Annual Report 2022

Statistical Highlights 2022

Price Review Mandate

• 1,138 patented medicines for human use were reported to the PMPRB, including 69 new medicines.
• 8 Voluntary Compliance Undertakings (VCUs) were accepted as of December 31, 2022.
• More than $31.2 million in excess revenues and potential excess revenues were offset by way of payments to the Government of Canada through VCUs, settlements, and Board Orders.

Reporting Mandate

Sales Trends:

• Sales of patented medicines in Canada were $18.4 billion in 2022, an increase of 5.7% from the previous year.
• Patented medicines accounted for approximately 49.0% of the sales of all medicines in Canada in 2022.

Price Trends:

• The Consumer Price Index rose by 6.8%, while the national average transaction price for patented medicines increased by 0.8%.
• Canadian list price ratios rose from third to second highest among the 31 Organisation for Economic Co-operation and Development (OECD) countries, behind only the US.

Research and Development

R&D–to–Sales Ratios Decreased in 2022:

• 3.1% for all rights holders, a decrease from 3.4% in 2021.
• 3.2% for Innovative Medicines Canada members, a decrease from 3.5% in 2021.

R&D Expenditures:

• $914.0 million in total R&D expenditures were reported by rights holders in Canada, a decrease of 1.0% over 2021.
• $748.6 million in R&D expenditures were reported by Innovative Medicines Canada members, an increase of 1.7% over 2021.

Letter to the Minister

24 November 2023

The Honourable Mark Holland, 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, 2022.

Yours very truly,

Thomas J. Digby
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.

With the coming-into-force of Health Canada’s amendments to the Patented Medicines Regulations on July 1, 2022, the PMPRB has been developing new Guidelines to implement these regulatory changes into the Board’s operations. The Board acknowledges these regulatory changes reflect important court decisions, including by the Quebec Court of Appeal [Merck Canada Inc c Procureur général du Canada, 2022 QCA 240] and the Federal Court of Appeal [Alexion Pharmaceuticals v Canada (Attorney General), 2021 FCA 157; Innovative Medicines Canada v Canada (Attorney General), 2022 FCA 210].

The regular operations of the Board have continued to provide value for Canadian payers. In the fall of 2022, the Board’s Hearing Panel issued a decision that found that the price of Procysbi (cysteamine bitartrate) was excessive under section 83 and 85 of the Patent Act, directing Horizon Therapeutics Canada to pay just over $22 million to the Receiver General of Canada. This brought the total excess revenues collected through Voluntary Compliance Undertakings (VCUs), settlements, and Board Orders in 2022 to more than $31 million.

Analytical studies conducted through the PMPRB’s reporting mandate under the banner of the National Prescription Drug Utilization Information System (NPDUIS) initiative continue to show the vast 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 1.8% per year, reaching $18.4 billion in 2022. High-cost medicines now account for 57.5% of these sales. In 2022 the 20 top-selling patented medicines in Canada, which accounted for 37.7% of total patented medicine sales, had a median treatment cost of $21,345, compared to just $803 in 2013.

Significantly, in 2022, the average list price for medicines in Canada rose from third to second highest among the 31 countries of the Organisation for Economic Co-operation and Development (OECD), behind only the US. The average list price is above all our PMPRB11 comparator countries, as may be seen in the average foreign–to–Canadian price ratios calculated using external data. It is acknowledged that the new Patented Medicines Regulations took effect at the mid–point of 2022, and are not expected to impact average list price ratios until later reporting cycles.

In early 2023, Douglas Clark, the PMPRB’s longtime Executive Director, announced his retirement after nearly a decade with the organization. On behalf of the PMPRB, I offer our thanks for his years of dedication and commitment. As we move forward under new leadership, the PMPRB remains committed to serving Canadians through the responsible and efficient use of our regulatory powers, in collaboration with and in support of our many stakeholders and partners in the Canadian healthcare system.

Thomas J. Digby
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 price review and reporting mandate. Through its price review 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 rights holders. 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. In Quebec, this evaluation process is conducted by INESSS.

The PMPRB is composed of up to five Board Members, Governor–in–Council appointees who are assisted in their work by public servants (Staff).

Jurisdiction

Price Review

The PMPRB reviews the price at which rights holders (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 review the prices of non-patented medicines (e.g., generics).

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 rights holder 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 rights holders (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, rights holders are required to file price and sales information at introduction and, thereafter, until all patents pertaining have expired. Rights holders 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 rights holders charge for each individual strength and form of a patented medicine. If the price of a patented medicine appears to be potentially excessive, the rights holder 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 rights holder. 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 rights holder 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 rights holders.

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.

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) 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

Chairperson

Thomas J. Digby

Thomas Digby was appointed Chairperson of the Board on February 1, 2023.

Thomas Digby is a lawyer with more than 25 years’ experience in Canadian and US intellectual property (IP) law, in the field of pharmaceuticals. He has worked closely with diverse biotech start-ups, their venture investors, and, for 10 years, with the global pharmaceutical leader, Novartis.

Thomas attended Queen’s University (BSc [Hons], 1987) and Dalhousie University (MSc [Biochem], 1990), and graduated from Dalhousie Law School (now Schulich School of Law) (JD, 1992). He is licensed to practice in both Canada and the United States (Ontario [1994], New York [1995], Massachusetts [1995], British Columbia [1998]). He was formerly registered to practice before the United States Patent and Trademark Office (2005-2012).

After articling with Blakes in Toronto, Thomas worked with a variety of biotech start-ups including Visible Genetics, Inex Pharmaceuticals, and Xenon Pharmaceuticals. At Inex, he provided IP strategy for the discovery efforts that led to the lipid-nanoparticle delivery system used in current COVID mRNA vaccines.

Thomas joined Novartis at its research headquarters in Cambridge MA (2005-2012), and later moved to the head office in Basel, Switzerland (2012-2015). At Novartis, he specialized in global transactions, led a multi-country IP enforcement program, supported the global tax team and the Novartis Venture Fund, and was regularly involved with the IP strategy of the generic (Sandoz) and innovator (Novartis) divisions.

In 2016, Thomas returned to Vancouver with his family, where he is a sole practitioner supporting the IP strategy of a small number of Canadian and US biotech clients. Among other community roles, he is a Commissioner of the Vancouver Board of Parks and Recreation.

Vice-Chairperson

Anie Perrault

Anie Perrault was appointed Vice-Chairperson of the Board on August 15, 2023.

Ms. Anie Perrault is a lawyer by training (University of Ottawa – 1992; Barreau 1993) with more than 30 years of professional experience in the public and private sectors. Her career has focused on communications and public affairs related to genomic research and biotechnology and she has held several strategic positions at a national level in this field. She was Director General of BIOQuébec from 2013 to 2022 and Vice President, Communications of Genome Canada from 2001 to 2006.

Named Sun Life Leadership – Exceptional Woman finalist in the prestigious Les Mercuriades 2021 competition, Ms. Perrault is also an accredited mediator from the Institute of Mediation and Arbitration of Quebec. Ms. Perrault was a Member (administrative judge) of the Canadian Human Rights Tribunal from 2015 to 2021, and continues to act as a mediator there today.

In 2013, Ms. Perrault received the title of Certified Corporate Administrator from the College of Corporate Administrators at Laval University. She is president of the board of directors of Génome Québec. She has also served on the board of directors of ACCESSA since 2020. She was a member of the boards of the Jeanne-Mance Foundation from 2016 to 2022, Loto-Québec from 2011 to 2021 and the University of Sherbrooke from 2016 to 2019.

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.

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 rights holders are fulfilling their filing obligations; encourages rights holders to comply voluntarily with the PMPRB’s Guidelines; implements related 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 2022-23, the PMPRB had a budget of $17.0 million and an approved staff level of 84 full–time equivalent employees.

Monitoring Prices of Patented Medicines: Informing on PMPRB Price Review 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 6.6%,^{Footnote 1} outpacing most other health care costs and growing at approximately three times the rate of inflation over the same period. At 13.6 % of total health care spending, pharmaceutical expenditure is level with spending on physicians.^{Footnote 2} In 2021, about 1 in 5 Canadians reported having no prescription medicine coverage while many more were under-insured or faced high deductibles or co-pays. As a result, almost 1 in 10 Canadians had to forego filling a prescription for reasons related to cost.^{Footnote 3}

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

Reporting Requirements

By law, rights holders 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. When the review of the information filed by rights holders suggests that the price of a patented medicine may be excessive, the rights holder is given an opportunity to voluntarily lower its prices and/or refund its potential excess revenues through a Voluntary Compliance Undertaking (VCU). If the rights holder 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 rights holder requiring that (1) the maximum ceiling price of the medicine be reduced to a non-excessive level; 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.

Amending Regulations to the Patent Act were published in the Canada Gazette, Part II, moving forward with the implementation of a new basket of comparator countries and reduced reporting requirements for those medicines at lowest risk of excessive pricing, which came into force on July 1, 2022. The composition of reference countries moved from the previous seven (PMPRB7) to a broader group of eleven countries (PMPRB11) by removing the United States and Switzerland and adding six others (Australia, Belgium, Japan, Netherlands, Norway, and Spain).

The Compendium of Policies, Guidelines and Procedures details price tests and triage mechanisms used by Staff up to July 1, 2022, when it reviewed and investigated the prices of patented medicines. The Board is in the process of developing new Guidelines and until new Guidelines are implemented, Interim Guidance issued by the Board on August 18, 2022, is in operation. Guidelines are not binding and are developed in consultation with stakeholders, including the provincial and territorial Ministers of Health, consumer groups, and the pharmaceutical industry. 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 price review mandate. Therefore, rights holders and former rights holders are required to submit this information to the PMPRB within the timelines set out in the legislation. The information that must be submitted and related deadlines are set out in section 82 of the Act and in the Regulations. In 2022, two medicines were reported to the PMPRB for the first time despite being patented and sold prior to 2022 (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 rights holder 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 2022.

Table 2. Failure to Report the Sale of Patented Medicines

Scientific Review

Human Drug Advisory Panel

Under the Guidelines, which were operational until July 1, 2022, a scientific evaluation was done on all new patented medicines as part of the price review process. The PMPRB established the Human Drug Advisory Panel (HDAP) to provide recommendations on the categorization of patented medicines to Staff. The HDAP conducted an evaluation to provide clinical context pertaining to the scientific information that was being considered by Staff. HDAP members reviewed and evaluated the appropriate scientific information available, including any submission by a rights holder about the proposed level of therapeutic improvement, the selection of comparator medicines, and comparable dosage regimens.

The HDAP provided recommendations on 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 2013 to 2022 by their level of therapeutic benefit. The largest percentage of patented medicines (78.6%) introduced since 2013 were categorized as "Slight or No Improvement” in therapeutic benefit over existing therapies.^{Footnote 4}

The "Overall 2013–2022" bar represents the therapeutic benefit breakdown for all new patented medicines introduced from 2013 to 2022. The "Overall 2013–2022 Revenue Share" bar illustrates the revenue share by therapeutic benefit for all new patented medicines introduced from 2013 to 2022.

As per the Interim Guidance issued by the Board on August 18, 2022, patented medicines without a maximum average potential price or non-excessive average price as of July 1, 2022, were not subject to price reviews by PMPRB Staff and are reported as "under review".

Price Review

The PMPRB reviews the average price (net of reported discounts and deductions) and the list price 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) (DINs) assigned by Health Canada at the time the medicine is approved for sale in Canada.

New Patented Medicines Reported to the PMPRB in 2022

For the purpose of this report, a new patented medicine in 2022 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, 2021, and December 1, 2022.

There were 69 new patented medicines for human use reported as sold in 2022. Some are one or more strengths of a new active substance and others are new presentations of existing medicines. Of these 69 new patented medicines, six (8.7%) were 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 these medicines.

Table 3. Number of New Patented Medicines for Human Use in 2022 by Year First Sold

Figure 2 illustrates the number of new patented medicines for human use reported to the PMPRB from 1989 to 2022.

Price Review of Existing Patented Medicines for Human Use in 2022

For the purpose of this report, existing patented medicines include all patented medicines first sold and reported to the PMPRB prior to December 1, 2021

At the time of this report, there were 1,069 existing patented medicines:

• 819 were not the subject of investigations;
• 197 were the subject of investigations;
• 36 were under review;
• 14 were the subject of a Voluntary Compliance Undertaking;
• 2 were subject to Board Order; and
• 1 was subject to a Settlement Agreement and Order.

Table 4 provides a summary of the status of the price review of the new and existing patented medicines for human use in 2022.

Table 4. Patented Medicines for Human Use Sold in 2022—Status of Price Review as of March 31, 2023

Update From the 2021 Annual Report

• 22 of the patented medicines for human use that were reported as under review in the 2021 Annual Report remain under review.

• 56 of the 169 investigations reported in the 2021 Annual Report resulted in one of the following:
  • the closure of the investigation;
  • a VCU by the rights holder to reduce the price and offset potential 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

The reduced reporting obligations for medicines with lowest risk of excessive pricing (i.e., veterinary, over-the-counter, and certain "generic" medicines) came into force on July 1, 2022, as provided for in the Amending Regulations. 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 complaint-based investigation was undertaken in 2022.

Certificates of Supplemental Protection

Amendments made to the Patented Medicines section of the Act, published in the Canada Gazette, which came into force on June 30, 2021, extended the PMPRB’s jurisdiction to medicines that are protected by a Certificate of Supplementary Protection (CSP). A CSP gives the certificate holder the same legal rights given by the patent and extends patent protection for a maximum period of two years. There were 58 CSPs reported to the PMPRB in 2022, with expiration dates ranging from 2024 to 2037. Each patent that had their duration extended through a CSP can be linked to multiple patented medicines; in total, there are 144 patented medicines linked to these 58 CSPs.

Voluntary Compliance Undertakings and Hearings

Voluntary Compliance Undertakings

A VCU is a promise by a rights holder 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 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 rights holder, 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 2022, the Chairperson approved the closure of investigations based on the receipt of eight VCUs. In addition to price reductions for certain medicines, potential excess revenues totaling $921,189.80 were offset by way of a payment to the Government of Canada.

No additional VCUs met the criteria for inclusion as of May 31, 2023.

Table 5. Voluntary Compliance Undertakings in 2022 up to May 31, 2023

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 price of the patented medicine in question (or of another patented medicine of the rights holder) 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 in September 2022, a decision was issued by the Hearing Panel that found that the price of Procysbi was excessive under section 83 and 85 of the Patent Act. On October 13, 2022, the Board ordered Horizon to pay $22,028,977.26 to the Receiver General of Canada within 30 days of the order date. This was coupled with an order that the ceiling price of Procysbi be reduced to a non-excessive level.

Failure to File–Jurisdiction

When it appears that a rights holder 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 rights holder 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 rights holder has failed to report the required information, the Hearing Panel can order the rights holder to file the required pricing and sales information.

There were no new failure to file hearings as of March 31, 2023.

On May 7, 2020, the Board issued its decision on redetermination 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), which is still pending.

Summary

Excess revenues and potential excess revenues totaling $31,278,774.47 were offset by payments to the Government of Canada through VCUs, settlements, and Board Orders in 2022 and up to May 31, 2023.

Since 1993, 170 VCUs have led to investigation closures. 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 or potential excess revenues by additional price reductions and/or payments to the Government of Canada. Over $241 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 19 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 sought 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 matter was discontinued in August of 2022.

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

One judgment was rendered on a challenge related to PMPRB legislation that commenced in 2019:

T-1465-19: on September 6, 2019, Innovative Medicines Canada (IMC) 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, IMC and the individual pharmaceutical companies filed a Notice of Appeal (A-215-20) with respect to the Federal Court decision. The Attorney General of Canada also filed a cross-appeal in respect of the invalidated amendments. Judgement on the matter was rendered on December 5, 2022, with the FCA dismissing the appellant’s challenge on the change of the list of comparator countries, and not rendering a decision on additional issues which had been rendered moot.

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 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 2022 up to May 31, 2023

Key Pharmaceutical Trends: Higher-Cost Medicines Continue to Influence Sales

Pharmaceutical spending is influenced by many factors, including price, utilization, the entry of newer, higher-cost medicines, and the loss of market exclusivity for older patented medicines. In 2022, 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, resulting in an overall increase in total spending of 5.7%. Canadian list prices of patented medicines remained among the highest in the Organisation for Economic Co-operation and Development (OECD), ranking second, behind only the US.

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 rights holders.

Under the Regulations, rights holders 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 5} and use of patented medicines.^{Footnote 6} 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 1.8% per year, reaching $18.4 billion in 2022. This section looks at the most important factors driving the change in sales revenues from 2021 to 2022 and compares them to trends from previous years.

Trends in Sales Revenues

Figure 3 reports on trends in the sales of patented medicines from 1990 to 2022. Between 2021 and 2022, there was a $956 million (5.7%) increase in the sales of patented medicines. While there has been more than a ten-fold increase in annual sales since 1990, 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), which has ranged between -1.7% and 9.4% since 2013.

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 before declining to 60.7% in 2013. In 2022, patented medicines accounted for 49.0% 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) displayed in Figure 3(c) show the ongoing importance of patented medicines in the Canadian economy. Overall, per capita sales of patented medicines rose from $61.60 in 1990 to $465.12 in 2022, while sales as a percentage of GDP rose from 0.25% in 1990 to 0.67% in 2022.

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 6.8% in 2022, reaching $25.1 billion or 66% of the sales of all medicines in Canada. Medicines that previously reported to the PMPRB accounted for estimated sales of $6.7 billion, or 26.6% of All PMPRB Medicine sales. This is considerably more than a decade ago when medicines that formerly reported to the PMPRB accounted for $1.0 billion, or 6.9% of All PMPRB Medicine sales.

A complete table of the data presented in Figure 3 for patented medicines currently reporting to the PMPRB is included in Appendix 2.

Figure 3. Trends in Patented Medicine Sales, 1990 to 2022

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 7} between 2017 and 2022 (a) in absolute dollar amounts, and (b) as proportions of the overall annual change in sales.

Figure 5. Key Drivers of Change in the Sales of Patented Medicines, 2017 to 2022

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 2022, 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 2022. 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 loss-of-exclusivity effect accounted for a pull effect of $0.87 billion (-5.0%) on sales in 2022. Figure 6 illustrates the change in the impact of the exiting effect since 2017 and identifies the 10 top-selling medicines that stopped reporting to the PMPRB in 2022.

Newer Medicines Driving Sales Revenues

Figure 8 breaks down the 2022 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. In recent years, 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.

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.

Figure 9 details the trend in the treatment costs of patented medicines since 2013. 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 2022, the top 20 medicines, which accounted for 37.7% of patented medicine sales, had a median annual treatment cost of $21,345, more than 25 times the median in 2013.

High-cost medicines continue to dominate the pharmaceutical landscape

The 20 top-selling medicines in 2022 had a median annual treatment cost of $21,345, compared to just $803 in 2013.

Figure 10 shows that high-cost medicines represent a growing share of the total sales of patented medicines, rising steeply from 21.8% in 2013 to 57.5% in 2022. 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 0.8% to 7.9% of sales over the same period. Despite the sharp increase in their share of costs, less than 1% of the population use these medicines.

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 8}

The number of patented oncology medicines with 28-day treatment costs over $7,500 rose from 15 to 68 between 2013 and 2022, now accounting for 17.3% of total patented medicine sales.

As a result, the average treatment cost for oncology medicines in 2022 was $14,024, compared to $5,564 in 2013.

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 2022, accounting for close to two thirds of all patented medicine sales. The "antineoplastics and immunomodulating agents" class experienced a 3.3% increase in sales between 2021 and 2022 while "systemic hormonal preparations" had the greatest year–over-year decrease at -55.8%.

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 9} It compares the distribution of sales by therapeutic class in 2013 and 2022 and provides the rates of growth in sales for each class from 2021 to 2022.

The "antineoplastics and immunomodulating agents' class accounted for a much larger share of sales in 2022 (44.0%) than in 2013 (28.9%), 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 from 7.5% to 2.0% over the same period, continuing the trend observed in previous years.