Monitoring and Evaluation Plan for the Major Changes in the Guidelines 2011

Indicators Related to Specific Changes in the Guidelines

Below is a list of the seven major changes made to the Guidelines, including information on the main purpose of each change, and the impacts the Plan will be monitoring. Although the majority of the indicators are quantifiable, the Plan will also employ a number of qualitative indicators.

1. New Levels of Therapeutic Improvement

Stakeholders had expressed concern that under the former Guidelines, the PMPRB´s approach to assessing the level of therapeutic improvement of a drug product did not recognize the nature of incremental pharmaceutical innovation. At that time, the Guidelines did not differentiate among products that demonstrated moderate, slight or no improvement. New drug products that demonstrated incremental innovation were subject to the same price tests as line extension drug products.

In order to more appropriately reflect therapeutic improvement as well as the incremental nature of innovation, the PMPRB introduced four levels of therapeutic improvement under the new Guidelines:

  • Breakthrough: first drug product to be sold in Canada that treats effectively a particular illness or clinical indication/use
  • Substantial Improvement: relative to other drug products sold in Canada, provides substantial improvement in therapeutic effects
  • Moderate Improvement: relative to other drug products sold in Canada, provides moderate improvement in therapeutic effects
  • Slight or No Improvement: relative to other drug products sold in Canada, provides slight or no improvement in therapeutic effects

The revised Guidelines also introduced nine secondary factors (e.g., patient convenience, success rate and route of administration) to be considered when making recommendations on the level of therapeutic improvement, from slight or no improvement to moderate improvement.

In order to assess the impact of the inclusion of the new moderate improvement category, the Plan includes indicators to gauge how frequently this category has been invoked, as well as the type of evidence used in making the determination. These include:

  • Number of moderate improvement “designations” granted based on primary factors
  • Number of moderate improvement “designations” granted based on secondary factors
  • Type of evidence resulting in moderate improvement using secondary factors

2. Price Tests—Overall Restructuring of Tests

The PMPRB, in consultation with interested stakeholders, has developed various price tests to determine whether the price of a drug product is within the Guidelines. These price tests were restructured in the revised Guidelines in order to better align them with the new levels of therapeutic improvement previously described. New price tests were developed for assessing moderate improvement drug products, which provide a premium over slight/no improvement drug products but demonstrate less “improvement” than substantial improvement drug products

The Plan will monitor the impact of these changes by examining, for example, the amount of price premiums being collected by drug products classified as “moderate improvements”.

3. Price Tests—Highest International Price Comparison (HIPC) Wholesaler Exemption

The Highest International Price Comparison (HIPC) test compares the average transaction price of new and existing patented drug products with the publicly available ex-factory prices of the same medicine sold in the seven comparator countries. In order to ensure a consistent and fair application of the HIPC test for all patentees, while recognizing the nature of generic drug product prices and rebates, the Board decided that the HIPC would:

  • Be conducted at the national level
  • Be conducted for the pharmacy and hospital customer classes
  • Be conducted for each province and territory
  • Not be applied to the wholesaler class of customer1

As set out in the January 2011 NEWSletter, the Board decided that the review of prices of existing patented products at the level of any market is not being implemented at this time. For purposes of this Plan, no indicator was developed to examine the application of the wholesaler exemption for existing patented drug product prices.

However, the following indicator was developed to examine the application of the wholesaler exemption for new patented drug products and the impact of this change on new patented drug prices:

  • The number of wholesaler prices that are above the result of the HIPC test
  • Of these, how many benefit from the wholesaler exemption

4. Use of Public Prices for Domestic Price Comparison

In order to ensure a fair and predictable application of the Guidelines and achieve greater transparency, the Board decided to specify a list of publicly available sources of price information in the new Guidelines.

Indicators included in the Plan will examine the impacts of this change to determine the extent to which the use of public prices results in higher Maximum Average Potential Prices (MAPP) for new patented drug products. Other indicators will monitor the change in utilization of price sources, including the frequency of each source indicating the lowest price, and the number of public sources cited for each comparator.

5. DIP Methodology

Patentees are allowed to take an annual price increase for their patented medicines equal to the forecasted Consumer Price Index (CPI) calculation. According to the PMPRB´s CPI Methodology, the price of an existing drug product during the year under review will be presumed to be excessive if it exceeds the allowable CPI-adjusted price over the period of three years or if the price increase is more than 1.5 times the forecast CPI.

The DIP Methodology was introduced in order to not create disincentives to the offering of “benefits”, which lead to a price reduction to customers. However, in the January 2011 NEWSletter, the Board announced that the DIP Methodology would not be applied until its application and impact had been assessed by Board Staff and proposed adjustments had been brought to the Board for approval.

In January 2011, the PMPRB established the DIP Methodology Technical Working Group (DIP-WG), which produced a report identifying current challenges in implementing the DIP Methodology and outlined options to address them2. The Board agreed to the proposed recommendations outlined in the report and decided to implement the recommendations on a pilot basis until the end of 2011 for any cases that arise.

The pilot DIP Methodology will consist of two processes: (1) the Simplified DIP Methodology, and (2) the Regular DIP Methodology. The Simplified DIP Methodology is a streamlined approach requiring minimal evidence for situations in which the National Average Transaction Price is less than or equal to the Introductory Benchmark Price. The Regular DIP Methodology, on the other hand, is an expanded version of the Simplified DIP Methodology requiring additional evidence from patentees. It is to be applied in cases where the DIP is invoked and the Simplified DIP Methodology does not apply.

In light of this, indicators will be developed once a permanent approach has been established.

6. Offset of Excess Revenues (Does not trigger investigation criteria)

Prior to the implementation of the revised Guidelines, patentees could offset excess revenues by not taking allowable (CPI) price increases. Excess revenue balances below the amount sufficient to trigger the investigation criteria were also observed to not be uncommon and in some cases existed for multiple years.

Under the new Guidelines, and as set out in the Patent Act, excess revenues can only be offset by either:

i) the reduction of the price of the medicine or the price at which the patentee sells another patented medicine in Canada

ii) a payment to Her Majesty in right of Canada.

Excess revenue balances below the amount sufficient to trigger the investigation criteria that are carried for six consecutive six-month reporting periods (3 years) are also expected to be offset through a Voluntary Compliance Undertaking (VCU).

In the January 2011 NEWSletter, the Board indicated that the requirement for a VCU and the thresholds for opening an investigation will be re-assessed.

7. Investigation Criteria

Prior to the implementation of the revised Guidelines, the price of an existing patented drug product would trigger an investigation if:

  • the price exceeded the maximum non-excessive price by 5% or more and there were cumulative excess revenues of $25,000, or
  • there were cumulative excess revenues of $50,000 or more, or
  • a complaint was received.

Under the revised Guidelines, the thresholds for commencing an investigation for existing patented drug products were changed to be the same as for new patented drug products. An investigation is triggered if:

  • the price exceeds the Maximum Average Potential Price (new patented drug product) or the National Non-Excessive Average Price (existing patented drug product) by more than 5%, or
  • there are cumulative excess revenues of $50,000 or more, or
  • a complaint is received.

The impact of this change is currently being assessed.

Changes Not Monitored

No active monitoring is proposed for the following changes to the Guidelines, as these changes did not significantly impact current procedures:

  • Terminology changes
    • “Maximum Average Potential Price” replaced “introductory Maximum Non-Excessive Price” for new patented drug products
    • “Non-Excessive Average Price” replaced “Maximum Non-Excessive Price” for existing patented drug products
  • Limited comparators for patented generic drug products
    • Comparators are limited to only the reference (bioequivalent) or licensing brand´s drug product
  • International Therapeutic Class Comparison test
    • Drug products used for comparison purposes in the ITCC mirror those used in the domestic Therapeutic Class Comparison test. The ITCC test is not a pivotal price test, but rather may provide useful information in the context of an investigation.

Reporting

This Plan will assist the Board in assessing the impact and application of the major changes to the Guidelines. These impacts may not be immediately apparent due to the timing of the regulatory filings of patentees, the price review process of existing patented drug products, which is based on a full calendar year, and the fact that it may take several reporting periods before any discernible trends become evident. The Board will monitor emerging issues to identify the need for any future amendments to the Guidelines or this Plan.

The following table presents a summary of the major changes made to the Guidelines, the indicators developed to date to measure the impact of these changes, as well as results or observations on 2010 data. As noted above, some indicators are still to be developed pending the outcome of pilot tests or Board consideration of emerging policy issues. Other observations by the Board may also be made as Board Staff continues to gain experience in the application with the Guidelines.

The Summary of Major Changes, Indicators and Results was presented to the Board in December 2011 and will be updated annually each December.

Summary of Major Changes, Indicators and Results (December 2011)
Change to Guidelines Section of Guidelines where Change is Applied Indicators to be Assessed Observations/Results

New Levels of Therapeutic Improvement

Guidelines and Procedures:

  • Scientific Review Process sections:
  • C.5 – The Level of Therapeutic Improvement
  • C.6 – Factors Considered in Recommending the Level of Therapeutic Improvement
  • C.7 – Methodology for the Evaluation of the Level of Therapeutic Improvement
  • C.8 – Selection of Drug Products to be Used for Comparison Purposes and Comparable Dosage Regimens
  • Schedule 1 – Submissions by Patentees on Level of Therapeutic Improvement
  • No. of moderate improvement based on primary factors
  • No. of moderate improvement based on secondary factors

  • Type of evidence resulting in moderate improvement using secondary factors

Of 68 new drug products reviewed in 2010, 13 drug products were classified as moderate improvement

Of these 13 drug products:

  • 5 drug products (representing 5 medicines classified as moderate improvement based on primary factors
  • 8 drug products (representing 4 medicines) classified as moderate improvement based on secondary factors

The moderate level of therapeutic improvement is therefore being used and secondary factors are being applied.

Type of evidence has included: randomized open label studies, observational studies, cohort studies, cross-sectional surveys, case control studies, guidance documents, expert opinion, expert opinion reviews.

Price Tests – Overall Restructuring
of Tests

Guidelines and Procedures:

  • The Price Review Process section:
  • C.11 – Review of Prices of New Patented Drug Products at Introduction
  • Schedule 8 – Application of Price Tests for New Drug Products
  • Amount of price premiums being collected by drug products classified as moderate improvement

Of the 13 new drug products classified as moderate improvement in 2010, the midpoint was conducted for 8 drug products:

  • Only 2 drug products (representing 2 medicines)benefited from the midpoint price test
  • For 5 drug products (representing 2 medicines), the ATPs were lower than their midpoints and TCC
  • For 1 drug product, the TCC > ATP > midpoint
  • For 4 drug products (representing 2 medicines), the MAPP was established by the HIPC
  • For 1 drug product, the MAPP was established by the MIPC due to the lack of comparators

Due to a small number of drug products receiving the midpoint price test, price premiums cannot be disclosed in order to maintain confidentiality

Price Tests –
HIPC Wholesaler Exemption

Guidelines and Procedures:

  • The Price Review Process section:
  • C.11 – Review of Prices of New Patented Drug Products at Introduction

- Highest International Price

Comparison Test subsection C.11.11

and C.11.12

  • Schedule 6 – Highest International Price Comparison Test
  • Number of wholesaler prices that are above the result of the HIPC test, and of these, how many benefit from the wholesaler exemption

Of the 68 new drug products introduced in 2010, 62 reviews have been completed:

  • No case where the W-MAPP was higher than the N-MAPP (i.e., no case that benefited from wholesaler exemption)
  • 60 cases where the W-ATP was less than the HIPC
  • 2 cases where the HIPC Test could not be conducted:
    • 1 drug product was only sold in Canada
    • 1 drug product where there was no sales to the Wholesaler

Use of Public Prices for Domestic Price Comparison

Guidelines and Procedures:

  • The Price Review Process section:
  • C.11 – Review of Prices of New Patented Drug Products at Introduction

- Highest International Price

Comparison Test subsection C.11.13

  • Schedule 3 – Therapeutic Class Comparison Test
  • Schedule 4 – Reasonable Relationship Test
  • Extent to which the use of public prices results in higher MAPP for new drug products

  • Change in utilization of price sources, including:
  • frequency of each source indicating the lowest price
  • number of public sources cited for each pivotal comparator

Of the 68 new drug products introduced in 2010, there were 19 new drug products where the TCC was performed:

  • 11 cases where public price of the pivotal comparator < N-NEAP, resulting in a higher MAPP
  • 2 cases where public price of the pivotal comparator > N-NEAP, resulting in a lower MAPP
  • For 6 drug products, the pivotal drug was not patented

From the 6 public sources, AQPP was the most frequently sourced, followed by RAMQ

  • AQPP cited 15 times
  • RAMQ cited 13 times
  • ODB cited 3 times
  • McKesson Canada cited 2 times
  • PPS Pharma cited 2 times
  • IMS cited 1 time

Of the 19 drug products where the TCC was performed:

  • 6 cases where only 1 public source cited
  • 8 cases where 2 public sources cited
  • 5 cases where 3 public sources cited

DIP Methodology

Guidelines and Procedures:

  • Schedule 10 – DIP Methodology (not being applied)

Refer instead to:

  • Pending end of pilot

Proposed recommendations outlined in DIP Methodology Technical Working Group Report being implemented on a pilot basis

Any Market

Guidelines and Procedures:

  • Schedule 12 – “Any Market” Price Reviews

  • Number of instances when introductory market-specific prices exceed the MAPP
  • Number of market-specific complaints where the N-ATP did not trigger an investigation

Of the 68 new drug products introduced in 2010, there were 108 classes of customer-specific or 416 region-specific prices submitted.

  • There were no cases where a price in any market for a new patented drug product was above the MAPP, where the N-ATP was within the Guidelines
  • No complaints to report for new patented drug products
  • Assessment is pending for existing patented drug products

Offset of Excess Revenues (Does not Trigger Investigation Criteria; and Thresholds for Opening an Investigation)

Policies:

  • B.7 – Policy on the Offset of Excess Revenues

Guidelines and Procedures:

  • Schedule 13 – Offset of Excess Revenues

  • Pending assessment


1 Only the domestic price test is used to assess the wholesaler class.

2 This report can be found at DIP Methodology Technical Working Group

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