Drug maker loses battle over Canada’s right to impose a price cap

A closely watched skirmish over the cost of prescription drugs has ended in defeat for a company that sought to challenge the right of a Canadian agency to impose a price cap on a pricey medicine.

In a June 23 ruling, Canada’s Federal Court dismissed a constitutional challenge that Alexion Pharmaceuticals filed against the Patented Medicine Prices Review Board, which early last year sought to keep a lid on the cost of the company’s Soliris medication. The board released the decision two days ago.

The medicine is used to treat a pair of rare diseases and costs either US$383,000 or US$585,000, depending upon the ailment being treated. The government agency had asked Alexion to lower its price and repay sales generated by the drug from 2012 through the first half of 2014.

The conflict was only the latest instance in which a government pushed back against the cost of prescription medicines. But this particular battle had wider implications. Beyond disputing specific allegations made by the board, Alexion took the unprecedented step of challenging the agency’s power to impose pricing caps.

In dismissing the case, the Federal Court agreed with the attorney general of Canada that the challenge was “bereft of any chance of success,” according to the ruling. In explaining its reasoning, the court noted that the constitutionality of the board and its ability to regulate pricing has been upheld on several other occasions in Canadian courts.

“It is far from surprising,” said Richard Gold, a professor at McGill University who specializes in intellectual property. “Alexion may still appeal in hopes that the Supreme Court of Canada will alter the law. I think the [possibility that the court will find] the provisions unconstitutional are remote. Parliament can create and limit patent rights as it wishes, but pharmaceutical companies have been known for being obstinate in the face of logic.”

An Alexion spokeswoman wrote us that the company is “disappointed” with the decision and will file an appeal today. “We continue to contest the [board’s] allegation that Alexion  charges more in Canada for Soliris than in other comparator countries. We have and will continue to negotiate the cost of Soliris with each of the [Canadian] provinces as they require.”

The dispute arose from a comparative pricing mechanism used by the board. Canadian rules require that drug prices should not be higher than the median price found in seven other countries — the United States, France, the United Kingdom, Germany, Italy, Sweden, and Switzerland. And the board determined that Alexion set “the highest international price” for Soliris.

Alexion argued that Soliris pricing had not changed or increased in Canada, or dropped elsewhere since the medicine was introduced there in 2009. The company also maintained any pricing difference was due to exchange rate fluctuations, which are outside of its control. But some patients were unable to obtain Soliris due to the cost, according to patient support groups in Canada.

Soliris is used to combat paroxysmal nocturnal hemoglobinuria, or PNH, a genetic disease that destroys red blood cells, and atypical hemolytic uremic syndrome, or aHUS, which is a progressive and life-threatening disease that affects the immune system. The drug generated nearly all of Alexion’s $2.6 billion in revenue last year (see page 58).

For aHUS patients, dosing is based on weight, but the overall price per patient, on average, is similar to PNH. The company has previously explained that a high proportion of aHUS patients are babies and children, and the average cost per year for this group is $80,000. The drug maker argued that the board had cited the highest price in the highest weight category for aHUS.

This post was updated to note that Soliris accounted for nearly all of the company’s $2.6 billion in revenue last year. It was incorrectly stated initially.