International Law

Keeping Drug Prices Down in Celgene Corp. v. Canada (Attorney General)

By Christine Kellowan

On January 20, 2011 the Supreme Court of Canada released its decision in Celgene Corp. v. Canada (Attorney General), 2011 SCC 1. In this case the SCC had to determine whether the Patented Medicine Prices Review Board (?Board?) correctly interpreted the Patent Act, R.S.C. 1985, c. P-4 (?the Act?). Technically, this issue is one that falls under the realm of administrative law since the applicant Celgene Corp. (?Celgene?) challenged the decision of an administrative decision-maker via judicial review. However, the SCC agreed with the Federal Court of Appeal majority that the particular standard of review would not really affect the outcome of this case. Accordingly, the SCC focused its attention on whether the Board correctly interpreted the provisions in question, rather than on the appropriate standard of review.

Section 80(1)(b) requires that a ?patentee of an invention pertaining to a medicine shall …  provide the Board with such information and documents as the regulations may specify respecting the price at which the medicine is being or has been sold in any market in Canada and elsewhere.? The  SCC had to determine whether the phrase ?sold in any market in Canada? in s. 80(1)(b)  applies to drug sales where the contracts are formed and the distribution of product occurs outside of Canada. According to commercial law principles, the aforementioned sales would not fall within the scope of that phrase. Celgene adopted this position so that it would not be required to provide the Board with price information.

Among other reasons, a drug maker will try to avoid providing price information so that the Board cannot determine whether prices are excessive. If they are excessive, then the Board has the power under s. 83 to order the drug maker to reduce the price.

Interpreting the Act to Promote Access to Drugs

Abella J. writing for the unanimous SCC, rejected the notion of applying general commercial law principles. Instead, she favoured an approach that respected the Board?s powers to ensure that prices paid for medicines subject to patent monopolies are not excessive. This approach was justified using the Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54 method of statutory interpretation. The relevant principles are described below:

It has been long established as a matter of statutory interpretation that ?the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament…  The interpretation of a statutory provision must be made according to a textual, contextual and purposive analysis to find a meaning that is harmonious with the Act as a whole.  When the words of a provision are precise and unequivocal, the ordinary meaning of the words play a dominant role in the interpretive process.  On the other hand, where the words can support more than one reasonable meaning, the ordinary meaning of the words plays a lesser role. The relative effects of ordinary meaning, context and purpose on the interpretive process may vary, but in all cases the court must seek to read the provisions of an Act as a harmonious whole.

In summary, the method in Canada Trustco is that if the words are clear, then their ordinary meaning will apply; if the words are ambiguous, then they will ?yield to an interpretation that best meets the overriding purpose of the statute.? Despite its best efforts to argue that the word ?sold? has a precise meaning that focuses on the location of the formation of the contract and thus required that the impugned contracts to be made in Canada for the Act to apply, Celgene was unable to sell the SCC on its interpretation.

Using the Canada Truscto approach, Abella J. succinctly interprets the phrase in light of legislative intent that the Board balance drug monopolies with consumer access to reasonable prices. Although it is not explicitly stated in her decision, the ability of the legislature to override the common law through statute is apparent in Abella J.?s reasoning. The power to review the price of drugs provided to Canadian consumers without regard to the precise place that the contract was formed facilitates the wellbeing of Canadian society, and is a clear instance of the legislature ousting the common law.

The significance of this decision is great because the SCC is signaling to drug makers that any drugs that are to be consumed by the Canadian public are subject to the Board?s jurisdiction notwithstanding creative attempts to circumvent that jurisdiction through commercial law principles. Otherwise, the ability of the Board to facilitate reasonable prices would be frustrated. Given the great extent to which business operations have been globalized, a decision in favour of Celgene would undermine the whole review process. Drug makers would strategically ensure that contracts are formed abroad to circumvent the Board?s jurisdiction, thus leaving Canadian consumers vulnerable to the whims of drug makers. The SCC is to be commended for preserving reasonable prices for consumers.

Full post as published by The Court on February 09, 2011 (boomark / email).