Ontario Superior Court denies pleading amendments based on Supreme Court of Canada’s rejection of promise doctrine in ramipril damages action

As we reported, Federal Court jurisprudence is being continually reshaped by the Supreme Court’s decision in AstraZeneca Canada Inc. v. Apotex Inc., 2017 SCC 36 (NEXIUM Decision). In Apotex v. Schering Corporation, 2018 ONSC 903, the Ontario Superior Court has now considered the impact of the NEXIUM Decision in the context of Apotex’s action for damages against Schering relating to ramipril.

Background

This action arises from Apotex’s success both in litigation under the Patented Medicines (Notice of Compliance) Regulations (Regulations) and in a subsequent action to impeach Schering’s patent relating to ramipril (206 Patent). Both decisions were upheld on appeal. Apotex subsequently succeeded in a claim for damages under section 8 of the Regulations. It then brought the present action in the Ontario Superior Court for damages pursuant to the Trade-marks Act and Monopolies Acts, reported here.

Pleading amendments denied

Following the NEXIUM Decision, Schering brought a motion to amend its pleadings. The proposed amendments alleged that the prior decisions of the Federal Court concerning the validity of the 206 Patent would have been decided differently in light of the NEXIUM Decision (i.e., the 206 Patent would not have been invalidated on the basis of the promise doctrine). Accordingly, Apotex should not be permitted to rely on those decisions to support the present action.

The Ontario Superior Court denied the amendments, applying the doctrines of issue estoppel and collateral attack. It found that the Federal Court’s decision impeaching the 206 Patent was final. Permitting the proposed amendments would invite the parties to relitigate the patent’s validity in the present action.

The Court further found that sections 62 and 63 of the Patent Act supported the same result. Section 62 provided that a patent voided by a judgment is void ab initio against all persons and for all purposes unless reversed on appeal as provided by section 63. As the previous impeachment decision was affirmed on appeal, it had to be given effect.

No “special circumstances”

Schering and Sanofi argued that the change in the law brought about by the NEXIUM decision negated issue estoppel and collateral attack. Although the Court recognized the possibility of such a “special circumstances” exception, it characterized Nexium as a change in an aspect of the interpretation of a statutory provision rather than a change in the law. It distinguished this from prior cases which effected a change in law that was entirely common law based (for example, the law of trusts) or for which there was an intervening legislative change. Further, where the “special circumstances” pleaded to avoid issue estoppel would effectively require extensive relitigation, there are no special circumstances.

Links:

Apotex v. Schering Corporation, 2018 ONSC 903

FCA upholds damage award based on Teva’s infringing sales of levofloxacin

The Federal Court of Appeal has upheld the Federal Court’s order that Teva Canada Limited pay Janssen Inc. (Janssen Canada) and Janssen Pharmaceuticals, Inc. (Janssen US) over $18 million for infringing sales of levofloxacin (reported here). The Court of Appeal’s decision addresses standing, mitigation, market reconstruction, and how freely a trial judge can swing the “broad axe” in quantifying damages.

Background

Since at least 1998, Janssen Canada has sold levofloxacin in Canada as LEVAQUIN®.

Teva sold its infringing Novo-levofloxacin in Canada from November 29, 2004, until October 17, 2006, when the Federal Court enjoined further sales. The injunction followed from the Federal Court’s finding that Teva was infringing Canadian Patent No. 1,304,080 (080 Patent). The 080 Patent expired on June 23, 2009.

Janssen US had standing to claim damages for lost transfer sales into Canada

The Court of Appeal upheld the Federal Court’s finding that Janssen US had standing to seek damages against Teva.

Janssen US’s claim was based on lost transfer sales to Janssen Canada. At issue was section 55(1) of the Patent Act, which provides, “A person who infringes a patent is liable to the patentee and to all persons claiming under the patentee” (emphasis added). The Court of Appeal held that a “party need only establish that they enjoy rights under a patent in order to be a person claiming under the patentee.”

The evidence was that the owner of the 080 Patent, Daiichi Sankyo Company, Limited, had been “well aware” as to how the Janssen companies had been “making and selling levofloxacin finished products.”  The Court of Appeal found this evidence amply supported the Federal Court’s finding that Janssen US had had Daiichi’s permission to be involved in the LEVAQUIN® supply chain and was thus a person claiming under the patentee. Janssen US was not required to demonstrate that it had held title in Canada to the LEVAQUIN® tablets it had sold to Janssen Canada.

Federal Court’s findings on mitigation, market reconstruction and costs upheld

The Court of Appeal upheld the Federal Court’s quantification of Janssen Canada’s and Janssen US’s damages. Although grounded in the facts of the case, particularly the construction of the market for LEVAQUIN®, AVELOX®, and TEQUIN®, several of the Court of Appeal’s findings are of general interest.

The “broad axe.” The Court of Appeal found the Federal Court had not erred by repeatedly invoking the “broad axe” principle. In its reasons, the Federal Court endorses a passage from Watson, Laidlaw & Co. Ltd. v Pott, Cassels, and Williamson (1914), 31 R.P.C. 104, where Lord Shaw wrote, “[C]ompensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe.” The Court of Appeal did not disagree. In the context of quantifying damages for patent infringement, where a hypothetical “but for” patent infringement world must be constructed, the references to the broad axe were not in error. The Federal Court looked to the economic proof and likely market outcomes; it did not mete out “rough justice.”

Mitigation. The Court of Appeal defined the concept of mitigation: a plaintiff is not entitled to recover compensation for loss that could have been avoided by taking reasonable action. The Court of Appeal added that, “[a] plaintiff will generally receive the benefit of the doubt on the ground that  a defendant should not be overly critical of a plaintiff’s good-faith effort to avoid difficulties caused by the defendant’s wrongful act.”

The Court of Appeal rejected Teva’s assertions that the Federal Court had misapprehended the evidence on mitigation.

The first issue on mitigation concerned Janssen’s damages from price suppression. Janssen had lowered the price of the LEVAQUIN® it sold to hospitals upon Teva’s market entry in November 2004. At trial, Teva argued that Janssen should have raised that price back up when it had regained market exclusivity in October 2006, following Teva’s market exit. The Court of Appeal upheld the Federal Court’s finding that Janssen had had business reasons for not doing so. As a result, Janssen suffered damages from the suppressed hospital price through patent expiry in 2009, even though Teva had long since left the market.

The second issue on mitigation concerned Janssen’s damages from lost share of the market for this class of compounds. The Court of Appeal upheld the Federal Court’s finding that Teva had not led compelling evidence that Janssen should have promoted LEVAQUIN® when it had regained market exclusivity in October 2006. Janssen had stopped promoting LEVAQUIN® upon Teva’s market entry in November 2004.  The Court of Appeal found that the evidence Teva had relied on was from experts not qualified to opine on the reasonableness of Janssen’s business decisions.

Costs. The Court of Appeal upheld the Federal Court’s $1 million costs award to the Janssen companies. The Court of Appeal rejected Teva’s argument that a lump-sum costs award must correspond to the amount an assessment officer would have assessed.

Links:

Health Canada consultation on the naming of biologics including biosimilars

On January 18, 2018, Health Canada and the Institute for Safe Medication Practices Canada opened a consultation on the naming of biologic drugs (including biosimilars) in Canada.

As we reported, the US Food and Drug Administration began affixing a four-letter suffix to the generic name of biosimilar drugs, which is intended to facilitate pharmacovigilance and minimize inadvertent substitution of biologics that have not been deemed interchangeable. To date, Canada has not followed suit, and all biosimilars marketed in Canada have the same generic name without a suffix.

The objective of the consultation is to gain insight into stakeholder views on different approaches to naming biologics.  Results of the consultation will be used to understand the impact of different approaches and inform Health Canada’s policy decision on a naming convention for biologic drugs.

The consultation consists of a brief questionnaire and will be open until February 9, 2018.

Link:

Stakeholder Consultation on the Naming of Biologic Drugs

Lower prices announced for commonly prescribed generic drugs

On January 29, 2018, the pan-Canadian Pharmaceutical Alliance (pCPA) and the Canadian Generic Pharmaceutical Association issued a joint statement announcing that effective April 1, 2018, 20 commonly prescribed generic drugs will be further reduced to 10% of the cost of the reference brand product.  The list of drugs reimbursed at 18% has also grown and now includes almost 50 products.  The complete list of products can be found here.

Most generic drugs are reimbursed by public drug plans at 25% of the cost of the reference brand product.  Over the past several years, the pCPA and public payors have implemented measures to further reduce the price of certain commonly prescribed products.  Initially, reimbursement for a small group of drugs was capped at 18% of the brand price and over time this list has grown.

Link:

Joint Statement from the pan-Canadian Pharmaceutical Alliance and the Canadian Generic Pharmaceutical Association

Top Headlines of 2017

Happy New Year from Pharma in Brief!

Reflecting back on 2017, the only constant over the last year was change, with the implementation of CETA, the rejection of the Promise Doctrine and proposals for reform of various regulatory regimes. We have compiled our list of top headlines below.

  • Major changes to regulatory framework for pharmaceutical industry. The implementation of the Comprehensive Economic and Trade Agreement Act on September 21, 2017 brought two major changes to industry: a single-track pharmaceutical patent litigation regime under the Patented Medicines (Notice of Compliance) Regulations (PM(NOC)) and up to two years of patent term restoration for patented pharmaceuticals under the Certificate of Supplementary Protection Regulations (CSP). Both regimes are in their infancy and the full extent of the impact remains to be seen. However, the first court action under the newly amended PM(NOC) Regulations was commenced on December 11, 2017 and CSP applications are being posted to the CSP Register.
  • Changes coming to PMPRB oversight. Proposed amendments to the Patented Medicines Regulations and a scoping document have been released. Potential changes include empowering the PMPRB to consider pharmacoeconomic information when determining excessive pricing, require broader disclosure of price adjustments and rely on a revised group of international comparators. Amended Regulations and Guidelines are expected in January 1, 2019.
  • End of the Promise Doctrine. In a landmark decision and a significant win for patentees and pharmaceutical innovation in Canada, the Supreme Court rejected the “promise doctrine” as a basis for invalidating patents for lack of utility. In its first application of the decision, the Federal Court of Appeal rejected an overarching promise for enzyme inhibition and therapeutic use, refused to expand the subject matter beyond what the claim states and held that enzyme inhibition is “doubtlessly a useful discovery.
  • Obviousness. The Federal Court of Appeal commented on the framework for analyzing obviousness twice in 2017, first by stating that the “inventive concept” is not materially different from “the solution taught by the patent,” which has often been treated as synonymous with “what is claimed” or simply “the invention” and second, by characterizing the search for an “inventive concept” in the obviousness analysis as an “unnecessary satellite debate”.
  • Health Sector Payment Transparency Act. Bill 160, which includes the Health Sector Payment Transparency Act, has received Royal Assent in Ontario.  Although the Act is not yet in force and many details will be released in yet to be published regulations, the Act will require pharmaceutical and medical device manufacturers to disclose financial relationships to healthcare professionals and organizations.
  • Section 8 damages. For the first time, in 2017 the Federal Court disentitled compensation under s. 8 on the basis of infringement of a patent. The Court rejected the argument that, as liability for section 8 damages had already been established, it was not open to the court to redetermine the issue and maintained it has a broad discretion under subsection 8(5) to consider all circumstances bearing on the section 8 claim and the ability to craft an appropriate remedy.
  • Proposal for abbreviated ANDS pathway. In July, Health Canada sought input on potential changes to the Food and Drug Regulations that would allow different salts, esters and complexes of the medicinal ingredient and generic drug products with different but comparable dosage forms to be approvable by way of an abbreviated new drug submission.‎

Pharma in Brief would also like to acknowledge the unexpected passing of Barry Sherman, the founder and visionary behind Apotex, in December, 2017. The impact of Dr. Sherman’s death on Apotex and the generic industry in Canada remains to be seen.

Federal Court of Appeal affirms that the Patent Act’s price control provisions over patented medicines were validly enacted

The Federal Court of Appeal has reaffirmed the constitutionality of the excessive price provisions of the Patent Act that ground the jurisdiction of the Patented Medicine Prices Review Board (PMPRB) over patented medicines.

Background

In 2015, the PMPRB commenced a proceeding against Alexion alleging that the price of Alexion’s drug SOLIRIS® (eculizumab) was excessive.  In response, Alexion brought a judicial review in the Federal Court seeking a declaration that the excessive price provisions of the Patent Act were unconstitutional.

Alexion’s judicial review application was struck on a motion by the Attorney General on the grounds that the Federal Court of Appeal had already ruled that the excessive price provisions were constitutional in the Sandoz decision.  The Federal Court upheld the decision.  Alexion appealed to the Federal Court of Appeal.

Sandoz is dispositive of the constitutional issue

The Court of Appeal held that the Sandoz Court found the relevant portions of the Patent Act had been validly enacted by Parliament: the price control provisions are within Parliament’s jurisdiction under subsection 91(22) of the Constitution Act, 1867 (“Patents of Invention and Discovery”) and do not impermissibly intrude on provincial authority under subsection 92(13) (“Property and Civil Rights in the Province”).  Although the Sandoz Court addressed whether the price control provisions validly applied to non-patent holders or owners, the Court first addressed the question of whether the provisions were constitutionally supported as they applied to patent-holders.  Thus, Alexion’s constitutional challenge had already been decided on the basis of stare decisis.

Links to Decisions:

Supreme Court dismisses leave to appeal on damages against Health Canada for Apo-Trazodone

On December 14, 2017, the Supreme Court dismissed Apotex’s application for leave to appeal the decision finding that Health Canada does not owe a duty of care to drug manufacturers in reviewing drug submissions.

Case: Apotex Inc v Canada (Minister of Health) (SCC Docket: 37593)

Drug: Apo-Trazodone

Nature of case: Application for leave to appeal related to action for damages in tort and breach of contract

Appellant: Apotex Inc.

Respondent: Her Majesty the Queen

Date of decision: December 14, 2017

Federal Court of Appeal decision

As we reported, the Federal Court of Appeal (FCA) allowed Apotex’s appeal, in part, from the Federal Court decision that found Apotex was entitled to damages for misfeasance of public office based on Health Canada’s review of Apotex’s drug submission for Apo-Trazodone.

The FCA, however, dismissed Apotex’s claim that the Federal Court erred in failing to conduct an analysis of negligence outside of Health Canada’s liability arising from the settlement agreement between the parties. The FCA found that Health Canada does not owe a prima facie duty of care to Apotex, or any other drug manufacturer, since this duty would conflict with the intent of the Food and Drugs Act and Regulations, which is directed to public health and safety through regulation of drug manufacturers.

Links:

CETA tracker: First CETA PM(NOC) action has been commenced in Federal Court

The first court action under the newly amended Patented Medicines (Notice of Compliance) Regulations (PM(NOC) Regulations) was commenced on December 11, 2017.  Genentech, Inc. and Hoffmann-La Roche Limited v Amgen Canada Inc. (T-1921-17) addresses allegations of infringement with respect to Canadian Patent Nos. 2,376,596; 2,596,133; 2,407,556 and 2,540,547 and a biosimilar new drug submission for trastuzumab.  Trastuzumab is marketed by Hoffmann-La Roche Limited under the brand name PrHERCEPTIN®.

Norton Rose Fulbright Canada LLP is representing the innovator plaintiffs.

Background

As we reported, the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act (CETA Act) and accompanying regulations came into force on September 21, 2017.  The CETA amendments provide key reforms to the Patent Act affecting the pharmaceutical industry, including a new pharmaceutical patent litigation regime under the PM(NOC) Regulations.  Proceedings previously conducted as summary applications will now proceed as actions while the confines of the 24-month statutory stay remain unchanged.

The new PM(NOC) Regulations apply to matters where a notice of allegation is served on or after September 21, 2017.

Link:

Are you CETA ready? Contact Norton Rose Fulbright with all your CETA questions

Ontario legislation requiring disclosure of payments to physicians receives Royal Assent

On December 12, 2017, Bill 160 passed third reading and received Royal Assent.  Included in Bill 160 is the Health Sector Payment Transparency Act (the “Act”). This Act will come into force at a later date to be determined by the government.

The stated purpose of the Act is to require the reporting of information about financial relationships in the Ontario healthcare system.  It enables the collection, analysis and publication of that information in order to increase transparency, provide patients with information that may assist in making healthcare decisions, and provide information for research, evaluation, planning and policy analysis.  The Act provides for broad reporting obligations, and many details (discussed further below) are left to be prescribed by regulation, copies of which are not yet available.

As we reported, Bill 160 was introduced on September 27, 2017.  As we also reported, it was referred to committee where consultation occurred.  The only change made to the Act since it was introduced is a change to the definition of “personal information” which now excludes personal health information.  The Act provides that the Minister may collect personal information, which now excludes personal health information as defined in the Personal Health Information Protection Act.

Summary of the Act

The Act provides for the reporting of transfers of value.

What must be reported? 

Any transfer of value provided directly or indirectly by a “payor” to a “recipient” must be reported to the Minister unless the transfer is exempt by regulations, due to a low dollar value or otherwise.  If required by the Minister, intermediaries or affiliates involved in the transaction may also be required to report transfers.

Who is a Payor?

Payor is defined as any person who provides a transfer of value to a recipient and is:

  • a manufacturer selling a medical product (drug, device, or any other prescribed product) whether under its own name or a name or mark that is owned or controlled by it;
  • a person who fabricates, produces, processes, assembles, packages, or labels a medical product on behalf of a manufacturer;
  • a wholesaler, distributor, importer, or broker of a medical product;
  • a marketing firm or person who markets or promotes a medical product;
  • a person who organizes continuing education on behalf of a manufacturer; or
  • a person otherwise prescribed in regulation.

Who is a Recipient?

A recipient is a person, prescribed by regulation, who receives a transfer of value.  As we noted above, regulations are not yet available and the types of persons who will be considered recipients remains unknown.

What information must be reported?

The following information must be reported:

  • the name and address of each party to the transaction (party includes the payor, the recipient, and any intermediary);
  • the source of the transfer if it is reported by an intermediary or affiliate;
  • the date of the transfer;
  • the dollar value or, in the case of non-monetary transfers, the approximate dollar value;
  • a description of the transfer including the reason for it; and
  • any other prescribed information.

The payor is responsible for collecting any necessary information from the recipient in order to report to the Minister.

How must transfers of value be reported?

This has yet to be announced.  The frequency and method of reporting are to be prescribed by regulation, and records must be kept for a length of time to be prescribed by regulation.

What will the Government do with the Information? 

The Act provides that the Minister shall disclose the information (including personal information) on a website, analyse the information and, if appropriate, publish the result of any analysis.

How will it be Enforced?

The Act provides for enforcement and offences including considerable inspection powers that would allow inspectors to enter premises without a warrant at any reasonable time should they believe that a record relating to a transaction may be located there in order to determine compliance.

If the Minister or an inspector has grounds to believe that a person has failed to comply with the Act or regulations, they may serve a compliance order requiring the person to take actions in order to comply with the legislation.  A person served with a compliance order has 14 days to make submissions, otherwise they must comply with the order.  If no submissions are made within 14 days or the Minister confirms the order following review of submissions, the name of the person and a description of non-compliance will be published on a website.

What else does the Act cover?

The Act also provides details as to the ability to correct information and notice requirements pursuant to the Freedom of Information and Protection of Privacy Act.

Link:

Bill 160

PMPRB responds to proposed amendments to the Patented Medicines Regulations with Guidelines Scoping Paper

On Monday, December 11, 2017, the Patented Medicine Prices Review Board (PMPRB) released a scoping paper providing a high-level overview of how a new, risk-based approach to its mandate could function under revised Guidelines following forthcoming amendments to the Patented Medicines Regulations. This previews an official consultation on a revised set of proposed Guidelines that the PMPRB intends to hold in the spring of 2018.

Background

As we reported, the government pre-published amendments to the Patented Medicines Regulations on December 2, 2017. The proposed amendments aim to empower the PMPRB to:

(i) consider new pharmacoeconomic information as part of determining excessive pricing;

(ii) require broader disclosure of price adjustments, such as third-party rebates under formulary listing agreements with the provinces;

(iii) provide reduced reporting obligations for patented medicines perceived to be at low risk of excessive pricing; and

(iv) address a new and expanded schedule of international comparator countries (the PMPRB12) that, notably, excludes the United States and Switzerland.

Highlights

The scoping document describes a five-part proposal for revisions to the price review process.

  • Part I: Interim international price reference test. The list price of all new drugs in Canada would be compared to the list price in the PMPRB12 countries. The Canadian list price would be considered potentially excessive if it exceeds the median of the PMPRB12 list prices.
  • Part II: Screening. A variety of factors would be used to classify new drugs as either “high” or “low” priority based on their impact on Canadian consumers (patients and payers). In general, high priority drugs would include breakthrough drugs, high-cost drugs, and drugs addressing large patient populations or unmet needs. High-priority drugs would be subject to automatic investigation and a comprehensive review.
  • Part III: High-priority drugs. The price of high-priority drugs would then be subjected to a two-part test:

First, the incremental cost per quality-adjusted life year (QALY) of the drug would be assessed, as determined by CADTH, against an explicit cost-effectiveness threshold.

Second, for drugs that meet the cost-effectiveness threshold, the potential for a further price adjustment would be assessed based on expected impact on payers within the first three to five years of launch.

If the price fails this two-part test, the patentee would be given an opportunity to explain why the price is not excessive, including using confidential commercial information (costs of making and marketing, “true” PMPRB12 prices, proposed rebates and discounts). If the price is found to be potentially excessive, the public ceiling price would continue to be set by international price referencing but the ceiling price resulting from application of the two-part test would remain confidential.

  • Part IV: Medium and low-priority drugs.
    • Medium-priority drugs (those with a minimum number of therapeutic alternatives and little-or-no therapeutic improvement over standard of care) would be subject to the same initial price test as high-priority drugs, and might also be required to meet a revised therapeutic class comparison test that requires each successive entrant to reduce its price relative to the price of the drug that preceded it.
    • Low-priority drugs (those with a significant number of therapeutic alternatives and/or generic competition) would not be subject to an introductory or ongoing section 85 analysis, and would be investigated on a complaints basis only.
  • Part V: Re-benching. The re-benching process, which is not described in detail, would ensure that previous determinations of potential excessive pricing and/or price ceilings remain relevant in light of a variety of factors (new indications, changes in market conditions), and might result in increases or decreases in ceiling price.

Next steps

The PMPRB is not currently seeking feedback on the scoping document, but encourages stakeholders to reflect upon it in the lead-up to an expected first draft of the new Guidelines in the spring of 2018. The PMPRB expects to consult on the draft with a view to having new Guidelines in place by early 2019.

Links

  • The PMPRB’s Guidelines Scoping Paper can be found here.
  • An HTML version of the proposed amendments to the Patented Medicines Regulations and associated RIAS can be found here.
  • An official copy of the Canada Gazette, Part I, Vol. 151, No. 48, setting out the proposed amendments to the Patented Medicines Regulations and associated RIAS can be found here.
  • Health Canada’s portal for consultation on the proposed amendments to the Patented Medicines Regulations can be found here.
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