Regulations amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), No. 3: SOR/2021-162

Canada Gazette, Part II, Volume 155, Number 14

Registration
SOR/2021-162 June 24, 2021

PATENT ACT

P.C. 2021-643 June 24, 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 Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), No. 3.

Regulations amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), No. 3

Amendments

1 (1) Section 4 of the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) footnote 1 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, 2022, 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, 2022, 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, 2021 is being or has been sold at an excessive price are the following:

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

7 (1) These Regulations, except subsection 3(4), come into force on January 1, 2022.

(2) Subsection 3(4) comes into force on a day to be fixed by amendment to this subsection.

Coming into Force

3 These Regulations come into force on the day on which they are made.

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) footnote 2 [the Amending Regulations] were published in the Canada Gazette, Part II. The Amending Regulations, which are set to come into force on July 1, 2021, provide the Patented Medicine Prices Review Board (PMPRB or Board) with the additional price regulatory factors (the new 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. Finally, the Amending Regulations also modified the definition of domestic price and sales information that patentees are to report, which must be adjusted for any discounts or rebates to third parties. However, given recent court decisions which are subject to appeals and cross-appeals, the latter change has been delayed until a future regulatory amendment fixes a coming-into-force date.

The Amending Regulations are the first substantive update of the PMPRB’s regulatory framework since its establishment, and are expected to impact stakeholders as they adapt to the changes they introduce. These changes are necessary as they provide the PMPRB with the tools and information needed to protect Canadians from excessive patented medicine prices. However, in consideration of the unexpected impact of the third wave of the COVID-19 pandemic and the ongoing efforts related to the pandemic response, additional time is required for patentees to prepare for and comply with the changes introduced in the Amending Regulations.

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. footnote 3 The PMPRB also has a mandate to report on medicine prices, sales and research and development.

The PMPRB’s mandate and jurisdiction is established under sections 79 to 103 of the 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 corresponding Patented Medicines 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.

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 since its establishment, 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:

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 (Attorney General) footnote 4 and the Quebec Superior Court in Merck Canada v. Attorney General of Canada, footnote 5which are both subject to appeals and cross-appeals by the parties involved.

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 did not obtain a DIN by that date, are not exempt.

Delays of the coming-into-force

The Amending Regulations were originally set to come into force on July 1, 2020; however, in June 2020, at the height of the first wave of the COVID-19 pandemic, this date was delayed until January 1, 2021. This delay footnote 6 eliminated the imposition of new administrative burden on industry as they faced increased demands related to supply chains and shortages in response to the COVID-19 pandemic. This delay also provided stakeholders a longer period in which to provide feedback to the PMPRB’s then-ongoing Guidelines consultation process.

In December 2020, the coming-into-force was delayed again by another six months, to July 1, 2021. This second delay footnote 7 provided industry with additional time to prepare for the new reporting obligations as the COVID-19 pandemic continued to challenge all stakeholders. The delay also provided industry with approximately eight months to further familiarize themselves with the PMPRB’s final Guidelines, which were published on October 23, 2020. However, since that time, industry stakeholders and governments have needed to continue to focus resources and efforts on responding to the COVID-19 pandemic.

PMPRB Guidelines consultations

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 were subject to public consultations. In addition to hosting policy forums, webinars and bilateral meetings in Ottawa with key stakeholders, the PMPRB hosted over 60 meetings across Canada, with more than 260 members of its stakeholder community. Additionally, over 120 written submissions were received at the close of the initial 85-day consultation process.

On June 19, 2020, the PMPRB published an updated draft of their Guidelines, reflecting the feedback from their public consultation, for a second round of public comment. This was followed by a 47-day written consultation period which ended August 4, 2020, and elicited over 100 written submissions.

The PMPRB published its final Guidelines on October 23, 2020.

In light of the second delay of the coming-into-force, the PMPRB further initiated a consultation on two consequential amendments to their final Guidelines. The first such amendment relating to the Guidelines’ definition of Gap medicines (i.e. medicines which obtain a DIN between August 21, 2019, and the coming-into-force date of the Amending Regulations) and the second to the number of filing periods patentees have to comply with the new Maximum List Price (MLP) ceiling for existing and Gap medicines. The PMPRB received 48 submissions during the month-long comment period. In the PMPRB’s final decision from April 16, 2021, the Board extended the definition of Gap medicines to the new coming-into-force date of July 1, 2021, and maintained the compliance timeline of two filing periods for existing and Gap medicines to meet the MLP. Accordingly, upon coming-into-force of the Amending Regulations on July 1, 2021, the operative date for assessing compliance with the MLP would be July 1, 2022.

Judicial consideration of the amendments

On August 23, 2019, Merck Canada Inc. and six other pharmaceutical companies filed a judicial review in the Superior Court of Quebec challenging the constitutionality of those sections of the Act that establish the PMPRB (sections 79 to 103), the Patented Medicines Regulations as they currently exist, as well as the Amending Regulations. On December 18, 2020, the Superior Court of Quebec in Merck Canada v. Attorney General of Canada footnote 8 upheld the constitutionality of the regime, with the exception of the amendment that would allow the PMPRB to collect price information that is net of third party rebates, which was declared invalid and ultra vires the federal power over patents.

On September 2, 2019, Innovative Medicines Canada, and sixteen Canadian subsidiaries of pharmaceutical companies, filed an application for a judicial review in the Federal Court alleging that the Amending Regulations are invalid because they are ultra vires to the Act. On June 29, 2020, the Federal Court of Canada in Innovative Medicines Canada v. Canada (Attorney General), footnote 9 upheld the validity of the revised basket of comparator countries and the new price regulatory factors (market size, pharmacoeconomic value, and GDP); however, the Court declared that the amendment that would allow the PMPRB to collect price information that is net of third party rebates was invalid and ultra vires the Act.

These rulings are currently the subject of appeals by the applicants and cross-appeals by the Crown. Accordingly, the subsection of the Amending Regulations that allows 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.

Consequential amendments to the coming-into-force of parts of the Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act (CETA Implementation Act)

Amendments to the Patented Medicines Regulations footnote 10 were made as part of Canada’s domestic implementation of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). Those amendments were consequential to the June 30, 2021, coming-into-force of Patent Act amendments footnote 11 that broaden the jurisdiction of the PMPRB to include medicines protected by CSPs by, for example, replacing the term “patentee” with the term “rights holder” to represent either a patentee or a holder of a CSP. As such, rights holders (CSP holders in addition to patentees) are subject to the PMPRB regime as of June 30, 2021, including the Amending Regulations once they come into force.

Objective

The objective of the Regulations amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), No. 3 (the Regulations) is to delay the coming-into-force of the Amending Regulations until January 1, 2022. This delay provides industry with additional time to prepare for and comply with the changes introduced in the Amending Regulations.

Description

The Regulations delay the July 1, 2021, coming-into-force of the Amending Regulations to January 1, 2022, at a time when the COVID-19 pandemic continues to challenge all stakeholders. The January 1, 2022, date aligns with the beginning of the PMPRB’s first reporting period of 2022 and allows patented drug manufacturers additional time to make any necessary adjustments to comply with the new regulatory regime.

While past delays of the coming-into-force for the Amending Regulations have provided an additional year combined, another six-month delay is appropriate to provide industry stakeholders with additional time to adapt to the new reporting obligations given the unexpected impact of the third wave of the COVID-19 pandemic.

The Regulations 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. Generally, the information that is to be provided in relation to the new factors is given within 30 days of the coming-into-force of the Amending Regulations, or if the medicine has yet to be sold in Canada by the coming-into-force date, 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, beginning on January 1 and July 1 in a year, within 30 days after the end of the period, for as long as the medicine is under the PMPRB’s jurisdiction.

Therefore, 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 provisions were also made to ensure that this 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 do not change the original cut-off date of August 21, 2019, enabling all medicines that obtained a Drug Identification Number (DIN) in Canada prior to this date to qualify for the exemption from the new factors and associated reporting obligations. The policy intent of these Regulations is to provide industry stakeholders with additional time to prepare for and comply with the new regulatory regime as the COVID-19 pandemic continues to challenge all stakeholders. This does not impact the original policy intent of the cut-off date, which was to provide a degree of continuity for medicines already on the market prior to the publication of the Amending Regulations.

The Regulations do not change the delayed subsection of the Amending Regulations that would allow the PMPRB to collect price information that is net of third party rebates. Given the court rulings which have declared this subsection invalid and ultra vires to the Act, this provision remains delayed until a future regulatory amendment fixes a coming-into-force date.

The consequential amendments that broaden the PMPRB’s jurisdiction to include medicines that benefit from CSPs are not modified by the Regulations. Those consequential amendments come into force on June 30, 2021, and include provisions to replace the term “patentee” with the term “rights holder” to represent either a patentee or a CSP holder. Following that date, all rights holders, rather than just patentees, are subject to the PMPRB regime, including the Amending Regulations once they come into force.

Coming-into-force

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

Regulatory development

Consultation

Most provincial health ministries, public and private health insurance providers, health professional associations, academics, and the generic pharmaceutical industry have been supportive of the Amending Regulations, encouraging the full implementation of the regulatory changes without further delay. Some provincial health ministries, industry stakeholders, life sciences organizations and some patient organizations, however, have requested a full delay of the coming-into-force of the Amending Regulations until the COVID-19 pandemic has abated, underscoring their specific concerns with the implementation of the new factors. Certain patient organizations have further advocated for a phased approach, starting with the new basket of comparator countries to bring down list prices without delay.

As stakeholders continue to focus their efforts in responding to the unexpected impact of the third wave of the COVID-19 pandemic, delaying the Amending Regulations by six months provides drug manufacturers and health system partners with additional time to prepare for the changes and their related reporting requirements, meanwhile maintaining the commitment to protect Canadians from excessive prices for patented medicines.

A letter notifying of the delay in the coming-into-force will be sent to all pertinent stakeholders as well as those 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 amendments into force in advance of July 1, 2021.

Prepublication in the Canada Gazette, Part I

An exemption from prepublication in the Canada Gazette, Part I, was sought as these amendments were neither necessary nor anticipated prior to the third wave of the COVID-19 pandemic. As public health measures and lockdowns remain to lower the rate of infection in Canada, and vaccination efforts intensify, there is insufficient time to seek prepublication before the Amending Regulations (with the exception of the subsection allowing the PMPRB to collect price information that is net of third party rebates) would otherwise come into force on July 1, 2021.

Modern treaty obligations and Indigenous engagement and consultation

There are no implications to 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, 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 the COVID-19 pandemic and provide additional time to prepare for and comply with the changes introduced in the Amending Regulations.

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

It was originally estimated that payers would save a total of $8.8 billion (PV) over 10 years from lower patented medicine spending as a result of the Amending Regulations. Delaying the coming-into-force by another six months may impact some of these savings, but Health Canada anticipates that most of these savings will continue to occur as originally estimated. Therefore, it is expected that the resulting increased costs these Regulations would impose on consumers will be low. There are two reasons for this:

(1) 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 Product Listing Agreements (PLAs) for any new medicines. Delaying the coming into force by another 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.

(2) 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 Regulations delay the administrative burden by another six months, patentees will still be required to submit the same amount of information once the Amending Regulations come into force. Therefore, 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. In June 2020, adjusting for the first extension of the coming-into-force date to January 1, 2021, changed this to an estimate of $2,758. A further adjustment in December 2020 for an additional six-month delay, changed this to an estimate of $2,577, a reduction of $181. This latest adjustment to delay by an additional six months changes this estimate to $2,388, another reduction of $189.

Table 1: One-for-one rule (administrative costs)
The current initiative is an: OUT
  Values to report for the Red Tape Reduction Act Unit of measure
Annualized administrative costs (constant 2012 $) $189 Constant 2012 dollars, present value, base year 2012

Regulatory cooperation and alignment

These Regulations do 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 this initiative.

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

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