CPI-Adjustment Factors for 2005

Consistent with section 85 of the Patent Act, the PMPRB´s Price Guidelines limit price increases for patented drugs to increases in the Consumer Price Index (CPI). Since 1987, the average annual rate of increase in the prices of patented drugs has been below the average increase in the CPI.

In 2003, the Consumer Price Index increased by 2.8%. Finance Canada forecasts lower rates of increase of 1.4% in 2004 and 1.8% in 2005.

To facilitate continued compliance with the Guidelines, the PMPRB publishes, on an annual basis, CPI-Adjustment Factors for the following year. In this way, in the event a patentee intends to adjust its price, it can calculate the new limit to ensure that the price will continue to be within the Guidelines. In recent years, the prices of most patented drugs have not increased by the full allowable increase based on the CPI. For those products that have gone up in price, increases are limited based on the CPI-Adjustment Factor.

The CPI-Adjustment Factors are based on the most current annual inflation projections by Finance Canada. This year, Finance Canada forecasts that the Consumer Price Index will increase by 1.4% in 2004 and 1.8% in 2005.

The methodology for monitoring compliance with the Guidelines on an annual basis is described in the Compendium of Guidelines, Policies and Procedures. It was developed in consultation with stakeholders, including representatives of the provincial ministries of health, consumer groups and the pharmaceutical industry. The Guidelines provide that the price of an existing patented drug product will be presumed to be excessive if it exceeds the benchmark price of the drug adjusted for changes in the CPI over the previous three years (or less for newer drugs). To prevent large one-time increases (for example, if a manufacturer seeks to “catch up” for increases not taken in a previous year) the Guidelines provide the further restriction that a one-year price increase may not exceed 1.5 times the projected increase in the CPI, even if the relevant CPI-Adjustment Factor for a multi-year period would have allowed for a larger increase. For 2005, the one-year limit is 2.7% in the event the CPI-Adjustment Factor would have allowed a larger increase.

The following table gives the CPI-Adjustment Factors for patented medicines for 2005 based on the benchmark year. The benchmark year is 2002 for all patented medicines introduced in 2002 or before and 2003 and 2004 for drugs introduced in those years.

If a patented drug product was first marketed in Canada in 2004, then 2004 is its benchmark year and its 2005 price may not exceed its 2004 price by more than 1.8%.

If a patented drug product was first marketed in Canada in 2003, then 2003 is its benchmark year and the price in 2005 may not exceed the lower of 3.2% over the price in 2003 and 2.7% over the price in 2004.

If a patented drug product was first marketed in Canada in 2002 or earlier, its benchmark year is 2002, and the price in 2005 may not exceed the lower of 6.1% over the price in 2002 and 2.7% over the price in 2004.

Please refer to Schedule 4 of the PMPRB´s Compendium of Guidelines, Policies and Procedures for a description of the CPI-Adjustment Methodology. The Compendium is available on our website under Legislation, Regulations and Guidelines.