1. Regular DIP Methodology – a refresher Ottawa, May 16, 2013 Patented Medicine Prices Review Board Regulatory Affairs and Outreach Branch

2.  Preparing for a successful Regular DIP Application  Benefits  Block 5 Canadian price list  Invoking the Regular DIP Methodology  Administrative forms  Application-Related Issues and Solutions  Understanding what happens after successfully invoking the Regular DIP  CPI Methodology  Dealing with future increases 2 Overview

3. 3 Preparing for a successful DIP application

4. Benefits at Introduction Q: How to apply the DIP Methodology when benefits exist at introduction? A: Report customers with and without benefits as separate lines in the Form 2 Block 4 at introduction and as long as benefits are given. The ATP excluding the benefits will be used to calculate the IBP*. 4

5.  Example : customers with and without benefits within the same class 2010: Drug product X introduced to Canadian market on September 1 DIN 1234567; strength/unit 1 MG/TAB; dosage form S1; pack size 10; 1000 packages sold only to hospitals, in Ontario Price to some hospitals: $20.00/tablet Price to other hospitals: $15.00/tablet (contract). MAPP is $20.00$/tablet N-ATP is $17.50/tablet H-ATP is $17.50/tablet 2012: Contract ends. Same quantities sold as in 2010 but price is now $20.00 to all hospitals. N-ATP is now $20/tablet 5 Benefits at Introduction

6. Form 2 Block 4 September-December 2010 N-ATP = $17.50 ; H 1 -ATP (class without benefits) = $20.00; H 2 -ATP (class with benefits) = $15.00 Form 2 Block 4 January-June and July-December 2012 6 Benefits at Introduction N-ATP = $20.00; H 1 -ATP = $20.00; H 2 -ATP = $20.00 When invoking the Regular DIP Methodology, the H 1 -ATP in 2010 (class without benefits) will be used to calculate the IBP* in 2012

7. Are you selling above your list price? 7 Block 5 Canadian list price Patentees are reminded to ensure that the reported Block 5 and Block 4 data are accurate. An ATP cannot be higher than the list price.

8. 8 Block 5 Canadian list price 200720082009201020112012 Form 2 Bl5 Canada $20.0000$20.6000 $20.9000 % Bl5 increase 3.0% 1.4% % annual CPI2.4% 0.3%1.8%2.9%1.5% IBP/IBP* $20.0000$20.4800 $20.7664 N-ATP $20.0000$19.0000$18.0000$17.0000 $21.0000 MAPP/N-NEAP $20.0000$20.4800$19.0950$18.4860$17.7480$17.3910 Block 5 prices as originally filed No more benefits in 2012 – investigation Regular DIP Methodology not successful; ATP>IBP*

9. 9 Block 5 Canadian list price 200720082009201020112012 Prices reported in Part B (and substantiated) $20.0000$20.6000 $20.9000$21.2000 % Bl5 increase 3.0% 1.5%1.4% % annual CPI2.4% 0.3%1.8%2.9%1.5% IBP/IBP* $20.0000$20.4800 $20.7872$21.0782 N-ATP $20.0000$19.0000$18.0000$17.0000 $21.0000 N-NEAP $20.0000$20.4800$19.0950$18.4860$17.7480$17.3910 Prices reported in Part B (copies of list prices provided) No more benefits in 2012 – investigation Regular DIP Methodology successful; ATP<IBP*

10. 10 Invoking the Regular DIP Methodology

11. 11 Application forms

12. 12 Application forms

13.  Part A: as described previously  Part B 13 Application forms

14.  Patented drug product has been sold to various customers since April 1, 2007. Its price became under investigation in 2012. Patentee believes that Regular DIP Methodology can be applied.  Only one List Price $20.00/tab in 2007, 2008 and 2009 $21.00/tab in 2010, 2011 and 2012  Price increase was effective as of April 1st 2010  Maximum selling price was list price 14 Regular DIP application

15. 15 Regular DIP application PART BPrice Increase Chart 2007 20082009201020112012 List Price (price/unit) 20.00 21.00 % List Price Increase 5.00% Maximum Selling Price/Unit 20.00 21.00 Effective Date of List Price increase 1-Apr-10 PART A Drug product information, background and description of benefit to be provided as required in the Form Copies of the List Price to be provided for each year reported in the Price Increase Chart

16.  Patented drug product has been sold to various customers since April 1, 2007. Its price became under investigation in 2012. Patentee believes that Regular DIP Methodology can be applied.  Two List Prices: Wholesaler $20.00/tab in 2007, 2008 and 2009 $21.00/tab in 2010, 2011 and 2012 Quebec $15.00/tab in 2007, 2008 and 2009 $15.60/tab in 2010, 2011 and 2012  Price increases were effective as of April 1st 2010  Maximum selling price was list price: 16 Regular DIP application

17. 17 Regular DIP application PART BPrice Increase Chart 2007 20082009201020112012 List Price (price/unit) 20.00 21.00 % List Price Increase 5.00% Maximum Selling Price/Unit 20.00 21.00 Effective Date of List Price increase 1-Apr-10 Quebec 2007 20082009201020112012 List Price (price/unit) 15.00 15.60 % List Price Increase 4.00% Maximum Selling Price/Unit 15.00 15.60 Effective Date of List Price increase 1-Apr-10 PART A Drug product information, background and description of benefit to be provided as required in the Form Copies of the List Price to be provided for each year reported in the Price Increase Chart

18. Regular DIP Methodology: Calculation of IBP* To calculate the IBP*, Board Staff applies the lower of the 1) CPI Methodology and 2) The Block 5 increases *Subject to the Highest International Price However there are two “Quick tips”. 18

19. Regular DIP Methodology: Calculation of IBP* Quick Tip 1: Block 5 Canada price increase vs. annual (one year) CPI Use lower of :  annual (one year) CPI and  % increase of Form 2 Block 5 Canada price 19 20072008 Form 2 Bl5 Canada $20.0000$20.6000 % Bl5 increase 3.0% % annual CPI2.4% IBP/IBP* $20.0000$20.4800

20. Regular DIP Methodology: Calculation of IBP* Quick Tip 2: No increase in Form 2 Block 5 Canada price for at least 3 years Use lower of:  Cap  % increase in Form 2 Block 5 20 200720082009201020112012 Form 2 Bl5 Canada $20.0000 $20.5000 % Bl5 increase 2.5% Cap 3.6%0.5%2.7%4.4% 2.3% IBP/IBP* $20.0000 $20.4600

21. Regular DIP Methodology: Calculation of IBP* When Form 2 Block 5 Canada price increases every year, CPI- Adjustment Methodology considered. 2010 CPI 20.0000 X 1.045 = 20.9000 CAP 20.5414 X 1.027 = 21.0960 % Bl5 increase 20.5414 X 1.018 = 20.9111 21 200720082009201020112012 Form 2 Bl5 Canada $20.0000$20.5000$20.5615$20.8700$21.2875$21.6068 % Bl5 increase 2.5% 0.3% 1.8% 2.0%1.5% % annual CPI2.4% 0.3%1.8%2.9%1.5% % Cap 3.6%0.5%2.7%4.4%2.3% % CPI Adj. Factor 2.4%2.7% 4.5% 5.1%6.3% IBP/IBP* $20.0000$20.4800$20.5414$20.9000$21.3180$21.6378 N-ATP $20.0000$19.5000$19.0000$18.5000$18.0000$21.5000 N-NEAP $20.0000$20.4800$19.5975$19.5130$19.3140$18.4140

22. Regular DIP Methodology: Calculation of IBP* Block 5 Canada price decrease 22 20072008 Form 2 Bl5 Canada $20.0000$19.5000 % Bl5 increase % annual CPI 2.4% IBP/IBP* $20.0000$19.5000

23. DIN previously sold Q: In cases involving the acquisition of a patented drug product prior to January 1, 2010, what is the appropriate Introductory Benchmark Price (IBP) where a patentee acquires a DIN(s) that had been previously sold by another patentee? A: The IBP for the product sold by the second patentee would be equal to the IBP for the product sold by the first patentee provided the second patentee receives this information from the first patentee. 23

24. 24 Understanding what happens after successfully invoking the Regular DIP

25. A: Change the year in which the Regular DIP is applied to year 1 for the purposes of the CPI- Adjustment Methodology. YR 1 - DIP successfully applied and N-NEAP = N-ATP  Excess revenue = 0 YR 2 - N-NEAP = YR 1 N-NEAP/N-ATP + CPI methodology 25 What happens after successfully invoking the Regular DIP Methodology?

26. Regular DIP Methodology 26 2007200820092010 – Yr. 1 2011 – Yr. 2 List Price Canada $20.0000$20.5000 % list price increase 2.5% % annual CPI 2.4% 0.3%1.8%1.5% Cap 3.6%0.5%2.7% IBP/IBP* $20.0000$20.4800 N-ATP $20.0000$19.0000$18.0000$20.0500 N-NEAP $20.0000$19.4560$18.4860$20.0500$20.3508 Regular DIP applied in 2010 (Year 1)

27. Regular DIP Methodology: Scenario 1 27 2007200820092010 – Yr. 1 2011 – Yr. 2 List Price Canada $20.0000$20.5000 % list price increase 2.5% % annual CPI 2.4% 0.3%1.8%1.5% Cap 3.6%0.5%2.7% IBP/IBP* $20.0000$20.4800 N-ATP $20.0000$19.0000$18.0000$20.0500$20.2500 N-NEAP $20.0000$19.4560$18.4860$20.0500$20.3508 Scenario 1 – Year 2 N-ATP < Year 2 N-NEAP

28. Regular DIP Methodology: Scenario 2 28 2007200820092010 – Yr. 1 2011 – Yr. 2 List Price Canada $20.0000$20.5000 % list price increase 2.5% % annual CPI 2.4% 0.3%1.8%1.5% Cap 3.6%0.5%2.7% IBP/IBP* $20.0000$20.4800 N-ATP $20.0000$19.0000$18.0000$20.0500$20.4500 N-NEAP $20.0000$19.4560$18.4860$20.0500$20.3508 Scenario 2 – Year 2 N-ATP > Year 2 N-NEAP, But < IBP*

29. Regular DIP Methodology: Scenario 2 Post Regular DIP application in Year 2 29 2007200820092010 – Yr. 1 2011 – Yr. 1 List Price Canada $20.0000$20.5000 % list price increase 2.5% % annual CPI 2.4% 0.3%1.8%1.5% Cap 3.6%0.5%2.7% IBP/IBP* $20.0000$20.4800 N-ATP $20.0000$19.0000$18.0000$20.0500$20.4500 N-NEAP $20.0000$19.4560$18.4860$20.0500$20.4500 Scenario 2 – Year 2 N-ATP > Year 2 N-NEAP, But < IBP*

30. Regular DIP Methodology: Scenario 3 30 2007200820092010 – Yr. 1 2011 – Yr. 2 List Price Canada $20.0000$20.5000 % list price increase 2.5% % annual CPI 2.4% 0.3%1.8%1.5% Cap 3.6%0.5%2.7% IBP/IBP* $20.0000$20.4800 N-ATP $20.0000$19.0000$18.0000$20.0500$20.7500 N-NEAP $20.0000$19.4560$18.4860$20.0500$20.3508 Scenario 3 – Year 2 N-ATP > N-NEAP, and > IBP* - no list price increase in Year 2

31. Regular DIP Methodology: Scenario 4 31 2007200820092010 – Yr. 1 2011 – Yr. 2 List Price Canada $20.0000$20.5000 $20.8075 % list price increase 2.5% 1.5% % annual CPI 2.4% 0.3%1.8%1.5% Cap 3.6%0.5%2.7%2.25% IBP/IBP* $20.0000$20.4800 N-ATP $20.0000$19.0000$18.0000$20.0500$20.7500 N-NEAP $20.0000$19.4560$18.4860$20.0500$20.3508 Scenario 4 – Year 2 N-ATP > N-NEAP and > IBP*, However - list price increase in Year 2

32. Regular DIP Methodology: Scenario 4 32 2007200820092010 – Yr. 1 2011 – Yr. 1 List Price Canada $20.0000$20.5000 $20.8075 % list price increase 2.5% 1.5% % annual CPI 2.4% 0.3%1.8%1.5% Cap 3.6%0.5%2.7%2.25% IBP/IBP* $20.0000$20.4800 $20.7872 N-ATP $20.0000$19.0000$18.0000$20.0500$20.7500 N-NEAP $20.0000$19.4560$18.4860$20.0500$20.7500 Scenario 4 – Year 2 N-ATP > N-NEAP and > IBP*, However - list price increase in Year 2

33. Considerations and General Reminders  DIP has to be applied for – the forms must be filled out  Pay attention and consider changes to CPI  Product must be sold at list price – Block 4 sale  Pay attention to your Block 5 data and your MAPP at introduction  HIPC is always a factor  Your SRO (Senior Regulatory Officer assigned to your company) is always available for discussion on specific issues 33

34. QUESTIONS ? 34