The New Canadian Pharmaceutical Compulsory Licensing Provisions
THENEWCANADIANPHARMACEUTICALCOMPULSORYLICENSINGPROVISIONS
or
HOWTOJUMPOUTOFTHEFRYINGPANANDINTOTHEFIRE
by
ThierryOrlhac
*
LEGERROBICRICHARD,Lawyers,
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.(514)9876242-Fax(514)8457874
www.robic.ca-info@robic.com
INTRODUCTION
Asatleastmostoftheinnovativepharmaceuticalcompaniesknow,the
CanadianPatentActhasalwaysincludedveryharshpharmaceutical
compulsorylicensingprovisions.
OnNovember18,1987,anActtoamendthePatentActwasadoptedbyour
FederalParliamentandgivenRoyalAssentonthesameday.ThisAct,whose
passageintolawhasbeenmarkedbyextensivelobbyingfromboththe
genericandinnovativesectorsofthepharmaceuticalindustry,has
substantiallymodifiedthecurrentlegislation.
ThecompulsorylicensingprovisionsintroducedbythisnewActwere
proclaimedonDecember7,1987,i.e.afewweeksaftertheActwas
adopted,andthePatentedMedicinePricesReviewBoard,whichisthe
“policecorps”inchargeofenforcingthenewprovisions,wascreatedonthe
sameday,withMr.EASTMANaspresident.
Theintroductionofthesenewprovisionswasheavilysupportedbythe
innovativepharmaceuticalcompaniesandtherevisedlawwaswelcomed
withcheersbythesamecompanieswhenitwasenacted.Thequestion
howeverthatweshalldiscusshereinafteriswhetherthenewActisactuallya
“gooddeal”forthesecompaniesorwhethertheyhavemerelyjumpedoutof
thefryingpanandintothefire.
©LEGERROBICRICHARD,1990.
*PatentAgent,ThierryOrlhacisonetheseniorpartnerswiththePatentandAgencyFirm
ROBIC,g.p.ofwhichthelawfirmLEGERROBICRICHARD,g.p.isassociated.
Afterashortreviewofthecurrentlegislation,weshallsetoutthemajor
changesrecentlyenactedandbrieflydiscusstheirpotentialadvantagesand
drawbacks,asweseethem.
A.THECURRENTLEGISLATION
Eversince1923,theCanadianPatentActhasincludedcompulsorylicence
provisionsspecifictopatentsforinventionsdealingwithfoodormedicine.
Thesealimentalorpharmaceuticalcompulsorylicenceprovisionsaretobe
distinguishedfromthemoregeneralcompulsorylicenceprovisionsalso
providedbyLaw,wherebyanyinterestedpersonmayobtainalicencefor
workingapatentedinventioninthecaseofabuseoftheexclusiverights
underthepatent,whateverbethetechnicaldomaintowhichtheinvention
belongs.Here,itisobligatorytoprovethattherehasbeensuchabuse,for
example,byfailuretoworktheinventiononacommercialscaleinCanada
orbyfailuretomeetthedemandforthepatentedinventiontoanadequate
extentandonreasonableterms.AccordingtothetermsoftheParis
Convention,suchalicencemayonlybeappliedfor,ifatleastthreeyears
haveelapsedsincethepatentwasofficiallygranted.
Inthecaseofpatentsdealingwithpharmaceuticalinventions(thosedealing
withfoodbeinginfactveryfewinnumber,onlyonehavingbeenmadethe
subjectmatterofacompulsorylicenceinthelastfiftyyears),itisnot
necessarytoprovethattherehasbeenabuseoftheexclusiverightsunder
thepatentandnograceperiodisapplicable.
UnderthepresentprovisionsofthePatentAct(whichprovisionshavenot
beenmodifiedbythenewAct),anyinterestedpersonmay,nomatterwhen
thepatentwasgranted,askforacompulsorylicencethatshallbe
automaticallygrantednotonlyformanufacturingbutalsoforimportingthe
patenteddrugintoCanada,eitherinbulkorinposologicalform.The
CommissionerofPatentsmustgrantthelicenceexceptifhesees”good
reasonsnottograntsuchalicence”
1.Insettlingthetermsofthelicenceand
fixingtheamountofroyalty,theCommissionermustalso”haveregardtothe
desirabilityofmakingthemedicineavailabletothepublicatthelowest
possiblepriceconsistentwithgivingtothepatenteeduerewardforthe
researchleadingtotheinvention”.
Inotherwords,theCanadianPatentActasitpresentlystands,practically
guaranteesthegrantofacompulsorylicencetomanufactureortoimport
intoCanadaamedicinetoanyinterestedpersonwhoasksforit.
1
Section41(4)ofthePatentAct.
Until1969,thegrantofcompulsorylicenceswasguaranteedonlyforthe
manufactureinCanadaofapatentedmedicine,therebeingnocompulsory
licencesavailableforimportationofthatmedicine.However,intheyears
closelypreceding1969,afewschandalshadariseninvolvingsome
innovativecompanieswhich,usingtheirdominatingposition,hadfixedthe
pricesoftheirmedicinesataveryhighlevel,particularlywhencomparedto
thepricesatwhichthesamemedicinesweresoldbythesamecompanies
outsideCanada.Thisabuseoftheexclusiverightsunderpatentsbecame
thesubjectofseveralpublicenquiriesandledtoreportssuchasthe1963
ReportontheManufacture,DistributionandSaleofDrugsoftheRESTRICTIVE
TRADEPRACTICESCOMMISSION.Suchreportsweregivengreatercurrency
because,atthattime,Canadawascompletingnationalizationofitsmedical
servicesandwasbeginningtopayforthem.
Accordingly,in1969,thecompulsorylicenceprovisionswerecompletely
modifiedtoallowthegrantofcompulsorylicencestoimportuponrequest
fromanyinterestedperson.Thiswasobviouslyinordertoreduceasmuchas
possibleanyfurtherabusebysomeinnovativecompaniesandtoattempta
reductionintheretailpriceofdrugsbyincreasingcompetitioninthemarket
place.
Assoonastheseprovisionswereenacted,agreatnumberofcompulsory
licencestoimportwereappliedforandgranted.Thisledtothedevelopment
ofastronggenericindustry(someofthegenericcompanieswhichactually
startedtheiroperationin1970,atpresenthavehighersalesthanthe
Canadiansubsidiariesofseveralmultinationalinnovativecompanies).In
fact,since1969,nearlyallthecompulsorylicencesthatwereappliedforand
granted(morethanfourhundred),werelicencestoimport.
Twoveryparticular,nottosaypeculiar,featuresdistinguishtheCanadian
pharmaceuticalcompulsorylicenceprovisionsfromanyothercompulsory
licenceprovisionsknowntous:
1-almostallofthecompulsorylicenceapplicationsthatwerefiled
andnotabandonedbytheirapplicantssincetheprovisionswere
enactedin1969,havebeengranted,irrespectiveofthe
argumentationsubmittedbythepatentee;and
2-theamountoftheroyaltygrantedtothepatenteehasalways
beenfixedat4%ofthenetsellingpriceofthedruginposological
formand/or15%ofthenetsellingpriceofthedruginbulk,again
irrespectiveoftheargumentationputforwardbythepatentee.
Inotherwords,since1969,theCommissionerofPatentshasneverseengood
reasonbottograntacompulsorylicenceinthepharmaceuticaldomain,in
spiteofthenumerousandvariousargumentsthathavebeensubmittedby
patentees.Infact,theonlycaseswherecompulsorylicenceapplications
havebeenrefusedare:
-wherethepatentslistedinthecompulsorylicenceapplications
hadexpiredordidnotdealwiththedrugforwhichthe
compulsorylicencewasrequested;and
-wheretheapplicantofthecompulsorylicencewasdeclared
bankruptafewdaysbeforehisapplicationwasfiled.
TheCommissionerofPatentshasalsoneverfoundargumentsconvincing
enoughtovarytheamountoftheroyaltyarbitrarilysetat4%ofthenetselling
priceofthedruginthefirstdecisionrenderedundertheprovisionsof1969,in
spiteofnumeroussubmissionsmadebypatenteesastotheamountof
moneytheyactuallyspentinresearchanddevelopmentinCanadaand/or
abroad.
Inaddition,ourCourtshaveneverthoughtfittoreversethedecisions
renderedbytheCommissionerofPatentsinspiteoftheinvariablenatureof
hisdecisions,because,ontheonehand,itwasactuallytheintentionofthe
legislatorsin1969togeneratecompetitioninthepharmaceuticalindustryin
anattempttoreducedrugprices,andbecause,ontheotherhand,the
decisiontograntorrefusetograntacompulsorylicenceisexclusivelyan
administrativedecisiononwhichaCourtshouldnotpronouncejudgement,
unlessthereissomeflagrantabuseofright.Inparticular,otherwisesound
arguments,suchas,forexample,thefactthattheprovisionsenactedin1969
areunconstitutionaland/orcontrarytotheCanadianCharterofRightsand
Libertiesinasmuchastheyleadtoadeprivationofapropertyright
guaranteedbyLaw,havebeendismissedbyourCourts.
B.THENEWLEGISLATION
Aspoliticalhistoriarshaveoftenobserved,thepreoccupationsofacountry’s
citizensandoftheirpoliticalrepresentatives(iftheyhaveany)changewith
timeandcircumstances.Inthepastfewdecades,oneofthemajorproblems
thathasbesetthedevelopedcountriesoftheworldisunemployment.A
popularmethodofobviatingthisproblem,atleastinpart,istostimulate
investmentinordertopromotegrowthandtherebycreatejobs.
Attheendoftheseventies,Canadawasperceivedtobeinhospitableto
investmentinthepharmaceuticalindustry,becauseoftheratherunfair
compulsorylicenceprovisionsofitsPatentAct.Italsoappearedthatthese
compulsorylicenceprovisionshadnotonlycausedasubstantialcutinthe
growthandinvestmentofresearchanddevelopmentinCanada,buthad
alsoledsomeinnovativecompaniestomoveabroad,therebyreducingthe
numberofjobsavailableinthepharmaceuticalfieldtohigh-levelgraduates
fromCanadianUniversities.
InJune1983,aworkingpaperwaspublishedbytheMinisterofConsumerand
CorporateAffairs,callingforachangetothecompulsorylicencingprovisions
ofthePatentActinorder”torebalancethe1969policy”and”generate
furthergrowthinthisindustry”.InApril1984,areportarisingfroma
CommissionofEnquirynamedeponymouslyafteritsPresident,Mr.EASTMAN,
suggestedfirstlythelegislationofaguaranteedperiodofpharmaceutical
patentprotectionforinnovativecompaniesandsecondlyanincreaseinthe
royaltyrateforcompulsorylicencestoimport,from4to14%.
TheadditionalcompulsorylicenceprovisionsintroducedintothePatentAct
bythenewActfollowthesesuggestions.Asstatedinapress-release
publishedin1986bytheMinisterofConsumerandCorporateAffairs,the
amendmentsthatwereadoptedonNovember1987andwhichcameinto
forceonDecember7,1987,havethefollowingobjectives:
“1)TotransformCanada’spharmaceuticalsectorintoaworld-class,
innovativeindustryledbyanunprecedentedincreasein
investmentandjobsinpharmaceuticalresearchand
development…
2)Toensurefair-priceddrugsforCanadiansthroughthecreationof
anindependentDrugPricesReviewBoard.
3)Toguaranteethatthepharmaceuticalindustry’scommitments
forresearchanddevelopmentaremet.Iftheyarenot,the
proposedperiodofprotectionwillbereducedoreliminated.
4)Tomaintainopportunitiesforgrowthforgenericcompaniesin
Canada.
5)TobringCanada’sIntellectualPropertyLawsintoconformitywith
internationalpractices.”
1.MAINTENANCEOFTHEEXISTINGPROCEDURES
ThenewAct
2doesnotrepealnormodifytheexistingprocedures.Itonlyadds
afewlimitationsinordertodelaythegrantofcompulsorylicencestogeneric
2
Section15ofthenewAct.
companiesaskingforthem,and,simultaneously,toinducetheinnovative
companiestotransferasubstantialpartoftheirresearchtoCanada.
Accordingly,unlesstheexistingRulesaresubstantiallyamendedorunlessthe
presentpolicyoftheCommissionerofPatentsisreversedbyaCourt,bothof
whichwedoubt,thecompulsorylicenceapplicationsthatarefiledafterthe
periodofexclusivitynowguaranteed,shouldbegrantedaseasilyastheyare
todayandforthesameconsideration,namelyanamountofroyalty
invariablyfixedat4%ofthenetsellingpriceofthepatenteddruginits
posologicalform.
2.EXISTINGLICENCESTOBERESPECTED
Newlyintroducedsub-section41.11(4)ofthePatentActprovidesthatany
compulsorylicencegrantedbeforeJune27,1986(i.e.theoriginallyintended
ParliamentorytablingdateoftheBillwhichledtothenewAct)willremain
unmodified,providedhoweverthatthelicenceeactuallyobtainedhisNotice
ofComplianceonhisdrugalsobeforeJune27,1986(theNoticeof
ComplianceorN.O.C.istheauthorizationgivenbytheGovernmenttoadrug
manufacturertosellhisproductinCanadaaftertheproducthasbeen
provedtomeetvariousrequirementspertainingtosafetyandefficacy).
Inotherwords,anycompulsorylicencethatwasinforceonJune27,1986
andwhoseobjectwasactuallyworkedatthesamedate,willremaininforce
andwillnotbeopentoreview.
Inaddition,newSection41.12ofthePatentActprovidesthatanycompulsory
licencetoimport,grantedorfiledonthedaythisportionofthenewAct
cameintoforce(thatisonDecember7,1987)isassumedtohaveasits
object,notonlytheimportationbutalsothemanufactureinCanadaofthe
drugformingitssubjectmatter.Accordingly,wecannotevensaythatthere
isastatus-quo,asthealreadygrantedlicencesnotonlyremaininforce,but
arebroadenedinscopetocoverthemanufactureofthelicenseddrugs.
3.INTRODUCTIONOFGUARANTEEDPERIODSOFEXCLUSIVITY
AlthoughthenewActdoesnotchangemuchintheexistingprocedureand
provisionsanddoesnotaffectthecompulsorylicencesthatwereinforceon
June27,1986,itdoesaddnewprovisionstothePatentActinorderto
guaranteeaminimumofexclusivitytoanyinnovativecompanythatobtains
orhasalreadyobtainedapatentonanewdrug.Theseguaranteesarea
functionof:
-thekindoflicenceappliedfor(manufactureorimportation);
-thedateofgrantofthepatent;and
-thedateofissueoftheNoticeofCompliancetotheinnovative
companybytheMinisterofHealthandWelfare.
Beforespecifyingthedurationoftheperiodofexclusivityguaranteedto
patenteesasafunctionoftheabovementionedfactors,itisworth
mentioningthatsuchperiodsofexclusivityareonlygiventothe”base”patent
disclosingandclaiminganewdrug.Thereisnoprotectionatallagainstthe
grantofacompulsorylicencewithimmediateeffectunderanypatent
coveringanewprocessofmanufacturingadrugthatisalreadypatentedor
knowperse
3.
Thus,forexample,apatenteehavingobtainedapatentonanewprocessof
manufacturingadrugformingthesubjectmatterofanotherpatentalready
expired,willnothaveanyperiodofexclusivityguaranteedinanyway.
Itisalsoworthmentioningthattheseperiodsofexclusivityarenottobe
substitutedfortheseventeenortwentyyearsofprotectionaffordedbythe
patent.Theseperiodsofexclusivityapplyonlywithinthenormalperiodof
protectionaffordedbyapatent,itbeingunderstoodthattheguaranteed
exclusivitywill,ineverycase,expireassoonasthe”base”patentexpiresor,in
thenextfuture,isnotmaintainedthroughnon-paymentofannuities.
a)Licencetomanufacture
Ifthecompulsorylicenceappliedforistomanufactureapatenteddrugin
Canada,theperiodofexclusivitywhichwillbegrantedtothepatentee
beforethecompulsorylicencecomesintoforceis7yearsstartingfromthe
dateofissueofthefirstNoticeofComplianceonthedrug,providedhowever
thatthisNoticeofComplianceissuedafterJune27,1986
4.
Accordingly,wemaydeduceacontrariothattherewillbenoperiodof
exclusivityagainstthecomingintoforceofalicencetomanufacturea
patenteddruginCanadaifthefirstNoticeofComplianceissuedbeforeJune
27,1986.
3
videthecombinedeffectofnewSections41.11(3)and41.13ofthePatentAct;seealsonew
Section41.12ofthePatentAct.
4newSection41.14(1)ofthePatentAct.
b)Licencetoimport
Ifthecompulsorylicenceappliedforisexclusivelytoimportthepatented
drugintoCanada,theperiodofexclusivitywhichwillbegrantedtothe
patenteebeforethelicencecomesintoforceis:
-7yearsfromthedateofissueofthefirstNoticeofComplianceif
(1)thisNoticeissuedafterJune27,1986and(2)alicencewas
grantedbeforeJune27,1986toagenericcompanybutthis
genericcompanyhadnotalreadyobtained,atthatdate,its
ownNoticeofComplianceor,alternatively,thisgeneric
companyhasobtainedaNoticeofCompliancebeforeJune27,
1986butthelicenceapplicationwasstillpending
5;
-8yearsfromthedateofissueofthefirstNoticeofComplianceif
(1)thisNoticeissuedbeforeJune27,1986and(2)nocompulsory
licenceandnootherNoticeofCompliancewasgrantedorhad
beenissuedatthatdate
6;and
-10yearsfromthedateofissueofthefirstNoticeofComplianceif
thisdateissubsequenttoJune27,1986
7.
Onceagain,wemaydeduceacontrario
thattherewillbenoperiodof
exclusivityguaranteedtoapatenteeagainstthecomingintoforceofa
compulsorylicencetoimportif(1)afirstNoticeofComplianceonthe
patenteddrughadalreadybeenissuedbyJune27,1986,(2)acompulsory
licencehasalreadybeengrantedtoagenericcompanyand(3)thisgeneric
companyhad,onJune27,1986,alreadyobtaineditsownNoticeof
Compliance.Thisis,ofcourse,inconformitywiththepoliticaldecisionto
whichwehavealreadyalluded,namelythatthecompulsorylicences
alreadygrantedandinforcewillberespected.
c)Anexception:Canadianpharmaceuticalinventions
InordertoinduceinnovativecompaniestoinvestinCanadaandtoincrease
theircommitmentstoresearchanddevelopment,thenewActhasalso
introducednewprovisionstotheCanadianPatentAct,wherebyavery
particularstatusofprotectionisgiventoanynewdrugthatisdiscoveredand
developedinCanada
8.
5
newSections41.11(1)and41.11(2)(a)ofthePatentAct.
6newSections41.11(1)and41.11(2)(b)ofthePatentAct.
7newSections41.11(1)and41.11(2)(c)ofthePatentAct.
8newSection41.16ofthePatentAct;seealsosections5to8ofthePatentedMedicine
Regulations.
Accordingtothesenewprovisions9,anypatenteewhoseinventionrelatesto
anewdrugthathasbeeninventedanddevelopedinCanada,may,by
supplyingsufficientevidenceandinformationinsupportofhisrequest,askthe
CommissionerofPatentsofficiallytodeclarehisnewdrugasbeinga
Canadianinventionandtherebydeservingofaparticularstatus.
Havingthisstatus,thepatenteddrugcannotbemadethesubjectmatterof
anycompulsorylicencetoimportfortheentiredurationofthepatent
10.Such
aninventionfurthermorecannotbemadethesubjectmatterofa
compulsorylicencetomanufacture
11,unlessitappearsthat,sevenyearsafter
thedateonwhichtheNoticeofCompliancehasissuedtothepatentee,the
sameisnotcapableofcompletelyorsubstantiallysupplyingtheCanadian
marketforthatdrug
12orrefusestocomplywithanorderfromthePatented
MedicinePricesReviewBoard(whichwewillmoreextensivelydiscuss
hereinafter),and,moreparticularly,refusestocomplywithanorderofthe
boardrequestingareductioninthesellingpriceofthepatenteddrug
13.
Inordertopreservetheparticularstatus,”Canadianinvention”forapatented
drug,thepatenteeisalsoboundtoansweranyrequestfromthe
CommissionerofPatentsforinformationonhismanufacturingactivity
14.
Failuretoanswersucharequestwillleadtotherevocationofthespecial
status,sosubjectingtheinventionthereaftertothegrantofanycompulsory
licencetomanufactureorimport
15.
4.ESTABLISHMENTOFTHEPATENTEDMEDICINEPRICESREVIEWBOARD
ThenewActestablishesa”PatentedMedicinePricesReviewBoard”
16,whose
powersareverybroadanddiscretionaryandwhoseostensiblepurposeisto
controlthesellingpriceofmarketeddrugs.
Theintroductionofsuchacontrolonretaildrugpricesisnotsurprisinginitself,
especiallyifweconsiderthat(1)healthservicesarenationalizedinCanada
and(2)theabovediscussedcompulsorylicenceprovisionswereamendedin
1969(tofacilitatethegrantofcompulsorylicencestoimport)precisely
becauseoftheexcessivepriceofsomedrugs.Whatisoriginal,surprisingand,
9
subsection41.16(1).
10
subsection41.16(2)ofthePatentAct.
11
subsection41.16(3)ofthePatentAct.
12
subsection41.16(4)ofthePatentAct.
13
subsections41.16(5)and(6)ofthePatentAct.
14
subsection41.16(9)ofthePatentAct.
15
subsections41.16(9)and41.16(2)ofthePatentAct.
16
newSections41.18to41.24ofthePatentAct.
wethink,incongruous,isthefactthatsuchapricecontrolsystemhasbeen
incorporatedintothePatentActandthereforeappliesexclusivelyto
patenteddrugs.Thiswillpenalizetheinnovaticecompanieswhichwill,from
nowon,alwayshavetojustifytheirprices,contrarytothegenericcompanies
which,providedtheirsellingpricesarelowerthanthoseoftheinnovative
companies(somethingthatisveryeasyforthemtoachieveinpractice
becausegenericcompaniesusuallyhavenoresearchanddevelopment
costs),willnotbesimilarlyrequiredtojustifytheirpricesorprofitmargins.
ThePatentedMedicinesPricesReviewBoardrecentlyestablished,consistsof
notmorethan5members
17,appointedforaperiodof5years18atthe
suggestionofanadvisorypanelofpersonschosenfromconsumergroups
andthepharmaceuticalindustry
19.
ThefirsttaskofthisBoardistoprepareeveryyearandsubmittotheMinisterof
ConsumerandCorporateAffairs,areportgivingasummaryofpricingtrends
inthepharmaceuticalindustryandthenamesofthepatenteesaboutwhom
enquiriesweremade
20.TheBoardmustalsoprepareamorespecificreport
frominformationobtainedfromalldrugpatentees,indicating,asa
percentage,theamountspentbyeachpatenteeonresearchand
developmentinCanadaasaproportionoftherevenueofthesame
patenteefromdrugsalesinCanada.Thesamereportmustalsogivea
compilationofthedataobtainedfromeachpatenteetogive,asa
percentage,theexpedituresofallthepatenteesactiveinpharmaceutical
researchanddevelopmentinCanada,asaproportionofthetotalrevenue
ofallofthesepatenteesfromtheirdrugsalesinCanada
21.
Fromapracticalpointofview,thepurposeofthelatterreportis,wethink,to
allowtheGovernmenttocheckwhethertheinnovativecompaniesrespect
thecommitmentmadebytheirprofessionalassociation,thePharmaceutical
ManufacturersAssociationofCanada(PMAC),totheMinisterofConsumer
andCorporateAffairsseveralyearsago,inorderto”push”himtomitigatethe
thenprevailingcompulsorylicenceprovisions.Thiscommitmentofthe
innovativecompanies,disclosedinapress-releaseentitled”PatentAct
Reform-PharmaceuticalPolicy”,publishedbytheMinisterofConsumerand
CorporateAffairsinNovember1986,wastoincreasetheratioofresearch
anddevelopmenttosalesfromthecurrent5%toatleast10%by1995.
17
newSection41.18(1)ofthePatentAct.
18
newSection41.19(1)ofthePatentAct.
19
Section41.19(1).
20
newSection41.24.
21
newSection41.25(4).
ThesecondtaskoftheBoardis,ofcourse,tocontrolpricesofpatenteddrugs
andtodealseverelywithanyabuse.
TheprovisionsintroducedbythenewActintothecurrentPatentAct
22,enjoin
theownerofanypatentdealingwithagivenmedicinetoprovidetheBoard
everysix-months,with:
1)thepriceatwhichthemedicineisbeingsoldinCanada;
2)thepriceatwhichthemedicineisbeingsoldabroad;and
3)thecostofmakingandmarketingthemedicine.
EachpatenteemustalsoprovidetheBoardeveryyear,with:
4)thenameofanylicenceeofthepatenteeinCanada;
5)thequantityofsalesmadebythepatentee,whetherdirectlyor
indirectlyinCanada,ofthemedicine;and
6)theamountofexpenditurebythepatenteeinCanadaon
researchanddevelopment
23.
TheBoardmayrequestapatenteetojustifyanyincreaseinthepriceofa
drug,withinaperiodof30days
24,ifthisincreaseishigherthanthe
percentageincreaseintheConsumerPriceIndexforthatperiod,as
publishedbyStatisticsCanada
25.
IfthepatenteerefusesoromitstoprovidetheBoardwiththeabove
mentionedinformationortheBoardconsidersthatthepriceofadrug
remainsexcessiveinviewofapluralityoffactorslistedinvarioussub-sections
ofthePatentAct
26andthepatenteestillrefusestoreducehispricewithinthe
nextmonth,theBoardmayrevoketheperiodofexclusivityguaranteedto
thepatenteeagainstthegrantofcompulsorylicencestoimportand/or
manufacture,notonlyforthepatenteddrugformingthesubjectmatterof
theparticularenquiry,butalsoforanyother
patenteddrugssoldbythe
patenteeinCanada.Alternatively,iftheBoarddoesnotdeemitnecessary
22
2seeSections41.15(1)and41.16(5)ofthePatentActandRule4ofthePatentedMedicine
Regulations.
23
newSection41.25(1)ofthePatentActandRule9ofthePatentedMedicineRegulations.
24
Rule3.2ofthePatentedMedicinePricesReivewBoardRules.
25
newSections41.15(1.1)and41.16(5)ofthePatentAct.
26
newSections41.15(5)and41.16(7).
torevoketheperiodofexclusivityguaranteedtothepatentee,itmayorder
thatthepriceofthedrugbereducedtoan”acceptable”value
27.
Todeterminewhetherthepriceofthepatentedmedicineisexcessiveornot,
theBoardmusttakeintoaccountthefollowingfactors:
-theprice(s)atwhichthepatenteesoldthemedicineinCanada
andabroadduringthefive(5)yearsimmediatelypreceeding
thecurrentdetermination;
-theprice(s)ofothermedicinesinthesametherapeuticclasson
themarketinCanadaandabroadduringthesame5years;and
-theConsumerPriceIndex
28.
TheBoardmayalsotakeintoaccountthecostofmakingandmarketingthe
medicine
29.Itmaynothowevertakeintoaccounttheworldwidecostof
researchleadingtothepatenteddrug.Rather,itmayonlytakeintoaccount
theCanadianportionoftheworldcostrelatedtotheresearchleadingtothe
invention,alongwiththecostofitsdevelopmentandcommercialisationasa
medicine,calculatedinproportiontotheratioofCanadiansalestoworld
salesbythepatenteeofthatmedicine
30.
Fromapracticalpointofview,theBoardhasquasi-judiciarypowers.Itmay
holdhearingstowhichitmaysubpoenaanypersontotestify
31,including,in
particular,thepatentee,to”explain”anyexcessiveincreaseintheselling
priceofagivendrug.
Thesehearingswillbepublic,unlesstheBoardissatisfiedthatdirectand
substantialharmwouldbecausedtothepatenteebythedisclosureof
informationordocumentationduringthehearing
32.However,anyspecific
informationsubmittedtotheBoardduringanenquiryonthepriceofadrug
shallremainconfidential
33.
TheBoardmustgivenoticetotheMinisterofNationalHealthandWelfare
andtheMinisterresponsibleforHealthineachProvinceofanysuchhearing
andeachsuchMinisterisentitledtoappearandmakerepresentationtothe
27
newSections41.15(2)and41.16(6).
28
newSection41.15(5)ofthePatentAct.
29
newSection41.15(6)ofthePatentAct.
30
newSection41.15(7)ofthePatentAct.
31
Rule10ofthePatentedMedicinePricesReviewBoard.
32
newSection41.17(1)ofthePatentAct.
33
newSections41.17(2),41.25(3)and41.25(5)ofthePatentAct.
Board34.Inthisconnection,nothingisknownaboutwhethertheprovincial
Ministersresponsibleforhealthwillactuallymakeanysuchrepresentation.
However,inthecaseoftheMinisterofNationalHealthandWelfareof
Canada,itisdoubtfulthathewillmakeanyrepresentationashehasnever
donesointhelast20yearsforanyofthegreatnumberofcompulsory
licencesthathavebeenappliedfor,despitehavingsucharight
35.
Itisworthmentioningthatnoleavetoappealisprovidedforinthecase
whereapatenteedesirestoopposeanorderoftheBoard.Thisisrather
surprisingandseriousifweconsiderthegreatsubjectivityofthedecisionsthat
mightbetaken.Weassumehoweverthatanydecisionamountingtoan
obviousabuseofright,evenifitisonlyadministrative,willbeopentoappeal
totheFederalCourt,asprovidedforatCommonLaw.
5.REVISIONOFTHENEWPROVISIONSWITHIN4YEARS
ThenewActgivestheGovernmenttherighttoamendSection41ofthe
PatentActwithoutreferringtoParliament,inorderto:
-either
reducetheperiodofexclusivityguaranteedtothe
patentees(thispresumablywouldfollowif,inthelongterm,drug
pricessubstantiallyincreaseoriftheinnovativeindustrydoesnot
respectitscommitments);
-or
completelyrepealSection41,whichwouldremoveany
specialstatusfrompatentsdealingwithmedicines
36.
Inanycase,itisprovidedbyLawthatthenewprovisionsintroducedintothe
PatentActandtheirconsequencesshallbereexaminedbyParliamentwithin
9yearsfromthedaytheycametoforce
37,i.e.beforeDecember7,1996.
C.DISCUSSION
Asindicatedhereinabove,thenewpharmaceuticalcompulsorylicence
provisionscameintoforceonDecember7,1987andthePatentedMedicine
PricesReviewBoardwascreatedonthesameday,withMr.EASTMANasits
President.
34
newSection41.15(8)ofthePatentAct.
35
seeRule124(2)oftheCanadianPatentRules.
36
newSection41.26ofthePatentAct.
37
subsection41.26(3)ofthePatentAct.
InaBulletindatedJuly1988,theBoardpublisheda”CompliancePolicy”
settingoutitsapproachtosecuringcompliancewiththenewlegislationby
thepatentees.Italsopublished”Guidelines”describinghowitwilldetermine
whetherthepriceofapatentedmedicineisexcessive.TheCompliance
Policyisapparentlybasedonthepremisethatmaximumcompliancecan
onlybeachievedthrougheffectivedisseminationofinformation”toensure
thatthepatenteesknowwhattherulesare,whattheymustdotocomply
andhowtheBoardwillproceedifapriceappearstobeexcessive”.This
approachwhoseaimispresumablytoachieve”voluntary”compliancebythe
patentees,appearstoberatherfairandopen-mindedunderthe
circumstances.
ThecriteriasetforthintheBoard’sguidelinestoassesswhetherthecurrent
retailpriceofagivenpatentedmedicineisexcessive,aretwofold.
Firstly,forpatentedmedicinesalreadyonsale
inCanadapriortothe
proclamationofthenewAct,theBoardhasdecided,inouropinion,quite
fairly,tocomparethecurrentpriceofagivenmedicine(atthetimeofthe
appraisal)withtheso-called”benchmark”priceofthismedicineadjustedfor
thecumulativechangeintheConsumerPriceIndex(CPI),thebenchmark
pricebeingtheretailpriceofthemedicineinquestiononDecember7,1987
(theAct’sproclamationdate).Inpractice,theBoardwillholdthatthe
currentpriceisexcessiveifitisgreaterthanthisCPIadjustedprice.
ThecriteriasetforthbytheBoardtoassesswhetherthecurrentpriceofevery
new
medicineisexcessiveishowevermuchmoresubjective.Indeed,inthis
case,theBoardhasdecidedthat,”unlessthereissignificantevidencetothe
contrary,thecurrentprices(ofthenewmedicines)willbepresumedtobe
notexcessiveiftheydonotexceedthelesserofthemedianinternational
priceandthetherapeuticallyadjustedprice”.
The”medianinternationalprice”isthemediansellingpriceofthemedicinein
WestGermany,France,Italy,Sweden,Switzerland,UnitedKingdomandthe
UnitedStates
38.The”therapeuticallyadjustedprice”isthe”value-adjusted
priceofthemedicinerelativetoothermedicinesavailableinCanadawhich
treatthesamediseaseandsymptoms”.
Clearlythepriceofanygoodsorservicesinanycountrydependson
numerousfactorsthatarespecifictothecountry:capitalinvestments,
salaries,charges,distributioncosts,medicalassistancecostsinthecaseof
drugs,etc…Evenifthestandardoflivinginalltheabovementioned
countriesarecomparable,therespectivecostsoflivingareverydifferentand
capitalinvestmentbypatenteesmayvarygreatlyoncrossinginternational
38
ScheduleIIofthePatentedMedicineRegulations.
frontiers.Allthiswillobviouslyaffectthepricesofmedicinesbeingsoldin
thesevariousstates.Therefore,wearenotconvincedthatanycomparison
withamedianinternationalpricetoassessthepriceofanewmedicinetobe
soldinCanadaisactuallyfairorevenmeaningful.
Theotherpriceyardstick,theconceptof”therapeuticallyadjustedprice”,
seemsequallymeaninglessandisatbesthighlysubjectiveanditsapplication
willnodoubtbelefttosomeadministrative”rulesofthumb”whichweawait
apprehensively.Thisconceptisalsounfairinasmuchasthepriceofthenew
drugwillbecomparedtothepricesofallthesimilardrugsavailableinthe
market,includinggenericcopiesofthepatenteddrugs.
Asamatteroffact,weactuallywonderwhyitissoimportanttocontrolthe
introductionpriceofanewdrugplacedontheCanadianmarket?Isitreally
harmfultoleavetheinnovativecompaniesfreetofixtheintroductionprices
oftheirnewproducts?Indeed,ifthemedicineisveryexpensiveandno
betterthananyotherinthesamecategory,itwillprobablynotbe
commerciallysuccessfulandthepatenteewillhimselfhavetoreassesshis
price.
ComingbacktothenewAct,whatwillbetheadvantagesanddrawbacks
ofthenewcompulsorylicensingprovisions?
Personnalyspeaking,wedothinkthatthedecisionofourlegislatorsto
guaranteesomeperiodofexclusivitytotheownersofpharmaceutical
patents,isgoodandfulfilsaclearneedthathasariseninthepastfewyears.
Wearenotentitledtojudgewhethertheintroductionofapricecontrol
systemintotheveryspecificfieldofpatentedpharmaceuticalsisgoodor
evenwhetheritwasactuallynecessary.However,wedothinkthatthe
incorporationofsuchapricecontrolsystemintothePatentActis
incongruousanddiscriminatory.Indeed,onlytheinnovativecompanies
applyingforpatentswillbesubjectedtosuchpricecontrolandwillsufferthe
administrativedecisionsofthePatentedMedicinePricesReviewBoard.
Moreover,wenotethattheprovisionsintroducedbythenewActare
extremelyconstraining,especiallyinviewofthekindandquantityof
informationthatmayhavetobeprovidedtotheBoardbytheinnovative
companiesowningdrugpatents.Inthisconnection,wenotethatthe
PatentedMedicineRegulationsenactedonSeptember28,1988callforthe
completionofFormswithaverygreat
dealofinformationanddatawhich
maybedifficulttoextractfromastandardmanagementdatabase.Thus,by
wayofexample,Rule4callsforthesubmissionoftheex-factorypriceat
whichthemedicineissoldforeach
dosageform,strengthandpackagesize,
toeach
classofcustomerineachprovince.Assumingthatthereareonly
threeclassesofcustomers,vizdrugstores,wholesalersandhospitals,thirty(30)
prices(3classesmultipliedby10provinces)willhavetobegivenforeach
formulationandeachsuchpricewillhavetobetheactualprice,i.e.the
price”afteranyreductiongivenasapromotionorintheformofrebates,
discounts,refunds,freegoods,freeservices,giftsoranyotherbenefitsofalike
nature”
39.Andwhathappenstothesefiguresifthedrugsarereturnedtothe
companiesorremovedfromthemarketplace,forexamplebecauseoftheir
expirationdate?
Therefore,weactuallywonderwhethertheinnovativecompanies,originally
soanxioustoseethepassageofthenewAct,havenotmerelyfallenoutof
thefryingpanandintothefire.
Fromapracticalpointofview,wedobelievealsothattheresultour
legislatorsareseekingcouldhavebeenobtainedinamuchsimplerand
moreefficientmanner,ifthesuccessiveCommissionersofPatentshad
enforced,withgreaterfinesse,theprovisionsofSection41(4)ofthecurrent
legislation,ratherthansystematicallyandinflexiblyapplyingthesame
administrative”recipe”formorethan20years.
AspointedoutbyMr.JusticeThurlowinCharlesPfifferandCo.Inc.v.
NovopharmLtd.,65C.P.R.132:
“Whatimpressedmemuchmorefromtheargumentwasthefactthat
notwithstandingsuchobviousdifferenceasexistedbetweenthecases,
asforexample,differencesinthedrugswithwhichtheinventionswere
concernedandinthepatentsinrespectofwhichlicenceswere
sought,differencesaswellinthecaseofdrugstowhichtheinventions
appliedanddifferencesinthelevelsofpricesandproposedprices
therefor,theresultreachedbytheCommissionerinallcaseswas4%of
thesellingpriceinfinaldosageforms.WhileIthinkitisincumbenton
theCommissionertodealwiththematteronthefactsoftheparticular
case,Idonotthinkthereisanysoundobjectiontohisapproachinga
problemofthisnature,thesolutionofwhichdependstoaconsiderable
extentontheapplicationofthe”broadaxes”principle,bytheinitial
applicationofsucharuleofthumbapproach,providedthatdue
considerationisthereaftergiventohowfarthefactsoftheparticular
caseindicatethatanalterationshouldbemadeinthepercentage
whichtheruleofthumbsuggests”(underliningours).
Inspiteofthisstatement,madeinthebeginningofthe70’s,noneofthe
patenteeswho,overthelasttwentyyears,hasdesperatelytriedtooppose
thegrantofCompulsoryLicensesontheirdrugs,haseverbeenabletoput
forwardfactsprovingthattheirnewdrugwasactuallyrevolutionaryinits
categoryand,becauseofthetremendousamountofresearchcarriedoutto
39
Rules4(9)and(10).
developit,wasthusdeservingofsome”extra-protection”comparedtoallthe
othernew,yetmore”ordinary”drugs.Moreover,noneofthepatenteeshas
everbeenabletoconvincetheCommissionerthattheamountofmoney
spentinresearchanddevelopmentinCanadaonagivendrug,deserveda
higheramountofroyaltythanothersuchdrugs.
WithduerespecttotheCourtandCommissionerofPatents,wedobelieve
thattherehasbeen,andstillis,somethingwrongwiththe”system”even
thoughnoneoftheCommissioner’sdecisionstograntcompulsorylicences
waseverrevisedbytheCourts.Moreparticularly,wedobelievethatitwould
havebeenfarpreferableforourCommissionerofPatentstohavefound
undercertaincircumstancessome”goodreasons”nottograntcompulsory
licences.Heshould,webelieve,alsohavemodifiedtheamountofroyaltyin
somecases,totakeintoaccounttheactualamountofmoneyspentin
researchanddevelopmentbythepatentee.
Therefore,itseemstousthattheimplementationofthenewprovisionswhich
arerathercomplicatedandconstraining,couldhavebeenavoidedifour
successiveCommissionersofPatentshadinterpreted,inafairermanner,the
exactwordingofsection41(4)ofthecurrentAct.
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