Michelle Boudreau, Executive DirectorOttawa Convention CentreSeptember 25, 2012

Patented Medicines Prices Review Board (PMPRB)

toCanadian Association of Healthcare Reimbursement Healthcare and Biopharmaceuticals in Canada: Federal

Perspective and Beyond

2

Outline________________________________________________

Market trends

Getting to know the PMPRB

How does it really work?

Concluding Remarks

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Market trends - Canada Compared to the World ________________________________________________ In 2005 and 2010, Canadian drug sales accounted for 2.4% and 2.7%,

respectively, of the global market

Small, but a growing market

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Market trends - Canada Compared to the World________________________________________________ Growth in drug sales outpacing comparator countries

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Market trends - Canada Compared to the World________________________________________________ Canadian prices comparatively higher than a number of OECD

countries

S.Korea Ita

ly UK

Australia

France

Spain

Austria

Belgium

Sweden

Switzerland

Denmark CA

N

Germany

Mexico

Japan US

A0.00

0.50

1.00

1.50

2.00

2.50Avg Bilateral Foreign-to-Canadian Price Ratios: Top 300 selling oral solids in Canada

IMS Health Data, 2010

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Market trends - share of total prescriptions* by segment, 2005/06 to 2010/11________________________________________________

Getting to know the PMPRB - key quotes and court pronouncements______________________________________________

“…changes (to Bill C-22) will also ensure consumer protection by creating a drug prices review board to monitor drug prices. . .”

The Honourable Harvie Andre made this comment upon introducing Bill C-22 for second reading on November 20, 1986.

The protection of consumer interests was one of the “Five Pillars” of public policy addressed by amendments to the Patent Act creating the PMPRB.

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Getting to know the PMPRB - key quotes and court pronouncements______________________________________________ “…The Board’s interpretation of its mandate under the relevant

provisions was consistent with its consumer protection purpose and should not be disturbed.”

Supreme Court of Canada’s decision in the Celgene/Thalomid matter, January 2011

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Getting to know the PMPRB - key quotes and court pronouncements______________________________________________“…the merest slender thread” - ICN Pharmaceuticals Inc. [1997]

(Virazole) Defines three-part test for PMPRB’s Jurisdiction

– patentee of an invention – invention must pertain to the medicine– sale of the medicine in Canada

Defines ‘patent pertains’ concept– a rational connection between the invention and the medicine – the

merest slender thread– no need to go beyond the face of a patent to establish the required

nexus – no requirement that the patent be used

* Jurisdiction - all patents whether used or capable of being used

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How does it really work - price regulation ______________________________________________Jurisdiction

Regulates prices patentees charge (i.e. factory-gate price) for patented drugs, to wholesalers, hospitals or pharmacies

Factors to be considered by Board in determining a non-excessive price Patent Act and Patented Medicines Regulations – class tests and

reference-based framework Prices of other medicines in same therapeutic class sold in Canada Prices of medicines sold in comparator countries* Changes in CPI

*7 comparator countries: France, Germany, Italy, Sweden, Switzerland, UK and the US

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How does it really work - price tests ________________________________________________ Blend of therapeutic improvement & international referencing Recognize incremental pharmaceutical innovation

At introduction, price premium aligned with therapeutic improvement: Four levels of therapeutic improvement:

1) Breakthrough – Median of International Price Comparison (MIPC)2) Substantial Improvement – Higher of top of Therapeutic Class Comparison

(TCC) and the MIPC3) Moderate Improvement – Higher of mid-point between top of TCC test and the

MIP, and top of TCC (primary & secondary factors apply here)4) Slight/No Improvement – Top of TCC

After introduction, monitor Average Transaction Price (ATP) subject to CPI based price increases and cannot be greater than HIPC

How does it really work - price tests________________________________________________

Price tests are applied in accordance with therapeutic improvement

Based on specific circumstances, price ceilings at intro may be set differently For example, in 2011, within the “slight or no improvement

category” (70% of new drugs) the highest international price (HIPC) test set the Maximum Average

Potential Price (MAPP) 30% of the time because the TCC was higher than HIPC, or a TCC could not be conducted

the therapeutic class comparison set the MAPP 40% of the time

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How does it really work - Biologics________________________________________________ Biologics treated like any other drug

Some biologics represent a breakthrough (eg. Enbrel in 2000) and get the MIPC

Others may fall under moderate or no improvement therapeutic categories (eg. Humira, Cimzia, Simponi)

Looking at vaccines, Gardasil was a breakthrough in 2006, but Cervarix was categorized as slight or no improvement in 2010

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How does it really work - MAPP compared with public price________________________________________________

* Brand price sets the MAPP – brand price $0.65

Drug Cat Intro- MIP

Intro - HIPC

Pivotal Test

MAPP IntroBench Price (ATP)

Publicly available price

Brand-X SNI 1.15 2.95 TCC 2.45 0.68 0.69

Brand-Y SNI 1.40 1.85 TCC 1.52 1.50 1.50

Generic-A SNI 0.85 1.50 TCC* 0.65 0.42 0.33

Average Ratio of 2011 Price to Introductory Price, by Year of Introduction________________________________________________

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1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100.85

0.90

0.95

1.00

1.05

1.10

1.01

1.06

0.94

1.01

1.06

1.02

0.97

1.03

0.98

1.06

0.99

0.93

1.00

0.93

0.99

1.04

Source: PMPRB

Ra

tio

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Concluding Remarks________________________________________________ Very dynamic market with many factors at play

On average, Canadian prices are lower than prices in certain EU countries and lower than US prices

Recognizing innovation and ensuring a non-excessive price is a delicate balance

Highly compliant industry

Continue to promote compliance

Commitment to Guidelines that are responsive to a changing environment

Thank you.Merci.

michelle.boudreau@pmprb-cepmb.gc.ca

www.pmprb-cepmb.gc.ca

Twitter: @PMPRB_CEPMB

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Annex – additional information, stats and NPDUIS overview

Market trends - Canadian Public Drug Plan* Spending on Rx Drugs, Rates of Growth and Annual Totals, 2005/06 to 2010/11

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* Does not include all drug plans. The totals include drug cost, retail/wholesale mark-ups as well as dispensing fees.

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PMPRB Price Tests - How Does it Really Work?________________________________________________ Of the 109 New Drug Products introduced in 2011:

12% under investigation

69% were of slight or no improvement

25% of moderate improvement

5% of substantial improvement 1% breakthrough

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Reference pricing at introduction and for existing drugs based on 7 comparator countries - France, Germany, Italy, Sweden, Switzerland, UK, and US Policy changes in these countries could impact prices in Canada

Over last three years, Germany has most often been the highest referenced price for PMPRB price tests, followed by US Recent cost containment measures by reference countries may lead to lower prices

in Canada (e.g., Germany)

France Germany Italy Sweden Switzerland UK USA0

1

2

3

4

5

6

7

8

2

1

2

3

7

1 1

3

6

4 200820092010

PMPRB Price Tests - International Referencing________________________________________________

Frequency in setting Highest International Price Comparison test at introduction

Regulatory Statistics High level of compliance - On average, 93-95% overall compliance

Between 2000 and 2009, average of 86 new patented drug products/year Of the 109 new drug products introduced in 2011:

79% within Guidelines 13% under investigation 8% outside of Guidelines but do not trigger an investigation

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2011 2010

New Drug Products Introduced

109 68

Number of Investigations

69 87

Regulatory Statistics: Voluntary Compliance Undertakings and Board Orders – 2008-2012 ________________________________________________

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Year # VCUs # Board Orders

Paymentsof Excess Revenues

2008 6 1 $25.5M

2009 10 1 $37.3M

2010 12 3 $13.2M

2011 9 1 $0.9M

2012(May 31)

6 1 $12.1M

National Prescription Drug Utilization Information System

Established in 2011, in partnership with the Canadian Institute on Health Information (CIHI), at the request of F/P/T Ministers of Health

Provides critical analyses of price, utilization, and cost trends to support drug plan policy decision-making for participating jurisdictions

Steering Committee composed of F/P/T representatives provides PMPRB with advice regarding research needs and priorities

Since December 2010, eight publications have been released

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NPDUIS________________________________________________

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Generic Drugs in Canada: International Price Comparisons and Potential Cost Savings

The Impact of Generic Entry on the Utilization of the Ingredient

Public Drug Plan Dispensing Fees: A Cost-Driver Analysis 2001/02 to 2007/08

Wholesale Up-charge Policies of Canada’s Public Drug Plans

And Soon to Come… New Drug Pipeline Monitor – Fourth Edition Diabetes Test Strips: Actual Utilization vs. Recommendations

Some Recent and Forthcoming Studies________________________________________________