Federal Court |
|
Cour fédérale |
T-1447-08
Ottawa, Ontario, July 10, 2009
PRESENT: The Honourable Madam Justice Mactavish
Docket: T-1442-08
BETWEEN:
and
and
PATENTED MEDICINE PRICES REVIEW BOARD
Intervener
Docket: T-1447-08
AND BETWEEN:
CANADA’S RESEARCH-BASED PHARMACEUTICAL COMPANIES,
AMGEN CANADA INC., ASTRAZENECA CANADA INC.,
BAYER INC., BRISTOL-MYERS SQUIBB CANADA INC.,
BOEHRINGER INGELHEIM (CANADA) LTD.,
ELI LILLY CANADA INC., EMD SERONO CANADA INC.,
GLAXOSMITHKLINE INC., HOFFMAN-LA ROCHE LIMITED,
JANSSEN-ORTHO INC., MERCK FROSST CANADA LTD.,
MERCK FROSST-SCHERING PHARMA PARTNERSHIP,
NOVARTIS PHARMACEUTICALS CANADA INC.,
PROCTOR & GAMBLE PHARMACEUTICALS CANADA, INC.,
SCHERING-PLOUGH CANADA INC.,
SHIRE CANADA INC., AND SOLVAY PHARMA INC.
Applicants
and
ATTORNEY GENERAL OF CANADA
Respondent
and
PATENTED MEDICINE PRICES REVIEW BOARD
Intervener
REASONS FOR JUDGMENT AND JUDGMENT
[1] In August of 2008, the Patented Medicine Prices Review Board released a decision in a “Stakeholder Communiqué” which required that patentees report rebates (including rebates or payments to third parties), discounts, free goods, free services, gifts and other benefits of a like nature, in calculating the average price of patented medicines.
[2] The applicants seek judicial review of this decision, asserting that the Board’s jurisdiction is limited to reviewing prices associated with sales of patented medicines made at the “factory gate”. The applicants say that the Board’s jurisdiction does not extend to transactions involving third parties that may take place further downstream in the supply chain.
[3] The respondent argues that these applications are premature, as the Board has not yet started to enforce the new reporting requirements, and thus there have been no proceedings before the Board involving specific factual situations. As a result, the respondent says that there is an insufficient evidentiary record for the Court to determine the question of statutory interpretation raised by the applications. In the alternative, if the matter is not premature, the respondent submits that the Board acted within its jurisdiction in requiring that rebates or payments made by patentees to third parties be reported.
[4] The Board was given leave to intervene in these applications. It supports the applicants’ position that the applications are not premature, and the respondent’s position that the Board acted within its jurisdiction.
[5] For the reasons that follow, I have concluded that the applications are not premature. I have also concluded that the Board acted outside its jurisdiction in requiring the reporting of rebates or payments made by patentees to third parties. As a consequence, the applications for judicial review will be allowed.
The Parties
[6] There are two applications for judicial review before the Court. By order of a prothonotary, the two applications were heard together, and these reasons pertain to both applications.
[7] Application T-1442-08 was commenced by Pfizer Canada Inc., an innovator pharmaceutical company which sells patented medicines in Canada. Application T-1447-08 was brought by Canada’s Research-Based Pharmaceutical Companies (“Rx&D”) and a number of its members. Rx&D is the trade association for innovative pharmaceutical manufacturers in Canada, and represents 50 member companies involved in the discovery, development and testing of new medicines and vaccines. The remaining applicants in T-1447-08 are patentees selling patented medicines in Canada.
[8] The Patented Medicine Prices Review Board is a quasi-judicial body established in 1987 under amendments to the Patent Act, R.S., 1985, c. P-4, which regulates the prices that patentees can charge for prescription and non-prescription patented medicines in Canada.
Background
[9] The 1987 amendments to the Patent Act expanded the intellectual property rights of patentees of patented medicines. To balance this, the Board was created to monitor the prices charged by patentees for patented medicines, in order to ensure that these prices were not excessive: see ICN Pharmaceutical, Inc. et al. v. Staff of the Patented Medicine Prices Review Board (1996) 68 C.P.R. (3d) 417 (F.C.A.); Hoechst Marion Roussel Canada Inc. v. Canada (Attorney General), 2005 FC 1552.
[10] In 1993, the Patent Act was once again amended. The period of patent exclusivity enjoyed by patentees was increased, and the compulsory licence provisions of the Act were repealed. At the same time, Parliament strengthened the Board’s mandate to deal with the price abuse that could potentially result from the monopolies that it had created. Regulations were also put into place specifying the information that was to be reported to the Board by patentees with respect to the sales of patented medicines.
[11] The role of the Board is not to set prices for patented medicines in Canada. This would be beyond the legislative competence of Parliament, as the setting of retail prices is a matter within provincial jurisdiction. Rather, the role of the Board is to determine whether, taking certain specified factors into account, a patentee is selling patented medicines to its customers at an “excessive price”.
[12] If it is determined that excessive prices are being charged by a patentee, then the Board has the power to make remedial orders. The Board also reports to Parliament with respect to pharmaceutical pricing trends, as well as with respect to research and development spending by pharmaceutical patentees.
[13] In order to determine whether a patentee is selling a patented medicine to its customers at an excessive price, the Board is statutorily empowered to require patentees to provide pricing information. A complete version of the relevant statutory and regulatory provisions is attached as an appendix to this decision.
[14] In particular, subsection 80(1)(b) of the Patent Act requires that patentees provide the Board with “such information and documents as the regulations may specify respecting … the price at which the medicine is being or has been sold in any market in Canada and elsewhere”.
[15] Section 85 of the Patent Act identifies the factors that are to be considered in determining whether a medicine is being sold at an excessive price in any market in Canada. These factors include the prices at which the medicine has been sold in the relevant market, the prices of medicines in the same therapeutic class in the relevant market, the prices at which the medicine and other medicines in the same therapeutic class have been sold in identified comparator countries, changes in the Consumer Price Index, and such other factors as may be specified in the regulations.
[16] Paragraph 4(1)(f) of the Patented Medicines Regulations, SOR/94-688, stipulates that patentees must provide the Board with information identifying the medicine, and must also indicate “the quantity of the medicine sold in final dosage form and either the average price per package or the net revenue from sales in respect of each dosage form, strength and package size in which the medicine was sold by the patentee or former patentee to each class of customer in each province and territory”.
[17] The Board’s Patentees’ Guide to Reporting identifies four classes of customers: Hospitals, Pharmacies, Wholesalers or “Other”. Direct sales to “others” may include, for example, doctors in remote areas who do not have ready access to a pharmacy.
[18] The evidence before the Court suggests that the vast majority of sales made by patentees are sales to drug wholesalers.
[19] Of particular importance to these applications is subsection 4(4) of the Regulations. Paragraph 4(4)(a) deals with the reporting of the average price per package in respect of each dosage form, and provides that:
(4) For the purposes of subparagraph (1)(f)(i),
(a) in calculating the average price per package of medicine, the actual price after any reduction given as a promotion or in the form of rebates, discounts, refunds, free goods, free services, gifts or any other benefit of a like nature and after the deduction of the federal sales tax shall be used …
[my emphasis] |
(4) Pour l’application du sous-alinéa (1)f)(i) :
a) le prix après déduction des réductions accordées à titre de promotion ou sous forme de rabais, escomptes, remboursements, biens ou services gratuits, cadeaux ou autres avantages semblables et après déduction de la taxe de vente fédérale doit être utilisé pour le calcul du prix moyen par emballage dans lequel le médicament était vendu …
[je souligne] |
[20] In recent years, some provinces have negotiated agreements (known as “expenditure limitation agreements” or “negotiated price agreements”) with patentees whereby a patented medicine is listed on a provincial formulary at a specified price. In some cases, these payments may be made by the patentee as consideration for the province’s agreement to list the product on the provincial formulary.
[21] The amount of the payment or payments made by patentees may, in some situations, be calculated as a percentage of the units of medicine sold in the province, for which the province is required to reimburse the patient. In other cases, payment arrangements may not be as simple, and may be negotiated on the basis of factors such as the achievement of target improvements in health outcomes. Agreements may also relate to multiple drugs, both patented and non-patented: see the Board’s January 31, 2008 Discussion paper.
[22] The Board submits that payments by patentees to the provinces are part of the “commercial and economic reality” relating to the actual prices charged for patented medicines, and should, therefore, be taken into account in the Board’s determination of whether the prices charged by patentees are excessive.
[23] The question for the Court is whether the Patent Act and the Patented Medicines Regulations empower the Board to require patentees to report information regarding these payments.
Events Leading up to the Decision
[24] The Board did not initially require that payments made to the provinces under expenditure limitation agreements be reported. In April of 2000, the Board published a newsletter identifying the information that was to be reported by patentees. It noted that inquiries had been received from patentees with respect to their reporting obligations with respect to various kinds of incentives and programs, including payments made under expenditure limitation agreements between manufacturers and public drug plans.
[25] It is apparent from this newsletter that patentees had a measure of discretion in terms of the reporting requirements in relation to benefits such as rebates, and that it was the intention of the Board that its policies and procedures “not discourage a patentee from offering an incentive program or entering into an agreement which would benefit patients”.
[26] The Board did stipulate that patentees must be consistent in reporting such programs “so as to avoid artificial fluctuations in the price calculated for price review purposes”.
[27] In March of 2007, this Court issued its decision in Leo Pharma Inc. v. Canada (Attorney General), [2007] F.C.J. No. 425. This was an application for judicial review with respect to a decision by the Board that Leo Pharma Inc. was selling its “Dovobet” medicine at an excessive price. At issue was whether the Board acted unreasonably in refusing to take the free distribution of Dovobet under a compassionate release program into account in establishing the average transaction price for the medicine.
[28] Justice Blais concluded that the Board acted unreasonably in refusing to consider the distribution of free samples of Dovobet in establishing the average price of the medicine, noting that “the fact that the distribution of free goods may benefit the patentee should not make such a distribution any less valuable to the patients who receive the free medicine”. It was, in Justice Blais’ view, “much more reasonable” to assume that Parliament, had sought to increase access to patented medicines for Canadians, some of whom would not have extensive drug insurance coverage.
[29] To achieve this objective, Justice Blais found that the Regulations had been drafted so as to provide incentives for patentees to distribute free medicine, by allowing them to include these goods in the average price calculation regardless of their actual intent in distributing such free goods. He concluded that “The determination of the average price per package of medicine for each period must take into account any reduction given as a promotion or in the form of rebates, discounts, refunds, free goods, free services, gifts or any other benefits of a like nature”: Leo Pharma, at para. 69, [my emphasis].
[30] As a result of the Leo Pharma decision, the Board undertook a review of its reporting requirements. In April of 2007, a further newsletter was released to the industry advising that, as a result of the Leo Pharma decision, “all reductions or benefits” must now be included in the average transaction price calculation. The Board advised that beginning with the reporting period ending June 30, 2007, patentees could no longer exclude any reductions or benefits, including payments to third parties under expenditure limitation agreements.
[31] After the publication of the April, 2007 newsletter, discussions ensued between the Board, and its stakeholders, including Rx&D and drug patentees, as well as the provinces. Rx&D and the drug companies took the position that the Leo Pharma decision did not require any change to the manner in which patentees reported the sale price of patented medicines insofar as payments to the provinces were concerned. They argued that the decision did not even address the issue of payments made by patentees under negotiated price agreements, nor did it require that these payments be reported to the Board.
[32] Several provinces also took the position that payments made by patentees to the provinces should not be included in the calculation of the average price of patented medicines, and that it was beyond the mandate of the Board to require their inclusion.
[33] In May of 2007, the Board issued a further newsletter advising that the reporting requirements would remain as they had been in accordance with the April, 2000 newsletter, pending further consultation with stakeholders, and a review of possible options by the Board.
[34] After completion of its consultations and review processes, a decision was made by the five members of the Board with respect to changes to the reporting requirements which, it said, would take effect beginning with the reporting period ending June 30, 2009.
[35] This decision was communicated to the industry in an August 18, 2008 “Stakeholder Communiqué”. The decision requires that patentees report “rebates (including rebates/payments to third parties), discounts, free goods, free services, gifts and other benefits of a like nature”, in calculating the average price from sales of patented medicines.
[36] The Board subsequently delayed implementation of the new reporting requirements until January 1, 2010, as a result of these applications for judicial review.
The Central Issue
[37] The central issue in these proceedings is whether sections 4(1)(f)(i) and 4(4) of the Patented Medicines Regulations authorize the Board to require the reporting of rebates or payments made to third parties by the manufacturers of patented medicines so that these payments may be included in the calculation of the average price for sales for the patented medicine in question.
[38] Before turning to consider this issue, however, I must first determine whether the applications are premature.
Are the Applications Premature?
[39] As I understand the respondent’s position, it is not disputed that the Board has made a final decision with respect to the change in reporting requirements. Rather, the respondent says that the applications are premature, as the Board has not yet commenced enforcing the interpretation of the Regulations set out in the August 18, 2008 “Stakeholder Communiqué”.
[40] As a consequence, the respondent says that there are currently no proceedings before the Board involving payments made by a patentee to a province under a specific negotiated price agreement, nor has the Board issued any rulings in relation to any cases actually involving a negotiated price agreement between a patentee and a province.
[41] In the circumstances, the respondent says that there is a limited factual record before the Court regarding price agreements, which is insufficient for the Court to determine the question of statutory interpretation raised by the applications.
[42] In particular, there is no actual negotiated price agreement between a patentee and a province before the Court. Moreover, there is limited evidence as to how common negotiated price agreements are in the pharmaceutical industry. Other than the single blank sample agreement in the record, there is no evidence regarding the actual terms of a negotiated price agreement nor is there any evidence as to the amount or refunds of payments made by a patentee to a province under a negotiated price agreement.
[43] According to the respondent, the proper time for patentees to raise the jurisdictional question would be in the context of actual Board proceedings involving an actual negotiated price agreement between a patentee and a province.
[44] All of that said, the respondent concedes that if all the Court is being asked to do is to simply interpret the Patent Act and Regulations, so as to determine whether provinces can be considered to be “customers” of the patentees, such that payments to provinces are subject to the reporting requirements established therein, it is open to the Court to do so on the basis of the existing record.
[45] The applicants point out that in order to comply with the Board’s new reporting requirements, patentees will have to devote resources to collecting and compiling the data in issue, long before the actual implementation date of January 1, 2010. According to the applicants, the Board’s reporting requirements are not only onerous and difficult to implement; they also intrude into sensitive commercial transactions that are outside the jurisdiction of the Board.
[46] As their efforts to dissuade the Board from implementing the decision that underlies these applications for judicial review were unsuccessful, the applicants say that they have been forced to commence these applications to have the Board’s decision set aside, before they are required to commit resources to collecting and compiling the information now being sought by the Board.
[47] The Board itself urges the Court to decide the issue, submitting that both it and the industry have a practical problem that requires an immediate resolution, so that all of those involved in the regulatory process know what the rules of the game are.
[48] I would start by observing that the respondent’s contention that these applications are premature, and cannot be decided in the absence of a fully developed evidentiary record is difficult to reconcile with the respondent’s argument that all of the evidence put before the Court by the applicants (other than the extracts from Hansard) should be disregarded as “irrelevant”, given that what is involved in this case is a pure question of statutory interpretation, for which evidence is not required.
[49] Moreover, the Board has clearly made a binding decision - one which will have immediate consequences for those involved in the patented medicine industry. Having given the matter careful consideration, and recognizing the respondent’s concession that the record is sufficient to allow for an interpretation of the Act and Regulations, independent of the specific terms of any particular expenditure limitation agreements, I have determined that the applications are not premature and that it is appropriate to decide the issue now before me.
Standard of Review
[50] The first issue to be determined is how much deference should be accorded to the Board’s own interpretation of its enabling legislation.
[51] The applicants and the respondent all agree that as what is in issue is a question of statutory interpretation going to the jurisdiction of the Board, the appropriate standard of review is that of correctness. In this regard, they rely on jurisprudence which has held that correctness should be the standard of review applied to the Board’s interpretation of its own enabling legislation: see Hoechst Marion Roussel Canada Inc., previously cited, at paras. 99-110, and Shire Biochem Inc. v. Canada (Attorney General), [2007] F.C.J. No. 1688, at para. 19.
[52] The Board itself has made no submissions in this regard.
[53] Neither of the cases cited by the parties were decided after the Supreme Court of Canada rendered its decision in Dunsmuir v. New Brunswick, 2008 SCC 9. There, the Court reaffirmed that the correctness standard will not automatically apply every time a tribunal is involved in interpreting legislation, particularly where, as here, an expert tribunal is interpreting its own enabling legislation.
[54] However, what is in issue in this case is what was described in Dunsmuir as “a true question of jurisdiction”: at para. 59. As such, I agree that the appropriate standard of review is that of correctness.
Analysis
[55] The question, then, is whether sections 4(1)(f)(i) and 4(4) of the Patented Medicines Regulations, SOR/94-688 authorize the Board to require the reporting of rebates or payments made to third parties by the manufacturers of patented medicines so that these payments may be included in the calculation of the average price for sales of patented medicines.
[56] At the outset, I would observe that although the Board’s April, 2007 newsletter suggests that the Board interpreted Justice Blais’ decision in Leo Pharma as requiring the reporting of rebates or payments made to third parties, I do not read the Leo Pharma decision as addressing the issue in this case.
[57] While Justice Blais held that the determination of the average price for a medicine must take into account any reduction given as a promotion or in the form of rebates, discounts, refunds, free goods, free services, gifts or any other benefits of a like nature, he did not consider whether this obligation extends to “rebates or payments to third parties”.
[58] In addressing this question, the starting point must be a consideration of the constitutional limitations on what Parliament can, and cannot, do in relation to drug prices. These limitations were recognized during the legislative process leading up to the creation of the Board.
[59] In this regard, Harvie Andre, the then Minister of Consumer and Corporate Affairs, stated in committee proceedings that:
We do not constitutionally have the ability in Canada of setting prices at the federal level. But again, it is worth repeating that it is not right to say there are not strong price control mechanisms in Canada; there are. They are at the provincial level. Through the fact that they purchase 60% of the drugs, have formularies in some provinces, and can have laws that direct that pharmacists must provide the lowest cost equivalent, and through the bulk purchasing and so on, the net result is that we do have in fact a price control system in Canada
[60] Minister Andre went on to observe that “it is not intended that the Board would be a profit-control mechanism. The Board is intended … as a watchdog on the general prices of pharmaceuticals within Canada”.
[61] Similarly, during the legislative process leading up to the 1993 amendments to the Patent Act, Barbara Sparrow, the Parliamentary Secretary to the Minister of Health and National Welfare, noted that federal jurisdiction was confined to the regulation of the “factory-gate” prices of patented medicines. It was the provinces that had jurisdiction over retail prices and dispensing fees for patented medicines.
[62] The term “factory-gate” appears to be one that is generally understood in the industry to refer to the transaction between the patentee and the first purchaser of the patented medicine in question. As was noted earlier, this first purchaser is most commonly a wholesaler.
[63] The Board itself understands that its jurisdiction is limited to the regulation of the factory-gate prices for patented medicines, and that it has no jurisdiction over prices subsequently charged by wholesalers and retailers. The Board also recognizes that it has no jurisdiction over matters such as whether the costs of patented medicines are covered by public drug plans: see the affidavit of Barbara Ouellet, the Board’s Executive Director, at paras. 4 and 5.
[64] Under subsection 83(1) of the Patent Act¸ the Board’s remedial jurisdiction is engaged where the Board finds that a patentee is selling a medicine in any market in Canada at a price that is excessive in the Board’s opinion. [my emphasis]
[65] In order for the Board to be able to determine whether the price of a patented medicine is or is not excessive, paragraph 80(1)(b) of the Patent Act requires that patentees provide the Board with such information respecting “the price at which the medicine is being or has been sold in any market in Canada and elsewhere” as may be specified in the Regulations.
[66] Subparagraph 4(1)(f)(i) of the Patented Medicines Regulations states that patentees must provide the Board with information with respect to “the average price per package … in which the medicine was sold by the patentee … to each class of customer”. [my emphasis]
[67] Thus what is clearly contemplated by the Act and the Regulations is a sale by a patentee to a customer. The question then is whether patentees “sell” patented medicines to the provinces, and whether the provinces can be considered to be “customers” of the patentees. This involves interpreting the statute and the Regulations.
[68] When addressing a question of statutory interpretation, the words of an Act are to be read in their entire context, and in their grammatical and ordinary sense, harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament: see Re Rizzo and Rizzo Shoes Ltd. [1998] 1 S.C.R. 27, at para. 21, and see Ruth Sullivan, ed., Sullivan on the Construction of Statutes, 5th ed. (Markham: LexisNexis., 2008), at p. 1.
[69] Moreover, where the words used are precise and unequivocal, the ordinary meaning of the words should play a dominant role in the interpretive process: see Canada Trustco Mortgage Co. v. Canada, [2005] S.C.J. No. 56, at para. 10.
[70] The object of the Act and Regulations, as well as the intention of Parliament in relation to their enactment, have been discussed earlier in these reasons. However, it bears repeating that the Board does not set the prices for patented medicines in Canada, nor does it control the profits made by patentees. Rather, the role of the Board is to monitor the prices charged by patentees for patented medicines, so as to ensure that these prices are not excessive.
[71] With these principles of statutory interpretation in mind, the first question is whether it can be said that patentees sell patented medicines to the provinces.
[72] As a starting point, I note that the Canadian Oxford Dictionary defines a “sale” as “the exchange of a commodity for money etc.”. See also H.W. Liebig & Co. v. Leading Investments Ltd., [1986] 1 S.C.R. 70, at para. 24.
[73] It is common ground that, regardless of the precise terms of the specific expenditure limitation agreements in issue, provinces never take title to patented medicines sold by the patentees under such agreements, nor do they ever take possession of them. Furthermore, provinces are not parties to the sale at the factory-gate, nor do they pay patentees for patented medicines. Indeed, in some cases, patentees are actually prohibited by law from selling patented medicines to provinces.
[74] That is, the Food and Drug Regulations, C.R.C. 1978, c. 870, identify who patentees can sell prescription medication to without a prescription. This list includes drug manufacturers, practitioners, wholesale druggists, registered pharmacists, and hospitals: see section C.01.043(1).
[75] Under the Regulations, sales can also be made to Departments of the Government of Canada or of a province, “upon receipt of a written order signed by the Minister thereof or his duly authorized representative”. [my emphasis]
[76] There is no suggestion that there are any Ministerial orders permitting the sale of patented medicines to provinces in accordance with expenditure limitation agreements. Indeed, in argument, the respondent submitted that the provinces created drug benefit programs specifically because they did not want to have to purchase and dispense medications themselves, preferring instead to use the existing commercial distribution network.
[77] More importantly, however, when read in context, it is clear that what is contemplated by section C.01.043(1) is a transfer of a physical product to an entity that actually takes title to and possession of the patented medicine in question in exchange of valuable consideration – that is, a “sale” in the conventional sense.
[78] Furthermore, even giving the word a broad and purposive interpretation, to interpret the term “sale” in the manner proposed by the respondent and the Board, so as to encompass the relationship between patentees and provinces would, in my view do violence to the ordinary meaning of the term.
[79] Moreover, such an interpretation is inconsistent with the Board’s own understanding of the term. Indeed, the Board’s own Patentee’s Guide to Reporting defines a “sale” as a “transfer of property rights from one person to another for money, money’s worth, or other consideration”.
[80] I am also not persuaded that provinces could be considered to be the “customers” of the patentees. Clearly, the role of provinces under expenditure limitation agreements is akin to that of public insurers who reimburse eligible patients for the cost of their drugs.
[81] The fact that the payments made by patentees under expenditure limitation agreements may, in some cases, be calculated as a percentage of the sales of the patented medicine in question does not make the province a customer of the patentee. By way of analogy, the rent paid by a restaurant business under the terms of a commercial lease may be calculated, in part, as a percentage of the restaurant’s sales. Such a contractual term does not turn the landlord into a customer of the restaurant.
[82] Indeed, the recognition that provinces are not “customers” of the patentees is implicit in the Board’s own description of them as “third parties”.
[83] I would also observe that my interpretation of the Patent Act and the Patented Medicines Regulations is consistent with the constitutional limitation on the Board’s ability to look beyond the factory-gate price of patented medicines, to consider contractual arrangements involving patentees and entities further down the distribution chain.
[84] Quite apart from the constitutional issues that would arise if the Board were able to go beyond an examination of the factory-gate prices charged for patented medicines, it is also clear from subsections 4(5) and 4(6) of the Regulations that the Board is only empowered to inquire into prices charged beyond the factory-gate where the factory-gate sale by the patentee is a non-arm’s length transaction.
[85] Furthermore, if correct, the Board’s interpretation would allow it to go well beyond the examination of the prices charged by patentees at the factory-gate for patented medicines in order to determine whether such prices were “excessive” within the meaning of the Patent Act and Regulations.
[86] Finally, the Board and the respondent contend that payments made to provinces under expenditure limitation agreements are “rebates”, and are thus within the scope of subsection 4(4) of the Regulations. Paragraph 4(4)(a) provides that in calculating the average price of sales for the purposes of subparagraph 4(1)(f)(i), “the actual price after any reduction … in the form of rebates …. or any other benefit of a like nature … shall be used”.
[87] The term “rebate” is defined in Black's Law Dictionary, 6th ed., (1990) as a “Discount; deduction or refund of money in consideration of prompt payment .... A deduction or drawback from a stipulated payment, charge, or rate ... not taken out in advance of payment, but handed back to the payer after [it] has paid the full stipulated sum”: as cited in Fourth Generation Realty Corp. v. Ottawa (City) [2005] O.J. No. 1982 (Ont. C.A.) at para. 54.
[88] I agree with the Ontario Court of Appeal in Fourth Generation Realty Corp. that the term “rebate” “refers to the return of a portion of money actually paid”: at para. 55. As a consequence, a “rebate” cannot be paid to a stranger to the sale transaction.
[89] Furthermore, even if the monies paid to the provinces by patentees could be considered to be a “refund”, a “discount” or “any other benefit of a like nature”, for the purposes of paragraph 4(4)(a) of the Patented Medicines Regulations, such payments still do not relate to patented medicines “sold” to a “customer” as contemplated by subparagraph 4(1)(f)(i).
Conclusion
[90] For the reasons given, I find that sections 4(1)(f)(i) and 4(4) of the Patented Medicines Regulations do not authorize the Board to require the reporting of rebates or payments made to third parties by the manufacturers of patented medicines. As a consequence, the applications for judicial review are allowed, and the Board’s decision as communicated in the August 18, 2008 “Stakeholder Communiqué” is set aside.
JUDGMENT
THIS COURT ORDERS AND ADJUDGES that:
1. These application for judicial review are allowed, and the decision of the Patented Medicine Prices review Board is set aside;
2. The Court declares that subsections 4(1)(f)(i) and 4(4) of the Patented Medicines Regulations do not authorize the Board to require the reporting of rebates or payments made to third parties by the manufacturers of patented medicines.
3. The applicants shall have their costs from the respondent. No costs are awarded with respect to the intervener.
APPENDIX
PATENT ACT
FEDERAL COURT
SOLICITORS OF RECORD
DOCKET: T-1442-08 and T-1447-08
STYLE OF CAUSE: PFIZER CANADA INC. v. AGC and
PATENTED MEDICINE PRICES REVIEW BOARD
and,
CANADA’S RESEARCH-BASED PHARMACEUTICAL COMPANIES ET AL v.
AGC and PATENTED MEDICINE PRICES
REVIEW BOARD
PLACE OF HEARING: Ottawa, Ontario
DATE OF HEARING: June 16 and 17, 2009
APPEARANCES:
Mr. Orestes Pasparakis FOR THE APPLICANT (PFIZER)
Mr. Martin W. Mason FOR THE APPLICANTS
(CANADA’S RESEARCH-BASED PHARMACEUTICAL COMPANIES ET AL)
Mr. Alexander Gay FOR THE RESPONDENT (AGC)
Mr. Gordon Cameron FOR THE INTERVENER
(PATENTED MEDICINE PRICES
REVIEW BOARD)
SOLICITORS OF RECORD:
OGILVY RENAULT LLP FOR THE APPLICANT (PFIZER)
Toronto, Ontario
GOWLING LAFLEUR HENDERSON LLP FOR THE APPLICANTS
Toronto, Ontario (CANADA’S RESEARCH-BASED
PHARMACEUTICAL COMPANIES
ET AL)
JOHN H. SIMS, Q.C. FOR THE RESPONDENT (AGC)
Toronto, Ontario
BLAKE CASSELS & GRAYDON LLP FOR THE INTERVENER
Ottawa, Ontario (PATENTED MEDICINE PRICES
REVIEW BOARD)