Regulations Amending the Patented Medicines Regulations and the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements): SOR/2021-116

Canada Gazette, Part II, Volume 155, Number 12

Registration
SOR/2021-116 June 1, 2021

PATENT ACT

P.C. 2021-466 June 1, 2021

His Excellency the Administrator of the Government of Canada 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 Patented Medicines Regulations and the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements).

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

Patented Medicines Regulations

1 (1) Paragraphs 3(1)(a) and (b) of the Patented Medicines Regulations footnote 1 are replaced by the following:

(2) Paragraph 3(1)(f) of the Regulations is replaced by the following:

(3) Subsection 3(1) of the Regulations is amended by adding “and” at the end of paragraph (h) and by adding the following after that paragraph:

2 (1) Paragraph 4(1)(a) of the Regulations is replaced by the following:

(2) Paragraph 4(1)(e) of the Regulations is replaced by the following:

(3) Subparagraphs 4(1)(f)(i) and (ii) of the Regulations are replaced by the following:

(4) Subsections 4(5) and (6) of the Regulations are replaced by the following:

(5) Subject to subsection (6), this section does not apply to medicine sold by a rights holder or former rights holder to a person with whom they do not deal at arm's length or to another rights holder or former rights holder.

(6) If the rights holder or former rights holder sells the medicine to a person with whom they do not deal at arm's length and who is not required to provide information under paragraph 80(1)(a) or (2)(a) of the Act, the rights holder or former rights holder shall provide the information required under paragraph (1)(f) in respect of any resale of the medicine by the person.

(5) Subsections 4(8) and (9) of the Regulations are replaced by the following:

(8) For the purposes of this section, the Income Tax Act, as that Act read on December 1, 1987, applies, with any modifications that the circumstances require, in determining whether a rights holder or former rights holder is dealing at arm's length with another person.

(9) For the purposes of this section, publicly available ex-factory price includes any price of a patented medicine or medicine protected by a certificate of supplementary protection that is agreed on by the rights holder or former rights holder and the appropriate regulatory authority of the country in which the medicine is sold by the rights holder.

3 (1) The portion of subsection 5(1) of the Regulations before paragraph (b) is replaced by the following:

5 (1) For the purposes of subsection 88(1) of the Act, information concerning the identity of any licensee in Canada of the rights holder and the revenues and research and development expenditures of the rights holder shall indicate

(2) Paragraph 5(1)(b) of the English version of the Regulations is replaced by the following:

(3) Paragraph 5(1)(c) of the Regulations is replaced by the following:

(4) The portion of paragraph 5(1)(d) of the Regulations before subparagraph (i) is replaced by the following:

(5) Subparagraphs 5(1)(d)(ii) and (iii) of the Regulations are replaced by the following:

(6) The portion of subsection 5(4) of the Regulations before paragraph (a) is replaced by the following:

(4) For the purposes of paragraph (1)(d), the rights holder shall specify

(7) Paragraph 5(4)(c) of the Regulations is replaced by the following:

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

4 Subsection 2(2) of the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) footnote 2 is amended by replacing the portion of the subsection (3.1) before paragraph (a) that it enacts with the following:

(3.1) Despite subsection (3), in each of the following cases, the information referred to in subsection (1) shall be provided within 30 days after the day on which the Board sends a request for the rights holder to provide that information:

5 (1) Subsection 3(1) of the Regulations is amended by replacing the French version of the paragraph 4(1)(e) that it enacts with the following:

(2) Subsection 3(3) of the Regulations is amended by replacing the portion of the subsection 4(3) before paragraph (a) that it enacts with the following:

(3) Despite subsection (2), in each of the following cases, the information referred to in subsection (1), for each six-month period beginning on January 1 and July 1 of each year, shall be provided within 30 days after the day on which the Board sends a request for the rights holder to provide that information and, during the two years following the request, within 30 days after the end of each six-month period:

(3) Subsection 3(4) of the Regulations is amended by replacing the paragraphs 4(4)(a) and (b) that it enacts with the following:

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

4.1 (1) For the purposes of paragraphs 80(1)(d) and 2(d) of the Act, in respect of the factor referred to in paragraph 4.4(a), the rights holder shall provide to the Board every cost-utility analysis prepared by a publicly funded Canadian organization, if published and communicated to the rights holder, for which the outcomes are expressed as the cost per quality-adjusted life year for each indication that is the subject of the analysis.

(2) The rights holder shall provide to the Board any information about the medicine that was redacted from a published analysis.

(2) Section 4 of the Regulations is amended by replacing the subsections 4.2(1) to (3) that it enacts with the following:

4.2 (1) For the purposes of paragraphs 80(1)(d) and (2)(d) of the Act, in respect of the factor referred to in paragraph 4.4(b), the rights holder shall provide to the Board the estimated maximum use of the medicine in Canada, as measured by the total quantity of the medicine in final dosage form expected to be sold.

(2) The rights holder shall provide to the Board the period of time used for the estimate of the maximum use of the medicine.

(3) The rights holder shall provide to the Board the estimated maximum use of the medicine within 30 days after the day on which the medicine is first offered for sale in Canada.

(3) Section 4 of the Regulations is amended by replacing the subsection 4.2(5) that it enacts with the following:

(5) The rights holder shall update the estimated maximum use of the medicine within 30 days after the day on which the Minister of Health issues a notice of compliance approving a new or modified therapeutic use of the medicine.

(4) Section 4 of the Regulations is amended by replacing the portion of the section 4.3 before paragraph (a) that it enacts with the following:

4.3 (1) Despite subsections 4.1(3) and (4) and 4.2(3) and (4), in each of the following cases, the information referred to in subsections 4.1(1) and (2) and 4.2(1) and (2) shall be provided within 30 days after the day on which the Board sends a request for the rights holder to provide that information:

Coming into Force

7 (1) These Regulations, except subsection 5(3), come into force on the day on which section 45 of the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act, chapter 6 of the Statutes of Canada, 2017, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

(2) Subsection 5(3) comes into force on a day to be fixed by amendment to this subsection.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The amendments to the Patented Medicines Regulations (the Regulations) are consequential to the coming into force of Patent Act (the Act) amendments that broaden the jurisdiction of the Patented Medicine Prices Review Board (PMPRB) to include medicines that are protected by Certificates of Supplementary Protection (CSP), the new and additional “patent-like” period of protection that was implemented pursuant to the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act (the CETA Implementation Act).

These amendments to the Regulations are needed to provide the PMPRB with a coherent regulatory framework by ensuring that all rights holders under its jurisdiction, including patentees and CSP holders, are subject to the same information reporting obligations. This information is used by the PMPRB to fulfill its legislative mandate to ensure that the prices of medicines within its jurisdiction are not excessive.

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 that significantly strengthened Canada's patent protection for medicines. The regulatory mandate of the PMPRB is to ensure that patentees do not charge consumers excessive prices during the period of time that they are protected by any patent in Canada. 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 Patent Act, and those sections are the responsibility of the Minister of Health. 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 Regulations set out the 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, any associated patent numbers and information related to the price and sales of the medicine.

Implementation of Canada's CSP regime

Pursuant to Canada's commitment under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) to provide an additional period of sui generis footnote 3 protection for eligible pharmaceutical products, Canada implemented a new period of “patent-like” protection, called a CSP. For an eligible medicinal ingredient or a combination of medicinal ingredients protected by an eligible patent, a CSP of up to two years may be provided following the expiration of the eligible patent. This additional period of protection is to partly compensate for time spent in research and obtaining marketing authorization. The CETA Implementation Act received royal assent on May 16, 2017, with the coming into force of the CSP regime in September 2017. This included changes to the Patent Act along with the Certificate of Supplementary Protection Regulations needed to create the CSP regime.

As part of Canada's domestic implementation of CETA, the Government of Canada committed to ensure that Canadian consumers continue to receive the same protection against excessive medicine prices during the CSP term as they do during the period of time that the medicinal ingredient or combination of medicinal ingredients are protected by a patent. Sections 45 to 58 of the CETA Implementation Act therefore also included changes to the Patent Act that extend the jurisdiction of the PMPRB to include medicines that are protected by a CSP by, for example, replacing the term “patentee” with the term “rights holder” to represent either a patentee or a holder of a CSP. Those amended sections of the Patent Act received royal assent, but were not brought into force, due to the need for accompanying changes to the Regulations that would require rights holders to report the same information to the PMPRB.

Subsection 138(5) of the CETA Implementation Act specifies that those Patent Act amendments are to be brought into force on a date that is to be fixed by the Governor in Council. Chapter 20 of the Canadian Statement on CETA Implementation further indicates that “[t]he Patent Act amendments that extend the price-review powers of the PMPRB to include medicines protected by the new CSP regime will be brought into force together with corresponding amendments to the PMPRB-related regulations.”

PMPRB modernization

On August 21, 2019, the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) [the Amending Regulations] were published in the Canada Gazette, Part II. The Amending Regulations consist of three elements that provide the PMPRB with new price regulatory factors and information to protect consumers against excessive prices of patented medicines. These elements included additional price regulatory factors of pharmacoeconomic value, market size and gross domestic product (GDP) and GDP per capita; an updated Schedule of countries for which patentees are to report price information to the PMPRB; and a modification to the definition of domestic price and sales information that patentees are to report, requiring they be adjusted for any discounts or rebates to third parties. Through these amendments to the Patented Medicine Regulations, the corresponding sections and subsections of the Amending Regulations are also being amended.

The modified definition of domestic price and sales information of the Amending Regulations was later declared invalid by the Federal Court of Canada in Innovative Medicines Canada v. Canada (Attorney General) footnote 4 in June 2020 and by the Quebec Superior Court in Merck et al vs the Attorney General of Canada footnote 5 in December 2020. The other provisions of the Amending Regulations were upheld by both the Federal Court and the Quebec Superior Court. Both rulings are subject to appeals and cross-appeals by the parties involved.

Objective

These amendments provide the PMPRB with a coherent regulatory framework by requiring holders of CSPs to report information to the PMPRB on the same terms and conditions as would be reported by patentees, allowing the PMPRB to have the information it needs to protect Canadian consumers from excessive prices for medicines protected by a CSP as it does for medicines protected by a patent.

Description

These amendments will require that holders of CSPs report information to the PMPRB on the same terms and conditions as would be reported by patentees. This is principally achieved by incorporating the terms “certificate of supplementary protection” and “rights holder” into the clauses of the Regulations and the Amending Regulations, where “rights holder” includes both patentees and holders of CSPs. These terms are in accordance with the amendments to the Patent Act which establish PMPRB jurisdiction over CSP-protected medicines.

For each reporting cycle to the PMPRB, which occurs on January 1 and July 1 of each year, all rights holders will be required to report the same price, sales, revenue and R&D information as is currently reported by patentees.

The clauses of the Regulations relating to identity information of the patentee and patent number have also been adjusted to require identity information from all rights holders. For instance, these clauses have been amended to require a holder of a CSP to submit information to the PMPRB that identifies the name and address of the rights holder, the CSP number, the date on which the CSP term begins, the date on which the CSP term ends and the number of the patent set out in the application for the CSP. The reporting of this information would be in addition to the existing reporting requirement for patentees.

These amendments neither reduce nor change the existing reporting obligations for patentees.

Coming into force

These amendments will come into force on June 30, 2021, and will amend the Regulations and the Amending Regulations as they read on that date.

The subsection of the Amending Regulations that allows for the PMPRB to collect price information that is net of third party rebates has been delayed until a future regulatory amendment fixes a coming-into-force date. This was done as this subsection was declared invalid by the Federal Court of Canada in Innovative Medicines Canada v. Canada and the Quebec Superior Court in Merck et al vs the Attorney General of Canada, which are both subject to appeals and cross-appeals by the parties involved. Therefore, the present amendments replacing the term “patentee” with “rights holder” in the corresponding subsection are being delayed accordingly.

Regulatory development

Consultation

Along with the changes to the Patent Act, these amendments fulfill a Government of Canada commitment to the domestic implementation of CETA that was the subject of significant consultation as part of the development of the CETA Implementation Act. Those consultations included provincial and territorial governments and the patented drug industry and were in relation to both Canada's adoption of a CSP regime and the accompanying extension of the PMPRB's jurisdiction to include CSP-protected medicines, along with the related reporting requirements.

Given these extensive consultations, in which no objections were raised and that no issues continue to be raised on these amendments since the CETA Implementation Act received royal assent in 2017, this regulatory proposal has been exempted from prepublication in the Canada Gazette, Part I.

Modern treaty obligations and Indigenous engagement and consultation

There are no implications to 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

These regulatory amendments are consequential to Patent Act amendments that extend the PMPRB's jurisdiction to include medicines that are protected by CSPs.

Regulatory analysis

Benefits and costs

These amendments are consequential to the Patent Act amendments that extend the PMPRB's jurisdiction to include CSP protected medicines. These amendments are needed so that all rights holders report information to the PMPRB on the same terms and conditions, whether their affiliated medicines are protected by a patent or a CSP. The benefit of these changes is to provide consistency for the Patent Act protection of pharmaceuticals in Canada, ensuring that the PMPRB is provided with the same level of information needed to protect Canadian consumers from excessive prices during the period of time that a medicine is protected by a CSP, as they would if the medicine is protected by patent. These amendments do not impact the prices of medicines, since those impacts would be associated with the application of PMPRB's legislative jurisdiction as provided for in the Patent Act.

In most cases, a medicine's CSP period of protection is anticipated to overlap with other patents on the medicine that are still in force. The presence of these other patents would already trigger the requirement to report price and revenue information to the PMPRB, thereby attenuating incremental reporting introduced through these amendments. While it is unlikely for a medicine to be protected only by a CSP without further protections from other patents, the incremental burden associated with reporting information to the PMPRB is nonetheless included as a potential cost under the One-for-one rule section.

Additionally, incremental administrative reporting burden is created by these amendments with respect to the filing of information on the identity of the CSP holder, and details of the CSP itself such as the CSP number and the date on which it takes effect and expiry dates. Anticipated costs associated with this information reporting are also included under the One-for-one rule section.

Small business lens

The small business lens does not apply, since these amendments only impact companies that sell patented medicines in Canada that also obtain a CSP. Among the patent-holding companies reporting to the PMPRB, none satisfy the small business definition. In general, patented medicines are sold by multinational enterprises or their subsidiaries.

One-for-one rule

As of March 12, 2021, a total of 64 CSPs have either been issued or a decision on issuance is pending in Canada. The earliest possible effective date for the CSP period of protection (pending decision on eligibility for issuance) is currently June 2022, and the furthest effective date begins in September 2033. Assuming that all pending CSP applications will be granted, the annualized administrative cost is $5,869, as calculated according to the methodology ascribed in the Red Tape Reduction Regulations.

For the first administrative requirement to provide price and revenue information to the PMPRB, it was assumed that this task takes 26 hours to complete, is performed twice a year (once every 6 months) by senior management, at a cost of labour of $62/hour. As discussed in the Benefits and costs section, this is expected to be a maximum cost given that most of the medicines that would have a CSP would also be covered by another patent with similar administrative requirements.

For the second administrative requirement to provide identity information to the PMPRB, this is assumed to be a one-time upfront cost that takes one hour to complete and is performed by administrative occupations at a cost of labour of $30/hour.

One-for-one rule summary
Table 1: Total administrative costs
Totals Annualized value
Total administrative cost (all impacted businesses) $5,869
Administrative cost per business $76.22

Regulatory cooperation and alignment

The amendments, requiring rights holders to report information to the PMPRB on the same terms and conditions, fulfill a Government of Canada commitment made as part of the domestic implementation of CETA.

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 amendments.

Implementation, compliance and enforcement, and service standards

These amendments will come into force on June 30, 2021, and will apply to all rights holders, including patentees and holders of CSPs which take effect on or after that date.

Once the Amending Regulations are published in the Canada Gazette, Part II, responsibility for implementation, enforcement and service standards are passed to the PMPRB.

Contact

Michelle Boudreau
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: 613‑710‑7663
Email: michelle.boudreau@canada.ca