2020 FC 725, 2020 FC 725

T-1465-19 2020 FC 725 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 Pharmaceuticals Inc., Pfizer Canada ULC, Sanofi-Aventis Canada Inc., and Takeda Canada Inc. ( Applicants ) v.

The Attorney General of Canada ( Respondent ) and Canadian Organization for Rare Disorders ( Intervener ) Indexed as: Innovative Medicines Canada v. Canada ( Attorney General) Federal Court, Manson J.—Vancouver and Toronto by videoconference, June 1 and 2; Ottawa, June 29, 2020.

Patents — Patented Medicines Regulations — Judicial review of Governor in Council’s decision to promulgate amendments to Regulations — Applicants seeking declaration that certain provisions of Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) (Amendments) invalid, ultra vires Patent Act — Taking issue with Amendments, s. 4 (introducing new mandatory economic factors), s. 6 (changing list of price comparator countries in

schedule to Regulations ), s. 3(4) (requiring patentees to alter way that prices calculated ) — Whether impugned Amendments ultra vires Patent Act — New mandatory factors, corresponding reporting requirements falling within Governor in Council’s regulation-making authority — Applicants misconstruing relevance of pharmacoeconomic value to determination of excessive pricing — Board having to consider this value alongside all other mandatory factors — New mandatory factors complementing pre-existing factors — Patentees of medicines not having unfettered pricing discretion — Preventing excessive patented medicines prices within Parliament’s jurisdiction — Patented medicines regime authorising Board to monitor, challenge, patentee’s ability to set prices — Governor in Council, Board different entities with separate roles, powers within patented medicines regime — Language of Patent Act , s. 101(1) (

d) not limiting type of factors Governor in Council may specify — Regulation-making authority thereof not limited by existing Patent Act , s. 85(1) factors — Decision to amend basket of comparator countries reasonable — Consistent with purpose of Patent Act — List of countries not form of price control — Patented medicines regime empowering Board to make determinations of excessive pricing — However, new price calculation ultra vires Patent Act — Allowing Board to factor third party rebates into its calculation of average transaction prices to inform existing factors — Information provided by patentees to Board under Patent Act , s. 80(1) (

b) having to be related to sale of medicines by patentees to customers — Amended language of Regulations , s. 4(4) (

a) not limited to adjustments made by patentee or customer, but extending to any adjustments made by any party — New price calculation therefore not limited to sales transactions made by patentee at factory-gate — Interpreting term “sale” as to encompass relationship between patentees, third parties who do not purchase medicines from patentees would do violence to ordinary meaning of term — New price calculation inconsistent with Regulations , s. 4(1) (f)(i) — Rebates provided by patentees to third party insurers unrelated to “price” at which patented medicines “sold” — New price calculation irreconcilable with enabling statute — Governor in Council exceeding scope of her regulation-making authority within scheme of Patent Act in advancing this objective — Application allowed in part.

This was an application for judicial review of the Governor in Council’s decision to promulgate amendments to the Patented Medicines Regulations ( Regulations ). The applicants sought a declaration that certain provisions of the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) (Amendments) are invalid because they are ultra vires the Patent Act .

The applicants, a national association of research-based pharmaceutical companies, and several Canadian innovative pharmaceutical companies, challenged the use of the Patented Medicine Prices Review Board (Board) as a mechanism to reduce patented medicines prices in Canada, taking issue with three aspects of the Amendments. The impugned Amendments at issue were:

(1) 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(1) (

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);

(2) section 6 and the

schedule to the Amendments, which replace the price comparator countries listed in the

schedule to the Regulations ; and (3) 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). The Amendments updated 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.

The new mandatory factors (i.e. the pharmacoeconomic value of the medicine; the size of the market for the medicine in Canada; and the Gross Domestic Product (GDP) in Canada and GDP per capita in Canada) 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. 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. The applicants made arguments directed at both the scope of the Governor in Council’s mandate, and the purpose of the Patent Act .

They argued, inter alia , that the impugned Amendments as a whole are unrelated to the purpose of the Patent Act ; that 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 ; that the purpose of selecting the new price comparator countries was to import price controls into the Patent Act ; and that the Governor in Council exceeded the scope of her regulation-making authority by enacting the new price calculation.

The applicants, in applying the ejusdem generis rule, submitted that “in paragraph 85(1)(e), Parliament provides the Governor in Council with a limited jurisdiction to add new mandatory factors.” Regarding the new price calculation, the applicants submitted, inter alia , that the Court in Pfizer Canada Inc. v. Canada ( Attorney General) ( Pfizer ) held that the Board’s jurisdiction is limited to the “sale” of the medicine by the patentee, and that the scheme of the excessive pricing factors in

section 85 distinguishes between the price of a medicine and its manufacturing and marketing costs. The applicants argued that listing payments are a cost of market access, and should not be considered part of the “price” at which a medicine was sold under subsection 85(1) and paragraph 80(1)(b). At issue was whether the impugned Amendments were ultra vires the Patent Act . Held , the application should be allowed in part. The new mandatory factors and corresponding reporting requirements fall within the Governor in Council’s regulation-making authority pursuant to paragraph 101(1) (

d) of the Patent Act . The applicants misconstrued the relevance of pharmacoeconomic value to a determination of excessive pricing. Assessing pharmacoeconomic value is an objective exercise using a standardized measure of benefit. Such an exercise could justify higher prices for patented medicines that offer pharmacoeconomic value. The Board must consider this value alongside all the other mandatory factors—none of the factors are looked at in isolation. Otherwise, any decision of the Board could be reviewed based on unreasonableness for failing to consider all mandatory factors.

The three new mandatory factors complement the four pre-existing factors in subsection 85(1) of the Patent Act . The weight given to any given factor by the Board will depend on the facts of each case. Patentees of medicines do not have unfettered pricing discretion. They must comply with Parliament’s excessive pricing scheme as contained in the Patented medicines regime and implemented by the Board. The prevention of excessive patented medicines prices comes within Parliament’s jurisdiction over patents under subsection 91(22) of the Constitution Act, 1867 .

The patented medicines regime, validly enacted pursuant to Parliament’s constitutional jurisdiction over patents, expressly authorises the Board to monitor, and when necessary challenge, a patentee’s ability to set prices based on what the Board determines to be excessive, and expressly authorises the Governor in Council to make regulations that the Board must consider in making its determination. The text and structure of the Patent Act does not support a finding that the Governor in Council exceeded the scope of her regulation-making authority by promulgating the new mandatory factors.

At issue was the scope of the Governor in Council’s regulation-making authority, as found in

section 101 of the Patent Act . The decision under review was that of the Governor in Council, not the Board. These are different entities with separate roles and powers within the patented medicines regime. On its face, the language of paragraph 101(1) (

d) does not limit the type of factors the Governor in Council may specify by way of regulation, so long as such factors are “for the purposes of subsection 85(1) or (2)”. Paragraph 85(1) (

e) is not the power-conferring provision at issue. The applicants misconstrued the statutory scheme in an attempt to use the ejusdem generis rule to limit the addition of new factors to those related to the original factors set out by Parliament at the time of drafting. The Governor in Council’s regulation-making authority to specify factors for the purposes of subsection 85(1) is found in paragraph 101(1) (

d) of the Patent Act , and is not limited by the existing subsection 85(1) factors. The term “for the purposes of subsection 85(1) or (2) ” as used in paragraph 101(1) (

d) means for the purpose of specifying additional mandatory and optional factors for the Board to consider in determining whether a patented medicine has been sold at an excessive price. The Governor in Council’s decision to amend the basket of comparator countries was reasonable. The purpose for selecting the new list of countries was consistent with the purpose of the Patent Act . The list of countries does not, in and of itself, constitute a form of price control. The

schedule merely requires patentees to file pricing information from the 11 countries listed, if available. The Board staff use this pricing information to identify prices that appear to be excessive based on its guidelines, and the Board can only order price reductions if, following a hearing, it determines that the price of a patented medicine is excessive based on all of the subsection 85(1) factors. The patented medicines regime empowers the Board to make determinations of excessive pricing, having considered particular factors. The new price calculation was ultra vires the Patent Act .

The purpose of the new price calculation was to require patentees to report price information net of discounts and rebates offered to parties further down the supply chain, such as insurers, allowing the Board to factor third party rebates into its calculation of average transaction prices to inform existing factors. While Pfizer focused on the Board’s stakeholder communiqué, much of the Court’s analysis therein of the statutory scheme remained relevant to the

interpretation of the regulation-making authority at issue in the present case. Any regulations made by the Governor in Council specifying information or documents that patentees must provide to the Board under paragraph 80(1) (

b) of the Patent Act must relate to sale of medicines by patentees to customers. The expansive language of paragraph 4(4) (

a) of the Regulations , as amended by subsection 3(4) of the Amendments, is not limited to adjustments made by the patentee or the customer, but extends to any adjustments made by any party. The new price calculation is therefore not limited to sales transactions made by the patentee at the factory-gate. The Supreme Court decisions in Celgene Corp. v. Canada ( Attorney General) and the Federal Court of Appeal decision in Canada ( Attorney General) v. Sandoz Canada Inc. do not instruct the Court to adopt a broad

interpretation of the price at which a medicine is sold. In both Celgene and Sandoz , the Courts recognized that the Board’s jurisdiction is over sales made by patentees to customers. Because the new price calculation directly links to paragraph 80(1) (

b) of the Patent Act , the Governor in Council’s regulation-making authority is limited to specifying information respecting the price at which the patentee sells the medicine. To interpret the term “sale” (or “sold”) in such a way as to encompass the relationship between patentees and third parties who do not purchase or take title of medicines from patentees would “do violence to the ordinary meaning of the term”. Furthermore, the new price calculation is inconsistent with subparagraph 4(1) (f)(

i) of the Regulations . Requiring patentees to take into account financial transactions with third parties who are not customers exceeds the scope of the Governor in Council’s statutory mandate by untethering the price calculation from the sale of the patented medicine. The Governor in Council’s decision did not meet the threshold of acceptability and defensibility characteristic of a reasonable decision in light of the relevant constraints. Rebates and discounts provided by patentees to third party insurers are unrelated to the “price” at which patented medicines are “sold” within the meaning of paragraph 80(1) (

b) of the Patent Act . Applying a broad, purposive approach to subsection 3(4) of the Amendments and sections 80 and 101 of the Patent Act , the new price calculation was irreconcilable with the enabling statute. While the new price calculation is ostensibly intended to protect consumers from excessive pricing of patented medicines, the Governor in Council cannot exceed the scope of her regulation-making authority within the scheme of the Patent Act in attempting to advance this objective. In conclusion, the impugned Amendments in sections 4 and 6, and the

schedule to the Amendments were found to be intra vires the Patent Act . The impugned Amendment in subsection 3(4) of the Amendments was found to be ultra vires the Patent Act . STATUTES AND REGULATIONS CITED Constitution Act, 1867 , 30 & 31 Vict., c. 3 (U.K.) (as am. by Canada Act 1982 , 1982, c. 11 (U.K.),

Schedule to the Constitution Act,

1982, Item 1) [R.S.C., 1985, Appendix II, No. 5], s. 91(22). Federal Courts Rules, SOR/98-106, r. 317. Food and Drug Regulations, C.R.C., c. 870, s. C.01.043(1).

Interpretation Act, R.S.C., 1985, c. I-21, s. 12. Order in Council P.C. 2019-1197. Order in Council P.C. 2020-413. Patent Act, R.S.C., 1985, c. P-4, ss. 42, 65, 66, 79–103, 80, 83, 85, 101. Patented Medicines Regulations, SOR/94-688, ss. 4.1, 4.2, 4.3, 4.4. Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements), SOR/2019-298, ss. 3(4), 4, 6, Sch.

TREATIES AND OTHER INSTRUMENTS CITED Agreement on Trade-Related Aspects of Intellectual Property Rights, Annex 1C of the Marrakesh Agreement Establishing the WorldTrade Organization, signed in Marrakesh, Morocco, 15 April 1994, 1869 U.N.T.S. 299, Arts. 27, 28. North American Free Trade Agreement Between the Government of Canada, the Government of the United Mexican States and theGovernment of the United States of America, December 17, 1992, [1994] Can. T.S. No. 2, Art. 1709. CASES CITED APPLIED: Pfizer Canada Inc. v.

Canada (Attorney General), 2009 FC 719, 76 C.P.R. (4th) 135; Canada (Minister of Citizenship and Immigration)v. Vavilov, 2019 SCC 65, 441 D.L.R. (4th) 1; Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64, [2013] 3S.C.R. 810; Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601. CONSIDERED: Free World Trust v. Électro Santé Inc., 2000 SCC 66, [2000] 2 S.C.R. 1024; Harvard College v. Canada (Commissioner of Patents),2002 SCC 76, [2002] 4 S.C.R. 45; Genentech Canada Inc. (Re) (1992), 44 C.P.R. (3d) 316, 1992 CarswellNat 1661 (WL Can)(P.M.P.R.B.); Celgene Corp. v.

Canada (Attorney General), 2011 SCC 1, [2011] 1 S.C.R. 3; Canadian Union of Public Employees v.Canada (Attorney General), 2018 FC 518; Airport Taxicab (Pearson Airport) Association v. Toronto (City) (2009), 61 M.P.L.R. (4th) 8, (Ont. S.C.); Thorne’s Hardware Ltd. v. The Queen, (SCC), [1983] 1 S.C.R. 106, (1983), 143 D.L.R.(3d) 577; Canada (Attorney General) v. Sandoz Canada Inc., 2015 FCA 249, 390 D.L.R. (4th) 691; Johnston v. Canadian Credit Men’sTrust Association, (SCC), [1932] S.C.R. 219, [1932] 2 D.L.R. 462; National Bank of Greece (Canada) v.

Katsikonouris, (SCC), [1990] 2 S.C.R. 1029, (1990), 74 D.L.R. (4th) 197; Newfoundland (Minister of Forest Resources and Agrifoods)v. A.L. Stuckless and Sons Ltd., 2005 NLCA 11, 244 Nfld. & P.E.I.R. 298; Nanaimo (City) v. Rascal Trucking Ltd., 2000 SCC 13, [2000]1 S.C.R. 342; H.W. Liebig Co. v. Leading Investments Ltd., (SCC), [1986] 1 S.C.R. 70, (1986), 25 D.L.R. (4th) 161. REFERRED TO: Sanofi Pasteur Limited v. Canada (Attorney General), 2011 FC 859, 94 C.P.R. (4th) 405; Portnov v. Canada (Foreign Affairs), 2018 FC1248; Canadian Council for Refugees v.

Canada, 2008 FCA 229, [2009] 3 F.C.R. 136; Catalyst Paper Corp. v. North Cowichan(District), 2012 SCC 2, [2012] 1 S.C.R. 5; Green v. Law Society of Manitoba, 2017 SCC 20, [2017] 1 S.C.R. 360; West Fraser Mills Ltd.v. British Columbia (Workers’ Compensation Appeal Tribunal), 2018 SCC 22, [2018] 1 S.C.R. 365; Teva Canada Ltd. v. Pfizer CanadaInc., 2012 SCC 60, [2012] 3 S.C.R. 625; Canada (Attorney General) v. Galderma Canada Inc., 2019 FCA 196; Manitoba Society ofSeniors Inc. v. Canada (Attorney General) (1991), 77 D.L.R. (4th) 485, (Man. Q.B.), affd (1992), 96 D.L.R. (4th)606, (Man.

C.A.); ICN Pharmaceuticals, Inc. v. Patented Medicine Prices Review Board (1996), 66 C.P.R. (3d) 45, (F.C.T.D.), affd [1997] 1 F.C. 32 (C.A.); Syncrude Canada Ltd. v. Canada (Attorney General),2014 FC 776, 91 C.E.L.R. (3d) 46, affd 2016 FCA 160, 398 D.L.R. (4th) 91; Bristol-Myers Squibb Co. v. Canada (Attorney General),2005 SCC 26, [2005] 1 S.C.R. 533; Teva Neuroscience G.P.-S.E.N.C. v. Canada (Attorney General), 2009 FC 1155, 357 F.T.R. 35;Alexion Pharmaceuticals Inc. v.

Canada (Attorney General), 2017 FCA 241, 154 C.P.R. (4th) 165; Alexion Pharmaceuticals Inc. v.Canada (Attorney General), 2019 FC 734, [2019] 4 F.C.R. 418; Leo Pharma Inc. v. Canada (Attorney General), 2007 FC 306, 57 C.P.R.(4th) 174. AUTHORS CITED Canada. Parliament. House of Commons. Minutes of Proceedings and Evidence of the Legislative Committee on Bill C-22, 33rd Parl.,2nd Sess., Issue No. 1 (December 11 and 16, 1986). Canada. Parliament. House of Commons. Minutes of Proceedings and Evidence of the Legislative Committee on Bill C-22, 33rd Parl.,2nd Sess., Issue No. 16 (February 18 and 19, 1987). Canada.

Parliament. House of Commons Debates, 33rd Parl., 2nd Sess., Vol. 1 (November 20, 1986). Canada. Parliament. House of Commons Debates, 34th Parl., 3rd Sess., Vol. 10 (September 17, 1992).

Canada. Parliament. House of Commons Debates , 33rd Parl., 2nd Sess., Vol. 1 (October 7 and November 20, 1986). Canada. Parliament. House of Commons Debates , 42nd Parl., 1st Sess., Vol. 148, No. 433 (June 13, 2019). Canada. Parliament. Senate. Proceedings of the Standing Senate Committee on Subject-matter of Bill C-22 , 33rd Parl., 2nd Sess., Issue No. 19 (July 7, 1987). Oxford English Dictionary , “price”, “sale”. Regulatory Impact Analysis Statement, C. Gaz. 2017.I.4497. Regulatory Impact Analysis Statement, SOR/2019-298, C. Gaz. 2019.II.5946.

APPLICATION for judicial review by the applicants who sought a declaration that certain provisions of the Regulations Amending the Patented Medicines Regulations (Additional Factors and Information Reporting Requirements) are invalid because they are ultra vires the Patent Act . Application allowed in part. APPEARANCES Orestes Pasparakis and Kristin Wall for applicants. Joseph Cheng and James Schneider for respondent. John Norman for intervener. SOLICITORS OF RECORD Norton Rose Fulbright Canada LLP , Toronto, for applicants. Deputy Attorney General of Canada for respondent.

Gowling WLG (Canada) LLP , Ottawa, for intervener. The following are the reasons for judgment and judgment rendered in English by Manson J.: 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 , R.S.C., 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 P.C. 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 2 000 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 , 76 C.P.R. (4th) 135 ( Pfizer ) , at paragraph 11 ; Sanofi Pasteur Limited v. Canada ( Attorney General) , 2011 FC 859 , 94 C.P.R. (4th) 405 ( Sanofi ) , at paragraph 17 ). [ 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 , 33rd Parl., 2nd Sess., Vol. 1 (October 7 and November 20, 1986), at page 152 and page 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 , 34th Parl., 3rd Sess., Vol. 10 (September 17, 1992), at page 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: Pricing information, etc., required by regulations 80 (1) … (

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 pages 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 [ C. Gaz. 2017.I.4497], 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 P.C. 2019-1197, dated August 7, 2019, published in the Canada Gazette ,

Part II, on August 21, 2019. By Order in Council P.C. 2020-413 dated May 30, 2020, the Amendments will come into force on January 1, 2021. [ 36 ] The Impugned Amendments at issue are: i.

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(1) (

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); ii.

Section 6 and the

schedule to the Amendments, which replace the price comparator countries listed in the

schedule to the Regulations ; and iii. 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 [of the Federal Courts Rules , SOR/98-106 ] 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 medicine 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 pages 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 page 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 percent 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 pages 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 page 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 page 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 page 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 page 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 page 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 , 2019 SCC 65 , 441 D.L.R. (4th) 1 ( 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” (at paragraph 65).

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 paragraphs 25 – 26 , citing Canadian Council for Refugees v. Canada , 2008 FCA 229 , [2009] 3 F.C.R. 136 , at paragraph 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 paragraphs 23, 66 – 68 ). [ 63 ] For the reasons that follow, I find that: A. The Impugned Amendments in sections 4 and 6, and the

schedule to the Amendments are intra vires the Patent Act . B. 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 paragraphs 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 paragraph 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 paragraph 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 paragraph 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 paragraph 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 , [2013] 3 S.C.R. 810 ( Katz ) , at paragraph 24 ; Catalyst Paper Corp. v. North Cowichan (District) , 2012 SCC 2 , [2012] 1 S.C.R. 5 ; Green v. Law Society of Manitoba , 2017 SCC 20 , [2017] 1 S.C.R. 360 ; West Fraser Mills Ltd. v. British Columbia (Workers’ Compensation Appeal Tribunal) , 2018 SCC 22 , [2018] 1 S.C.R. 365 ( 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 paragraph 100 ).

Further, the presumption of validity favours an interpretive approach that reconciles the impugned regulation with its enabling statute ( Katz , above, at paragraph 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 paragraph 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 paragraph 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 paragraphs 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 paragraph 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: i. The Impugned Amendments as a whole are unrelated to the purpose of the Patent Act (a purpose argument); ii. The new mandatory factors are both inconsistent with the purpose of the Patent Act, and were promulgated by the Governor inCouncil exceeding the scope of her mandate under sections 85 and 101 of the Patent Act (purpose and scope arguments); iii. The purpose of selecting the PMPRB11 was to import price controls into the Patent Act, and this purpose is inconsistent with thepurpose of the Patent Act (a purpose argument); iv.

The Governor in Council exceeded the scope of her regulation-making authority by enacting the new price calculation. This Court, inPfizer, has already determined the issue of whether the Board has jurisdiction over third party payment information, and the analysis inthat 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 newmandatory factors must also fail.

However, the applicants have satisfied me that the new price calculation exceeds the scope of theGovernor in Council’s regulation-making authority in the context of the scheme of the Patent Act, the Patented Medicines Regime withinthat 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 innovationby offering an inventor exclusive rights in a new and useful invention for a limited period in exchange for disclosure of the invention sothat society can benefit from this knowledge (Teva Canada Ltd. v. Pfizer Canada Inc., 2012 SCC 60, [2012] 3 S.C.R. 625, at paragraph32). Two central objectives of the Patent Act as a whole are to “advance research and development and to encourage broader economicactivity” (Free World Trust v. Électro Santé Inc., 2000 SCC 66, [2000] 2 S.C.R. 1024, at paragraph 42; Harvard College v.

Canada(Commissioner of Patents), 2002 SCC 76, [2002] 4 S.C.R. 45 (Harvard College), at paragraph 185). [77] As acknowledged by both the applicants and the respondent, patent monopoly rights are not unlimited, and Parliament has attimes balanced promotion of ingenuity against other considerations (Harvard College, above, at paragraph 185). Parliament implementedthe Patented Medicines Regime to ensure that patentees of medicines do not abuse their statutory monopoly by charging excessive pricesfor those medicines (Canada (Attorney General) v.

Galderma Canada Inc., 2019 FCA 196 (Galderma), at paragraph 10). [78] While the respondent takes issue with characterizing “excessive pricing” as abuse, arguing that patent abuse is a separate conceptdealt 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 C.P.R. (3d) 316, 1992 CarswellNat 1661 (WL Can) (P.M.P.R.B.), at pages 328–329; CanadaGazette,

Part I, Vol. 151, No. 48, at page 4500). Moreover, the Courts have endorsed this framing of the Board’s mandate (ManitobaSociety of Seniors Inc. v. Canada (Attorney General) (1991), 77 D.L.R. (4th) 485, (Man. Q.B.), affd (1992), 96D.L.R. (4th) 606, (Man. C.A.); Galderma, above, at paragraph 10). [79] The Supreme Court has referred to the Board’s purpose as one of consumer protection, noting that Parliament’s intent in creatingthe Board was “to address the ‘mischief’ that the patentee’s monopoly over pharmaceuticals during the exclusivity period might causeprices to rise to unacceptable levels” (Celgene Corp. v.

Canada (Attorney General), 2011 SCC 1, [2011] 1 S.C.R. 3 (Celgene), atparagraph 28, quoting with approval from ICN Pharmaceuticals, Inc. v.

Patented Medicine Prices Review Board (1996), 66 C.P.R. (3d)45, (F.C.T.D.), affd [1997] 1 F.C. 32, (C.A.)). [80] The Supreme Court endorsed an approach to the Board’s mandate that takes into account its “responsibility for ensuring that themonopoly that accompanies the granting of a patent is not abused to the financial detriment of Canadian patients and their insurers”(Celgene, above, at paragraph 29). [81] That said, I agree with the respondent that the jurisprudence does not suggest that Courts have equated the “abuse” of excessivepricing with “patent abuse” under

section 65 of the Patent Act. Instances of “patent abuse” and the powers of the Commissioner ofPatents 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, 91 C.E.L.R. (3d) 46, at paragraphs 131–135, affd 2016 FCA 160, 398 D.L.R. (4th) 91).While the Patent Act is not divided into Parts and Divisions in the same way as the enabling statute at issue in Syncrude, the PatentedMedicines 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 isgenerally 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 awhole. [84] The legislative history establishes that the Patented Medicines Regime was intended to strike a balance between competingpolicy objectives in the Patent Act.

Increased patent protection extended to patentees of medicines in 1987 and 1993 were balanced withincreased consumer protection, intended to ensure that Canadian consumers are protected from the abuse of excessively priced patentedmedicines, 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 paragraph 11; Sanofi,

above, at paragraph 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.] (Canada. Parliament. House of Commons. Minutes of Proceedings and Evidence of the Legislative Committee on Bill C-22 , 33rd Parl. 2nd Sess., Issue No. 1 (December 11 and 16, 1986), at page 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.] (Canada. Parliament. House of Commons. Minutes of Proceedings and Evidence of the Legislative Committee on Bill C-22 , 33rd Parl., 2nd Sess., Issue No. 16 (February 18 and 19, 1987), at page 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. (Canada. Parliament. Senate.

Proceedings of the Standing Senate Committee on Subject-matter of Bill C-22 , 33rd Parl., 2nd Sess., Issue No. 19 (July 7, 1987), at page 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 that patentees of medicines do not abuse their patent monopolies by charging consumers excessive prices. The Board, created by Parliament as part of this regime, operates to balance the promotion of innovation with measures to protect institutional and individual consumers from excessive patented medicines prices. B.

The Purpose of the Amendments [ 90 ] While the applicants challenge three specific aspects of the Amendments, the Court must consider the purpose of the Amendments as a whole. A purposive

interpretation of the Impugned Amendments necessitates reading them in the context of the entirety of the Patent Act , to provide a proper framework for determining their vires within the scheme of the Patent Act . [ 91 ] Determining whether the regulations at issue represent a reasonable exercise of delegated power is, at its core, an exercise in statutory

interpretation, considering the text, context, and purpose of the laws ( West Fraser Mills , above, at paragraph 12). 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 paragraph 26). [ 92 ] The Court can consider the RIAS accompanying regulations in determining the purpose of the regulations and their intended application ( Bristol-Myers Squibb Co. v. Canada ( Attorney General) , 2005 SCC 26 , [2005] 1 S.C.R. 533 , at paragraph 157 ).

The RIAS sets out the purpose of the Amendments as follows (RIAS, at page 5954): The purpose of these Amendments is to equip the PMPRB with the regulatory tools and information reporting authorities it needs to effectively protect Canadian consumers from excessively priced patented medicines in today’s regulatory environment. [ 93 ] The applicants submit that the Impugned Amendments have no connection to patent abuse—the term is not even mentioned in the RIAS—and the animating purpose of the Amendments is to deliver health care savings and pave the way for national pharmacare.

As discussed above, the purpose of the Patented Medicines Regime of the Patent Act is not to prevent patent abuse in general, but to prevent the specific abuse of excessive pricing of patented medicines. The purpose of the Amendments as stated in the RIAS is consistent with the Board’s consumer protection mandate to prevent excessive pricing.

However, other telling statements made by the federal Minister of Health and Health Canada paint a different purpose beyond controlling excessive pricing. [ 94 ] In a May 2017 letter to the Ontario Minister of Health and Long-Term Care, the federal Minister of Health noted the federal government’s commitment to using the regulatory framework that guides the Board’s work to lower high drug prices: At our January 2016 Health Ministers’ Meeting, we committed to taking concrete action to advance our shared interest in improving the affordability, accessibility and appropriate use of prescription drugs.

Within federal jurisdiction, this includes lowering high drug prices

through modernization of the regulatory framework that guides the work of the Patented Medicine Prices Review Board (PMPRB).[Emphasis added.] (Exhibit K to the January 9, 2020, Affidavit of Karen Reynolds.) [95] Similar language is found in a May 2017 Health Canada Consultation Document: In January 2016, federal, provincial and territorial Ministers agreed to work together to improve the affordability, accessibility andappropriate use of prescription drugs to better meet health care system needs.

The Government of Canada is firmly committed to thiswork and is taking action to significantly lower the cost of prescription drugs; … [T]he PMPRB’s current regulatory framework does not provide it with adequate tools to effectively protect Canadians from excessiveprices, or for optimal price setting in today’s pharmaceutical environment. That is why Health Canada is advancing the proposedamendments for consultation. [Emphasis added.] (Exhibit E to the October 3, 2019, Affidavit of Dr.

Forest.) [96] The applicants particularly take issue with Health Canada’s framing of the Board as a regulatory tool for “optimal price setting”.That said, the final articulation of the government’s intention in the RIAS suggests that the Board is to use the tools at its disposal to set anon-excessive price ceiling applicable to all Canadian consumers, as opposed to setting “ideal” prices for different types of consumers(RIAS, at page 5954): ….

Given the PMPRB’s mandate and status as a federal regulator, the intention is for the Board to use these tools in order to identify anational ceiling price above which it would be unreasonable for any consumer in Canada to pay, as opposed to an ideal price for differenttypes of consumers having regard to their individual ability and willingness to pay. [Emphasis added.] [97] The applicants further refer to the following statement made by the federal Minister of Health during Commons Debates in June2019 as evidence of the government’s true intentions: We are in the process of modernizing the Patented Medicine Prices Review Board in order to once again make sure we lower the costof drugs and are able to move forward with this program. (Canada.

Parliament. House of Commons Debates, 42nd Parl., 1st Sess., Vol. 148, No. 433 (June 13, 2019), at page 29061 (Hon. GinettePetitpas Taylor).) [98] On this point, the respondent submits that motives of the Minister of Health should not be imputed to the Governor in Council,relying on Canadian Union of Public Employees v. Canada (Attorney General), 2018 FC 518, at paragraph 146 —a case aboutlegitimate expectations.

Based on the record before the Court, the only material definitively before the Governor in Council when shepromulgated the Amendments was the regulatory package, consisting of the Amendments themselves and the RIAS. Conversely, theapplicants submit that the Court may consider the Minister’s comments, so long as these comments have “an institutional quality”(Airport Taxicab (Pearson Airport) Association v. Toronto (City) (2009), 61 M.P.L.R. (4th) 8, (Ont.

S.C.)). [99] As previously noted, the Minister and the Governor in Council are separate entities, and the decision under review is that of theGovernor in Council. That said, the Minister’s comments describing modernizing the Board to “lower the cost of drugs” are consistentwith the explanation for the Amendments found in the RIAS, which states that the Amendments “contribute to the Government’scommitment [to improve the accessibility, affordability, and appropriate use of medicines] by lowering the prices of patented medicinesin Canada” (RIAS, at page 5949).

Therefore, these comments are not merely reflective of the Minister of Health’s individual concerns ormotivations, but reflect the broader institutional intent of the Governor in Council. [100] The comments made by the Minister of Health and in the RIAS with respect to lowering the prices of patented medicines inCanada must be read in the context of the rest of the RIAS.

As quoted above, the stated purpose of the Amendments is to modernize theBoard with the necessary regulatory tools to effectively protect Canadian consumers from excessive patented medicines prices (RIAS, atpage 5954). [101] The purpose statements in the RIAS recognize the Board’s mandate to lower prices only where it finds a patentee has abused itsmonopoly by charging excessive prices for a patented medicine. The Minister’s comments and statements in the RIAS related tolowering drug prices must be read in this context.

Lower drug prices may have been a motivating factor leading to the Amendments, butthis is an issue of “economic policy and politics”, beyond the scope of this application (Thorne’s Hardware Ltd. v. The Queen, (SCC), [1983] 1 S.C.R. 106, at page 115, (1983), 143 D.L.R. (3d) 577 (Thorne’s Hardware); Katz, at paragraphs 27–28). [102] The parties blurred the lines between the “purpose” of the Amendments and the “motives” that led to their promulgation.

Whilethe motives for promulgating the Amendments are irrelevant to this judicial review, a given factor could be both a motive and a purpose.Fully disentangling motive from purpose may not always be possible. It is the purpose of the Amendments and scope of the Governor inCouncil’s regulation-making authority that are key in determining whether any of the proposed Amendments may be ultra vires. [103] The purposes for promulgating a regulation may be multifaceted (Thorne’s Hardware, above, at page 117).

In the present case,much like in Thorne’s Hardware, the lowering of patented medicines prices is clearly one factor that prompted the Amendments. Thatsaid, even if this were considered a “purpose” of the Amendments for the purposes of the vires analysis, lowering prices was not the solereason for the Amendments. The Amendments update the Board’s arsenal of regulatory tools and information reporting authority inorder to effectively protect Canadian consumers from excessively priced patented medicines.

In the words of the respondent,“recognition that the Amendments may result in cost savings does not mean it must be their purpose”.

[ 104 ] Having considered the Amendments, the RIAS, and the extrinsic evidence from the Minister of Health and Health Canada, the purpose of the Amendments is to modernize the Board with new regulatory tools and information reporting authority, and to lower patented medicines prices to protect Canadian consumers from the abuse of excessively pricing. [ 105 ] The applicants also submit that the Patent Act should be read to conform to Canada’s international treaty obligations, and the Amendments are inconsistent with these obligations.

Specifically, the Governor in Council’s regulation-making authority is constrained by the prohibition on discrimination based on field of technology contained in the Agreement on Trade-Related Aspects of Intellectual Property Rights [ Annex 1C of the Marrakesh Agreement Establishing the World Trade Organization , signed in Marrakesh, Morocco, 15 April 1994, 1869 U.N.T.S. 299 ] (TRIPS) and the North American Free Trade Agreement [ Between the Government of Canada, the Government of the United Mexican States and the Government of the United States of America , December 17, 1992, [1994] Can. T.S. No. 2] (NAFTA).

The respondent submits that these international agreements provide minimum standards of protection, and Canada’s patent regime is fully compliant. [ 106 ] International treaties, even those not implemented domestically by statute, can help inform whether an administrative decision was reasonable ( Vavilov , at paragraph 114 ).

Article 27 of TRIPS states that “patents shall be available and patent rights enjoyable without discrimination as to … the field of technology” . Pursuant to

Article 28, the minimum rights conferred on a patent owner are the exclusive rights of making, using, offering for sale, selling, or importing the patented invention. These rights are enshrined in Canadian law in

section 42 of the Patent Act . [ 107 ] Notably,

section 42 of the Patent Act and

Article 28 of TRIPS do not guarantee patentees the right to charge whatever price they would like for their patented inventions. I agree with the applicants that one benefit generally conferred by a patent is the ability to charger a higher “monopoly” price, but this benefit is not an unrestricted right. [ 108 ] Therefore, the Board’s jurisdiction to prevent excessive pricing of patented medicines does not offend

Article 27 of TRIPS, as the alleged discrimination does not target a right to which patentees of medicines are entitled. NAFTA

Article 1709 includes nearly identical language to TRIPS Articles 27 and 28. [ 109 ] The applicants do not appear to suggest that the Board’s powers to regulate excessive pricing of patented medicines as exercised up until 2019 breached Canada’s international obligations. This alleged “discrimination” against patented medicines as compared to other fields of technology has clearly been present since the Board’s inception.

I am satisfied that the Amendments comply with Canada’s international obligations under TRIPS and NAFTA. [ 110 ] The applicants make further arguments about the factory-gate limits of the Board’s jurisdiction, and I will address these below in connection with the new price calculation. [ 111 ] I find the purpose of the Amendments related to the new mandatory factors under

section 4 of the Amendments, and the PMPRB11 under

section 6 and the

schedule to the Amendments is sufficiently connected to and consistent with the purpose of the Patented Medicines Regime in the context of the Patent Act : protecting consumers from the abuse of excessive pricing. Each Impugned Amendment is discussed further below. C. The Impugned Amendments

(1) Section 4 of the Amendments: the New Mandatory Factors [ 112 ]

Section 4 of the Amendments adds 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 GDP in Canada and GDP per capita in Canada. [ 113 ] The applicants submit that the new mandatory factors constitute an unreasonable exercise of the Governor in Council’s regulation-making authority under paragraphs 85(1) (

e) and 101(1) (

d) of the Patent Act . Their two primary submissions are that the new mandatory factors undermine the objects of the Patent Act and the Board’s jurisdictional limits, and are inconsistent with the governing statutory scheme, particularly

section 85 of the Patent Act . (

a) Pharmacoeconomic Value — consistency with the object of the Patent Act [ 114 ] As previously discussed, pharmacoeconomic value is a measure of how much a medicine costs for the health benefit it provides, and this measure for a given medicine can be compared to other medicines or treatments. Pharmacoeconomic value provides information on the relative value of a drug as compared to other treatment options. A commonly used standardized unit of pharmacoeconomic value is the “quality-adjusted life year” or “QALY” . As explained by Dr.

Lachaine, “cost-per-QALY” , which is the cost to deliver one additional year of life in perfect health, can be used to estimate the cost effectiveness of a drug. Public and private insurers will often use a cost-per-QALY threshold to set a limit on drug coverage, refusing to cover drugs that exceed the threshold. Dr.

Lachaine’s evidence is that if the Board is to use pharmacoeconomic value to drive pricing decisions, it must use a cost-per-QALY threshold. [ 115 ] The applicants submit that the new mandatory pharmacoeconomic value factor requires the Board to make systemic judgments on value for all Canadians; a role entirely unrelated to its statutory mandate to regulate patent abuse through excessive pricing of patented medicines.

In the applicants’ view, inputs related to pharmacoeconomic value relate to policy decisions that have nothing to do with the patent grant or any action by the patentee that could be considered abusive, and this factor is therefore irrelevant to the statutory role of

the Board. I again note that the applicants repeatedly refer to patent abuse in general, which obscures the Board’s actual mandate of preventing and regulating the specific abuse of excessive pricing. [ 116 ] CORD makes a similar submission on this point, arguing that the intention of adding economic-based factors is to cause significant price reductions for patented medicines, unrelated to whether prices were excessive.

CORD suggests that this approach will reduce the incentive offered by the patent bargain in the name of generally lowering patented medicines prices. [ 117 ] The applicants suggest the RIAS supports their position that the pharmacoeconomic value factor was chosen to “bring national pharmacare to Canada” (RIAS, at page 5955): It is often noted that Canada is the only country with a publicly funded health care system that does not include universal pharmaceutical coverage. The result is a patchwork of public and private payers who lack the national buying power to counter the monopoly position of patentees.

That monopoly position is bolstered by an increasing proportion of public and private spending that is taken up by high-cost medicines with few or no therapeutic alternatives. Requiring the PMPRB to consider the pharmacoeconomic value of these medicines will ensure that the concept of opportunity cost is taken into account in determining whether their price is excessive. [ 118 ] In my view, the applicants misinterpret this passage from the RIAS, and misconstrue the relevance of pharmacoeconomic value to a determination of excessive pricing.

As argued by the respondent, assessing pharmacoeconomic value is an objective exercise using a standardized measure of benefit. Such an exercise could justify higher prices for patented medicines that offer pharmacoeconomic value. As noted in the RIAS, this factor becomes more relevant for high-cost medicines with few or no therapeutic alternatives. Where the Board has limited reference pricing information available, it is limited in how it can conduct its excessive pricing determination.

Recognizing this limitation, the Governor in Council introduced this new factor and corresponding reporting requirement. [ 119 ] Further, the applicants and CORD both focus on pharmacoeconomic value as if it will be used as a standalone factor. CORD submits that the Board will overtake the role of CADTH and INESSS by using fixed cost-per-QALY thresholds, ultimately picking

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