Ontario delays implementation of regulations under the Health Sector Payment Transparency Act

Although there has been no public announcement, we understand that the Ontario government has indicated it will not be proceeding with the final approval of regulations developed under the Health Sector Payment Transparency Act (“HSPTA”) before the upcoming election.  Rather, these regulations will be revisited in the fall of 2018.

As we reported, Ontario passed the HSPTA as part of Bill 160 in December 2017.  It will require reporting certain financial relationships in Ontario’s healthcare system to the government. As we also reported, draft regulations were published for consultation in February 2018.  The deadline for consultation was April 6, 2018, and this deadline has not been extended.

The draft regulations contained an implementation timeline that would require reporting of transactions that occurred in the 2019 calendar year.  It is expected that when the regulations are revisited this timeline will be delayed.

Change in utility law not a factor in s. 8 damages

The Federal Court of Appeal (FCA) has refused to apply the “special circumstances” exception to issue estoppel in view of a change in law arising from the rejection of the “promise doctrine” in AstraZeneca Canada Inc v Apotex Inc, 2017 SCC 36 (NEXIUM, reported here). Noting any injustice to Lilly is “entirely commercial in nature” as well as a concern of Teva being ‟twice vexed,” the court rejected Lilly’s argument that the NEXIUM decision should be considered as a factor in determining damages pursuant to section 8 of the Regulations.

Background

Teva sought damages from Eli Lilly Canada Inc. pursuant to section 8 of the Regulations, as compensation for having been prevented from coming to market in 2006-2007 with a generic version of ZYPREXA® (olanzapine). As we reported, the Federal Court considered the established parameters to calculate Teva’s damages for being delayed from entering the olanzapine market, clarified evidentiary issues on fact witnesses and hearsay, and rejected Teva’s argument that its damages should include a pipefill adjustment.

The FCA upheld the Federal Court on the evidentiary issues but overturned on the issues of pipefill.

Issue Estoppel

On appeal, Lilly argued the FCA ought to consider the Supreme Court’s decision in NEXIUM, which changed the state of the law for patent utility. Lilly argued the sole basis on which Teva succeeded in the prohibition proceedings that gave rise to section 8 liability was a finding of inutility, and in light of the subsequent NEXIUM decision the court should consider the change in law as a factor in assessing section 8 damages.

The FCA applied the doctrine of issue estoppel, finding it would not be appropriate to allow a collateral attack on the findings of invalidity of the patent given that the issue had already been decided. The court noted a change in the law did not trigger the “special circumstance” exception to issue estoppel, and found there was no basis to exercise its discretion to bar the application of issue estoppel in this case.  Given the real-world impact of “entirely commercial” high-stakes litigation, the special circumstance exception warrants further clarity from the courts.

The Court of Appeal refused to follow the Supreme Court of the United Kingdom’s reasoning in Virgin Atlantic Airways Limited v Zodiac Seats UK Limited, [2013] UKSC 46, [2014] 1 A.C. 160, which did consider a change in law in its assessment of damages, and noted its reasoning is consistent with a recent Ontario Superior Court  decision in litigation relating to ramipril, reported here.

Fact Witnesses Speaking to the Construction of the But-For World

In the underlying decision, the Federal Court addressed the admissibility of evidence on actions fact witnesses would have taken in the but-for world. It held that fact witnesses could be asked about what they did in the real world, and whether they knew of any reason why they would have acted differently in the but-for world. However, opinion evidence from a fact witness about what it would have done in the hypothetical but-for world was inadmissible.

The FCA found it was an error for the Federal Court not to consider factual testimony about what would have happened in the but-for world. It clarified that appropriately positioned fact witnesses can testify not only about their conduct in the real world, but about their own conduct and that of their businesses in the but-for world.

Pipefill Sales Recoverable

In quantifying Teva’s damages, the Federal Court found that pipefill sales do not represent lost sales incurred during the liability period because those units would not be sold to end consumers until after the end of the liability period.

The Court of Appeal found this to be an error, noting section 8 damages are intended  to compensate the generic manufacturer for sales it actually would have made during the period. Since the manufacturer would have made sales into its distribution pipeline during the relevant period, it is immaterial that the units might not be sold to end-users until after the end of the liability period.

Link:

Eli Lilly Canada Inc v Teva Canada Limited, 2018 FCA 53

 

CETA Tracker: Update on CSPs

As we reported, on September 21, 2017 the Canada–European Union Comprehensive Economic and Trade Agreement Implementation Act and accompanying regulations came into force. The legislation provided key reforms to the Patent Act affecting the pharmaceutical industry, including up to two years of patent term restoration for patented pharmaceuticals under the Certificate of Supplementary Protection Regulations (CSP).

The protection given under a CSP is intended to “partly compensate for time spent in research and obtaining marketing authorization.” A CSP provides “patent-like rights” that take effect after patent expiry, and is subject to the “same limitations and exceptions” as the patent. Like a patent, a CSP is subject to the jurisdiction of the Patented Medicine Prices Review Board and can be listed on the Patent Register, as well as on the CSP Register.

CSPs are now available for patents relating to drugs with a notice of compliance issued on or after September 21, 2017, provided all other eligibility requirements are met.

The fee for filing a CSP application has increased to $9192 on April 1, 2018.

Health Canada’s online Register of Certificates of Supplementary Protection and Applications indicates that the first CSP has issued in relation to TrumenbaTM, a meningococcal group B vaccine. The CSP is also now listed on the Patent Register.

Health Canada releases a cost-benefit analysis survey for labelling changes of natural health products as part of the self-care product framework

Health Canada is conducting a cost-benefit analysis survey to gather information about the impact of its  proposed changes to the labels of Natural Health Products (NHPs). Interested stakeholders have until May 30, 2018, to complete the survey and provide any other comments.

As we reported,  Health Canada is changing the way it regulates non-prescription drugs, natural health products and cosmetics, referred to as “self-care products.” As part of this process, Health Canada has proposed to change the labelling requirements for NHPs. These changes, which will be made by way of amendments to the Natural Health Products Regulations, include:

  • a facts table to standardize the format for certain information (Product Facts Table);
  • modernized contact information for problem reporting and asking questions; and
  • the use of comprehensible and readable language (including use of plain language attributes such as simple sentences, information presented in simple bullets, short lists, contrast, font style and size) on all NHP labels.

These new requirements would be in addition to the information already required to be on the product, which are set out in Part 5 of the Natural Health Products Regulations.

Health Canada is proposing a coming-into-force period of one year for new licencees. NHPs that are marketed  prior to the coming into force could continue to be sold without meeting the new requirements for an additional four years following the coming into force.

The cost-benefit analysis survey can be submitted to Health Canada by mail or e-mail to the addresses included in the survey.

Health Canada will be responding to questions on the survey from 1:30 p.m. to 3 p.m. (EST) on April 4, 2018, and 10:30 a.m. to 12 p.m. (EST) on April 6, 2018, either via teleconference or webinar. If you are interested, please e-mail selfcareproducts-produitsautosoins@hc-sc.gc.ca and indicate your preferred date.

Link:

Cost-Benefit Analysis Survey for Improved Labelling for Natural Health Products in English and French

 

Section 8 liability offset by patent infringement in esomeprazole case

The Federal Court denied Apotex’s section 8 claim relating to esomeprazole on the basis that its product would have infringed a valid AstraZeneca patent. This aligns with a previous decision of the court that placed significant weight on patent infringement in the context of section 8 damages (reported here). There was no dispute that Apotex’s Apo-esomeprazole product infringed, and the court’s interpretation of the Supreme Court of Canada’s (SCC) decision in AstraZeneca Canada Inc v Apotex Inc, 2017 SCC 36 that the same patent was valid was central to the decision.

Background

As we reported, in 2010 Apotex successfully defended a prohibition application relating to esomeprazole. After Apotex launched its Apo-esomeprazole product, AstraZeneca sued Apotex for patent infringement and Apotex sued AstraZeneca for section 8 damages.

In the infringement action, the Federal Court found that AstraZeneca’s patent was novel and not obvious, but lacked utility. The Federal Court of Appeal upheld the decision on utility, but the SCC reversed, holding that the patent was not invalid for lack of utility.

Considerations on Patent Infringement

In the section 8 action, AstraZeneca sought to rely on the SCC decision to disentitle Apotex to damages either because (i) no damage had arisen (a requirement of subsection 8(1) of the Regulations) or (ii) the court should exercise its discretion under subsection 8(5) to prevent recovery for sales that would necessarily infringe the patent.

The court concluded it was preferable to consider patent infringement in the but-for world under subsection 8(5) rather than subsection 8(1). However, the court did not preclude the possibility that patent infringement would be a consideration under subsection 8(1).

Disentitlement Pursuant to Subsection 8(5)

The court also concluded AstraZeneca’s section 8 liability was completely offset by Apotex’s infringement of the patent. It determined that the SCC decision effectively found the patent to be, and to always have been, valid. Accordingly, to allow Apotex to recover damages would be to provide compensation for profits that it never could have rightly made.

Apotex argued: (i) the change in the law brought about by the SCC decision was not foreseeable; (ii) AstraZeneca had started several prohibition applications, which were all discontinued or dismissed; and (iii) the regime imposed by the Regulations would be unbalanced if section 8 liability could be offset by a subsequent finding of infringement. Apotex noted a generic is not entitled to damages under section 8 if it loses prohibition proceedings but subsequently succeeds in an infringement action, since section 8 liability is tied to the prohibition proceedings. The court found that patent infringement outweighed all of these factors.

What Happens in the Real World Happens in the But-For World

Apotex also attempted to defend against AstraZeneca’s reliance on the SCC decision by alleging events in the but-for world would have unfolded differently than they did in the real world. Apotex asserted there was no evidence AstraZeneca would have sued Apotex for patent infringement; the parties would not have settled the matter before a trial; the SCC would have granted leave to appeal or the SCC would have decided such an appeal the same way.

AstraZeneca disputed the relevance of hypothetical infringement actions in the but-for world, and led no positive evidence on the issue.

The Federal Court held on the facts that what happened in the real world would have occurred in the but-for world, albeit six months earlier. Apotex would have been found to have infringed a valid patent in the but-for world. Notably, however, the court explained that its complete offset of section 8 liability under subsection 8(5) was independent of how the promise doctrine would have evolved in the but-for world.

Apotex has appealed the decision.

Link:

Apotex Inc v AstraZeneca Canada Inc, 2018 FC 181

CADTH releases updated guidelines for biosimilars

The CADTH Common Drug Review Procedure and Submission Guidelines for Biosimilars (Non-Cancer) and the CADTH pan-Canadian Oncology Drug Review Submission Guidelines for Biosimilars (Cancer) provide an overview of the Common Drug Review procedures and guidance to applicants for biosimilar submissions. The new guidelines are effective as of February 13, 2018.

CADTH reports the following key changes to reviews and resubmissions of biosimilars.

Shorter timeline. The timeline for review is reduced to three months from the current six months.

Fewer submission requirements. The previous biosimilar submission templates have been abbreviated to reduce submission requirements.

New fee structure. Biosimilar submissions are subject to the new Guidelines for Manufacturers on Application Fees for CADTH Pharmaceutical Reviews.

No reimbursement recommendations. CADTH will not issue reimbursement recommendations. CADTH reviewers will, however, review manufacturer-completed templates, provide a summary of stakeholder inputs and comment on the manufacturer’s cost-comparison table This information will be sent to the applicant, participating drug plans and will be available on the CADTH website.

According to CADTH, these changes are intended to reduce duplication, optimize resources, and ensure all participating jurisdictions benefit from a single approach to evidence review.

Links:

CADTH announcement.

CADTH Frequently Asked Questions: Submission Guidelines for Biosimilars

Federal Budget 2018 – the foundation for a national pharmacare program?

The Federal government tabled the 2018-2019 budget on February 27, 2018, which included an announcement of steps toward the creation of a national pharmacare program to cover the reimbursement of certain prescription medications.

The government will create an Advisory Council on the Implementation of National Pharmacare, with the goal of starting a national dialogue on pricing and reimbursement of prescription medications. The Advisory Council will undertake a social and economic assessment of domestic and international pricing and reimbursement models, and work with experts in the relevant fields and with national, provincial, territorial and Indigenous leaders to provide recommendations to the Federal government on how to move forward on this subject.

The Advisory Council – to be chaired by Dr. Eric Hoskins, who recently served as the Minister of Health for Ontario – is scheduled to provide a report in the spring of 2019. The government has indicated that this timing will allow national pharmacare to become a focus for the 2019 Federal election.

Links:

Government of Canada – 2018 Federal Budget – Advancement Initiatives

Health Canada to advance self-care products framework under existing regulations

As we reported, Health Canada is proposing to change the way it regulates non-prescription drugs, natural health products and cosmetics, which will now be referred to collectively as “self-care products.” Under the new proposed regime, a product will be regulated by Health Canada based on the risk posed to consumers. Products will be classified as lower risk, moderate risk and higher risk and a product’s classification will dictate: (a) the amount and type of information Health Canada will review, (b) the degree of scrutiny necessary before the product can be made available on the market, and (c) the level of monitoring required for safety and compliance once the product is in the marketplace.

Health Canada recently announced it intends to advance the self-care products framework under existing legislation, including the Natural Health Products Regulations and the Food and Drug Regulations. Updates to these regulations will occur in the following three phases:

Phase 1 (Fall 2018): Health Canada will introduce amendments for consultation to the Natural Health Products Regulations regarding labelling requirements for natural health products. Amendments will include requirements for a facts table (similar to the drug facts table for non-prescription drugs), and the inclusion of risk information clearly displayed in plain language on the label.

Phase 2 (Early 2019): Health Canada will introduce amendments for consultation to the Food and Drug Regulations to introduce a risk-based approach to regulatory oversight for non-prescription drugs. The amendments will include an expedited approval pathway for lower-risk products.

Phase 3 (2020): Health Canada will introduce amendments for consultation to address: (a) evidence standards for similar health claims, (b) the extension of risk-based regulatory oversight, and (c) additional powers for Health Canada in enforcement and compliance, such as the ability to require a recall or label change for all self-care products. This phase will likely require amendments to the Natural Health Products Regulations, the Food and Drug Regulations and potentially, the Cosmetic Regulations.

Interested stakeholders can expect the opportunity to provide comments on the proposed amendments as proposals are released by Health Canada.

Link:

Next steps on the self-care framework

Ontario Health Sector Payment Transparency Act, 2017 – Draft Regulation Published for Consultation

As we reported, Ontario passed the Health Sector Payment Transparency Act, 2017 (Bill 160) in December 2017, which will require those defined as “payors” – such as pharmaceutical and medical device manufacturers, wholesalers and distributors – to disclose financial relationships with healthcare professionals and organizations to the government.

On February 21, 2018, the Ontario Government published a draft regulation under the Health Sector Payment Transparency Act, 2017 (“Act”). Comments on the draft regulation are due April 6, 2018.

At a high level, the draft regulation provides additional detail on the following:

  • Who is a “recipient” under the Act. 31 categories of persons or entities will be considered a “recipient” of a transfer of value (“TOV”) and includes regulated healthcare professionals, hospitals, independent and community health facilities, patient and disease advocacy groups, charitable foundations, universities, various not-for-profit organizations, and individuals or immediate family members of certain designated “recipients”.
  • What constitutes a reportable “transfer of value” (“TOV”). The draft regulation sets out a list of 24 items that are considered reportable TOVs under the Act, such as cash or cash equivalents, compensation for services, consulting fees, membership fees, grants and donations, honoraria, event sponsorships, membership fees, renovations, entertaining and sporting events, food, travel and accommodations, rebates and discounts, licenses and copyright fees, and personal gifts.
  • The Threshold for reporting a TOV. Any TOV of $10 or more is  reportable under the Act.
  • Additional payors. Community pharmacies and laboratories are added to the list of payors under the Act.
  • Who is an “intermediary” for the purposes of the Act. A person or entity is an “intermediary” and deemed to be facilitating a TOV on behalf of a payor if the TOV originates from the payor, whether or not the payor directs how the TOV is used or is aware of the identities of the recipients. TOVs made through intermediaries are reportable under the Act.  A person or entity is not an intermediary if: (i) they are prescribed as a “recipient” under the Regulation, (ii) if the payor does not direct how the TOV will be used by that recipient and (iii) a published ethical guideline or code commonly accepted within the field would be breached if the identity of the recipient is disclosed to the payor.
  • Market research firm treated as a recipient. A market research firm is deemed to be a recipient (and not an intermediary) where: (i) a manufacturer gives a payment or other TOV to the market research firm; and (ii) the firm then uses the payment as an incentive to recipients to encourage their participation in a market research study. The manufacturer must not know the identity of the recipients, and knowing the identity must cause the manufacturer to be in breach of a published ethical code or guideline. In this case, the payor must disclose the amount paid to the market research firm that is used as an incentive.
  • Exceptions to the Reporting Requirement. A payor is not required to report: (i) transactions less than $10, (ii) salary and benefits provided to an employee of a payor, (iii) medical products provided to a recipient that are intended to be given to a patient free of charge (i.e., samples), (iv) educational materials intended to be used by the recipient in a clinical setting for the benefit of a patient, (v) compensation for expert witness services, and (vi) rebates provided in accordance with ordinary commercial terms and in compliance with subsection 1(11) of Ontario Regulation 201/96 made under the Ontario Drug Benefit Act.
  • Manner and frequency of reporting. Reporting shall occur annually, no later than June 30 in any year beginning after 2019 (i.e., initial reporting for all TOVs in the previous calendar year will begin on June 30, 2020). Reporting will be done through an electronic data collection platform maintained by the Minister.
  • Process for Disclosure and Correction of Information. The draft regulation outlines a process for disclosing and correcting information under the Payors will be required to notify each recipient no later than March 31 in any given year of the TOV they intend to disclose. The recipient must be given a minimum of 45 days to review the information. If the recipient disagrees with the TOV to be reported, they must advise the payor. The payor must then review the correction request made by the recipient and notify the recipient in writing of its decisions and reasons. If the decision is not resolved and reported to the Minister, the recipient can request that the Minister mark the information as disputed.

Link:

Draft regulation – Health Sector Payment Transparency Act, 2017

FCA affirms that infringer does not have the right to elect remedy for infringement in drospirenone case

Following the Federal Court’s decision that Bayer’s patent relating to YAZ and YASMIN (both containing drospirenone and ethinyl estradiol) was valid and infringed by Apotex and Cobalt, Apotex argued that it, rather than Bayer, should be entitled to elect between damages and an accounting of profits. As we reported, the court disagreed, and ordered that Bayer has the right to elect.

Apotex appealed and asked that the court choose an accounting of profits. The Federal Court of Appeal (FCA) dismissed Apotex’s appeal, finding that the Federal Court did not err in its interpretation of the Patent Act.

Only the patentee can elect an accounting of profits

Apotex argued the Patent Act allows both a plaintiff and a defendant to request that the court grant the remedy of accounting of profits, and that an infringer is not prevented from electing the way in which damages are calculated. Additionally, Apotex argued the trial judge failed to consider and address circumstances that would have led to the exercise of discretion to award an accounting of profits.

The FCA rejected Apotex’s assertion as an “astounding proposition.” In reviewing the case law and legislative history, the FCA held that the election of an accounting of profits belongs to the patentee only, subject to the court’s discretion. The FCA also held that the patentee always has a right to damages under the Patent Act, and the court cannot force a patentee to choose an accounting of profits over its damages, unless it is willing to seek such a remedy. Justice Nadon noted Apotex was unable to point to a single case where the infringer was able to select the remedy and he agreed with the trial judge that allowing Apotex to elect an accounting of profits “would turn the doctrines of equity and parliamentary sovereignty on their heads.”

Links:

Apotex Inc. v Bayer Inc., 2018 FCA 32

Liability decision: Bayer Inc v Apotex Inc, 2016 FC 1013

Order allowing the election between damages and an accounting of profits: Bayer Inc v Cobalt Pharmaceuticals Company, 2016 FC 1192

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