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.


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.


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.


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.


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.


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.


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.”


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

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.


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.


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.


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.


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.


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.


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