Regulations Amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements): SOR/2020-126

Canada Gazette, Part II, Volume 154, Number 12

Registration

SOR/2020-126 June 1, 2020

PATENT ACT

P.C. 2020-413 May 30, 2020

Her Excellency the Governor General in Council, on the recommendation of the Minister of Health, pursuant to subsection 101(1) footnote a of the Patent Act footnote b, makes the annexed Regulations Amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements).

Regulations Amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements)

Amendments

1 Section 1 of the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) footnote 1 is amended by replacing the section 2.1 that it enacts with the following:

2.1 Sections 4.1 to 4.4 do not apply to any medicine for which a drug identification number has been assigned under the Food and Drug Regulations before August 21, 2019.

2 (1) Section 4 of the Regulations is amended by replacing the subsection 4.1(4) that it enacts with the following:

(4) Despite subsection (3), in the case of a medicine that is offered for sale in Canada before January 1, 2021, an analysis shall be provided

(2) Section 4 of the Regulations is amended by replacing the subsection 4.2(4) that it enacts with the following:

(4) Despite subsection (3), in the case of a medicine that is offered for sale in Canada before January 1, 2021, the most recent version of the estimated maximum use of the medicine shall be provided

(3) Section 4 of the Regulations is amended by replacing the portion of section 4.4 before paragraph (a) that it enacts with the following:

4.4 For the purposes of paragraph 85(1)(e) of the Act, the other factors that the Board shall take into consideration to determine whether a medicine that is sold in any market in Canada after December 31, 2020 is being or has been sold at an excessive price are the following:

3 Section 7 of the Regulations is replaced by the following:

7 These Regulations come into force on January 1, 2021.

Coming into Force

4 These Regulations come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

On August 21, 2019, the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) [Amending Regulations] were published in the Canada Gazette, Part II. The Amending Regulations, which are set to come into force on July 1, 2020, provide the Patented Medicine Prices Review Board (PMPRB) with the additional price regulatory factors of pharmacoeconomic value, market size and the gross domestic product (GDP) and GDP per capita in Canada. The Amending Regulations also change the schedule of countries for which patentees are to report price information to the PMPRB. They also modify the definition of domestic price and sales information that patentees are to report, which must now be adjusted for any discounts or rebates to third parties.

The information that is to be provided in relation to the new factors is primarily given within 30 days of the coming into force of the Amending Regulations, or within 30 days of the medicine first being sold. Information related to the schedule of countries and domestic price and sales information must be reported every six months, for as long as the medicine is under the PMPRB’s jurisdiction. The amended schedule of countries and adjusted price and sales definition are changes to existing reporting obligations.

The Amending Regulations would introduce new reporting obligations at a time where there is an increased demand on the pharmaceutical industry in Canada to help combat COVID-19. This industry is also facing increasing pressure to monitor and manage the supply chain of medicines in Canada during this pandemic. To support the Government and industry’s focus on COVID-19, the Regulations Amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) [the Regulations]delay the coming into force of the Amending Regulations by six months.

Background

Overview of the PMPRB

The PMPRB was created in 1987 as the consumer protection “pillar” of a major set of reforms to the Patent Act (the Act) that significantly strengthened Canada’s patent protection for medicines. The regulatory mandate of the PMPRB is to protect consumers against excessive prices of patented medicines. The PMPRB also has a mandate to report on medicine prices, sales and research and development (R&D).

The PMPRB’s mandate and jurisdiction are established under sections 79 to 103 of the Act. The Minister of Health is named as the “Minister” for these sections of the Act. Among other things, the Act identifies the factors that are to be considered by the PMPRB in determining whether the price of a patented medicine is excessive, the authority to collect information from patentees and the remedial measures that may be taken by the PMPRB to resolve excessive pricing concerns.

The corresponding Patented Medicines Regulations define the specific information that patentees are to report to the PMPRB and the timeframes in which that information is to be provided. This includes baseline information such as the identity of the medicine and its associated patent number and information related to the price and sales of the medicine.

Amendments to the Patented Medicines Regulations

In August 2019, after more than two years of stakeholder consultation, the Government published the Amending Regulations in the Canada Gazette, Part II. These represented the first substantive update of the PMPRB’s regulatory framework in more than 20 years, and provided the Board with new price regulatory factors and information to protect consumers against excessive prices of patented medicines.

There were three elements to the Amending Regulations:

1) New additional price regulatory factors

2) An updated schedule of comparator countries

3) Changes in reporting requirements

The Amending Regulations also exempted all medicines that obtained a Drug Identification Number (DIN) in Canada prior to August 21, 2019, from the new price regulatory factors and all reporting obligations that are associated with those factors. This was to provide a degree of continuity for existing medicines. Medicines sold in Canada prior to August 21, 2019, but that that did not obtain a DIN by that date, are not exempt.

The Amending Regulations have a coming-into-force date of July 1, 2020, which was chosen to give patentees enough time to make any necessary adjustments to comply with the new regulatory regime. This delay in the coming into force was also meant to provide the PMPRB additional time to complete its consultation on new Guidelines to operationalize the amendments.

PMPRB Guidelines consultation

To implement the Amending Regulations, the PMPRB launched associated stakeholder consultations on new draft Guidelines on November 21, 2019. The PMPRB is authorized to make non-binding Guidelines under section 96 of the Act, subject to consultation with relevant stakeholders. The purpose of the Guidelines is to ensure that patentees are aware of the general policies and procedures undertaken by PMPRB staff to identify patented medicines that appear to be priced excessively. The new draft Guidelines largely focus on the operationalization of the Amending Regulations.

The COVID-19 pandemic and related public health measures have affected the ability of the PMPRB and stakeholders to proceed with the Guidelines consultation process as planned. This included the need to cancel a public policy forum that was scheduled to occur in March, which would have given stakeholders an additional in-person opportunity to provide feedback on the draft Guidelines. Many stakeholders have since expressed concerns regarding their ability to engage in the Guidelines consultation process given disruptions caused by COVID-19.

Objective

The objective of the Regulations is to delay the coming into force of the Amending Regulations until January 1, 2021. This delay would minimize the imposition of new administrative burden on industry as patented drug manufacturers face increased demands related to supply chains and shortages of existing products and, potentially, new treatments and vaccines in response to COVID-19. A delay would also provide stakeholders a longer period in which to provide feedback to the PMPRB’s Guidelines consultation process, which has been impacted by the COVID-19 pandemic.

Description

The Regulations would delay the July 1, 2020, coming into force of the Amending Regulations to January 1, 2021. This aligns with the beginning of the PMPRB first reporting period of 2021 and would allow the patented drug manufacturers, currently impacted by the COVID-19 response, additional time to make any necessary adjustments to comply with the new regulatory regime.

This proposal would also consequentially update some dates in the Amending Regulations themselves to ensure that deadlines to submit new reporting information remain consistent with the new coming-into-force date. Specifically, the deadlines for submitting cost-utility analyses and market-size information have been updated to reflect the new coming-into-force date. Similarly, changes to the estimated market-size information were also made to ensure that this information only captures up to three years of information preceding the new coming-into-force date. Finally, amendments were made to ensure that the new factors could not apply to sales made before the new coming-into-force date. In all instances, these changes were necessary to maintain the original policy intent behind the Amending Regulations.

The Regulations also make it explicit that the cut-off date to be exempt from the new factors and associated reporting obligation is August 21, 2019. footnote 2 These amendments do not change the original date to qualify for the exemption, as the policy intent is to lower any potential administrative burden on patented drug manufacturers over the next few months as the industry focuses on COVID-19 response. This does not impact the original policy intent of the cut-off date, which was to provide a degree continuity for medicines already on the market prior to the publication of the Amending Regulations.

Coming into force

The Regulations come into force on the day they are registered.

Regulatory development

Consultation summary

Industry stakeholders have already requested a delay of the coming into force of the Amending Regulations by six months, citing the pressing COVID-19–related challenges that they are experiencing. Innovative Medicines Canada, the largest industry association representing companies impacted by the Amending Regulations, wrote a letter to the Minister of Health in April 2020 to request that the implementation date for the amendments to the Patented Medicines Regulations be delayed to at least January 1, 2021.

Likewise, on March 23, 2020, five of Canada’s largest patient group organizations wrote the Minister of Health “to urgently request, in light of the COVID-19 pandemic health crisis, that [the Government] pause implementation of changes to the price control regulations of the Patented Medicines Prices Review Board (PMPRB) set to come into force on July 1, 2020,” arguing it to be “necessary to allow for a singular focus on COVID-19 countermeasures and to continue further review and consultations on the PMPRB implementation.”

For its part, the PMPRB has expressed support to Health Canada for delaying the coming into force of the Amending Regulations, noting that COVID-19 has meant that many of its stakeholders are unable to turn their full attention to the final phase of the consultation process and would thus benefit from a longer period in which to provide their feedback.

Key stakeholders were notified of the Department’s consideration of making these changes through proactive outreach on a bilateral basis. Furthermore, a letter notifying of the Department’s consideration to delay the coming into force will be sent to all interested stakeholders who participated in the consultation process leading to the development of the Amending Regulations.

Broader consultations were not possible given the timeliness considerations associated with bringing the Regulations into force in advance of July 1, 2020.

Prepublication in the Canada Gazette, Part I

These Regulations were not prepublished in the Canada Gazette, Part I, as these amendments were neither necessary nor anticipated prior to the COVID-19 pandemic and there is now insufficient time to seek prepublication before the Amending Regulations would otherwise come into force on July 1, 2020.

Modern treaty obligations and Indigenous engagement and consultation

There are no implications on the Government’s obligations in relation to rights protected by section 35 of the Constitution Act, 1982, modern treaties or international human rights obligations.

Instrument choice

Regulatory delay of the coming into force provides the regulator and regulated parties and consumers with the highest level of predictability and certainty.

A non-regulatory alternative, such as enforcement discretion by the PMPRB, would not be sufficient to support the policy objective, since patentees could still face administrative burden to fulfill the new information reporting obligations. Delaying the coming into force provides greater certainty to the regulated industry as it is legally binding rather than discretionary. This is particularly material in this case given that the entity that enforces the regulations (i.e. the PMPRB) is independent from the governmental organization that sponsors amendments to the Patented Medicines Regulations (i.e. Health Canada).

Regulatory analysis

Benefits and costs

The main anticipated benefit of the Regulations is to allow drug manufacturers and health system partners to remain focused on responding to COVID-19 and allow stakeholders enough time to respond to and be informed on new Guidelines currently being developed by the PMPRB.

This extension will result in a small possibility of higher cost for Canadian payers.

It was originally estimated that payers would save Can$220 million from lower patented medicine spending in the first year of the Amending Regulations coming into force. Delaying the coming into force by six months may impact some of these savings, but Health Canada anticipates that most of these savings will continue to occur as originally estimated. As such, it is expected that the resulting increased costs these Regulations would impose on consumers will be low. There are several reasons for this:

1) Patentees are presumed to anticipate their non-excessive price in Canada and price accordingly

Once a manufacturer decides on a price at launch, there are several external factors (e.g. the existence of external and therapeutic price referencing, confidential product listing agreements [PLAs], provincial price regulations, and generic pricing schemes) that discourage frequent changes to that price. Thus, once a medicine is launched, and once payers and manufacturers agree on a price, there is a strong impetus to maintain that price. As such, it is anticipated that patentees will continue to seek the optimal price of the medicine for the length of its patent, knowing that external factors might create challenges in changing that price in the future. As such, a six-month delay in the coming into force of the Amending Regulations is unlikely to alter the overall pricing strategies of patentees, whose pricing strategies tend to focus on a 10+ year time horizon.

2) The Amending Regulations may already impact payer negotiations

Patentees and public payers are already aware that medicines that obtained a DIN after August 21, 2019, will be subject to the new price regulatory factors, once the Amending Regulations come into force. It is anticipated that both parties will possess this knowledge when negotiating long-term PLAs for any new medicines. Delaying the coming into force by six months in this case is unlikely to have much of an impact on the negotiated prices of new medicines as potentially lower future price ceilings are already being absorbed and accounted for in the pricing and listing decisions of new medicines.

3) The Regulations do not affect which medicines are subject to the new price regulatory factors

The Regulations do not alter the original exemption to the new factors: all medicines that did not obtain a DIN prior to August 21, 2019, continue to be subject to the new price regulatory factors, once these come into force. A delay in the coming into force does not affect whether a medicine will be impacted, and that fact is anticipated to inform pricing and listing decisions.

Small business lens

The small business lens does not apply to the Regulations, as no companies that sell patented medicines in Canada satisfy the small business definition. In general, patented medicines are sold by large multinational enterprises or their subsidiaries.

One-for-one rule

While the proposal delays the administrative burden by six months, patentees will still be required to submit the same amount of information under both scenarios. As such, a six-month delay is expected to yield a marginal decrease in administrative burden to industry strictly related to timing of administrative requirements rather than the actual activities themselves.

The original amendment had estimated an increase in administrative burden costs of $3,062 as calculated according to the methodology ascribed in the Red Tape Reduction Regulations. Adjusting for the extended coming-into-force date changes this to an estimate of $2,758, a reduction of $304.

Table 1: One-for-one rule (administrative costs)

Current initiative is an:

Out

  

Values to report in Regulatory Impact Analysis Statement:

Unit of measure

Annualized administrative costs (constant 2012 $)

$304

Constant 2012 dollars, present value base year 2012

Annualized administrative costs per business (2012 $)

$4

Constant 2012 dollars, present value base year 2012

Regulatory cooperation and alignment

These Regulations align with Canada’s response efforts during the COVID-19 pandemic and does not further impact national or international regulatory cooperation efforts.

Strategic environmental assessment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for these Regulations.

Implementation, compliance and enforcement, and service standards

The Regulations delay the coming into force of the Amending Regulations. The PMPRB is responsible for implementation, enforcement and service standards related to the application of the Patented Medicines Regulations.

Contact

Lawrence Cheung
Acting Executive Director
Office of Pharmaceuticals Management Strategies
Strategic Policy Branch
Health Canada
Brooke Claxton Building, 10th Floor
70 Colombine Driveway, Tunney’s Pasture
Ottawa, Ontario
K1A 0K9
Telephone: 613‑941‑2497
Email: PMR-Consultations-RMB@hc-sc.gc.ca