Innovative Medicines Canada v. Canada (Attorney General)

Innovative Medicines Canada v. Canada (Attorney General)
Court (s) Database
Federal Court Decisions
Date
2020-06-29
Neutral citation
2020 FC 725
File numbers
T-1465-19
Notes
A correction was made on 052721.
Reported Decision
Decision Content
Date: 20200629
Docket: T-1465-19
Citation: 2020 FC 725
Ottawa, Ontario, June 29, 2020
PRESENT: The Honourable Mr. Justice Manson
BETWEEN:
INNOVATIVE MEDICINES CANADA,
ABBVIE CORPORATION, AMGEN CANADA INC.,
ASTELLAS PHARMA CANADA, INC., ASTRAZENECA CANADA INC.,
BRISTOL-MYERS SQUIBB CANADA CO., ELI LILLY CANADA INC.,
HOFFMANN-LA ROCHE LIMITED,
IPSEN BIOPHARMACEUTICALS CANADA, INC.,
LEO PHARMA CANADA INC., LUNDBECK CANADA INC.,
NOVARTIS PHARMACEUTICALS CANADA INC.,
NOVO NORDISK CANADA INC.,
OTSUKA CANADA PHARMACEUTICAL INC., PFIZER CANADA ULC,
SANOFI-AVENTIS CANADA INC., AND TAKEDA CANADA INC.
Applicants
and
THE ATTORNEY GENERAL OF CANADA
Respondent
and
CANADIAN ORGANZATION FOR RARE DISORDERS
Intervener
JUDGMENT AND REASONS
I. Introduction
[1] This is an application for judicial review of recent amendments to the Patented Medicines Regulations, SOR/94-688 [the Regulations], under the Patent Act, RSC 1985, c P-4. The Applicants seek a declaration that certain provisions of the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), SOR/2019-298 [the Amendments] are invalid because they are ultra vires the Patent Act.
[2] The Applicants essentially challenge the federal government’s use of the Patented Medicine Prices Review Board [the Board] as a mechanism to reduce patented medicines prices in Canada. The Applicants take issue with three aspects of the Amendments. First, the Amendments specify additional factors that the Board must consider when determining whether the price of a patented medicine is excessive. Second, the Amendments change the “basket” of comparator countries for the purpose of reference pricing. Third, the Amendments require patentees to take into account discounts and rebates provided to third parties when reporting medicine prices to the Board [collectively, the Impugned Amendments].
[3] The Amendments were scheduled to come into force on July 1, 2020. At the outset of the hearing, the Respondent informed the Court that by Order in Council PC 2020-413, dated May 30, 2020, the coming into force of the Amendments has been deferred until January 1, 2021.
II. Background
A. The Parties
[4] The Applicants are Innovative Medicines Canada [IMC], a national association of research-based pharmaceutical companies, and several Canadian innovative pharmaceutical companies. Each pharmaceutical company Applicant is a member of IMC and a patentee subject to the requirements of the Regulations, and will be directly affected by the Impugned Amendments.
[5] The intervener, the Canadian Organization for Rare Disorders [CORD], is a national network of patient organizations representing Canadians with rare disorders. By definition, rare disorders affect 1 in 2000 people, and ultra-rare disorders affect fewer than 20 people per million. Patients with rare diseases rely on innovative medicines for treatment.
[6] CORD was granted leave to intervene to speak to the unique perspective of patients with rare disorders. CORD takes similar positions to the Applicants, albeit from a different perspective.
B. History of the Patented Medicine Prices Review Board
[7] Created by Parliament in 1987, the Board is a quasi-judicial body that regulates the prices that patentees can charge for patented medicines during the statutory monopoly period. The Board’s mandate includes a type of consumer protection: ensuring that patentees do not abuse their patent rights by charging “excessive” prices for patented medicines. The Board’s mandate is not to set prices for patented medicines, but to ensure patentees do not sell patented medicines at excessive prices (Pfizer Canada Inc v Canada (Attorney General), 2009 FC 719 at para 11 [Pfizer]; Sanofi Pasteur Limited v Canada (Attorney General), 2011 FC 859 at para 17 [Sanofi]).
[8] The Board was created to balance expanded patent rights extended to patentees of medicines pursuant to the 1987 amendments to the Patent Act with the need to prevent excessive pricing of those medicines by patentees. The 1987 amendments significantly curtailed the compulsory licensing regime, opened up patent protection to pharmaceutical products, and extended the patent term to 20 years from the date of filing of a patent application. Parliament sought to ensure that patented medicines prices would not become excessive because of these changes.
[9] During the legislative process leading up to the 1987 amendments, the Honourable Harvie Andre, then Minister of Consumer and Corporate Affairs, stated that the purpose of the Board is to “ensure that prices of drugs not yet discovered…will be reasonable” and that the proposed amendments included “enormous checks and balances” to meet this objective (House of Commons Debates, 33-2, Vol 1 (October 7 and November 20, 1986) at 152 and 1373 (Hon Harvie Andre)).
[10] In 1993, Parliament further amended the patented medicines regime, abolishing the compulsory licensing regime altogether in order to better align Canada’s patent system with international treaty obligations. Amongst other changes, the 1993 Patent Act amendments enhanced the Board’s powers to address excessive pricing of patented medicines sold in Canada. The Board was given the power to address introductory prices of patented medicines, and expanded powers to make new types of orders including orders to offset past excess revenues, and orders imposing fines or imprisonment on patentees.
[11] The 1993 amendments defined the Minister of Health and Welfare (now the Minister of Health) as the Minister responsible for sections 79 to 103 of the Patent Act [the Patented Medicines Regime]. Prior to 1993, this regime fell under the purview of the Minister of Consumer and Corporate Affairs.
[12] Further, these amendments updated the factors that the Board considers when determining whether a medicine has been sold at an excessive price in Canada, and provided the Governor in Council with an express regulation-making authority to specify additional factors for the Board to consider. Prior to the regulations at issue in this application, the Governor in Council had never exercised this authority.
[13] In the legislative debates surrounding the 1993 amendments, the Government again highlighted the Board’s role in protecting Canadian consumers from excessive patented medicines prices. The Honourable Pierre Blais, then Minister of Consumer and Corporate Affairs, stated that the amendments to the Patented Medicines Regime were a “guarantee that Canadians can continue to buy patented drugs at a price that is and will remain reasonable” (House of Commons Debates, 34-3, Vol 10 (September 17, 1992) at 13258 (Hon Pierre Blais)).
C. Operation of the Governing Statutory Scheme
[14] As noted above, the Patented Medicines Regime is set out in sections 79 to 103 of the Patent Act.
[15] Section 83 of the Patent Act empowers the Board to issue certain orders to patentees who are selling or have sold medicines in any market in Canada at a price that, in the Board’s opinion, is excessive. Upon such a finding, the Board may, amongst other things, order the patentee to reduce the price to a non-excessive level, and order the patentee to pay a specified amount to Her Majesty in right of Canada.
[16] Section 83 also provides patentees with a right to a hearing prior to the Board making any order.
[17] In practice, price reductions and repayment of excess revenues by patentees occur pursuant to a Voluntary Compliance Undertaking [VCU], or a Board order made following a public hearing and Board determination that the medicine has been sold at an excessive price.
[18] A VCU is a written undertaking by a patentee to adjust its price to conform to the Board’s guidelines. Following a finding that the price of a patented medicine appears to have been sold at an excessive price, the Board, pursuant to its guidelines, offers patentees the opportunity to submit a VCU.
[19] Section 85 of the Patent Act prescribes factors for the Board to consider when determining whether the price of a patented medicine is excessive under section 83. Subsection 85(1) defines mandatory factors that the Board must consider, and subsection 85(2) sets out additional factors the Board may consider where it is unable to determine whether a patented medicine has been sold at an excessive price based only on the mandatory factors.
[20] The mandatory factors defined in subsection 85(1) require the Board to consider the price of the medicine at issue as compared to the prices of other medicines in the same therapeutic class, and the prices of the same and similar medicines in other countries. This comparison is referred to as “reference pricing”. The schedule to the Regulations sets out a list of comparator countries to be used as international reference pricing benchmarks. From 1988 to 2019, the comparator countries were France, Germany, Italy, Sweden, Switzerland, the United Kingdom, and the United States [the PMPRB7].
[21] Subsection 85(1) also requires that the Board consider changes in the Consumer Price Index and “such other factors as may be specified in any regulations made for the purposes of this subsection.” Prior to 2019, no regulations had been enacted for the purposes of applying subsection 85(1).
[22] Section 80 of the Patent Act governs information that patentees must provide to the Board to enable it to conduct excessive price reviews. Patentees with inventions pertaining to medicines must provide the Board with information and documents as prescribed by regulation with respect to:
(a) the identity of medicine;
(b) the price at which the medicine is being sold in Canada and elsewhere;
(c) the costs of making and marketing the medicine;
(d) the factors referred to in section 85; and
(e) any other related matters.
[23] Subsection 101(1) provides the Governor in Council with broad regulation-making authority. Relevant to this proceeding, the Governor in Council may make regulations “specifying the information and documents that shall be provided to the Board under subsection 80(1) or (2)” (paragraph 101(1)(a)) and “specifying factors for the purposes of subsection 85(1) or (2)” (paragraph 101(1)(d)).
[24] Subsection 101(2) states that no regulations may be made under paragraphs 101(1)(d), (f), (h), and (i) except on the recommendation of the Minister of Health, made after the Minister has consulted with the provincial health ministers, and consumer groups and pharmaceutical industry representatives that the Minister deems appropriate.
[25] It bears emphasizing that the Board, the Minister of Health, and the Governor in Council are separate entities, each with different mandates, powers, and responsibilities under the Patented Medicines Regime.
D. Events Leading to the Amendments
[26] The parties frame the consultation and amendment process differently. The Applicants assert that following a January 2016 meeting between the federal, provincial, and territorial Ministers of Health to discuss health care funding, the federal government formed a plan to use the Board to lower prices of patented medicines.
[27] In particular, in a May 2017 letter to the Ontario Minister of Health and Long-Term Care, the federal Minister of Health referenced the governments’ commitment to improve the affordability, accessibility, and appropriate use of prescription drugs. She noted that within federal jurisdiction, this includes lowering high drug prices through modernization of the regulatory framework that guides the work of the Board.
[28] The Respondent notes that in light of relatively high patented drug prices and record low pharmaceutical research and development in Canada, the Board itself had identified the need for modernization as early as 2014. The Minister of Health’s recognition of this need at the outset of the consultation process signified the government taking up the Board’s call for modernization.
[29] The Regulatory Impact Analysis Statement [the RIAS] that accompanied the Amendments describes how the pharmaceutical industry has changed significantly since the Board was created, making it more difficult for the Board to fulfill its statutory mandate of identifying and preventing excessive patented medicine prices (Canada Gazette Part II, Vol 153, No 17 at 5946-5996).
[30] Specifically, the RIAS notes that patentees are increasingly focusing on high cost patented medicines with few, if any, direct comparators. These types of medicines pose the potential for an increased risk of excessive prices. Further, the PMPRB7 comparator countries were selected on the understanding that price and patent protection were key determinants of the location of worldwide pharmaceutical research and development. The RIAS states that this understanding has not been borne out in reality, and is no longer considered an appropriate basis for selecting comparator countries. Finally, over time the discrepancy between the net prices reported by patentees to the Board and the actual prices and revenues realized by drug companies has increased. The RIAS states that this increase is attributable to the practice of manufacturers negotiating confidential rebates and discounts with third parties in exchange for having their products listed on public and private formularies.
[31] The Board identified each of these trends prior to the Minister of Health commencing the pre-amendment consultation process. The Board conducted consultation on updating its guidelines to combat these trends, completing the first phase of consultation in October 2016. As explained in the RIAS, simply changing the Board’s guidelines could not address underlying limitations in the Regulations, and the Board opted not to adopt the proposed guideline changes.
[32] Pursuant to subsection 101(2) of the Patent Act, the Minister of Health started a pre-consultation process in May 2017, consulting with her provincial and territorial counterparts and engaging numerous other stakeholders, including innovative and generic pharmaceutical companies, insurers, academics, and patient organizations.
[33] Consultation and refinement of the proposed amendments took place between May 2017 and August 2019. In December 2017, proposed amendments and an accompanying RIAS were published in the Canada Gazette Part I, followed by a 75-day consultation period. Roundtable consultation meetings between pharmaceutical industry representatives and Health Canada were held in April 2018, October 2018, and May 2019.
III. Decision Under Review
[34] The decision under review is the Governor in Council’s decision to promulgate the Impugned Amendments.
[35] On the recommendation of the Minister of Health, the Governor in Council made the Amendments by Order in Council PC 2019-1197, dated August 7, 2019, published in the Canada Gazette Part II, on August 21, 2019. By Order in Council PC 2020-413 dated May 30, 2020, the Amendments will come into force on January 1, 2021.
[36] The Impugned Amendments at issue are:
Section 4 of the Amendments, which introduces new section 4.4 of the Regulations, requiring the Board to consider three new mandatory economic factors under paragraph 85(l)(e) of the Patent Act, as well as new sections 4.1, 4.2, and 4.3 of the Regulations, requiring patentees to report related information [the New Mandatory Factors];
Section 6 and the schedule to the Amendments, which replace the price comparator countries listed in the schedule to the Regulations; and
Subsection 3(4) of the Amendments, which amends paragraphs 4(4)(a) and (b) of the Regulations, requiring patentees to alter the way that price is calculated [the New Price Calculation].
[37] The full text of the Impugned Amendments is included in the Appendix.
[38] The Applicants made a Rule 317 request for the record of the Governor in Council’s decision. They were provided with the Order in Council, but other material before the Governor in Council concerning the Amendments was withheld as a confidence of the Queen’s Privy Council for Canada. That said, the RIAS sets out the rationale for the decision.
[39] The RIAS identifies the issues that led to the Amendments: (1) the Board’s regulatory framework had not been substantively updated since its inception in 1987; (2) since that time, market changes had eroded the Board’s ability to fulfill its mandate, as it was relying on outdated regulatory tools and information that pricing authorities in other countries had long-since updated; (3) because of this outdated regulatory framework, Canada’s patented medicines prices were among the highest in the world; and (4) the Board was in need of modernization.
[40] Accordingly, the Amendments update the Board’s regulatory framework to include new price regulatory factors and patentee information reporting requirements in order to protect Canadian consumers from excessive prices.
[41] Section 4 of the Amendments adds three new mandatory factors that the Board must consider in determining whether the price of a patented medicines is “excessive” for the purposes of subsection 85(1) of the Patent Act:
i. The pharmacoeconomic value of the medicine;
ii. The size of the market for the medicine in Canada;
iii. The Gross Domestic Product [GDP] in Canada and GDP per capita in Canada.
[42] Pharmacoeconomic value is a measure of how much a medicine costs for the health benefit it provides. The pharmacoeconomic value for a given medicine can be compared to other medicines or treatments, such as surgery, by using a standard measure of benefit. This factor was selected to allow the Board to take into account the concept of opportunity cost in determining whether a patented medicine price is excessive (RIAS, above at 5954-5955).
[43] The RIAS expressly states that the policy intent behind adding pharmacoeconomic value as a mandatory factory is to require the Board to adopt the perspective of the public health care system (RIAS at 5955):
Given that the private market for pharmaceuticals in Canada is an offshoot of the public system and cannot function without it, the policy intent is for the PMPRB to adopt the perspective of the public health care system and favour a supply-side cost-effectiveness threshold in estimating opportunity cost.
[44] The RIAS further states that in Canada, consumer protection from excessively priced patented medicines includes the protection of both individual and institutional purchasers.
[45] Patentees will be required to provide the Board with cost-utility analyses prepared by a publicly funded Canadian organization such as the Canadian Agency for Drugs and Technologies in Health [CADTH] or the Institut national d’excellence en santé et services sociaux [INESSS]. CADTH and INESSS specialize in clinical and economic evaluation of medicines and their cost-utility analyses help inform coverage and reimbursement decisions made by public drug plans. Both organizations communicate their reports to patentees. This reporting requirement only applies to medicines whose annual cost exceeds 50% of Canada’s GDP per capita, and patentees are not required to prepare a cost-utility analysis if one does not already exist (RIAS at 5959-5960).
[46] Market size was added to ensure that the Board considers the economic impact of paying for the medicine for everyone who needs it, and to allow the Board to reassess prices of patented medicines as market size changes over time (RIAS at 5956).
[47] Patentees must provide the Board with the estimated maximum use of the patented medicine in Canada as measured by the quantity of the medicine that is estimated to be sold in final dosage form (RIAS at 5961).
[48] GDP is considered an indicator of overall societal wealth, and GDP per capita can be viewed as an indicator of individual wealth within that society. GDP and GDP per capita were added as mandatory factors under subsection 85(1) to serve as a rough proxy for what the entire Canadian population and individual consumers, respectively, can afford to pay for new patented medicines that come to market (RIAS at 5956).
[49] Overall, the New Mandatory Factors and the corresponding reporting requirements are intended to enable the Board to assess the economic impact of a patented medicine’s price on both insurers and individual consumers. With this information in hand, the Board will be empowered to develop screening criteria and market size tests for medicines that are likely to pose affordability challenges to the health care system as a whole (RIAS at 5957).
[50] Section 6 of the Amendments updates the schedule of countries for which patentees must report publicly available ex-factory prices to the Board. Switzerland and the United States were removed from the previous list, and Australia, Belgium, Japan, the Netherlands, Norway, and Spain were added. France, Germany, Italy, Sweden, and the United Kingdom remain on the list. The new list of countries is referred to as the PMPRB11.
[51] The schedule of countries was updated to better align with the Board’s consumer protection mandate and the federal government’s commitment to improve affordability of prescription drugs in Canada. Three criteria were used to select the new basket of countries: policy measures constraining free market pricing, similar economic standing to Canada, and similar market characteristics to Canada, such as population, consumption, and access to medicines containing new active ingredients (RIAS at 5957).
[52] Subsection 3(4) of the Amendments changes how patentees report prices and revenues to the Board. Patentees will be required to report the actual price obtained for the medicine, taking into account any adjustments made by the patentee or any party that directly or indirectly purchases the medicine or reimburses for the purchase of the medicine. The actual price obtained must also take into account any reduction given to any party in the form of free goods, free services, gifts or any other similar benefit.
[53] The current reporting requirements only require patentees to report information on price adjustments for the first point of sale, referred to as the “ex-factory” or “factory-gate” price. Patentees are not required to report rebates and discounts they may provide to third party insurers, such as public drug plans, that reimburse consumers for the cost of a medicine. According to the RIAS and the Respondent, the new reporting requirement to deduct adjustments such as indirect rebates will allow the Board to better understand the actual prices patentees charge for medicines.
[54] The Amendments also reduce reporting requirements for patented veterinary, non-prescription, and “generic” drugs. The Applicants do not challenge this aspect of the Amendments.
IV. Evidence
[55] The Applicants submitted affidavits from four expert witnesses and three fact witnesses. The Respondent submitted affidavits from two fact witnesses. None of the witnesses were cross-examined, so all of the evidence is uncontroverted.
[56] The Respondent’s fact evidence predominantly details the legislative history of the Patented Medicines Regime and the consultation process that took place in the lead up to promulgation of the Amendments. The Applicants’ fact evidence describes some of the same history, but also details how medicines are sold and reimbursed in Canada, and how the Amendments will affect pharmaceutical patentees.
[57] The Applicants filed affidavits from the following expert witnesses:
Wayne Critchley, Executive Director of the Board from 1990–2005. Mr. Critchley gave evidence on the origins of the Board and its regulatory mandate and operation;
Dr. Pierre-Gerlier Forest, Director of the School of Public Policy at the University of Calgary. Dr. Forest gave evidence on the Canadian health care system, the genesis of the Amendments, and the impact of the Impugned Amendments on the role of the Board;
Dr. Jean Lachaine, professor of Pharmacy at the University of Montreal. Dr. Lachaine gave evidence describing pharmacoeconomics, and how it is already used in the Canadian health care system;
Dr. Ian Cockburn, business school professor at Boston University. Dr. Cockburn opined on the economic benefits of the patent monopoly, the role of reference pricing, and the consequences of the Impugned Amendments.
[58] The Respondent alleges the Applicants’ expert opinion evidence is largely irrelevant as it is directed towards the purported effect of the Amendments and the wisdom of the policy choices upon which they are based, rather than whether the Impugned Amendments are consistent with the purposes of the enabling legislation.
[59] In general, I agree with the Respondent. Some of the expert evidence assists in understanding the complex patented medicine market in Canada, but much of the relevant context is also included in the Applicants’ fact evidence. To the extent the expert evidence canvasses policy considerations and potential effects of the Amendments on the pharmaceutical industry in Canada, it is beyond the scope of this application. As will be discussed further below, a vires challenge inquiry does not involve assessing the policy merits of the regulations at issue.
V. Issue
[60] The issue is whether the Impugned Amendments are ultra vires the Patent Act.
VI. Standard of Review
[61] In Canada (Minister of Citizenship and Immigration) v Vavilov, a majority of the Supreme Court of Canada [Supreme Court] held that it would “cease to recognize jurisdictional questions as a distinct category attracting correctness review” (2019 SCC 65 at para 65 [Vavilov]). Prior to Vavilov, the issue of whether a regulation had been enacted within the jurisdiction of its enabling statute was treated as a legal question attracting the correctness standard (Portnov v Canada (Foreign Affairs), 2018 FC 1248 at paras 25-26, citing Canadian Council for Refugees v Canada, 2008 FCA 229 at para 57).
[62] Pursuant to Vavilov, determination of the standard of review begins with a presumption that reasonableness is the applicable standard in all cases. None of the exceptions to this presumption apply here, and therefore the standard of review when considering the exercise of the Governor in Council’s regulation-making authority is reasonableness (Vavilov, above at paras 23, 66-68).
[63] For the reasons that follow, I find that:
The Impugned Amendments in sections 4 and 6, and the schedule to the Amendments are intra vires the Patent Act.
The Impugned Amendment in subsection 3(4) of the Amendments is ultra vires the Patent Act.
VII. Analysis
[64] Reasonableness review is not merely a “rubber-stamping” process. It remains a robust form of review, responsive to context (Vavilov at paras 13, 67). Reasonableness review does not give administrative decision makers license to enlarge their powers beyond what the legislature intended. When applying the reasonableness standard to a decision maker’s interpretation of its authority, precise or narrow statutory language will necessarily limit the number of reasonable interpretations open to the decision maker (Vavilov at para 68).
[65] In cases such as this where no formal reasons are given, the Court must look to the record as a whole to understand the decision (Vavilov at para 137). The assessment of reasonableness in the present case must focus on the relevant factual and legal constraints around the Governor in Council’s exercise of her delegated powers (Vavilov at para 105). In a challenge to the vires of regulations, the governing statutory scheme, principles of statutory interpretation, and other statutory and common law are particularly relevant (see Vavilov at para 106 for a non-exhaustive list of elements that are generally relevant in conducting reasonableness review).
[66] While Vavilov establishes a general framework for substantive review of administrative decisions that applies to a wide variety of decision makers, in the context of a vires challenge, other Supreme Court precedents where statutory grants of authority were at issue remain relevant (Katz Group Canada Inc v Ontario (Health and Long‑Term Care), 2013 SCC 64 at para 24 [Katz]; Catalyst Paper Corp v North Cowichan (District), 2012 SCC 2; Green v Law Society of Manitoba, 2017 SCC 20; West Fraser Mills Ltd v British Columbia (Workers’ Compensation Appeal Tribunal), 2018 SCC 22 [West Fraser Mills]).
[67] In Katz, the Supreme Court concisely detailed the appropriate approach to considering a challenge to the vires of regulations.
[68] As a starting point, regulations benefit from a presumption of validity. This presumption places the burden on challengers to demonstrate the invalidity of regulations. This is consistent with the teaching in Vavilov that the burden lies on the Applicants to show the decision to promulgate the regulations was unreasonable (Vavilov at para 100). Further, the presumption of validity favours an interpretive approach that reconciles the impugned regulation with its enabling statute (Katz, above, at para 25).
[69] A successful challenge to the vires of regulations requires the challenging party to show that the regulations are inconsistent with the objective of the enabling statute or the scope of the statutory mandate. The test for conformity with the enabling statute is not necessarily satisfied by merely showing that the decision maker stayed within the literal terms of the power-conferring provision. The power-conferring language is qualified by the overriding requirement that the regulations accord with the purposes and objects of the enabling statute read as a whole (Katz at para 24).
[70] The Court must take a broad and purposive approach to interpreting the challenged regulation and the enabling statute, consistent with the Supreme Court’s guidance on statutory interpretation generally (Katz at para 26).
[71] A vires challenge does not involve assessing the policy merits of the regulations. The motives for promulgation of the regulations are irrelevant, and the Court is not inquiring into the underlying political, economic, social, or partisan considerations (Katz at paras 27-28).
[72] Regardless of whether the Court believes the regulations will actually succeed in achieving the statutory objectives, the challenging party must establish that the regulations are “irrelevant”, “extraneous”, or “completely unrelated” to the statutory purpose to be ultra vires on the basis of inconsistency with statutory purpose (Katz at para 28).
[73] In light of the relevant constraints on the Governor in Council’s regulation-making authority, the Applicants made arguments directed at both the scope of the Governor in Council’s mandate, and the purpose of the Patent Act. I find it helpful to characterize each argument as a “scope” argument or a “purpose” argument in order to focus on the essential nature of the attacks on each Impugned Amendment.
[74] The Applicants make four principal arguments:
The Impugned Amendments as a whole are unrelated to the purpose of the Patent Act [a purpose argument];
The New Mandatory Factors are both inconsistent with the purpose of the Patent Act, and were promulgated by the Governor in Council exceeding the scope of her mandate under sections 85 and 101 of the Patent Act [purpose and scope arguments];
The purpose of selecting the PMPRB11 was to import price controls into the Patent Act, and this purpose is inconsistent with the purpose of the Patent Act [a purpose argument];
The Governor in Council exceeded the scope of her regulation-making authority by enacting the New Price Calculation. This Court, in Pfizer, has already determined the issue of whether the Board has jurisdiction over third party payment information, and the analysis in that case is applicable to the facts in this case [a scope argument].
[75] As discussed below, I find that the “improper purpose” arguments must fail, and the scope argument related to the New Mandatory Factors must also fail. However, the Applicants have satisfied me that the New Price Calculation exceeds the scope of the Governor in Council’s regulation-making authority in the context of the scheme of the Patent Act, the Patented Medicines Regime within that Act, and the legislative intent that bears on the purposive approach to the impugned amendment.
A. The Purpose of the Enabling Statute
[76] The policy rationale underlying the Patent Act is the patent bargain, or quid pro quo. The patent bargain encourages innovation by offering an inventor exclusive rights in a new and useful invention for a limited period in exchange for disclosure of the invention so that society can benefit from this knowledge (Teva Canada Ltd v Pfizer Canada Inc, 2012 SCC 60 at para 32). Two central objectives of the Patent Act as a whole are to “advance research and development and to encourage broader economic activity” (Free World Trust v Électro Santé Inc, 2000 SCC 66 at para 42; Harvard College v Canada (Commissioner of Patents), 2002 SCC 76 at para 185 [Harvard College]).
[77] As acknowledged by both the Applicants and the Respondent, patent monopoly rights are not unlimited, and Parliament has at times balanced promotion of ingenuity against other considerations (Harvard College, above, at para 185). Parliament implemented the Patented Medicines Regime to ensure that patentees of medicines do not abuse their statutory monopoly by charging excessive prices for those medicines (Canada (Attorney General) v Galderma Canada Inc, 2019 FCA 196 at para 10 [Galderma]).
[78] While the Respondent takes issue with characterizing “excessive pricing” as abuse, arguing that patent abuse is a separate concept dealt with in section 65 of the Patent Act, the Board and Health Canada have used this exact language to describe the Board’s mandate (Genentech Canada Inc, Re (1992), 44 CPR (3d) 316 at 328–329; Canada Gazette Part I, Vol 151, No 48 at 4500). Moreover, the Courts have endorsed this framing of the Board’s mandate (Manitoba Society of Seniors Inc v Canada (Attorney-General), 1991 CanLII 8289 (MB QB), aff’d 1992 CanLII 8541 (MB CA); Galderma, above, at para 10).
[79] The Supreme Court has referred to the Board’s purpose as one of consumer protection, noting that Parliament’s intent in creating the Board was “to address the ‘mischief’ that the patentee’s monopoly over pharmaceuticals during the exclusivity period might cause prices to rise to unacceptable levels” (Celgene Corp v Canada (Attorney General), 2011 SCC 1 at para 28 [Celgene], quoting with approval from ICN Pharmaceuticals Inc v Patented Medicine Prices Review Board, 1996 CanLII 11903 (FC), aff’d 1996 CanLII 4089 (FCA)).
[80] The Supreme Court endorsed an approach to the Board’s mandate that takes into account its “responsibility for ensuring that the monopoly that accompanies the granting of a patent is not abused to the financial detriment of Canadian patients and their insurers” (Celgene, above, at para 29).
[81] That said, I agree with the Respondent that the jurisprudence does not suggest that Courts have equated the “abuse” of excessive pricing with “patent abuse” under section 65 of the Patent Act. Instances of “patent abuse” and the powers of the Commissioner of Patents in such cases are detailed in sections 65 and 66 of the Patent Act. The Board’s mandate is limited to the specific and separate “abuse” of excessive pricing, and the powers conferred on the Board are limited to those found in sections 79 to 103 of the Patent Act.
[82] This Court has considered the statutory purpose of a distinct division of a statute when determining vires (Syncrude Canada Ltd v Canada (Attorney General), 2014 FC 776 at paras 131-135, aff’d 2016 FCA 160). While the Patent Act is not divided into Parts and Divisions in the same way as the enabling statute at issue in Syncrude, the Patented Medicines Regime is, effectively, a distinct division of the Patent Act with its own definitions, applicable only to patented medicines. Further, the Minister responsible for the Patented Medicines Regime is the Minister of Health, whereas the Minister of Industry is generally responsible for other aspects of the Patent Act.
[83] The focus should be on the purpose of the Patented Medicines Regime within the context of the purpose of the Patent Act as a whole.
[84] The legislative history establishes that the Patented Medicines Regime was intended to strike a balance between competing policy objectives in the Patent Act. Increased patent protection extended to patentees of medicines in 1987 and 1993 were balanced with increased consumer protection, intended to ensure that Canadian consumers are protected from the abuse of excessively priced patented medicines, such that prices remain reasonable and affordable to Canadians.
[85] However, in striking that balance, Parliament never intended for the Board to set prices (Pfizer, above, at para 11; Sanofi, above, at para 17). The Board is not empowered to control or lower prices absent a finding of excessive pricing, based on the factors set out in the Patent Act. To this point, the Honourable Harvie Andre made the following statements during 1986 Legislative Committee meetings leading up to the Board’s creation:
We do not constitutionally have the ability in Canada of setting prices at the federal level. But again, it is worth repeating that it is not right to say there are not strong price control mechanisms in Canada; there are. They are at the provincial level. Through the fact that they purchase 60% of the drugs, have formularies in some provinces, and can have laws that direct that pharmacists must provide the lowest cost equivalent, and through the bulk purchasing and so on, the net result is that we do have in fact a price control system in Canada.
[Emphasis added]
(House of Commons Minutes of Proceedings and Evidence of the Legislative Committee on Bill C-22, 33-2, No 1 (December 11 and 16, 1986) at 41 (Hon Harvie Andre))
[86] Minister Andre further commented on how the Board’s role is limited to exercising powers in relation to patentees:
We have legal opinion that indeed it is constitutionally valid based on the following reasons. The federal government has, under subsection 91.22 of the Constitution Act, jurisdiction over patents. In conformity with this jurisdiction, the board exercises powers in relation to patentees and its sanction is revoking patent exclusivity. This is what the board is doing.
The board is not setting prices; it is exercising the authority of the federal government in terms of exclusivity.
[Emphasis added]
(House of Commons, Legislative Committee on Bill C-22, Minutes of Proceedings and Evidence, 33-2, No 16 (February 18 and 19, 1987) at 68 (Hon Harvie Andre))
[87] In Senate Committee proceedings on the bill creating the Board, Mr. George Redling, Chief of Legal Analysis-Intellectual Property in the Department of Consumer and Corporate Affairs stated that the Board does not purport to fix or set prices:
The board does not purport to fix prices or control prices by setting a price at which a medicine may be sold. The board attempts to deal with abuse. It is the abuse of the monopoly granted to the patentee, not price-fixing, in which the board is involved.
(Senate, Special Committee on Bill C-22, Proceedings, 33-2, No 19 (July 7, 1987) at 20 (George Redling))
[88] This commentary from government actors leading up to the Board’s creation indicates that Parliament did not intend for the Board to engage in setting prices for patented medicines, but rather, that the Board would address the abuse of excessive pricing of patented medicines.
[89] The jurisprudence aligns with the legislative history. Decisions of the Supreme Court and Federal Court of Appeal have been consistent: the purpose of the Patented Medicines Regime is to ensure