On October 30, the Supreme Court of Canada granted leave to appeal from the Federal Court of Appeal (FCA) decision in Apotex Inc. v. Sanofi-Aventis, et al, 2014 FCA 68.
Sanofi owned a series of patents for the drug Ramipril, the last of which were set to expire in 2005. In anticipation of the expiry, Apotex had received certain regulatory approvals from Health Canada in 2004; however, it did not receive its Notice of Compliance (NOC) until December 12, 2006. This was due to the fact that Sanofi exercised its rights under the PM (NOC) Regulations for a statutory stay of the issuance, which was later found unsustainable. Sanofi acknowledged that Apotex was entitled to damages for the delay but at issue were the relevant dates for computing the loss and the various assumptions and projections built into the assessment of damages.
In order to determine damages, the Trial Judge applied the test from Apotex Inc. v. Merck & Co. , 2011 FCA 329 that requires the Judge to consider the hypothetical question: What would have happened if Sanofi had not brought an application for prohibition? The parties disagreed on the outcome of eight factors that would determine the scope of Apotex's losses.
In regards to the relevant date for computing the loss suffered by Apotex, the Court looked at all of the Prohibition Orders obtained by Sanofi. Apotex had originally served a notice of allegation in August, 2003, alleging non-infringement of Sanofi's patent. Sanofi then attempted to obtain a Prohibition Order and was successful, effectively blocking the Minister from issuing a NOC. In November of 2003, Apotex filed a second notice of allegation, this time alleging invalidity of the patent. Once again, Sanofi attempted to obtain a Prohibition Order, however this time they were refused by the Court and Sanofi launched an appeal. Before the appeal could be heard, the patent expired and the appeal was dismissed for mootness. The Federal Court found that the second allegation effectively "unlocked" the door for Apotex to receive a NOC and therefore relevant date for assessing damages was the date that the Minister would have issued a NOC, April 26, 2004.
In assessing the relevant end date for assessing damages, Apotex argued that the correct date was May 2, 2008; the dismissal date of the last Prohibition proceeding. However, the Prothonotary dismissed the Prohibition application as moot, as the NOC had already been issued on December 12, 2006. Sanofi argued that the correct end date was June 27, 2006, the date Apotex ceased to be a "second person" for the purposes of the NOC Regulations. The Court rejected this argument as well, stating that the purpose of S. 8 of the NOC Regulations was to compensate "a second person for the loss occasioned by the operation of the statutory stay." When Apotex received its NOC on December 12, 2006, they could no longer claim to be at a loss and so the Court decided that December 12, 2006 was the relevant end date for assessing damages. The FCA agreed with the Federal Court on both the start and end dates for assessing the liability period.
The Trial Judge then turned to an assessment of Apotex's lost profits based on what their share of the market would have looked like in a "but, for" world. The Court considered the testimony from experts on both sides and determined what the market for generic Ramipril would have been during the liability period. The Court then turned its attention to assessing what share of the generic market Apotex would have received during the liability period. In considering this, one of the most contentious factors was at what theoretical point other generic manufacturers would have entered the market. Teva had made plans to enter the generic market but was prepared to wait until the expiration of the '457 Patent in December of 2005. Considering the regulatory impediments it would have then encountered, the Trial Judge decided that their date of market entry would have been August 1, 2006. Riva had also made plans to enter the generic market but due to the fact it had cross-referenced its own application to that of Pharmascience and the resulting regulatory hurdles, Riva could not have entered the market until June 21, 2007, after the liability period had expired. Lastly, the trial judge also considered whether an "authorized generic", meaning a drug manufactured by an innovative drug company but sold by a generic company under a generic's name, would have also entered the generic market. The Trial Judge found that it was more likely than not that it would have entered the market, however Apotex's launch would have surprised the innovator and therefore, it would take three months for an authorized generic to enter the market. The Trial Judge selected July 26, 2004 as the likely entry period for the authorized generic. The FCA found that the Trial Judge erred in finding that Teva would have entered the generic market during the liability period, as they found that they would have acted the same in the hypothetical world as they did in the real world. Since they actually did not receive summary dismissal from their Prohibition Applications until December 16, 2006, the FCA found that this is the date they would have entered the generic market, outside the liability period. Therefore, the only competing generic on the market at the time would have been the authorized generic.
The Trial Judge then took the hypothetical entry dates and determined what Apotex's share of the market would have been during the liability period based on who else was in the market. The original Apotex decision had been handed down at the same time as an identical case dealing with what liability Sanofi owed Teva. The Trial Judge divided the generic market based on the hypothetical dates of entry. In the immediate period after Teva entered the generic market, Apotex was to be granted damages representing 70 percent of the market, Teva was to receive 30 percent of the market and the authorized generic would receive 33 percent of the market. Though the Trial Judge accepted that the arithmetic exceeded the total revenue for the market, she rejected Sanofi's argument that there should be only a "single hypothetical market" for the generic product since the "assessment of damages can and should be made on the facts of each case" and that the evidence provided in separate trials led to different conclusions. The majority in the FCA decision agreed and pointed to the fact that the Regulations only expressed that they should be disregarded in constructing one element of the hypothetical generic market. Since it was stated for only one purpose, to read in another would amount to judicially amending S. 8 of the Regulations.
This methodology was rejected by the minority in the FCA who found that the evidence in both cases was largely the same. The minority found that the proper approach is to construct a hypothetical market that most resembles a real market. In constructing a "real market" the minority found that once a Prohibition Order is refused, the innovating drug company cannot litigate the same issues repeatedly with other generic drug manufacturers. Therefore, it will only be minor regulatory restraints that prevent all the generics from entering the hypothetical real market. This approach creates a "hypothetical market reflecting a level regulatory playing field" and the minority would have sent the matter back to the Federal Court to be re-assessed using these guidelines.
Also at issue between the parties was whether the "ramp-up" period should be counted twice. A ramp-up period is the time it takes a drug manufacturer to penetrate the market to its full potential. Apotex argued that it already experienced a ramp-up period after they received their NOC, so including a ramp-up period in the damages calculations essentially imposes the penalty twice. The Trial Judge rejected the ramp-up claim because the loss occurred outside of the S. 8 liability period, namely the period of time they were prevented from entering the market. The majority agreed, however the minority would have reversed the Trial Judge's decision to include the second ramp-up period and found that in these cases it is appropriate to exercise discretion and consider the actual ramp-up period as a relevant factor.
The last issue decided by the Trial Judge and heard on appeal dealt with the so-called HOPE Patents and whether Apotex's compensation could extend to sales of its generic drug for unapproved indications. The drug Ramipril had originally been approved for hypertension; however, further testing revealed it was also beneficial for heart-related health issues and Sanofi had filed two further patents for Ramipril, known as the HOPE Patents, for further uses. The Trial Judge found that some sales of the generic product would have related to the HOPE indications since (a) generic products are not promoted for specific uses, (b) off-label subscribing and substitution commonly take place, (c) Sanofi had not opposed the generic version as being fully interchangeable, and (d) Sanofi could begin an action for patent infringement if they thought it was reasonable to do so. The FCA agreed with the Trial judge and Sanofi's arguments were rejected.
It is unclear whether the decision on start and end dates will once again be brought before the Supreme Court, however it is clear that the Supreme Court will have to decide the proper way for deciding which generics will enter the market and when they would have done so in a hypothetical world. It will also hopefully clarify what a Court is expected to do when facing more than one trial on for the same patent; create one hypothetical world combining the evidence from both or treat each separately and confine the hypothetical world to the one before the Court.
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