
Anne Tardiff E-mail: atardif@fasken.com

LIST OF ATTACHMENTS

Attachment 1 ratio-Salbutamol Product Insert

Attachment 2 Notice of Compliance (NOC) for Alti-Salbutamol October 26, 2001 and NOC for ratio-Salbutamol July 16, 2002

Attachment 3 Canadian Patents Nos. 2,125, 665 and 2,125,667

Attachment 4 Letter dated March 9, 2007 from Board Staff to ratiopharm

Attachment 5 Publicly Available International Prices of Ventolin HFA for the period 2002-2007

Attachment 6 Publicly Available Price Listings (2003 -2007) for ratio-Salbutamol from Association Québécoise des Pharmaciens Propriétaires

Attachment 7 ratio-Salbutamol – Calculation of Excess Revenues