Court limits Canada's power over generic drug prices

Canada's populist stance on drug patents and prices has not endeared it to Big Pharma, which has both complained and pursued legal action against some of its rulings. A federal court in Canada has now agreed with the industry that the country's price setting board has assumed too much authority and severely curtailed its ability to control prices over generic drugs in a case centered on Novartis' ($NVS) generic drug company Sandoz, and a unit of Teva Pharmaceutical Industries ($TEVA), which started as Ratiopharm.

Judge James O'Reilly

The ruling by Canada's Federal Court has limited the Patented Medicine Prices Review Board from being able to set prices for generic drugs, the Financial Post reports. "The decision means that generic drug makers who do not hold patents themselves and do not exercise monopoly power need not file price information with the Board," says Gavin MacKenzie, a lawyer with Davis LLP who represented Ratiopharm and Sandoz, arguing that they did not fall within the definition of patentees. "Generics came within the jurisdiction of the Board only if they were such 'patentees'," MacKenzie explains. "The court ruled that they were not and reversed the $65-million judgment."

Federal Court Judge James O'Reilly said that the board's decision to extend its authority to generic drugs was an overreach that would set the law up for a constitutional challenge, PharmaTimes reports. He also chastised the board for leaning too heavily on the law's "consumer protection purpose," it said.

Ratiopharm, now Teva Canada, ran afoul of the board when it raised the price on an inhaler to $7.50 from $4.50, putting its price in line with competitors, but still $5 less than the branded version, the Financial Post said. The board found the price hike excessive and ordered the company to return the extra profits. In the Sandoz case, it had complained about some of the reporting requirements of the law.

Many of the problems Big Pharma has when it comes to its treatment by Canada have centered on how quickly it has allowed generics of branded drugs to hit the market. Eli Lilly ($LLY), which is one of the more vocal critics of Canada's patent positions, last year filed a $500 million lawsuit against the government under provisions of the North American Free Trade Agreement. It argues Canada's patent laws are inconsistent and permitted generics of some of Lilly's drugs to hit the market sooner than they should have. "Patent decisions in Canada over the last decade not only fly in the face of long-established international standards, but they're subjective and completely unpredictable. The standard seems to be that there is no standard," Doug Norman, general patent counsel for Lilly said in a statement at the time.

The European Union has been wrangling with Canada in trade talks over the country's patent standards. It wants Canada to adopt Europe's 10-year patent protection for drugs instead of the 8 years Canada now provides. The provision has been opposed by many of Canada's local governments, which say it will be a big hit to their healthcare budgets.

- here's the Financial Post story
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