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In a setback to the pharmaceutical industry, a Federal Court judge in Canada has dismissed a challenge by drug makers that contended controversial new government rules designed to regulate excessive pricing would inhibit innovation and hurt the Canadian economy.

Last August, the government passed regulations for patented drugs that would base Canadian prices on those from a group of countries with lower prices than a benchmark group now used to set ceilings. The Patented Medicine Prices Review Board would also review new drugs based on cost effectiveness assessments.

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