ARCHIVED - Patented Medicine Prices Review Board Canada

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SECTION I - OVERVIEW

Chairperson's Message

I am pleased to present the 2006-2007 Departmental Performance Report for the Patented Medicine Prices Review Board (PMPRB).

The PMPRB's mandate is two-fold:

1. To ensure that prices charged by patentees for patented medicines sold in Canada are not excessive, thereby protecting consumers and contributing to Canadian health care; and

2. To report on pharmaceutical trends and on the research and development (R&D) spending by pharmaceutical patentees, in order to contribute to informed decisions and policy-making.

During the past year, the PMPRB was very active in supporting both these outcomes. In keeping with our regulatory mandate, we reviewed the prices of more than 1100 patented drug products, including 99 new drugs that came under our jurisdiction in 2006. Linked to these reviews, eight Notices of Hearing were issued under s.83 of the Patent Act. The purpose of a hearing is for the Board to determine whether a patented medicine is, or was, being sold in any market in Canada at a price that, in the opinion of the Board, is or was excessive.

In the spring of 2006, the Board followed through on its plans to issue a discussion guide on its Excessive Price Guidelines (Guidelines) and, later in the year, held face-to-face consultations with stakeholders to hear their views on potential needs to revise the Guidelines. The key issues being addressed by this review include the categorization of new drugs for price review purposes, price tests, potential reviews of "any market," "re-benching" (i.e., relating to whether re-setting the benchmark price may be appropriate), and guiding principles for the price review process. Subsequent to these consultations, the Board expanded the Guidelines review to also encompass other price factors in the Act (i.e., - the prices of comparator medicines in other countries, and the cost of making and marketing) and the Board's current approach to applying the Consumer Price Index (CPI) factor.

In addition, the PMPRB undertook a number of new studies and analyses. We released two studies under the National Prescription Drug Utilization Information System (NPDUIS): the Budget Impact Analysis Guidelines and the New Drug Pipeline Monitor. In support of the National Pharmaceuticals Strategy and our recent additional responsibility to monitor and report on non-patented prescription drug prices, we released three other reports - Canadian and Foreign Price Trends, Trends in Canadian Sales and Market Structure and Markets for New Off-Patent Drugs.

The Board continues to ensure that all of its activities are transparent and that stakeholders are well informed through our Web site, quarterly NEWSletters and other notices and publications.

In conclusion, the Board remains keenly aware of its mandate to serve Canadians through an appropriate, efficient and modern patented drug price regulatory scheme and through timely information on Canadian pharmaceutical price trends.

Brien G. Benoit, MD
Chairperson

Management Representation Statement

I submit for tabling in Parliament, the 2006-2007 Departmental Performance Report for the Patented Medicine Prices Review Board.

This document has been prepared based on the reporting principles contained in the Guide for the Preparation of Part III of the 2006-2007 Estimates on Plans and Priorities and Departmental Performance Reports:

• It adheres to the specific reporting requirements outlined in the Treasury Board Secretariat guidance;

• It is based on the department's approved Strategic Outcome and Program Activity Architecture that were approved by Treasury Board;

• It presents consistent, comprehensive, balanced and reliable information;

• It provides a basis of accountability for the results achieved with the resources and authorities entrusted to it; and

• It reports finances based on approved numbers from the Estimates and the Public Accounts of Canada.

Brien G. Benoit, M.D.
Chairperson

Summary Information

Department's Reason for Existence

The Patented Medicine Prices Review Board (PMPRB) has a dual role:

Regulatory	To ensure that prices charged by patentees for patented medicines sold in Canada are not excessive, thereby protecting consumers and contributing to Canadian health care.
Reporting	To report on pharmaceutical trends and on the R&D spending by pharmaceutical patentees, in order to contribute to informed decisions and policy-making.

The PMPRB is an independent, quasi-judicial body created by Parliament as a result of revisions to the Patent Act (Act) in 1987 (Bill C-22) which increased patent protection for pharmaceuticals. The PMPRB represents a strategic component of the federal government's policy to balance consumer protection and affordable health care with the trade and industrial development objectives of pharmaceutical patent legislation.

Subsequent revisions to the Act in 1993 (Bill C-91) further increased patent protection for pharmaceutical products by eliminating compulsory licensing. The amendments also gave the PMPRB increased remedial powers and shifted ministerial responsibility for the PMPRB to the Minister of Health. Prior to that, responsibility for the PMPRB rested with the Minister of Consumer and Corporate Affairs (now the Minister of Industry), who has overall responsibility for the Act. The Minister of Health is responsible for the pharmaceutical provisions of the Act as set out in sections 79 to 103.

Financial Resources ($ thousands)

2006-2007
Planned Spending	Total Authorities	Actual Spending
$6,512.0	$11,690.01	$7,365.32

Total Human Resources

2006-2007
Planned	Actual	Difference
48	43	5

Departmental Priorities

Status on Performance		2006-2007
Strategic Outcome: Prices charged by manufacturers of patented medicines sold in Canada are not excessive.
Government of Canada Outcome: Healthy Canadians
Priority	Program Activity - Expected Results	Performance Status	Planned Spending($ 000)	Actual Spending($ 000)
Priority #1 Compliance and enforcement	Activity: Review prices for new and existing patented medicines sold in Canada andupdate Board Guidelines as needed Expected result: All manufacturers' prices for new and existing patented medicines sold in Canada are reviewed in a timely manner and in accordance with the Board's Excessive Price Guidelines.	Met expectations The Board issued a discussion guide on its Guidelines and held face-to-face consultations with stakeholders. Further work is ongoing	3,107.0	5,551.9
Priority #2 Report on pharmaceutical trends	Activity: Identify and provide more informative information on key pharmaceutical issues of interest to Canadian consumers and other stakeholders. Expected results: Canadian consumers and other stakeholders have complete and accurate information on trends in manufacturers' prices of patented medicines sold in Canada and on patentees' research-and-development expenditures.	Met expectations	1,455.0	1,016.8
	Activity: Provide critical analyses of price, utilization and cost trends for prescription drugs sold in Canada. Expected results: F/P/T drug plans and Canada's health system will have more accurate information on how prescription drugs are being used and on sources of cost indices through critical analyses of price utilization and cost trends.	Met expectations	1,350.0	557.3
Priority #2 Report on pharmaceutical trends - cont.	Activity: Monitor and report on non-patented prescription drug prices in Canada. Expected results: F/P/T Governments and other stakeholders will have critical analyses and comprehensive information on non-patented prescription drug prices.	Partially met expectations.	600.0	239.3

Overall Departmental Performance

Mandate and Jurisdiction

The PMPRB has two roles:

Regulatory: To ensure that prices charged by patentees for patented medicines sold in Canada are not excessive thereby protecting consumers and contributing to Canadian heath care.

	The PMPRB is responsible for regulating the prices that patentees charge - the factory gate prices - for prescription and non-prescription patented drugs sold in Canada for human and veterinary use, to ensure that they are not excessive.
	The PMPRB has no authority to regulate the prices of non-patented drugs, and does not have jurisdiction over prices charged by wholesalers or retailers, or over pharmacists' professional fees.

Reporting: To report on pharmaceutical trends of all medicines, and on R&D spending by pharmaceutical patentees, thereby contributing to informed decisions and policy-making.

In addition, under section 90 of the Act, the Minister of Health has directed the Board to undertake two initiatives:

1. National Prescription Drug Utilization Information System (NPDUIS)
   
   In 2001, pursuant to an agreement by the federal/provincial/territorial (F/P/T) ministers of health, the Minister directed the PMPRB to conduct research into price, utilization and cost trends of prescription drugs sold in Canada. The purpose of this research is to shed light on how these drugs are being used and to determine sources of cost increases.

2. Non-Patented Prescription Drug Prices (NPPDP)
   
   In 2005, in consultation with his provincial and territorial colleagues, the Minister directed the PMPRB to monitor and report on prices of non-patented prescription drugs. This initiative provides a credible, centralized source of information for the First Ministers National Pharmaceuticals Strategy.

Issues, Trends and Challenges

Pharmaceuticals are a vital component of healthcare. The use of pharmaceuticals continues to increase worldwide, including in Canada, and represents an increasing share of total health expenditures. Understandably, this causes concern for consumers, drug insurance plans and governments.

For its part, the pharmaceutical industry's ability to develop and bring to market innovative new medicines depends on the return on investment it can expect.

Recently, innovation within the pharmaceutical industry appears to be moving toward technological improvements - i.e., new delivery technologies - and away from new breakthrough "blockbuster" drugs. As well, pricing strategies by the brand-name pharmaceutical industry suggest that the industry is seeking to move toward a global pricing scheme.

Associated with this, is the issue of cross-border drug sales from Canada to the United States. While these sales appear to have declined, largely due to implementation of Medicare Part D, concerns about significant Canada-U.S. price differentials appear to remain. Changes in pricing and reimbursement policies in Europe are also affecting pricing strategies in Canada.

In June 2006, the F/P/T Ministerial Task Force released a progress report on the National Pharmaceuticals Strategy. Ministers noted that the challenges and opportunities Canada faces in the area of pharmaceuticals management relate to three fundamental themes: 1) Access; 2) Safety, Effectiveness and Appropriate Use; and 3) System Sustainability. Pricing and Purchasing, particularly focused on non-patented prescription drugs, is one of the Task Force's key priorities and is complicated by the complex array of payers, incentives and interests.

To effectively meet the challenges of an evolving pharmaceutical environment, the PMPRB increasingly needs to understand pharmaceutical innovation and the broader environment, while still ensuring that the interests of Canadian consumers are protected.

The PMPRB has faced significant workload pressures, including:

• an increased number of patented drugs for human use requiring review, complicated by increases in late reporting by patentees;

• an unprecedented number of Notices of Hearing issued under the Patent Act; and

• the need to undertake a comprehensive review of, and public consultation on, the Board's Excessive Price Guidelines given recent stakeholder concerns that the Guidelines may no longer be appropriate in light of current trends and developments.

Performance Highlights

• A total of 1181 patented drug products for human use were under the PMPRB's jurisdiction in 2006. In addition, 48 patented drugs for veterinary use were under the Board's jurisdiction.

• Ninety-nine new patented drugs products (at the level of the Drug Identification Number - DIN³) for human use were reported to the PMPRB in 2006, of which 29 medicines, representing 43 DINs, were new active substances. As of March 31, 2007, 79 new patented drugs had been reviewed. Of those, 68 were considered to be within the Guidelines while 11 were subject to ongoing investigations.

• Six new DINs were reported for veterinary use in 2006, all of which remained under review.

• The Board issued eight Notices of Hearing, bringing the total ongoing proceedings to ten. The Dovobet and Nicoderm matters, initiated in previous years, remained before the hearing panels for final resolution.

• The Board approved five Voluntary Compliance Undertakings (VCUs), including one in May and June 2007, both in the context of a hearing, and each of which concluded one of the ten aforementioned hearings.

• Several new studies and analyses were released relating to the Board's responsibilities under NPDUIS (the Budget Impact Analysis Guidelines and the New Drug Pipeline Monitor) and NPPDP (Canadian and Foreign Price Trends, Trends in Canadian Sales and Market Structure, and Markets for New Off-Patent Drugs).

Sales, Prices and R&D Trends

• Sales of patented drugs in Canada increased by 3.7% to $12 billion in 2006. In recent years, the annual rate of sales growth has decreased.

• The share of total sales accounted for by patented drugs declined to 68.1% in 2006, from 71.4% in 2005.

• The antineoplastics and immunomodulating agents (such as drugs used in chemotherapy) remained the leading drug class contributing to sales growth.

• Patentees' prices of patented drugs, as measured by the Patented Medicine Price Index (PMPI), decreased on average by 0.2% in 2006. This slight decline was attributable to falling prices paid by hospitals. Over the same period, the Consumer Price Index was at 2.0%.

• Analysis by therapeutic class, by class of customer, by province/territory, and by comparator country, demonstrated considerable variability in price changes.

• In 2006, the ratio of Canadian prices to the international median for comparator countries was slightly below parity, meaning that, on average, Canadian prices remained slightly below the median of international prices observed in the seven comparator countries used by the PMPRB (France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States).

• Patentees reported total R&D expenditures of $1.2 billion in 2006, a slight decrease of 1.9% over the previous year, in part explained by the decrease in the number of reporting patentees, from 80 in 2005 to 72 in 2006. Members of the national association of brand-name drug companies, known as Canada's Research-based Pharmaceutical Companies (Rx&D), reported R&D expenditures of $0.949 billion in 2006, down 8.7% from the $1.0 billion in expenditures in 2005.

• The R&D to sales ratio for all patentees declined to 8.1% from 8.7% in 2005, as did the R&D-to-sales ratio for members of Rx&D (down to 8.5% compared to 8.8% in the previous year).

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