1. Patented Medicine Prices Review Board
Let’s Talk Numbers
Ottawa, December 6, 2012

2. Content Price Review of Existing Medicines Exchange Rates
CPI-Adjustment Methodology
Highest International Price Comparison
Exchange Rates
Verification of International Prices
Calculating ex-factory prices
Criteria for an Investigation
Application Forms for the DIP Methodology

3. CPI-Adjustment Methodology
Guidelines - Schedule 9
1.1 … the National Average Transaction Price and … of an existing patented drug product will be presumed to be excessive if they increase by more than that allowed under the Board’s CPI-Adjustment Methodology, as long as this price does not exceed the HIPC test.

4. CPI-Adjustment Methodology
Constraint #1
1.2 - Adjusting the benchmark prices of the drug product for the cumulative change in the CPI from the benchmark year to the year under review (CPI-Adjusted Price); and

5. CPI-Adjustment Methodology
Constraint #2
1.2 - Applying a cap on the maximum price increase in any one year, equal to 1.5 times the forecast change in the annual CPI. In periods of high inflation (over 10%), the limit will be five percentage point more than the forecast change in the CPI.

6. Terminology Benchmark Year & Price Introductory vs Current
Benchmark Year is 3 years prior to the date of sale, unless date of first sale is less than 3 years
Introductory Benchmark Price: Lower of the
N-ATP and MAPP
Current Benchmark Price: Lower of the N-ATP and
N-NEAP

7. CPI-Adjustment Methodology
CPI factor derived using Stats Can factors
Cap factor is 1.5x the annual forecast CPI
Factors Published in the PMPRB NEWSletter
Actual: January NEWSletter
Forecast: April NEWSletter

8. Calculating the N-NEAP Example: 3 years
N-ATP
N-NEAP
Highest International Price
2009 (Benchmark) $ $
2010 $ $
2011 $ $
2012 $ ?
2012 Forecast CPI Factor = 1.064
2012 Forecast Cap Factor = 1.032
CPI = x $ = $
Take the lower
Cap = x $ = $
The forecast N-NEAP for 2012 = $

9. Highest International Price
Calculating the N-NEAP Example: When Date of First Sale is less than 3 years prior
Year
N-ATP
MAPP /
N-NEAP
Highest International Price
2010 (Benchmark) $ $
2011 $ $
2012 $ ?
2012 Forecast CPI Factor (2 year) = 1.046
2012 Forecast Cap Factor = 1.032
CPI = x $ = $
Take the lower
Cap = x $ = $
The forecast N-NEAP for 2012 = $

10. Calculating the N-NEAP Example: No yearly price increase
N-ATP
MAPP /
N-NEAP
Highest International Price
2009 (Benchmark) $ $
2010 $
2011 $
2012 $ ?
2012 Forecast CPI Factor = 1.064
2012 Forecast Cap Factor = 1.032
CPI = x $ = $
Take the lower
Cap = x $ = $
The forecast N-NEAP for 2012 = $

11. Highest International Price
Calculating the N-NEAP Example: How CPI & Cap differ in the second year of sales
Date of first Sale - March 23, 2011
Benchmark Price: $
Year
N-ATP
MAPP /
N-NEAP
Highest International Price
2011 (Full Year)
$9.0000 $ $
2012 ?
2012 Forecast CPI Factor (1 year) = 1.021
2012 Forecast Cap Factor = 1.032
CPI = x $ = $
Take the lower
Cap = x $ = $9.2880
The forecast N-NEAP for 2012 = $9.2880

12. Highest International Price Comparison
Guidelines - Schedule 6
1.2 … the Average Transaction Price of a patented drug product at the national level…will be presumed to be excessive if it exceeds the highest price of the same strength and dosage for of the same patented drug product for each country listed in the Regulations (France, Germany, Italy, Sweden, Switzerland, the United Kingdom, and the United States).

13. Highest International Price Comparison
Guidelines - Schedule 6
2.1 To calculate the HIPC test for a new patented drug product, the exchange rates used are the simple average of the thirty-six monthly average noon-spot exchange rates for each country (taken to eight decimal places) as published by the Bank of Canada for the thirty six months ending four months before the date of the first sale of the drug product.

14. Highest International Price Comparison
Seven countries listed in the Regulations
Reported Form 2 Block 5
Exchange rates (36-month average)
Verification of International Prices

15. Exchange Rates 36-Month Average Found on the website
April 2009
March 2012
April 2010
April 2011
Found on the website
Are you a Patentee?
Frequently Requested Items (

16. International Price Verification
ABC 100 mg/tab (DIN )
International Price Verification
January-June 2011
Country
Company Submission Prices
International Ex-Factory Prices
Backed Out From Public Sources
(Local Currency)
(Canadian Currency)
Publicly Available International Prices
(30)
(CDN$)(H)
(CDN$)
Canada
(CDN$)(P)
$2.6775
(CDN$)(W)
(28)
(€)(H)
(€)
(€)(P)
Germany
$2.1463
(€)(W)
$2.1561
(US$)(H)
(US$)(WAC)
(US$)(P)
(US$)(FSS)
(US$)(W)
(90) US
$6.9589
N/A
$6.3429
Median
$4.5526
$4.2495

17. Verification of International Prices
Country
Source
Hospital
Pharmacy
Wholesaler
Other
France
Vidal X
Germany
Röte Liste
Italy
L’Informatore Farmaceutico
Sweden
TLV Website
Switzerland
BAG online
United Kingdom
Monthly Index of Medical Specialties (MIMS)
United States
Thompson PDR- Red Book
Direct Price (DP)
Wholesale Acquisition
Cost (WAC)
Federal Supply Schedule
X(a)
X 4-FSS
(a) Report only one Wholesale price unless the DP and WAC prices are different.

18. Example: Verification for Germany
Company Submission
Pack Price Customer
Size € Class
Average Price / Unit in €
Average Price/ Unit in CDN $
(28) (H)
[(40.04/28) +( 42.10/28) + (40.04/28)] / 3
= €
x =
CDN $
(28) (P)
(28) (W)
Exchange rate for Germany:
Company would be requested to provide evidence that € is the publicly available ex-factory price of ABC for hospitals in Germany.

19. Calculating the Ex-Factory Price (Germany)
Formulary Price (FP) stated in euros in Röte Liste
FP includes 19% Value Added Tax (VAT)
No price comparable to ex-factory hospital price reported by patentee

20. Calculating the Ex-Factory Price (Germany)
Step 1: Remove VAT: FP net (FPN) = FP / 1.19
Step 2: Calculate ex-factory pharmacy price (PP)
PP = (FPN-8.10) / 1.03
Step 3: Derive ex-factory wholesale price (WP)

21. Calculating the Ex-Factory Price (Germany)
Ex-factory wholesale price (WP) is derived as follows:
If : < PP ≤
WP = PP / 1.15
3.46 < PP ≤
WP = PP
4.20 < PP ≤
WP = PP / 1.12
5.61 < PP ≤
WP = PP
7.27 < PP ≤
WP = PP / 1.09
9.82 < PP ≤
WP = PP
< PP ≤
WP = PP / 1.07
< PP ≤
WP = PP
< PP ≤ 1,272.00
WP = PP / 1.06
PP > 1,272.00
WP = PP – 72

22. Example: Verification Germany (Drug ABC, March-June 2011)
Publicly Available Price(1)
Pack
Size Price
Ex-Factory Price
Pack Price Cust.
Size € Class
Average Price/ Unit in €
Average Price/ Unit in CDN $
(28) (€)
(28) (€)(P)
[42.10/ /28 ]/2
= €
x = CDN $
(28) (€)(W)
(1) Price Source for Germany: Röte Liste Jan. 1, 2011
Exchange rate for Germany:
Explanation of second column
Prescription drug
Step 1 remove VAT FPN = / =
Step 2 PP = (FPN-8.10) / = (51.46 – 8.10) / =
Step 3 WP = / =

23. International Price Verification
ABC 100 mg/tab (DIN )
International Price Verification
January-June 2011
Country
Company Submission Prices
International Ex-Factory Prices
Backed Out From Public Sources
(Local Currency)
(Canadian Currency)
Publicly Available International Prices
(30)
(CDN$)(H)
(CDN$)
Canada
(CDN$)(P)
$2.6775
(CDN$)(W)
(28)
(€)(H)
(€)
(€)(P)
Germany
$2.1463
(€)(W)
$2.1561
(US$)(H)
(US$)(WAC)
(US$)(P)
(US$)(FSS)
(US$)(W)
(90) US
$6.9589
N/A
$6.3429
Median
$4.5526
$4.2495

24. Criteria for Investigation
N-ATP exceeds the MAPP by 5% at intro
Excessive Revenues greater than $50,000
PMPRB receives a complaint

25. OTC and Veterinary
Patentees still have to submit the Form 1 and Notification of Intent to Sell
If there is a complaint, the PMPRB will request that the patentee file the complete Form 2s since date of first sale.

26. DIP Methodology Simplified and Regular DIP
Introductory Benchmark Price (IBP)
Two parts to the form (A & B)
Part A (simplified & regular)
reasons for the DIP
Part B (regular only)
Block 5 list price increases
Must demonstrate loss of benefits

27. Reference Material
PMPRB Website - special section reserved for Patentees, look for the pill bottle along the side. (
Exchange Rates
Verification of International Prices
(Outreach Session) or
(Formulas)
DIP Methodology (Webinar, Forms and Reports)