The Patented Medicine Prices Review Board (PMPRB) has issued an excessive-pricing order against Alexion Pharmaceuticals Inc. (Alexion) in respect of SOLIRIS (eculizumab) based on the application of a Lowest International Price Comparison (LIPC) test. In public reasons issued September 27, 2017, the PMPRB ordered Alexion to (i) repay excess revenues to the Crown from the date of introduction through the date of the decision and (ii) lower its prices to match the lowest international price going forward.
Alexion has marketed SOLIRIS in Canada since June 2009. SOLIRIS is indicated for the treatment of paroxysmal nocturnal haemoglobinuria (PNH) and atypical haemolytic uremic syndrome (aHUS). The Board described SOLIRIS as a “breakthrough drug”, with no other medicines in the same therapeutic class.
The PMPRB first advised Alexion that it was investigating the price of SOLIRIS in June 2010. In January 2015 Board Staff filed a Statement of Allegation that the price of SOLIRIS was excessive between 2012 and 2014. These allegations were later amended to include the entire period since launch and the application of the LIPC test. All of the “International Price Comparison” tests are based upon the seven countries listed in the schedule to the Patented Medicines Regulations, i.e., France, Germany, Italy, Sweden, Switzerland, the U.K., and the U.S. As we reported, Health Canada has proposed changes to this list that include removing the U.S. and adding several additional countries.
As we reported, Alexion’s application for judicial review of the decision to allow these amendments was unsuccessful.
As we also reported, Alexion has also applied for a declaration that several of the PMPRB’s enabling provisions in the Patent Act are ultra vires and an order prohibiting the PMPRB from proceeding with the hearing in respect of SOLIRIS. An Order striking Alexion’s application is currently under appeal.
Deviating from the Guidelines: The LIPC Test
The PMPRB’s holding in this case turned on its decision to deviate from the price tests contained in the Compendium of Policies, Guidelines, and Procedures (the Guidelines) and apply the LIPC test. Although this test is not contained in the Guidelines, the PMPRB found that its overriding obligation was to apply a reasonable interpretation of the excessive-pricing factors in subsection 85(1) of the Patent Act to SOLIRIS. On the facts of this case, the PMPRB concluded that this could not be achieved with the Highest or Median International Price Comparison tests (HIPC and MIPC, respectively).
The PMPRB’s decision to apply the LIPC test was based on evidence that it can be assumed Alexion was covering its costs and earning a normal rate of return in the U.K., the country which had the lowest international price. The PMPRB found that given the evidence it heard regarding the significant impact SOLIRIS has on the provincial health-care budgets, there was no reason for Canadians not to benefit from the same price offered to purchasers in the U.K.
For the purpose of applying the LIPC, the PMPRB compared the publically-available ex-factory price of SOLIRIS in each jurisdiction, without regard to discounts or rebates. Although Alexion argued that this factor was unreliable and should be given less weight because it is not based on a comparison of actual prices, the PMPRB held that its methodology was a proper implementation of paragraph 85(1)(c) of the Patent Act.
The PMPRB also rejected Alexion’s argument that its prices were only excessive because of fluctuations in the foreign exchange rate, a factor outside its control for which it said it should not be held responsible. The PMPRB disagreed, holding that the Guidelines properly require patentees to bear the risk of currency fluctuations and provide a mechanism to account for excess revenues resulting therefrom. It held that Alexion bears the responsibility of having failed to do so.
The PMPRB’s order
Although the PMPRB based its excessive-pricing finding on an application of the LIPC test, it did not actually order Alexion to repay excess revenues based upon that test. Rather, the PMPRB ordered Alexion to make payment to the Crown in an amount to be calculated based on the HIPC test. However, it also ordered that the price of SOLIRIS be reduced to the LIPC going forward.
Alexion argued that the excess revenues it was said to have earned were completely offset by four factors, each of which was rejected by the PMPRB:
- Rebates under product-listing agreements (PLAs). On the facts and evidence of this case, the PMPRB determined that rebates paid to certain provinces under PLAs were not reportable. Notably, as we reported, Health Canada has proposed that the Patented Medicines Regulations possibly be amended to require reporting of third-party rebates, including under PLAs.
- Credit notes to wholesaler. Alexion argued that it issued credit notes to Innomar, its wholesaler and only “customer” in Canada. The PMPRB rejected these rebates on the basis that Alexion failed to meet its evidentiary burden.
- Infusion costs included in price. Alexion argued that its contract with Innomar included infusion costs for SOLIRIS. The PMPRB found that Alexion also failed to meet its evidentiary burden on this issue.
- CPI adjustments foregone. Alexion argued that since it has never increased the list price of SOLIRIS in Canada, the real price had in fact decreased due to changes in the CPI. The PMPRB disregarded this argument, among other reasons because it incorrectly assumed that Alexion would have been permitted to take CPI increases.
The PMPRB’s order requires the parties to submit their calculations of the amount of excess revenues owed to the Crown by October 20, 2017.
It has been reported that Alexion intends to seek judicial review of this decision.
The PMPRB’s decision on the merits can be found here.