Regulations Amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), No. 4: SOR/2021-273

Canada Gazette, Part II, Volume 156, Number 1

Registration
SOR/2021-273 December 21, 2021

PATENT ACT

P.C. 2021-1052 December 17, 2021

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), No. 4.

Regulations Amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), No. 4

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 July 1, 2022, an analysis shall be provided

  • (a) if the analysis is published before July 1, 2022, by July 30, 2022; or
  • (b) if the analysis is not published before July 1, 2022, within 30 days after the day on which it is published.

(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 July 1, 2022, the most recent version of the estimated maximum use of the medicine shall be provided

  • (a) if the medicine is first offered for sale in Canada during the period beginning on July 1, 2019 and ending on June 30, 2022, by July 30, 2022; or
  • (b) if the medicine is first offered for sale in Canada before July 1, 2019, but the Minister of Health assigns a drug identification number under the Food and Drug Regulations
    • (i) during the period beginning on August 21, 2019 and ending on June 30, 2022, by July 30, 2022, or
    • (ii) after June 30, 2022, within 30 days after the day on which the drug identification number is assigned.

(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 June 30, 2022 is being or has been sold at an excessive price are the following:

2 Subsection 7(1) of the Regulations is replaced by the following:

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

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 1 [the Amending Regulations] were published in the Canada Gazette, Part II. The Amending Regulations, which are set to come into force on January 1, 2022, 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 rights holders footnote 2 are to report price information to the PMPRB. Finally, the Amending Regulations also modify the definition of domestic price and sales information that rights holders 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 in 1987, and are expected to impact stakeholders as they adapt to the changes being introduced. In the current pharmaceutical system, these changes provide the PMPRB with the tools and information needed to protect Canadians from excessive prices of medicines falling within its jurisdiction. Due to considerations associated with the COVID-19 pandemic, the original coming-into-force date of July 1, 2020, has been delayed three times by six months. As the global impact of the pandemic persists and new coronavirus variants of concern emerge, additional time is warranted to allow stakeholders to continue their focus on pandemic recovery, while also allowing the Government to consider and continue to discuss the Amending Regulations in the context of ongoing initiatives and considerations within an evolving pharmaceutical landscape.

Background

Overview of the Patented Medicine Prices Review Board

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 or medicines protected by a certificate of supplementary protection (CSP). 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 79–103 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 or CSP-protected medicine is excessive, the authority to collect information from rights holders 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 rights holders 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 and/or CSP 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 medicines falling within its jurisdiction.

There are three elements to the Amending Regulations:

1) New additional price regulatory factors

  • These supplement the existing factors that the PMPRB must consider when determining whether the price of a patented or CSP-protected medicine is excessive under section 85 of the Act.

2) An updated schedule of comparator countries

  • Adjustments of the schedule to the Patented Medicines Regulations to include countries with similar consumer protection priorities, economic wealth and marketed medicines as Canada. This element is an update to the PMPRB’s existing approach of reference-based pricing, which uses price information for patented or CSP-protected medicines sold in Canada and their prices in seven other countries.

3) Changes in reporting requirements

  • Reduction of rights holders’ reporting obligations for medicines with the lowest risk of excessive pricing (i.e. veterinary, over-the-counter, and certain “generic” medicines).
  • Introduction of new reporting obligations related to the new price regulatory factors.
  • Modification of price and revenue reporting obligations to require rights holders to file information that is net of all price adjustments.

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 3 and the Quebec Superior Court in Merck Canada v. Attorney General of Canada. footnote 4 which 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 associated with the COVID-19 pandemic

The Amending Regulations have faced a series of delays due to considerations associated with the COVID-19 pandemic.

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 5 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 6 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 then-final Guidelines, which were published on October 23, 2020.

In June 2021, in consideration of the unexpected impact of the third wave of the COVID-19 pandemic and the ongoing efforts related to the pandemic response, another six-month delay was introduced to provide industry stakeholders with additional time to prepare for and comply with the changes in the Amending Regulations. This third delay footnote 7 revised the coming-into-force date to January 1, 2022.

Important challenges remain as we continue to respond to the COVID-19 pandemic, including the recent emergence of the Omicron variant. Internationally, the pandemic continues to have a significant impact on public health and global supply chains. Domestically, Canada has been steadfast in its efforts, working closely with other levels of governments and industry to secure vaccine supplies, booster doses, pediatric vaccines and therapeutics. Although supplies and distribution chains in Canada have stabilized due to the efforts of governments, health system partners, and the industry; continued focus on these efforts is necessary to maintain Canada’s momentum in trending out of the pandemic. The emergence of new variants requires urgent preparation and response to ensure that Canada is fully ready to respond. Another regulatory delay would provide impacted stakeholders, including industry, governments, and other parties within the drug reimbursement and distribution system, with an opportunity to direct their focus on Canada’s urgent response to the impacts of emerging variants, rather than on preparation for changes introduced by the new regulatory regime.

Ongoing initiatives in the pharmaceutical landscape

Since the Amending Regulations were made, a new context has developed brought on by the COVID-19 pandemic, such as the launch of Canada’s Biomanufacturing and Life Sciences Strategy in July 2021 and the progression of other initiatives such as the National Strategy for Drugs for Rare Diseases and the development of a Canadian Drug Agency. In addition to addressing the current context of the pandemic and emergence of new variants, a regulatory delay would also provide additional time for the Government to consider and continue to discuss the Amending Regulations in the context of these initiatives.

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 including the Minister of Health and the provincial ministers of the Crown responsible for health. The purpose of the Guidelines is to ensure that rights holders are aware of the general policies and procedures undertaken by PMPRB staff to identify patented or CSP-protected 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 updated Guidelines on October 23, 2020, which was subsequently adjusted on March 17, 2021, to account for consequential amendments resulting from the second delay of the coming-into-force of the Amending Regulations.

Judicial consideration of the amendments

Following the publication of the Amending Regulations in Canada Gazette, Part II, on August 21, 2019, two court proceedings were commenced challenging the validity of the PMPRB regime.

On August 23, 2019, Merck Canada Inc. and six other pharmaceutical companies filed an application for 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 4 upheld the constitutionality of the current regime, as well as Amending Regulations 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 3 upheld the validity of the revised basket of comparator countries and the new price regulatory factors (market size, pharmacoeconomic value, and GDP) and associated reporting obligations; 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.

Objective

The objective of the Regulations Amending the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), No. 4 (the Regulations) is to delay the coming-into-force of the Amending Regulations until July 1, 2022. This delay provides additional time for impacted stakeholders to continue to focus their efforts on pandemic recovery and for the Government to continue to discuss the Amending Regulations with all stakeholders amidst ongoing initiatives and considerations within an evolving pharmaceutical landscape.

Description

The Regulations delay the January 1, 2022, coming-into-force of the Amending Regulations to July 1, 2022, at a time when the COVID-19 pandemic continues to challenge all stakeholders. The July 1, 2022, date aligns with the beginning of the PMPRB’s second reporting period of 2022 and provides additional time for rights holders to prepare for changes introduced by the new regulatory regime.

While past delays of coming-into-force for the Amending Regulations have provided an additional eighteen months combined, another six-month delay is appropriate to provide all stakeholders with additional time to continue their focus on pandemic recovery, in consideration of the ongoing global impact of the pandemic, and for the Government to continue to discuss the Amending Regulations with all stakeholders amidst ongoing initiatives within an evolving pharmaceutical landscape.

The Regulations also consequentially update some dates embedded in the Amending Regulations 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 data 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 stakeholders with additional time to prepare for the changes introduced in the Amending Regulations 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.

Coming-into-force

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

Regulatory development

Consultation

Health Canada and the PMPRB have continued to receive input from stakeholders since publication in the Canada Gazette, Part II. The majority of input was received as submissions to the PMPRB’s consultation processes for their Guidelines. Other correspondences were received by Health Canada on an ad hoc basis.

Most provincial health ministries, public and private health insurance providers, health professional associations, academics, and the generic pharmaceutical industry have shared their support for the Amending Regulations, encouraging the full implementation of the regulatory changes without further delay. Other 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 with previous coming-into-force delays of the Amending Regulations, a communication notifying of the delay in the coming-into-force will be sent by Health Canada 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 Regulations into force in advance of January 1, 2022.

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 current situation of the COVID-19 pandemic. As public health measures adapt to lower the rate of infection of COVID-19 and emerging variants in Canada, and vaccination efforts continue to advance, 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 January 1, 2022.

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 rights holders 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 all stakeholders, including drug manufacturers, health system partners and parties within the drug reimbursement and distribution system, to remain focused on responding to the COVID-19 pandemic and maintain the current stability of Canada’s health system. The Regulations would delay the preparations impacted stakeholders would have to undertake based on 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 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

Rights holders 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. While each extension to the coming-into-force of regulatory requirements further contributes to uncertainty in the negotiation process, all parties understand that this has been the result of exceptional circumstances. 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, will 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 or CSP-protected medicines in Canada satisfy the small business definition. In general, these 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, rights holders are still 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. A further six-month delay introduced in June 2021 changed the estimate to $2,388, a reduction of $189. This latest delay changes this estimate to $2,321, another reduction of $67.

Table 1: One-for-one rule (administrative costs)
The current initiative is an: OUT
  Value to report for the Red Tape Reduction Act: Unit of Measure
Annualized administrative costs (constant 2012 $) $67 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 proposal.

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@hc-sc.gc.ca