Working group recommends that PMPRB adopts DIP methodology permanently

On 16th May 2012 the Patented Medicine Prices Review Board (PMPRB) released a report setting out the follow-up recommendations of the DIP working group on the pilot implementation of the DIP methodology. In its report, the working group recommended that the PMPRB adopt the DIP methodology on a permanent basis.

The DIP methodology was introduced to address situations where the price of a patented medicine increases in excess of that allowable under the Consumer Price Index (CPI) adjustment methodology due to a reduction or termination of benefits to customers (ie, any reduction given as a promotion or in the form of rebates, discounts, refunds, free goods, free services, gifts or any other benefits of a similar nature). Under the DIP methodology, when a market-specific average transaction price of a drug product increases by more than that allowable under the CPI adjustment methodology and the patentee provides the required evidence, the price of the drug product may increase up to the highest non-excessive average price of another class of customer without being presumed to be excessive, as long as this price does not exceed the highest international price comparison test.

The working group was established to identify potential challenges and develop workable solutions in implementing the DIP methodology. The challenges identified mainly involved the seemingly onerous evidence requirements to invoke the DIP methodology. In order to simplify the evidence reporting task, the working group proposed that the DIP methodology be divided into two streams:

• A simplified DIP methodology with lower evidence requirements, for situations where the national average transaction price of a patented drug product does not exceed its introductory benchmark price.
• A regular DIP methodology with greater evidence requirements, to be considered in situations when the national average transaction price of a patented drug product is greater than its introductory benchmark price.

The PMPRB chose to implement the working group's recommendations on a one-year pilot basis.

Based on its assessment of the pilot implementation, the working group concluded that the DIP methodology is an effective solution to address and resolve investigations arising from the reduction or termination of benefits. Moreover, the working group reported that the pilot application was generally a positive experience for both patentees and PMPRB staff due to:

• The less burdensome process to request and invoke the DIP methodology.
• Standardised means to report required evidence.
• Manageable and operationally available evidence requirements.