Annual Report 2021

Statistical Highlights 2021

Regulatory Mandate

• 1,177 patented medicines for human use were reported to the PMPRB, including 59 new medicines.
• 2 Voluntary Compliance Undertakings were accepted as of December 31, 2021.
• $38 thousand in excess revenues were offset by way of payments to the Government of Canada, in addition to price reductions.

Reporting Mandate

Sales Trends:

• Sales of patented medicines in Canada were $17.4 billion in 2021, a slight decrease of 1.7% from the previous year.
• Patented medicines accounted for approximately 51.0% of the sales of all medicines in Canada in 2021.

Price Trends:

• The Consumer Price Index rose by 3.4%, while the national average transaction price for patented medicines increased by 0.4%.
• Canadian list prices were third highest among the 31 Organisation for Economic Co-operation and Development (OECD) countries, lower than prices in the US and Switzerland.

Research and Development

R&D-to-Sales Ratios Remained Steady in 2021:

• 3.4% for all patentees, unchanged from 2020.
• 3.5% for Innovative Medicines Canada members, unchanged from 2020.

R&D Expenditures:

• $922.9 million in total R&D expenditures were reported by patentees, an increase of 12.2% over 2020.
• $735.9 million in R&D expenditures were reported by Innovative Medicines Canada members, an increase of 11.0% over 2020.

Letter to the Minister

15 September 2022

The Honourable Jean-Yves Duclos, P.C., M.P.
Minister of Health
House of Commons
Ottawa, Ontario
K1A 0A6

Dear Minister:

I have the pleasure to present to you, in accordance with sections 89 and 100 of the Patent Act, the Annual Report of the Patented Medicine Prices Review Board for the year ended December 31, 2021.

Yours very truly,

Mélanie Bourassa Forcier
Acting Chairperson

Chairperson’s Message

The Patented Medicine Prices Review Board (PMPRB) is an independent quasi-judicial body established by Parliament in 1987 under the Patent Act (the Act). The PMPRB’s mandate is to protect and inform Canadians by ensuring that the prices of patented medicines sold in Canada are not excessive and by reporting on pharmaceutical trends.

Uncertainty has been the one constant in the lives of Canadians the past two tumultuous years, with the best laid plans of governments and individuals repeatedly upended by intensifying waves of the COVID-19 pandemic. However, in so far as the PMPRB is concerned, recent announcements by the Minister of Health with respect to the implementation of Health Canada’s amendments to the Patented Medicines Regulations have finally brought certainty and predictability to policy questions that remained unsettled since the early days of the pandemic. Further predictability and clarity will emerge from the PMPRB’s upcoming consultation on its new Guidelines later this year. Once the new Guidelines are in place, as always, the PMPRB will do its utmost to protect Canadians from excessively priced patented medicines through the responsible and efficient use of our regulatory powers.

In terms of the PMPRB’s reporting mandate, this past year we continued to provide analytical support and expertise to our health partners under the broad umbrella of the National Prescription Drug Utilization Information System (NPDUIS) initiative. In addition to a great deal of behind-the-scenes analytical work on various pan-Canadian pharmaceutical policy initiatives, since the beginning of 2021, the PMPRB has published five analytical reports, one chartbook, and four presentations under the NPDUIS banner. These studies continue to highlight the pressures stemming from the increased use of higher-cost medicines in Canada. Over the last five years, sales of patented medicines have grown by an average of 2.2% per year, reaching $17.4 billion in 2021. High-cost medicines now account for 57.1% of these sales. As noted in this year’s Annual Report, in 2021, the 20 top-selling patented medicines in Canada, which accounted for 40% of total patented medicine sales, had a median treatment cost of $42,616, nearly 60 times the median in 2012. In 2021, Canadian list prices of patented medicines were the third highest in the Organisation for Economic Co-operation and Development (OECD), behind only the US and Switzerland. These trends all serve to reinforce the significance the government’s current suite of very ambitious pharmaceutical policy objectives, such as a national formulary, a strategy for drugs for rare diseases, and a national drug agency.

2021 was a year of significant change in senior leadership at the PMPRB, with Dr. Mitchell Levine’s five-year term as the Chairperson of the Board coming to an end in November 2021. Although a permanent replacement has yet to be named, I and my fellow Board members look forward to finally turning the page on the multiyear effort to modernize our regulatory framework and working with our stakeholders and partners under new leadership to deliver as best we can on the PMPRB’s mandate priorities.

Mélanie Bourassa Forcier
Acting Chairperson

About the Patented Medicine Prices Review Board: Acting in the Interest of Canadians

The Patented Medicine Prices Review Board (PMPRB) is an independent, quasi-judicial body established by Parliament in 1987 under the Patent Act (Act).

The PMPRB is a quasi-judicial administrative agency with a dual regulatory and reporting mandate. Through its regulatory mandate, it ensures that the prices of patented medicines sold in Canada are not excessive. The PMPRB also reports on trends in pharmaceutical sales and pricing for all medicines and on research and development (R&D) spending by patentees. In addition, at the request of the Minister of Health, pursuant to section 90 of the Act, the PMPRB conducts critical analyses of price, utilization, and cost trends for patented and non-patented prescription medicines under the National Drug Utilization Information System (NPDUIS) initiative. Its reporting mandate provides pharmaceutical payers and policy makers with information to make rational, evidence-based reimbursement and pricing decisions.

The PMPRB is part of the Health Portfolio, which includes Health Canada, the Public Health Agency of Canada, the Canadian Institutes of Health Research and the Canadian Food Inspection Agency. The Health Portfolio supports the Minister of Health in maintaining and improving the health of Canadians.

Although part of the Health Portfolio, because of its quasi-judicial responsibilities, the PMPRB carries out its mandate at arm’s length from the Minister of Health, who is responsible for the sections of the Act pertaining to the PMPRB. The PMPRB also operates independently of other healthcare-related bodies, such as:

• Health Canada, which approves medicines for marketing in Canada based on their safety, efficacy, and quality;
• federal, provincial and territorial (F/P/T) public drug plans, working collectively as the pCPA, which approve the listing of medicines on their respective formularies for reimbursement purposes; and
• the Common Drug Review and pan-Canadian Oncology Drug Review, administered by the CADTH, which recommend which new medicines should qualify for reimbursement by the pCPA.

The PMPRB is composed of public servants (Staff) who are responsible for carrying out the organization’s day-to-day work, and Board Members, Governor-in-Council appointees who serve as hearing panel members in the event of a dispute between Staff and a patentee over the price of a patented medicine.

Jurisdiction

Regulatory

The PMPRB reviews the price at which patentees (companies) sell their products to wholesalers, hospitals, pharmacies and other large distributors to ensure that this price is not excessive. This price is sometimes also known as the “factory gate” (ex-factory) price. The PMPRB does not regulate the prices of non-patented medicines.

The PMPRB’s jurisdiction is not limited to medicines for which the patent is for the active ingredient or for the specific formulation(s) or uses the patentee sells the medicine for in Canada. Rather, its jurisdiction also covers medicines for which a patent “pertains”, including patents for manufacturing processes, delivery systems or dosage forms, indications/use, and any formulations.

The Act requires patentees (which include any parties who benefit from patents regardless of whether they are owners or licensees under those patents and regardless of whether they operate in the “brand” or “generic” sector of the market) to inform the PMPRB of their intention to sell a new patented medicine. Upon the sale of a new patented medicine, patentees are required to file price and sales information at introduction and, thereafter, until all patents pertaining have expired. Patentees are not required to obtain approval of the price to be able to market their medicines. However, the Act requires the PMPRB to ensure that the prices of patented medicines sold in Canada are not excessive.

Staff review the prices that patentees charge for each individual strength and form of a patented medicine. If the price of a patented medicine appears to be potentially excessive, the patentee may volunteer to lower its price and/or refund its potential excess revenues through a Voluntary Compliance Undertaking (VCU). If this fails, the Chairperson may consider whether a hearing on the matter is in the public interest. At the hearing, a panel composed of Board members acts as a neutral arbiter between Staff and the patentee. If a Hearing Panel concludes, after hearing all of the evidence in light of the factors set out in section 85 of the Act, that the price of a patented medicine is/was excessive in any market, it can order the maximum ceiling price to be reduced to a non-excessive level. It can also order a patentee to make a monetary payment to the Government of Canada to offset the excess revenues earned and, in cases where the panel determines there has been a policy of excessive pricing, it can double the amount of the monetary payment.

Reporting

As required by the Act, the PMPRB reports annually to Parliament through the Minister of Health on its price review activities, the prices of patented medicines and price trends of all prescription medicines, and on the R&D expenditures reported by pharmaceutical patentees.

In addition, as a result of an agreement by the F/P/T Ministers of Health in 2001, and at the request of the Minister of Health, pursuant to section 90 of the Act, the PMPRB conducts critical analyses of price, utilization, and cost trends for patented and non-patented prescription medicines under the National Prescription Drug Utilization Information System (NPDUIS). The PMPRB publishes the results of NPDUIS analyses in the form of reports, posters, presentations, briefs, and chartbooks. This program provides F/P/T governments and other interested stakeholders with a centralized, objective, and credible source of information on pharmaceutical trends.

Among other initiatives under its reporting mandate, the PMPRB also hosts various forums, such as webinars, research forums, and information sessions, with academics and policy experts to discuss and disseminate research on emerging areas for study on pharmaceutical trends in Canada and internationally.

Communications and Outreach

The PMPRB takes a proactive and plain-language approach to its external communication activities. This includes targeted social media campaigns and more conventional (e.g., email and telephone) engagement with domestic, international, and specialized news media. The PMPRB is actively pursuing additional opportunities to leverage new and emerging media to communicate with its stakeholders and the Canadian public.

The PMPRB recognizes the importance of openness and transparency as we continue to work on modernizing the way we carry out our mandate. We communicate regularly, through various channels, about our progress, including projected timelines, and key milestones. Engagement with stakeholders will remain a central part of our multi-faceted communications approach. Reporting on our progress helps ensure we remain focused on delivering results.

Governance

The Board consists of not more than five members who serve on a part-time basis. Board members, including a Chairperson and a Vice-Chairperson, are appointed by the Governor-in-Council. The Chairperson, designated under the Act as the Chief Executive Officer of the PMPRB, has the authority and responsibility to supervise and direct its work. By law, the Vice-Chairperson exercises all the powers and functions of the Chairperson when the Chairperson is absent or incapacitated, or when the office of the Chairperson is vacant.

The members of the Board, including the Chairperson, are collectively responsible for implementing the applicable provisions of the Act. Together, they establish the guidelines, rules, by-laws, and other policies of the PMPRB provided for by the Act (section 96) and consult, as necessary, with stakeholders including provincial and territorial Ministers of Health, representatives of consumer groups, the pharmaceutical industry, and others.

Members of the Board

Vice-Chairperson (Acting Chairperson)

Mélanie Bourassa Forcier
LLB., LL.L, MSc, LL.M., DCL

Mélanie Bourassa Forcier was appointed Vice-Chairperson of the Board on June 19, 2019, and has been Acting Chairperson since November 2021.

Professor Mélanie Bourassa Forcier is a lawyer and Full Professor in the Faculty of Law at the Université de Sherbrooke. She directs the Law and Health Policy, and Law and Life Sciences programs. She has expertise in Health governance and Ethics in Health Policy, Intellectual Property, Regulation of Digital Technologies, Technology Transfers and in Pharmaceutical Law and Policies. Over the years she has particularly concentrated her research on policies promoting the development, integration and access to innovation in the health care sector.

Professor Bourassa Forcier has published numerous books and articles on the subject of pharmaceutical regulation and health law. She holds a Ph.D. in Pharmaceutical Patent Law from McGill University, an MSc in International Health Policy from the London School of Economics and Political Science (concentration in Health Economics), a LL.M. in Law and Biotechnologies from the University of Montreal and an LL.L. from the University of Ottawa (summa cum laude).

Members

Carolyn Kobernick,
B.C.L., LL.B.

Carolyn Kobernick was appointed Member of the Board on June 13, 2014.

Ms. Kobernick is a lawyer and former public servant. Prior to her retirement in 2013, Ms. Kobernick had been Assistant Deputy Minister of Public Law for the Department of Justice since 2006. As principal counsel to the Minister of Justice and Attorney General of Canada, Ms. Kobernick was instrumental in the development and delivery of policy for the Department of Justice. In addition to identifying key strategic, legal, and operational matters, she tackled cross-cutting national issues as the liaison between the Department of Justice and other government organizations.

Ms. Kobernick holds a B.C.L. and LL.B. from McGill University and is a member of the bar of Ontario. In 2012 she obtained a Certificate in Adjudication for Administrative Agencies, Boards and Tribunals from the Osgoode Hall Law School and the Society of Ontario Adjudicators and Regulators.

Dr. Ingrid Sketris,
BSc (Pharm), PharmD, MPA(HSA), Clinical Toxicology Residency

Dr. Ingrid Sketris was appointed Member of the Board on June 29, 2018.

Dr. Sketris is a licensed pharmacist and a professor at the College of Pharmacy, Dalhousie University, with cross appointments to Medicine and Health Administration.

Dr. Sketris received her Doctor of Pharmacy in 1979 from the University of Minnesota, followed by her residency in Clinical Toxicology at the University of Tennessee Centre for the Health Sciences. She also received a Master of Public Administration/Health Services Administration from Dalhousie University.

She is a leader in pharmacy, and has served as President of the Association of Faculties of Pharmacy of Canada and as a board member of the Canadian Council for Accreditation of Pharmacy Programs.

Dr. Sketris is a Fellow of the Canadian Society of Hospital Pharmacists, the American College of Clinical Pharmacy and the Canadian Academy of Health Sciences. She was previously elected to the US National Academies of Practice.

Matthew Herder,
B.Sc. (hons), LL.B., LL.M., J.S.M.

Matthew Herder was appointed Member of the Board on June 29, 2018.

Mr. Herder is the Director of the Health Law Institute at Dalhousie University, as well as an Associate Professor in the Department of Pharmacology in the Faculty of Medicine, with a cross-appointment to the Schulich School of Law.

Mr. Herder’s research focuses on biomedical innovation policy, with a particular emphasis on intellectual property rights and the regulation of biopharmaceutical interventions. His work is often interdisciplinary and policy-oriented, and he has received grants from the Canadian Institutes of Health Research and the Royal Society of Canada, in addition to appearing as an expert witness before several Parliamentary committees on pharmaceutical regulation and policy.

Prior to arriving at Dalhousie, Mr. Herder was the Ewing Marion Kauffman Foundation Legal Research Fellow at New York University’s School of Law. He was a Law Clerk at the Federal Court of Canada and was admitted to the Law Society of Upper Canada. Mr. Herder holds a Master of the Science of Law degree from Stanford Law School as well as two law degrees from Dalhousie University.

Organizational Structure and Staff

Executive Director

The Executive Director is responsible for advising the Board and for the leadership and management of Staff.

Regulatory Affairs and Outreach

The Regulatory Affairs and Outreach Branch reviews the prices of patented medicines sold in Canada; ensures that patentees are fulfilling their filing obligations; encourages patentees to comply voluntarily with the PMPRB’s Guidelines; implements related compliance policies; and investigates complaints into the prices of patented medicines.

Policy and Economic Analysis

The Policy and Economic Analysis Branch develops policy and strategic advice; leads stakeholder consultations and makes recommendations on possible amendments to the PMPRB’s Guidelines; conducts research and analysis on the prices of medicines, pharmaceutical market developments, and R&D trends; and publishes studies aimed at providing F/P/T governments and other interested stakeholders with centralized, objective, and credible information in support of evidence-based policy.

Corporate Services

The Corporate Services Branch provides advice and services in relation to human resources management; facilities; procurement; health, safety and security; information technology; and information management. It coordinates activities pursuant to the Access to Information Act and the Privacy Act, and is responsible for strategic planning and reporting. It is also responsible for financial planning and reporting, accounting operations, audit and evaluation, and liaising with federal central agencies on these topics.

Board Secretariat

The Board Secretariat manages the Board’s meeting and hearing processes, including the official record of proceedings.

General Counsel

The General Counsel advises the PMPRB on legal matters, leads the legal team representing Staff in proceedings before the Board, and liaises with counsel for the Attorney General in PMPRB-related proceedings before federal and provincial courts.

Budget

In 2021-22, the PMPRB had a budget of $18.9 million and an approved staff level of 85 full-time equivalent employees.

Regulating Prices of Patented Medicines: Informing on PMPRB Regulatory Activities

Medical advancements have introduced many innovative new medicines to the Canadian marketplace to improve existing treatments and to treat conditions that previously had no pharmaceutical therapy. However, many of these new medicines come at a very high cost. Since 1987, pharmaceutical costs in Canada have grown at an average annual rate of 4.1%,^{Footnote 1} outpacing all other health care costs and growing at well over three times the pace of inflation. At 13.9% of total health care spending, pharmaceuticals now rank ahead of spending on physicians.^{Footnote 2} About 1 in 5 Canadians reports having no prescription medicine coverage and many more are under-insured or face high deductibles or co-pays. Almost 1 in 10 Canadians have had to forego filling a prescription medicine in the past year for reasons related to cost.^{Footnote 3}

The PMPRB protects the interests of Canadian consumers by ensuring that the prices of patented medicines sold in Canada are not excessive. It does this by reviewing the prices that patentees charge for each individual patented medicine and by ensuring that patentees reduce their prices and pay back excess revenues, where appropriate.

Reporting Requirements

By law, patentees must file information about the sale of their medicines in Canada. The Act and the Patented Medicines Regulations (Regulations) set out the information required and Staff reviews pricing information on an ongoing basis until all relevant patents have expired.

The Compendium of Policies, Guidelines and Procedures (Guidelines) details price tests and triage mechanisms used by Staff when it reviews and investigates the prices of patented medicines. The Guidelines are not binding and were developed in consultation with stakeholders, including the provincial and territorial Ministers of Health, consumer groups, and the pharmaceutical industry. When an investigation suggests that the price of a patented medicine is excessive, the patentee may volunteer to lower its price and/or refund its potential excess revenues through a Voluntary Compliance Undertaking (VCU). If the patentee chooses not to submit a VCU, the Chairperson may consider whether a hearing on the matter is in the public interest. If such a hearing is held before a panel composed of Board members (“Hearing Panel”) and that Hearing Panel concludes, after hearing all of the evidence in light of the factors set out in section 85 of the Act, that the patented medicine was priced excessively in any market, an order may be issued to the patentee requiring that (1) the price be reduced; and/or (2) that measures be taken to offset any excess revenues that may have been earned through sales of the patented medicine at an excessive price. Copies of the Act, the Regulations, and the Guidelines are available on the PMPRB’s website.

Failure to Report

Access to timely and accurate information regarding the sale of patented medicines is necessary for the PMPRB to fulfil its regulatory mandate. Therefore, patentees and former patentees are required to submit this information to the PMPRB. The information that must be submitted is set out in section 82 of the Act and in the Regulations. In 2021, two medicines were reported to the PMPRB for the first time despite being patented and sold prior to 2021 (see Table 2, Failure to Report the Sale of Patented Medicines).

Failure to File Price and Sales Data (Form 2)

Failure to file refers to the complete or partial failure of a patentee to file the information required by the Act and the Regulations to the PMPRB. There were no Board Orders issued for failure to file in 2021.

Table 2. Failure to Report the Sale of Patented Medicines

Scientific Review

Human Drug Advisory Panel

A scientific evaluation is done on all new patented medicines as part of the price review process. The PMPRB established the Human Drug Advisory Panel (HDAP) to provide advice to Staff. The HDAP conducts an evaluation to provide clinical context pertaining to the scientific information that is being considered by Staff. HDAP members review and evaluate the appropriate scientific information available, including any submission by a patentee about the proposed level of therapeutic improvement, the selection of comparator medicines, and comparable dosage regimens.

The HDAP evaluates the therapeutic benefit of new patented medicines according to the following definitions:

• Breakthrough: A medicine that is the first one sold in Canada to effectively treat a particular illness or effectively address a particular indication.
• Substantial Improvement: A medicine that, relative to other medicines sold in Canada, provides substantial improvement in therapeutic effects.
• Moderate Improvement: A medicine that, relative to other medicines sold in Canada, provides moderate improvement in therapeutic effects.
• Slight or No Improvement: A medicine that, relative to other medicines sold in Canada, provides slight or no improvement in therapeutic effects.

Figure 1 shows the distribution of new patented medicines introduced from 2012 to 2021 by their level of therapeutic benefit. The largest percentage of patented medicines (87%) introduced since 2012 were categorized as "Slight or No Improvement" in therapeutic benefit over existing therapies.^{Footnote 4}

The "Overall 2012–2021" bar represents the therapeutic benefit breakdown for all new patented medicines introduced from 2012 to 2021. The "Overall 2012–2021 Revenue Share" bar illustrates the revenue share by therapeutic benefit for all new patented medicines introduced from 2012 to 2021.

Price Review

The PMPRB reviews the average price (net of reported discounts and deductions) of each strength of each individual dosage form of each patented medicine. In most cases, this unit is consistent with the Drug Identification Number(s) (DIN, DINs) assigned by Health Canada at the time the medicine is approved for sale in Canada.

New Patented Medicines Reported to the PMPRB in 2021

For the purpose of this report, a new patented medicine in 2021 is defined as any patented medicine or new dosage form or strength of a patented medicine first sold in Canada, or previously sold but first patented, between December 1, 2020, and December 1, 2021.

There were 59 new patented medicines for human use reported as sold in 2021. Some are one or more strengths of a new active substance and others are new presentations of existing medicines. Of these 59 new patented medicines, one (1.7%) was sold in Canada prior to the issuance of the Canadian patent that brought it under the PMPRB's jurisdiction. Table 3 shows the year of first sale for this medicine.

Table 3. Number of New Patented Medicines for Human Use in 2021 by Year First Sold

The list of New Patented Medicines Reported to PMPRB is available on the PMPRB’s website. This list is updated yearly upon the release of the Annual Report and includes information on the status of the review (i.e., whether the price of the medicine is under review, within the Guidelines, under investigation, or subject to a VCU or Notice of Hearing). Figure 2 illustrates the number of new patented medicines for human use reported to the PMPRB from 1989 to 2021.

Of the 59 new patented medicines, the prices of 23 had been reviewed as of March 31, 2022:

• 12 were found to be within the thresholds set outin the Guidelines and, as such, did not trigger investigations; ^{Footnote 5}
• 3 were at a level that appeared to exceed the thresholds set out in the Guidelines by an amount that did not trigger investigations;
• 7 were at levels that appeared to exceed the thresholds set out in the Guidelines and resulted in investigations being commenced; and
• 1 was the subject of a Voluntary Compliance Undertaking.

For a complete list of the 59 new patented medicines and their status, see Appendix 2.

Price Review of Existing Patented Medicines for Human Use in 2021

For the purpose of this report, existing patented medicines include all patented medicines first sold and reported to the PMPRB prior to December 1, 2020.

At the time of this report, there were 1,118 existing patented medicines:

• 771 were priced within the thresholds set out in the Guidelines and, as such, did not trigger investigations;
• 162 had prices that appeared to exceed the thresholds set out in the Guidelines by an amount that did not trigger investigations;
• 162 were the subject of investigations;
• 7 were under review;
• 11 were the subject of a Voluntary Compliance Undertaking;
• 4 were the subject of a hearing; and
• 1 was subject to a Stayed Price Reduction Order (Stay Order).

Table 4 provides a summary of the status of the price review of the new and existing patented medicines for human use in 2021.

Table 4. Patented Medicines for Human Use Sold in 2021—Status of Price Review as of March 31, 2022

Update From the 2020 Annual Report

• 5 of the patented medicines for human use that were reported as under review in the 2020 Annual Report remain under review.

• 41 of the 166 investigations reported in the 2020 Annual Report resulted in one of the following:
  • the closure of the investigation where it was concluded the price was within the thresholds set out in the Guidelines;
  • a VCU by the patentee to reduce the price and offset excess revenues through a payment and/or a reduction in the price of another patented medicine (see "Voluntary Compliance Undertakings"); or
  • a public hearing to determine whether the price was excessive, including any remedial Order determined by the Board (see “Hearings”).

Patented Over-the-Counter Medicines, Patented Generic Medicines, and Patented Medicines For Veterinary Use

Staff only review the prices of patented over-the counter medicines, patented generic medicines, and patented veterinary medicines when a complaint of excessive pricing has been received. No such complaints were received in 2021.

Voluntary Compliance Undertakings and Hearings

Voluntary Compliance Undertakings

A VCU is a promise by a patentee to reduce its price(s) and/or offset any potential excess revenues from the sale of a patented medicine that is subject to an investigation. The Guidelines set out procedures for patentees to submit a VCU. The consideration of a VCU is an administrative procedure and does not constitute an admission or determination by the PMPRB that the price submitted by the patentee, or used to calculate a revenue offset, is not excessive. However, the acceptance of a VCU by the Chairperson will result in the closure of an investigation.

In 2021, the Chairperson approved the closure of investigations based on the receipt of two VCUs. In addition to price reductions for certain medicines, potential excess revenues totaling $38,309.14 were offset by way of a payment to the Government of Canada.

As of May 31, 2022, the Chairperson had approved the closure of five investigations after the receipt of two additional VCUs that resulted in price reductions.

Table 5. Voluntary Compliance Undertakings in 2021 up to May 31, 2022

Hearings

The PMPRB holds hearings into two types of matters:

• excessive pricing; and
• failure to file–jurisdiction.

Excessive Pricing

When an investigation into the price of a patented medicine is completed, and the matter is not resolved, the Executive Director may submit a report to the Chairperson. The Chairperson may decide to issue a Notice of Hearing if he or she is of the opinion that it is in the public interest. During a hearing, submissions and evidence from the parties are heard by a Hearing Panel consisting of at least two Board members. The Hearing Panel determines whether a patented medicine is being, or has been, sold at an excessive price in any market in Canada by taking into consideration the available information relating to the factors set out in section 85 of the Act. If the Hearing Panel finds the price is excessive, it can issue an order to reduce the maximum ceiling price of the patented medicine in question (or of another patented medicine of the patentee) and/or to offset revenues received as a result of the excessive price. Judicial review of Board decisions can be sought in the Federal Court of Canada.

In January 2019, the PMPRB announced it would hold a public hearing in the matter of the price of the patented medicine cysteamine bitartrate sold under the trade name Procysbi by Horizon Therapeutics Canada. The purpose of this hearing was to determine whether the medicine has been, or is being, sold in any market in Canada at a price that, in the Board’s opinion, is or was excessive: and, if so, what order, if any, should be made to remedy the excessive pricing. The hearing was held over several weeks in late 2020-early 2021 and a decision on the matter is pending.

Failure to File–Jurisdiction

When it is the opinion of Staff that a patentee has failed or refused to provide the PMPRB with the pricing, sales, or revenues and like information required by law, the Executive Director may submit a report to the Chairperson. The Chairperson may decide to issue a Notice of Hearing if he or she is of the opinion that it is in the public interest to hold a hearing to determine whether the patentee has, in fact, breached the reporting requirements of the Act and Regulations. If the Hearing Panel finds, as the result of a public hearing, that the patentee has failed to report the required information, the Hearing Panel can order the patentee to file the required pricing and sales information.

There were no new failure to file hearings as of March 31, 2022.

On May 7, 2020, the Board issued its decision on re-determination on its decision dated December 19, 2016, whereby the Board originally found that Canadian Patent No. 2,478,237 pertains to the patented medicine adapalene sold under the trade name Differin and ordered Galderma to file the required information for the period between January 1, 2010, and March 14, 2016. The Board’s decision on redetermination again ordered Galderma to file the required information for the period between January 1, 2010, and March 14, 2016. On August 11, 2020, Galderma Canada Inc. filed an application for judicial review of the Board’s May 7, 2020 decision on redetermination (T-906-20).

Summary

Excess revenues totaling $38,309.14 were offset by payments to the Government of Canada through VCUs and Board Orders in 2021 and up to May 31, 2022.

Since 1993, 162 VCUs have been accepted. In addition, 31 notices of hearing have been issued, 14 of which were resolved through settlements prior to the hearing on the merits and 17 of which were subject to a full public hearing on the merits (10 related to allegations of excessive pricing and 7 related to allegations of failure to file). These measures resulted in price reductions and the offset of excess revenues by additional price reductions and/or payments to the Government of Canada. Over $210 million has been collected through VCUs, settlements, and Board Orders through payments to the Government of Canada.

Matters Before the Federal Court, Federal Court of Appeal, and Supreme Court of Canada or Other Courts

A-237-19: on October 20, 2017, Alexion Pharmaceuticals Inc. filed an application for judicial review of the Board’s decision dated September 20, 2017, in respect of its finding that the patented medicine eculizumab sold under the trade name Soliris was being sold at an excessive price in Canada and ordering Alexion to lower its price (currently stayed) and make an excess revenue payment of $4,245,329.60. The Board’s decision was found to be reasonable by the Federal Court via a decision dated May 23, 2019. Alexion has appealed the Federal Court’s decision in the Federal Court of Appeal. The Federal Court of Appeal heard the appeal of the Board Panel’s decision in October 2020. The Federal Court of Appeal granted Alexion’s appeal on July 29, 2021, and remitted the matter to the Board for redetermination. On June 21, 2022, the matter was settled through a Board order granting a discontinuation of the redetermination and related settlement agreement.

T-906-20: on January 18, 2017, Galderma Canada Inc. filed an application for judicial review of the Board’s decision dated December 19, 2016. In that decision the Board found that Canadian Patent No. 2,478,237 pertains to the patented medicine adapalene sold under the trade name Differin and ordered Galderma to file the required information for the period between January 1, 2010, and March 14, 2016. The Federal Court granted Galderma’s judicial review application on November 9, 2017, and quashed the Board’s decision. On November 21, 2017, the Attorney General appealed the Federal Court’s grant of the judicial review application. On June 28, 2019, the Federal Court of Appeal granted the appeal and issued its decision sending the matter back to the Board for redetermination. The Board’s decision on redetermination, issued on May 7, 2020, again ordered Galderma to file the required information for the period between January 1, 2010, and March 14, 2016. On August 11, 2020, Galderma Canada Inc. filed an application for judicial review of the Board’s May 7, 2020, decision on redetermination (T-906-20). The Board Panel’s redetermination in this matter is under judicial review by the Federal Court.

T-1419-20: on November 23, 2020, Innovative Medicines Canada and nineteen individual pharmaceutical companies brought an application in Federal Court for judicial review of the PMPRB’s decision to issue new Guidelines on October 23, 2020 (then slated to come into effect in July 1, 2021). The application seeks a declaration that the new Guidelines are ultra vires the Patent Act and an order quashing and setting aside the decision of the PMPRB to issue the new Guidelines. The hearing on the matter was scheduled for May 2-3, 2022, but was subsequently adjourned.

There are no PMPRB-related matters before the Supreme Court of Canada.

Two challenges related to PMPRB legislation were commenced in 2019:

T-1465-19: on September 6, 2019, Innovative Medicines Canada (I.M.C.) and sixteen individual pharmaceutical companies brought an application in Federal Court to judicially review s. 4 (new factors), s. 6 and Schedule (new basket of countries), and ss. 3(4) (new net price calculation) of the 2019 Amendments to the Patented Medicines Regulations on the basis that they were ultra vires the regulation-making power contained in the Patent Act. The Federal Court issued its decision on June 29, 2020, and held that the amendments in s 4, s. 6 and the Schedule are intra vires the Patent Act, but that the amendment in ss. 3(4) is not. On September 10, 2020, I.M.C. and the individual pharmaceutical companies filed a Notice of Appeal with respect to the Federal Court decision. The Attorney General of Canada has also filed a cross-appeal in respect of the invalidated amendments. This appeal is currently pending.

No. 500-17-109270-192. Merck et al. v Canada (Attorney General): on August 22, 2019, six individual pharmaceutical companies brought an application for judicial review in Quebec Superior Court challenging the constitutionality of ss. 79-103 of the Patent Act. In its decision issued on December 18, 2020, the Quebec Superior Court found the amendments to subsections 4(4)a) and 4(4)b) that would update the net price calculation to require patentees to include discounts and rebates provided to third parties unconstitutional and of no force or effect. The Court found the rest of the Regulations, including the other amendments, and the relevant sections of the Patent Act constitutionally valid. The pharmaceutical company applicants filed a Notice of Appeal with respect to the Superior Court of Quebec’s decision on January 25, 2021 and the Attorney General of Canada has also filed a cross-appeal in respect of the invalidated amendments. The Quebec Court of Appeal granted the appeal in part and dismissed the cross-appeal on February 18, 2022.

Table 6.  Status of Board Proceedings in 2021 up to July 4, 2022

Key Pharmaceutical Trends: More Expensive Medicines Continue to Influence Sales

Pharmaceutical spending is influenced by many factors, including price, utilization, the entry of newer, more expensive medicines, and the loss of market exclusivity for older patented medicines. In 2021, there was a sizable increase in the volume of patented medicines sold, as well as a moderate rise in the sales of higher-cost medicines. At the same time, some key top-selling medicines stopped reporting sales to the PMPRB, and as a result, the total spending on patented medicines decreased slightly by 1.7%. Canadian list prices of patented medicines remained among the highest in the Organisation for Economic Co-operation and Development (OECD), ranking third, well behind the US and just marginally lower than Switzerland.

The PMPRB is responsible for reporting on trends in pharmaceutical sales and pricing for all medicines, patented and non-patented, and for reporting research and development spending by patentees.

Under the Regulations, patentees are required to submit detailed information on their sales of patented medicines, including quantities sold, gross ("list") and net prices, and net revenues. The PMPRB uses this information to analyze trends in the sales, prices,^{Footnote 6} and use of patented medicines.^{Footnote 7} This section provides key trends, including analyses of Canadian national, public, and private payer markets for all medicines. Note that any reference to sales in this section should be interpreted as sales revenues unless otherwise noted.

Trends in Sales of Patented Medicines

Canadians spend much more on patented medicines today than they did a decade ago. Over the last five years, sales of these medicines have grown by an average of 2.2% per year, reaching $17.4 billion in 2021. This section looks at the most important factors driving the change in sales revenues from 2020 to 2021 and compares them to trends from previous years.

Trends in Sales Revenues

Between 2020 and 2021, there was a modest $297 million (1.7%) decrease in the sales of patented medicines. Figure 3 reports on trends in the sales of patented medicines from 1990 to 2021. While there has been a ten-fold increase in annual sales over the last 30 years, the year-over-year rate of change within that period has varied. This trend is highlighted by the five-year compound annual growth rate given in Figure 3(b).

Figure 3(a) gives the sales of patented medicines as a share of overall medicine sales. This share reached a peak of 72.7% in 2003. In 2021, patented medicines accounted for 51.0% of the sales of all medicines in Canada.

The trends in sales per capita and sales as a percentage of the gross domestic product (GDP) show the increasing importance of patented medicines in the Canadian economy. Overall, per capita sales of patented medicines rose from $61.60 in 1990 to $456.14 in 2021, while sales as a percentage of GDP rose from 0.25% in 1990 to 0.76% in 2021 [Figure 3(c)].

To highlight the continuing impact of patented medicines, Figures 3(a) and 3(b) also provide results for “All PMPRB Medicines”. This broader category includes all medicines, current and historic, that ever reported sales to the PMPRB. Historically, medicines have experienced a substantial decrease in market share upon loss of patent protection; however, that same effect has not been observed in a number of the medicines that have stopped reporting to the PMPRB in recent years.

Sales for All PMPRB Medicines rose by 4.0% in 2021, reaching $23.5 billion or 68% of the sales of all medicines in Canada. Medicines that previously reported to the PMPRB accounted for estimated sales of $6.1 billion, or 26.0% of all sales. This is considerably more than a decade ago when medicines that formerly reported to the PMPRB accounted for $0.9 billion, or 4.2% of all sales.

A complete table of the data presented in Figure 3 for patented medicines currently reporting to the PMPRB is included in Appendix 3.

Figure 3. Trends in Patented Medicine Sales, 1990 to 2021

Drivers of the Growth in Sales Revenues

The growth in the sales revenues of patented medicines is influenced by changes in several key factors:

• Volume effect: changes in the quantity or amount of patented medicines sold.
  • This effect focuses on established medicines that were on the market for the period analyzed. Increases in the population, changes in demographic composition (e.g., shifts in the age distribution), increases in the incidence of disease, and changes in prescribing practices are among the factors that may contribute to this effect.
• Mix effect: shifts in use between lower- and higher-cost patented medicines.
  • This effect applies to both new medicines and those that were already on the market. The switch to new higher-priced medicines, the use of new medicines that treat conditions for which no effective treatment previously existed, and changes in prescribing practices are among the factors that may contribute to this change.
• Exiting effect: previously patented medicines that have stopped reporting sales revenues to the PMPRB or are no longer sold in Canada.
• Loss-of-exclusivity effect: medicines that have lost market exclusivity and are open to some level of generic competition but are still patented.
• Price effect: changes in the prices of existing patented medicines.
  • This effect applies to both increases and decreases in the prices of patented medicines over the time period analyzed.

Some factors, such as the mix effect, will generally put an upward pressure on sales, while others, such as the loss-of-exclusivity effect, have the opposite effect.

Figure 5 summarizes the major factors that drove the year-by-year change in patented medicine sales^{Footnote 8} between 2016 and 2021 (a) in absolute dollar amounts, and (b) as proportions of the overall annual change in sales. In addition to the standard sales drivers, the emergence of novel medicines that have a significant influence on sales may be monitored as a separate effect. For example, direct acting antiviral (DAA) treatments for hepatitis C are presented separately to show the continued impact of their large-scale entry onto the market in 2014 and 2015. As the influence of the DAA treatments on expenditures has since stabilized, this will be the last year the PMPRB will report their effect separately. Please consult previous reports to view the full historical data.

Figure 5. Key Drivers of Change in the Sales of Patented Medicines, 2016 to 2021

Changes in the prices of patented medicines have played a minor role in the growth in patented medicine sales over the last several years, suggesting that, on average, the prices of existing patented medicines are fairly stable. However, this does not reflect the overall increases in treatment costs due to the entry of newer, higher-priced patented medicines, the impact of which is captured by the mix effect.

The shift to new higher-cost patented medicines has been a major driver of sales growth in recent years. In 2021, the use of higher-cost patented medicines other than DAAs put an upward pressure on expenditures of $1.8 billion (push effect of 10.0%). While growth was observed in many therapeutic areas, the increase in sales of “antineoplastic and immunomodulating agents” exceeded that of any other class. These medicines, which include oncology treatments, accounted for more than 44% of all patented medicine sales in 2021. Results by therapeutic class are discussed in further detail in the upcoming sections.

Counterbalancing the upward sales pressure from the mix effect, there was a moderate market segment shift as some high-selling medicines stopped reporting their sales to the PMPRB. The exiting effect accounted for a pull effect of $1.54 billion (-8.6%) on sales in 2021. Figure 6 illustrates the change in the impact of the exiting effect since 2016 and identifies the 10 top-selling medicines that stopped reporting to the PMPRB in 2021.

Newer Medicines Driving Sales Revenues

Figure 8 breaks down the 2021 sales of patented medicines according to the year in which the medicine was first issued a Notice of Compliance (NOC) by Health Canada. Throughout the latter part of the 1990s and early 2000s, sales growth was largely driven by a succession of new “blockbuster” medicines that ultimately achieved very high sales volumes. As the patents for these medicines expired, their share of sales gradually decreased.

The introduction of new higher-cost medicines such as biologics, oncology medicines, and treatments for hepatitis C has accounted for a growing share of sales in recent years. Humira, which was issued an NOC in 2004, was the top-selling medicine in 2021, accounting for $887.8 million (5.1%) of total patented medicine sales (Table 8). Similarly, many new medicines introduced over the last decade also made the list of top-sellers in 2021, including Eylea (2013), Imbruvica (2014), Jardiance (2015), and Keytruda (2016).

Higher-Cost Medicines Driving Sales Revenues

Over the last decade, there has been a notable shift in pharmaceutical development toward more specialized medicines, with an increasing number of higher-cost medicines entering the market and accounting for a substantial share of sales.

In 2021, the trend in the shift to new or higher-cost medicines continued to put an upward pressure on overall patented medicine sales. The top 10 medicines contributed $800 million to the increase in sales (Table 7). Most of these medicines had an average annual treatment cost greater than $10,000.^{Footnote 9}

While Table 7 reports the top 10 medicines contributing to the increase in the sales of patented medicines, Table 8 compares the 10 top-selling patented medicines in 2012 and 2021, along with their treatment costs. The shift towards higher-cost medicines is also evident in the list of top-selling patented medicines. Over the last 10 years, the average treatment cost of the top 10 medicines increased from $9,365 in 2012 to $23,121 in 2021. In 2021, four of the top 10 medicines were biologics, with annual treatment costs ranging from $9,284 to $46,848, while two of the top-selling non-biologic medicines in 2021 had an annual treatment cost exceeding $60,000. With collective annual sales of $4.7 billion, these 10 medicines accounted for over one quarter of the total sales for all patented medicines in 2021.

Figure 9 details the trend in the treatment costs of patented medicines since 2006. For many years, the majority of the 20 top-selling patented medicines had annual treatment costs under $1,000, but in recent years, costs for the top-sellers have soared into the thousands or tens of thousands of dollars. In 2021, the top 20 medicines, which accounted for 39.6% of patented medicine sales, had a median annual treatment cost of $42,616, nearly 60 times the median in 2012.

Figure 10 shows that high-cost medicines represent an increasingly significant share of the total sales of patented medicines, rising steeply from 17.3% in 2012 to 57.1% in 2021. This growth was evident in all ranges of annual treatment costs ($10,000 to $20,000; $20,000 to $50,000; $50,000 to $100,000; and $100,000 and over), with medicines in the highest cost band climbing from 0.6% to 5.0% of sales over the same period. Despite the sharp increase in their share of costs, less than 1% of the population use these medicines.

High-cost treatments continue to dominate the pharmaceutical landscape

The 20 top-selling medicines in 2021 had a median annual treatment cost of $42,616, nearly 60x the median in 2012.

High-cost medicines continue to account for an increasing share of all patented medicine sales

Over the last decade, the number of medicines with average annual treatment costs of over $100,000 more than tripled from 9 to 29. These medicines now account for 5.0% of all patented medicine sales.

The shift toward higher-cost treatments is especially evident in oncology medicines. Figure 12 shows the share of total sales for patented oncology medicines by treatment cost based on a standard 28-day treatment regimen.^{Footnote 10}

The number of patented oncology medicines with 28-day treatment costs over $7,500 rose from 10 to 58 between 2012 and 2021, now accounting for 16.8% of total patented medicine sales.

As a result, the average treatment cost for oncology medicines in 2021 was $13,478, double the average cost in 2015 and close to four times that in 2006.

Many treatment regimens use multiple medicines resulting in even higher treatment costs per beneficiary. The dual pressures of increasing average treatment costs and growing utilization mean that this therapeutic area is likely to continue to grow as a proportion of patented medicine sales.

Top Therapeutic Classes Driving Sales Revenues

“Antineoplastics and immunomodulating agents”, “alimentary tract and metabolism”, and “general antiinfectives for systemic use and antiparasitic products” were the three top-selling therapeutic classes in 2021, accounting for close to two thirds of all patented medicine sales. The “antineoplastics and immunomodulating agents” class experienced a 7.3% increase in sales between 2020 and 2021 while “respiratory system products” had the greatest year-over-year decrease at -45.3%.

Figure 14 breaks down the sales of patented medicines in Canada by therapeutic class using level 1 of the World Health Organization’s (WHO) Anatomical Therapeutic Chemical (ATC) system.^{Footnote 11} It compares the distribution of sales by therapeutic class in 2012 and 2021 and provides the rates of growth in sales for each class from 2020 to 2021.

The “antineoplastics and immunomodulating agents” class accounted for a much larger share of sales in 2021 (44.2%) than in 2012 (25.4%), as more oncology medicines entered the market over the past decade, many of which were high-cost. By contrast, the share of sales held by “cardiovascular system” medicines decreased dramatically from 10.5% to 2.2% over the same period, continuing the trend observed in previous years.