Price Increases – Monitoring Compliance with the Guidelines
As a result of recent reports of possible price increases for some patented medicines, the PMPRB has received enquiries regarding the application of the Guidelines.
The mission of the PMPRB is to protect consumers and contribute to Canadian health care by ensuring that prices charged by manufacturers for patented medicines are not excessive. Prices of all patented medicines, new and existing, prescribed or not, are reviewed according to factors set out in the Patent Act and the PMPRB´s Guidelines.
Consistent with section 85 of the Patent Act, the Guidelines limit increases in the prices of patented medicines to increases in the Consumer Price Index (CPI). The method for forecasting changes in the CPI and the calculation of allowable increases is set out in Schedule 4 of the Compendium of Guidelines Policies and Procedures. With respect to existing drugs, the PMPRB reviews the price of the drug to determine if it exceeded its benchmark price adjusted for the cumulative change in the CPI from the benchmark year to the year under review. The usual practice is to calculate the average of the prices at which drug product was sold to all classes of customers in all provinces during the period under review.
In 2002, the prices of all patented medicines declined, on average, by 1.2% from the previous year. This result continued the trend of average increases below the increases in the CPI that has been reported over the past decade.
There is no requirement for a manufacturer to seek the approval of the PMPRB before implementing a price increase. In the event of a price increase, the PMPRB expects that manufacturers will continue to comply with the Guidelines. As part of its regulatory mandate, the PMPRB will continue to monitor prices to ensure this is the case.
In addition, the policies of the PMPRB provide that Board Staff may conduct an investigation upon receipt of a substantiated complaint. If it receives information that a manufacturer has increased a price by more than the allowable amount, Board Staff will conduct an investigation to determine the facts.
An investigation may result in a hearing by the Board. In the event that the Board finds that a price is excessive, it can order a price reduction. Section 83 of the Act provides that the Board may make such a finding and order in respect of the price at which a patented medicine is being sold in any market in Canada (emphasis added). It is therefore open to the Board to determine whether, in any particular circumstances, a patented drug is being sold to any class of customer or in any province at an excessive price in respect of any period of review.
Under the Act, the Board may also order the manufacturer to offset double any excess revenues it received if it finds that there was a policy of excessive pricing.
For more information, the Compendium of Guidelines, Policies and Procedures is available on our website under Legislation, Regulations and Guidelines or by contacting us at 1 877 861-2350.
