Federal Court Affirms Price Regulation Schemes are intra vires

Federal Court Affirms Price Regulation Schemes are intra vires

Alexion Pharmaceuticals Inc v Canada (Attorney General), 2016 FC 716

Pharmaceutical companies should be cognizant of the price control regime when setting prices, especially potentially excessive ones, for patented medicines.

In this Federal Court (“FC”) decision, the Attorney General of Canada (“the AG”) was successful in bringing a motion to strike Alexion Pharmaceuticals Inc.’s (“Alexion”) constitutional challenge to the patented medicines price regulation scheme in the Patent Act. [3] The AG brought the motion to strike on the ground that the application was bereft of any chance in light of a line of jurisprudence, the most recent of which being Canada (Attorney General) v Sandoz Canada Inc, 2015 FCA 249 [Sandoz], which had fully and finally determined that these sanctions are intra vires and constitutional. [4]

Alexion’s application sought declaratory relief declaring that ss. 80-86 of the Patent Act and the words “in any proceeding under section 83” in s. 87(1) (“the Impugned Provisions”) were ultra vires the Parliament of Canada because the price regulations scheme created by the Impugned Provisions exceeded the powers granted to Parliament under s. 91(22) and other federal power, of the Constitution Act, 1867.  [3] Alexion had further alleged that that Impugned Provisions violated provincial jurisdiction over property and civil rights under s. 92(13) of the Constitution Act, 1867. [3]

Background & Positions

On January 20, 2015, the Patented Medicines Prices Review Board (“the Board”) issued a Notice of Hearing, notifying Alexion that the Board would “determine whether, under section 83 and 85 of the Patent Act… [Alexion] is selling or has sold… SOLIRIS in any market in Canada at a price that, in the Board’s opinion, is or was excessive and if so, what order, if any, should be made.” [8] Alexion’s application stated that the “price of SOLIRIS in Canada has neither increased since it was first introduced in the Canadian market in 2009, or decreased in the countries where the product is sold outside of Canada. Further, it is noted that in 2010 and 2011, the Board explicitly acknowledged that the introductory price of SOLIRIS was not excessive based on international pricing of the product.” [9]

The AG’s argument was simply that the constitutionality of the Impugned Provisions had already been established in prior jurisprudence, leaving the application bereft of any chance of success. [5] Alexion rebutted that the application is not bereft of any chance of success because despite the constitutionality of the Impugned Provisions being adverted to in several cases, the discussion had been peripheral in nature and not focused on a pith and substance approach, leaving none of the jurisprudence dealing with the issue head on. [6]

Issues Under Appeal

The AG cited three cases in its argument, however the Federal Court of Appeal (“FCA”) case Sandoz engaged the Impugned Provisions directly. [28] In Sandoz, following the commencement of proceedings and seeking of information, [31] orders by the Board were made against Ratiopharm Inc. (“Ratiopharm”) and Sandoz Canada Inc. (“Sandoz”) to pay over $65 million to offset excess revenues, [32] and provide information relating to five drugs, [33] respectively. Both orders were judicially reviewed, [34] with it being found that neither Ratiopharm nor Sandoz were patentees within the meaning of the Patent Act, and thus beyond the jurisdiction of the Board. [35] Justice O’Reilly also found that the Impugned Provisions were constitutional. [35] The AG appealed both decisions, and in the FCA’s view, the FC and the Board had correctly held that the control of prices charged for patented medicines comes within the jurisdiction conferred on Parliament, when applied to a patent holder or owner. [38] In the decision at hand, this determination by the FCA was sufficient to show that the Impugned Provisions were constitutional, and enough to render the application bereft of any chance of success. [39]

Application Struck

The test to be applied on a motion to strike is whether the proceeding is bereft of any chance of success. The FC was of the view that this requirement had been met. [43] The FC was also of the view that the precedent set by Sandoz in the FCA was sufficient to dispose of this motion, and applied the doctrine of stare decisis. [44] The motion of the AG was granted and the application was struck with costs. [46]

Commentary

Decisions such as these may yet reappear in the foreseeable future, as the Sandoz decision is being appealed to the Supreme Court of Canada (“SCC”) even though no decision has been rendered yet by the SCC on the leave to appeal application. Sandoz’s argument is focused on whether a generic manufacturer can be captured by the definition of a “patentee” in the Patent Act, however if the SCC grants leave to appeal, then the matter of constitutionality of price control and the jurisdiction of the Board will also likely be considered by the SCC.

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