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

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

3. 3 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. Guidelines - Schedule 9 CPI-Adjustment Methodology

4. 4 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 Constraint #1 CPI-Adjustment Methodology

5. 5 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. Constraint #2

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

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

8. Calculating the N-NEAP Example: 3 years 8 2012 Forecast CPI Factor = 1.064 CPI = 1.064 x $10.0000 = $10.6400 Cap = 1.032 x $10.2000 = $10.5264 Take the lower The forecast N-NEAP for 2012 = $10.5264 2012 Forecast Cap Factor = 1.032 YearN-ATPN-NEAP Highest International Price 2009 (Benchmark)$10.0000 $12.0000 2010$10.1000$10.1800$12.0000 2011$10.2000$10.4700$12.0000 2012$10.4000?$12.0000

9. Calculating the N-NEAP Example: When Date of First Sale is less than 3 years prior 9 2012 Forecast CPI Factor (2 year) = 1.046 CPI = 1.046 x $10.0000 = $10.4600 Cap = 1.032 x $10.0500 = $10.3716 Take the lower The forecast N-NEAP for 2012 = $10.3716 2012 Forecast Cap Factor = 1.032 YearN-ATP MAPP / N-NEAP Highest International Price 2010 (Benchmark)$10.0000 $12.0000 2011$10.0500$10.2900$12.0000 2012$10.2000?$12.0000

10. Calculating the N-NEAP Example: No yearly price increase 10 2012 Forecast CPI Factor = 1.064 CPI = 1.064 x $10.0000 = $10.6400 Cap = 1.032 x $10.0000 = $10.3200 Take the lower The forecast N-NEAP for 2012 = $10.3200 2012 Forecast Cap Factor = 1.032 YearN-ATP MAPP / N-NEAP Highest International Price 2009 (Benchmark)$10.0000 $12.0000 2010$10.0000$10.1800$12.0000 2011$10.0000$10.4400$12.0000 2012$10.5000?$12.0000

11. Calculating the N-NEAP Example: How CPI & Cap differ in the second year of sales 11 2012 Forecast CPI Factor (1 year) = 1.021 CPI = 1.021 x $10.0000 = $10.2100 Cap = 1.032 x $9.0000 = $9.2880 Take the lower The forecast N-NEAP for 2012 = $9.2880 2012 Forecast Cap Factor = 1.032 YearN-ATP MAPP / N-NEAP Highest International Price 2011 (Full Year)$9.0000$10.0000$12.0000 2012$10.0000?$12.0000 Date of first Sale - March 23, 2011 Benchmark Price: $10.0000

12. Highest International Price Comparison 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). 12 Guidelines - Schedule 6

13. Highest International Price Comparison 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. 13 Guidelines - Schedule 6

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

15. Exchange Rates 36-Month Average 15 Found on the website (http:// www.pmprb-cepmb.gc.ca/english/View.asp?x=1606&mp=1298 ) www.pmprb-cepmb.gc.ca/english/View.asp?x=1606&mp=1298 Frequently Requested Items Are you a Patentee? March 2012 April 2009 April 2010 April 2011

16. 16 ABC 100 mg/tab (DIN 01234567) 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 (Local Currency) (Canadian Currency) (30) 76.5000(CDN$)(H) (30) 76.5000(CDN$) (30) 84.1500(CDN$)(H) (30) 84.1500(CDN$) Canada (30) 76.5000(CDN$)(P) $2.6775 (30) 84.1500(CDN$)(P) (30) 76.5000(CDN$)(W) (30) 84.1500(CDN$)(W) (28) 40.0400(€)(H) (28) 61.2400(€) (28) 42.1000(€)(P) Germany (28) 42.1000(€)(P)$2.1463 (28) 39.7200(€)(W)$2.1561 (28) 40.0400(€)(W) (30)203.0000(US$)(H) (30)188.8400(US$)(WAC) (30)203.0000(US$)(P) (30)165.3400(US$)(FSS) (30)203.0000(US$)(W) (90)566.4700(US$)(WAC) US (30)167.2400(US$)(FSS) $6.9589 (90)496.0400(US$)(FSS) N/A $6.3429 (90)608.9600(US$)(H) (90)608.9600(US$)(P) (90)608.9600(US$)(W) (90)501.7100(US$)(FSS) Median $4.5526 $4.2495 International Price Verification

17. Verification of International Prices 17 CountrySourceHospitalPharmacyWholesalerOther FranceVidalXX GermanyRöte ListeXX ItalyL’Informatore FarmaceuticoXX SwedenTLV WebsiteXX SwitzerlandBAG onlineX United Kingdom Monthly Index of Medical Specialties (MIMS) XX United States Thompson PDR- Red Book - Direct Price (DP) - Wholesale Acquisition Cost (WAC) Federal Supply Schedule XX X (a) X X 4-FSS (a) Report only one Wholesale price unless the DP and WAC prices are different.

18. Example: Verification for Germany Pack Price Customer Size € Class Average Price / Unit in €Average Price/ Unit in CDN $ (28) 40.04 (H) [(40.04/28) +( 42.10/28) + (40.04/28)] / 3 = 1.4545 € 1.4545 x 1.47565833 = CDN $ 2.1463 (28) 42.10 (P) (28) 40.04 (W) 18 Company would be requested to provide evidence that € 40.04 is the publicly available ex- factory price of ABC for hospitals in Germany. Company Submission Exchange rate for Germany: 1.47565833

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

20. 20 Step 1: Remove VAT: FP net (FPN) = FP / 1.19 Calculating the Ex-Factory Price (Germany) 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) 21 Ex-factory wholesale price (WP) is derived as follows: If : 0 < PP ≤ 3.45WP = PP / 1.15 3.46 < PP ≤ 4.19WP = PP - 0.45 4.20 < PP ≤ 5.60WP = PP / 1.12 5.61 < PP ≤ 7.26WP = PP - 0.60 7.27 < PP ≤ 9.81WP = PP / 1.09 9.82 < PP ≤ 12.37WP = PP - 0.81 12.38 < PP ≤ 24.61WP = PP / 1.07 24.62 < PP ≤ 28.43WP = PP - 1.61 28.44 < PP ≤ 1,272.00WP = PP / 1.06 PP > 1,272.00WP = 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) 61.2400 (€)(28) 42.10 (€)(P) [42.10/28 + 39.72/28 ]/2 = 1.4611 € 1.4611 x 1.47565833 = CDN $ 2.1561 (28) 39.72 (€)(W) 22 Exchange rate for Germany: 1.47565833 (1) Price Source for Germany: Röte Liste Jan. 1, 2011 Explanation of second column Prescription drug Step 1 remove VAT FPN = 61.24 /1.19 = 51.46 Step 2 PP = (FPN-8.10) / 1.03 = ( 51.46 – 8.10) / 1.03 = 42.10 Step 3 WP = 42.10 / 1.06 = 39.72

23. 23 ABC 100 mg/tab (DIN 01234567) 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 (Local Currency) (Canadian Currency) (30) 76.5000(CDN$)(H) (30) 76.5000(CDN$) (30) 84.1500(CDN$)(H) (30) 84.1500(CDN$) Canada (30) 76.5000(CDN$)(P) $2.6775 (30) 84.1500(CDN$)(P) (30) 76.5000(CDN$)(W) (30) 84.1500(CDN$)(W) (28) 40.0400(€)(H) (28) 61.2400(€) (28) 42.1000(€)(P) Germany (28) 42.1000(€)(P)$2.1463 (28) 39.7200(€)(W)$2.1561 (28) 40.0400(€)(W) (30)203.0000(US$)(H) (30)188.8400(US$)(WAC) (30)203.0000(US$)(P) (30)165.3400(US$)(FSS) (30)203.0000(US$)(W) (90)566.4700(US$)(WAC) US (30)167.2400(US$)(FSS) $6.9589 (90)496.0400(US$)(FSS) N/A $6.3429 (90)608.9600(US$)(H) (90)608.9600(US$)(P) (90)608.9600(US$)(W) (90)501.7100(US$)(FSS) Median $4.5526 $4.2495 International Price Verification

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

25. OTC and Veterinary 25 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 26 Introductory Benchmark Price (IBP) Must demonstrate loss of benefits Block 5 list price increases Simplified and Regular DIP Two parts to the form (A & B) Part B (regular only) Part A (simplified & regular) reasons for the DIP

27. Reference Material PMPRB Website - special section reserved for Patentees, look for the pill bottle along the side. (www.pmprb-cepmb.gc.ca) (www.pmprb-cepmb.gc.ca) 27 DIP Methodology (Webinar, Forms and Reports) http://www.pmprb-cepmb.gc.ca/english/View.asp?x=1490&mp=277 Verification of International Prices http://www.pmprb-cepmb.gc.ca/english/view.asp?x=1511&id=278 http://www.pmprb-cepmb.gc.ca/english/view.asp?x=1511&id=278 (Outreach Session) or http://www.pmprb-cepmb.gc.ca/english/View.asp?x=1600&mp=274http://www.pmprb-cepmb.gc.ca/english/View.asp?x=1600&mp=274 (Formulas) Exchange Rates http://www.pmprb-cepmb.gc.ca/english/View.asp?x=1606&mp=1298www.pmprb-cepmb.gc.ca/english/View.asp?x=1606&mp=1298