Federal Court of Appeal Affirms PMPRB’s Consumer Protection Mandate

The Federal Court of Appeal has unanimously ruled that a drug company does not have to own a patent to be subject to the consumer protection mandate of the Patented Medicine Prices Review Board (“PMPRB” or “Board”).  Canada (Attorney General) v. Sandoz Canada Inc., 2015 FCA 249, holds that a “patentee” within the authority of the PMPRB can include companies exercising rights under a patent without holding or owning the patent.

The ruling affirms the PMPRB’s broad consumer protection powers, and its expertise in addressing the complex relationship between so-called “innovator” and “generic” drug companies.

Background

The appeal arose out of a series of proceedings before the Board in relation to medicines sold by ratiopharm (now Teva)[1] and Sandoz.

Ratiopharm sold generic equivalents of various medicines subject to patents, including a generic equivalent (ratio-Salbutamol HFA) of a widely-used anti-asthmatic medicine sold by GlaxoSmithKline (Ventolin HFA). Sandoz sold medicines subject to patents held by its parent company, Novartis Pharma AG. The Board found that ratiopharm sold the medicine in question at excessive prices, and separately found that ratiopharm had to provide certain information regarding other medicines. In a subsequent ruling, the Board ordered Sandoz to provide certain information with respect to the medicines marketed by it.

The threshold question in both cases was whether ratiopharm and Sandoz were “patentees” under s. 79(1) of the Patent Act, R.S.C. 1985, c. P-4, given that neither directly owned patents over the medicines in question. A related question was whether subjecting companies that did not hold patents to excessive pricing controls was constitutionally valid.

The Board answered both threshold questions in the affirmative.  The Federal Court (Mr. Justice O’Reilly) disagreed, ruling that such entities were not captured by the term “patentee”, and concluding otherwise could render s. 79(1) unconstitutional.

Decision of the Federal Court of Appeal

The unanimous decision of Chief Justice Noël (Pelletier and Rennie JJ.A., concurring) is significant in a number of ways.

First, the Court of Appeal reaffirmed the Board’s characterization of its mandate as protecting consumers from excessive pricing of patented medicines.  The Court rejected the narrower view of the scheme, favoured by O’Reilly J., as intended to prevent patent holders from pricing their patented medicines excessively.

Second, the Court emphasized the need for deference to the Board’s expertise. The question whether a person is “entitled to exercise any right in relation to a patent” is highly fact dependent, informed by the Board’s appreciation of the pharmaceutical industry and the complex relationship between innovators and generics.

Third, in the Court’s view, including non-patent owners in s. 79(1) did not render the scheme unconstitutional. Moreover, it was not open to interpret the term “patentee” narrowly on the basis that the Board’s interpretation might render the scheme unconstitutional.

Fourth, the Court rejected the view that the Board’s price review power is limited to “factory-gate prices”. The Court recognized the Board’s power to look past the first sale, provided the party whose prices are subject to review is also a “patentee” of the medicine in question.

The Federal Court of Appeal ruling is not the last word on the subject.  Certain issues were referred back to the Federal Court for decision, including the reasonableness of the excessive pricing finding of the Board in respect of ratio-Salbutamol HFA.

[1] David K. Wilson was counsel for Board Staff before the Board in the ratiopharm proceedings.