Blog: Richard C. Owens: Quebec gets the constitution right (on drug price control) – Financial Post

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Richard C. Owens: Quebec gets the constitution right (on drug price control)

While unconstitutional institutions and policies may be accommodated by the provinces to some degree, pushing them too far will end that accommodation

Author of the article:

Richard C. Owens, Special to Financial Post

Quebec has challenged as unconstitutional new regulations for price control by the Patented Medicine Prices Review Board.
Quebec has challenged as unconstitutional new regulations for price control by the Patented Medicine Prices Review Board. Photo by George Frey/Getty Images files

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Quebec recently intervened in the appeal of the Cour supérieure case between several pharmaceutical companies (Merck, Janssen and Bayer among them) and the Attorney General of Canada. The case challenges as unconstitutional new regulations for price control by the Patented Medicine Prices Review Board (PMPRB), which came into being in 1987 as part of a political compromise that saw the Mulroney government strengthen patent-holders’ rights but also put drug prices under review.

Quebec argues: “Drug prices fall within provincial jurisdiction over property and civil rights … Only the province has jurisdiction over price regulation in a specific industry … Federal jurisdiction over patents cannot be used as a Trojan horse to regulate a particular industry or to interfere with the management of public services under provincial jurisdiction.”

Quebec is correct. The regulations are plainly unconstitutional. But Quebec doesn’t carry the logic of its arguments far enough: not only the impending regulations (which come into force July 1) but also the whole PMPRB regulatory apparatus is unconstitutional.

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The new regulations will forcefully and excessively depress drug prices. In recent years, the PMPRB’s control of the pharmaceutical marketplace has essentially been usurped by collective, confidential negotiations between pharmaceutical suppliers and the federal and provincial governments acting in consortium. A consequence of these confidential negotiations is a shrunken pool of pricing data from which the PMPRB can draw its bureaucratic conclusions about what a drug “should” cost, not to mention untold delays getting new drugs to Canadians. The new regulations seek to remedy this data scarcity by requiring disclosure of these confidential deals — which has already been found unconstitutional by both Quebec and federal courts. But data scarcity is just a symptom. The real problem is that the PMPRB isn’t useful anymore — and never was.

The PMPRB was born of a Faustian bargain made so that much-needed patent reforms favouring drug manufacturers would be politically palatable. It’s hard to assess, in hindsight, whether clearer-headed, more forceful leadership could have carried the reforms without the PMPRB albatross, but that option was forgone. So the albatross endures.

The fact remains, however, that the PMPRB rests on constitutional sand. Its purpose was to control abuse of drug patents by preventing “excessive” prices, but it is, and always was, about simple price control, not patent abuse (which in any event is thoroughly and separately covered in the Patent Act). Canada doesn’t have a history of pharmaceutical patent abuse, and evidence even from markets where drug prices are unregulated shows that such abuse isn’t really a significant thing. Pharmaceuticals typically face stiff competition from other patented products and off-patent products and processes. Drug prices don’t need controls — though that is neither here nor there with respect to the constitutionality of existing controls.

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Health-care advocates and the life sciences industry fiercely oppose the new regulations, which they fear will make it impossible to obtain many drugs in Canada. Though not yet implemented, they are already having that effect, according to virtually all Canadian life sciences CEOs surveyed.

Ontario has complained to the federal government about the new regulations but so far has not joined Quebec in the case, even though life sciences are a significant part of its economy. Provinces aren’t obliged to defend their constitutional turf, of course. They can acquiesce in the PMPRB’s existence if they wish. But PMPRB’s likely unconstitutionality means drug manufacturers and sellers could ignore the PMPRB and its orders and, if the PMPRB tries to enforce them, challenge its constitutionality. Or they could go to court themselves to challenge it. Given the risk the PMPRB poses to the health of Canadians, presumably any of us could have standing to ask the courts to put it out of our misery.

Though the constitutional situation seems clear there remains a risk the courts will disagree. In a less than convincing judgement, Judge Sophie Picard of the Cour supérieure decided part of the new regulations was constitutional. The Quebec government was not at the trial but has entered the fray now that the case has risen to the appellate level. Appeal judges in Quebec are unlikely to show the deferential indulgence of federal interference in provincial jurisdiction that the lower court has. Nor is the Supreme Court of Canada, although we have not always been well-served by its defence of the constitutional rights of Canadians. Consider its recent decisions on provincial trade barriers and the carbon tax.

That the constitutionality of the PMPRB is now challenged because of egregiously bad new regulations is a good lesson for the federal government: while unconstitutional institutions and policies may be accommodated by the provinces to some degree, pushing them too far will end that accommodation.

Richard C. Owens, a lawyer, is a Senior Munk Fellow of the Macdonald-Laurier Institute and long an adjunct law professor at the University of Toronto Faculty of Law.

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