Generics are not “patentees” subject to PMPRB oversight

On May 27, 2014, the Federal Court allowed two related judicial reviews  from decisions of the Patented Medicines Prices Review Board that would have otherwise permitted the Board to regulate pricing on generic pharmaceutical products.  The previous decisions of the Board held that Sandoz and ratiopharm (now Teva) came within the definition of “patentee” under section 79 of the Patent Act. This finding would have required both ratiopharm and Sandoz to file information required by the Board to conclude whether they were charging excessive prices.  The Board’s decision would have also required ratiopharm to pay damages of over $65 million for its pricing of ratio-salbutamol HFA.

In its previous decisions, the Board had held that because Sandoz’s generic products are protected by Novartis’ patents, Sandoz is sometimes immune from competition from other generic companies, and so it would fall to the Board to protect Canadian consumers from the excessive prices that Sandoz might be inclined to charge based on its monopoly position.  In ratiopharm’s case, the Board held that by virtue of the agreement for sale between ratiopharm and GlaxoSmithKline, ratiopharm was entitled to exercise rights in relation to the patent, which brought it within the definition of “patentee” in subsection 79(1) of the Patent Act.

In granting judicial review applications, Justice O’Reilly disagreed with the Board’s characterization of generic companies:

Generally speaking, generic companies either help create or join a competitive marketplace, which helps keep the costs of patented medicines down. Reviewing the prices charged by generic companies who hold no patents and no monopolies, on its face, appears to be beyond the Board’s mandate.

If the term “patentee” is interpreted too broadly so as to catch a company in the position of [Ratiopharm/Sandoz] there are likely few generic companies who would not be similarly placed. Most generics enter the market by comparing their products against drugs that are the subject of patents held by other companies. To that extent, they indirectly enjoy the benefits of patents and, ultimately, may be regarded as having acquired rights in relation to them. If [Ratiopharm/Sandoz] is a patentee, so are many other generic companies and possibly other entities down the line of distribution.

Justice O’Reilly noted that if a generic company did own a patent and held a monopoly for a drug, that company could be a “patentee” and come within the Board’s jurisdiction.  However, he found that the Board’s conclusion that the Sandoz and ratiopharm were “patentees” was unreasonable:

Taking account of all of these factors, I find the Board’s conclusion that [Ratiopharm/Sandoz] is a “patentee” unreasonable. The objectives the legislation sought to achieve did not include regulating the prices charged by companies who do not hold a monopoly. The constitutionality of the legislation depends on its close connection to patent protection and the potential undue exploitation of the concomitant monopolies. Generic companies, like [Ratiopharm/Sandoz], do not generally hold monopolies and, in fact, do not normally operate in a market where any monopoly exists.

Justice O’Reilly briefly considered, and rejected, Sandoz’s and ratiopharm’s arguments that if they were subject to the Board’s jurisdiction, that the relevant portions of the Patent Act was unconstitutional.

Justice O’Reilly sent both cases back to the Board with a direction that it find that neither Sandoz nor ratiopharm is a “patentee”.

Copies of Justice O’Reilly’s Judgment and Reasons in the Sandoz and ratiopharm judicial review application may be found here, and here, respectively