Constitutional Limits on the Administrative State: Galderma Canada Inc. v. Canada (Attorney General), 2024 FCA 208

The Federal Court of Appeal recently released an interesting decision at the intersection of constitutional and administrative law in Galderma Canada Inc. v. Canada (Attorney General), 2024 FCA 208 (I was co-counsel for the appellant).

The case involved a judicial review of a decision of the Patented Medicines Prices Review Board purporting to regulate an off-patent acne medicine (that is, a medicine for which the patent has expired and is thus subject to market competition).

At first glance, this looks strange, as Stratas JA pithily explained:

The Patented Medicine Prices Review Board regulates the pricing of medicines under the market power given by a patent—namely, patented medicines. The Board does not regulate the pricing of unpatented medicines. After all, it’s right in the Board’s name: the Board is the “Patented Medicine Prices Review Board”, not the “Patented and Unpatented Medicine Prices Review Board” or the “All Medicine Prices Review Board” (at para. 4).

The Board is a federal board and, as such, the scope of its authority is confined by the Constitution of Canada. Section 91(22) gives Parliament the power to legislate in relation to patents. And Parliament has enacted the Patent Act, RSC 1985, c P-4. Amongst other things, this statute allows patentees a period of exclusive use of their patent.

However, a long line of cases has established that this power does not extend to price regulation but only to the abuse of patents, whether during the period of exclusive use, the patentee seeks to charge abusively high prices. But whether too high a price is being charged for unpatented medicines is a matter for the provinces. Parliament only has the power to regulate patent abuse: “the Board does not have any freestanding consumer protection or general price regulation mandate” (at para. 7). Indeed, the Board cannot exercise powers that Parliament cannot delegate to it (Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 SCR 653, at para. 56) and so the Board cannot engage in price regulation at large.

Here, the Board’s justification for regulating an unpatented medicine was that there was a relationship between the unpatented medicine (sold as Differin) and the patented medicine (sold as Differin XP). The difference between Differin and Differin XP, which are both topical solutions applied to the skin to treat acne, is the concentration of the key ingredient (Adapalene): .1% for Differin, .3% for Differin XP.

The Differin patent had expired, but the Board’s position was that, based on clinical similarities between the two, Differin XP “pertains” to Differin as it “is intended or capable of being used for” Differin, consistent with s. 79(2) of the Patent Act. Note that s. 79(2) uses the term “pertains” (which can be read broadly: ICN Pharmaceuticals Inc. v. Patented Medicine Prices Review Board (1996), 1996 CanLII 4089 (FCA), [1997] 1 F.C. 32, 119 F.T.R. 70 (C.A.)) but also further defines that broad term as “intended or capable of being used for” a medicine (Canada (Attorney General) v. Galderma Canada Inc., 2019 FCA 196).

In a previous round of litigation, the Federal Court of Appeal found that the Board’s position was unreasonable but remitted the matter to the Board to consider whether the evidence of clinical similarities met the test set out in s. 79(2)): 2019 FCA 196.

The Board concluded that it did but Stratas JA roundly rejected the Board’s position:

By making that order, the Board crashed through the constitutional, statutory and jurisprudential guardrails. Or to use the more orthodox, formal, administrative law language in Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653, the Board exceeded the constraints acting upon it—some pretty clear, longstanding and well-established ones too. Thus, the Board’s order must be set aside.

The Board argued, as mentioned, that the clinical similarities between Differin and Differin XP meant that the statutory test was satisfied. On the facts, however, this position was not tenable:

• Under subsection 79(1) of the Patent Act, after December 2009 the appellant was no longer “entitled to the benefit of the patent for [the] invention”, which was a lower, 0.1% concentration of the active ingredient, adapalene, in Differin. Thus, after December 2009 the appellant was no longer a “patentee” under subsection 79(1) for Differin. From December 2009, Differin has been an unpatented medicine.
• The ’237 Patent is a “use patent” that covers the use of the 0.3% concentration of adapalene, the active ingredient in Differin XP, not adapalene itself. As a matter of patent law, the Board cannot somehow stretch and pull that “use patent” to cover Differin, which uses a different concentration of adapalene (0.1%). The invention in the ’237 Patent, the use of the 0.3% concentration of adapalene, cannot (in the words of subsection 79(2)) be “intended or capable of being used” for Differin or for “the preparation or production” of Differin, because Differin does not embody that use at all.
• Subsection 79(2) of the Patent Act does not give the Patented Medicine Prices Review Board the power to review unpatented medicines. Had it done so, it would have extended the Board’s power beyond its constitutional limits, into the field of regulating the prices of unpatented medicines. In the case of ambiguity—and here there is none—where possible, statutory provisions like subsection 79(2) must be interpreted to stay within the limits of the Constitution: Hills v. Canada (Attorney General), 1988 CanLII 67 (SCC), [1988] 1 S.C.R. 513, 48 D.L.R. (4th) 193; R. v. Monney, 1999 CanLII 678 (SCC), [1999] 1 S.C.R. 652, 171 D.L.R. (4th) 1; R. v. Nova Scotia Pharmaceutical Society, 1992 CanLII 72 (SCC), [1992] 2 S.C.R. 606, 93 D.L.R. (4th) 36; Cooper v. Canada (Human Rights Commission), 1996 CanLII 152 (SCC), [1996] 3 S.C.R. 854, 140 D.L.R. (4th) 193.
• If the appellant is pricing the patented medicine, Differin XP, excessively due to abuse of its market power under the ’237 Patent, the Board can go after Differin XP, not Differin, now unpatented. Nowhere does the Patent Act say that the Board can regulate an unpatented medicine just because a patented medicine might be used in its place or because it shares some unpatented properties of the patented medicine (here, the unpatented ingredient adapalene) (at para. 13).

The appellant had argued that the standard of review was correctness, on the basis that the correct interpretation and application of s. 79(2) is a constitutional question that requires the courts to provide uniform and definitive answers. Stratas JA held that it was not necessary to resolve the debate about standard of review in this case, as the court’s analysis demonstrated that it was possible “to characterize the problem as the Board adopting and applying an unacceptable and indefensible (i.e., unreasonable) interpretation of the Patent Act” (at para. 16), such that the same result would be reached under either standard (at para. 17).

With characteristically colourful prose, Stratas JA concluded with an admonition to the Board:

The Board has an important mandate. Given the importance of that mandate, the Board is dedicated and enthusiastic about pursuing it. That’s worthy of praise. But the Board must temper its dedication and enthusiasm with a firm and unwavering obedience to legality and the rule of law. Like all administrative decision-makers, the Board must stay within the constraints imposed by the Constitution, its governing statute (the Patent Act, interpreted reasonably in the administrative law sense), and the jurisprudence under each (at para. 19).

This is a very useful, well-written decision that touches concisely and incisively on some key basics of administrative and constitutional law about the limits on the authority (or, dare I say it, “jurisdiction”) of administrative decision-makers.

This content has been updated on December 5, 2024 at 12:38.