Apotex Inc v Sanofi-Aventis, 2014 FCA 68
Innovator pharmaceutical companies should be cautious and think twice about how aggressively they defend their patents as they could potentially face paying more than 100% of actual damages as an award under section 8 of the Patented Medicines (Notice of Compliance) Regulations (“PM(NOC) Regulations”). This can occur when multiple plaintiffs successfully sue a company and the calculation of each plaintiff’s market share is not coordinated to appropriately allocate 100% of the market share in a hypothetical world.
Courts must create a “hypothetical world” to attempt to assess what would have occurred if a generic company, who was successful in a Notice of Compliance (“NOC”) proceeding, entered the market at an earlier time. Such awards can provide generic companies with a windfall when damages are calculated in the face of multiple section 8 damage claims against an innovator pharmaceutical company. Such was the situation in this case where Sanofi-Aventis (“Sanofi”) was also facing a claim by another generic drugmaker, Teva.
Background: Two Generics Delayed Market Entry under PM(NOC) Regulations
Sanofi held the rights to a series of Canadian patents, including Canadian Patent No. 1,246,457 (the “’457 Patent”) for the brand name version of the drug ramipril used in the treatment of hypertension. [2] Apotex manufactured a generic version of ramipril, Apo-ramipril, and in April 2014, Apotex applied for an NOC to market it in Canada. Sanofi successfully applied for an order of prohibition with respect to its ‘457 Patent. As a result, a 24-month statutory stay was triggered that prevented Apotex from receiving an NOC until December 12, 2006. However, Apotex was subsequently successful alleging the invalidity of the ‘457 Patent. [78] Apotex then brought an action for damages under section 8 of the PM(NOC) Regulations for lost profits in respect of Apo-ramipril for delayed entry into the market.
In regard to Apotex’s market share during the relevant period, the Trial Judge awarded Apotex 100% of the generic market from April 26, 2004 to July 26, 2004 (when Apotex was determined to be alone in the market), 70% from July 26, 2004 to August 1, 2006 (when Apotex and the authorized generic were determined to be the only participants in the market), and 50% from August 1, 2006 to December 12, 2006 (when Apotex, Teva and the authorized generic were determined to be sharing the market). [61]
Both parties appealed. The principal issues on appeal were whether the Trial Judge erred in determining (1) the liability period, (2) the attributes of the hypothetical market during that period, (3) how “double ramp-up” should be treated and (4) whether sales for unapproved indications should be included.
1. Section 8 Liability Period Upheld
The FCA held that the Trial Judge made no error in concluding that the section 8 liability period ran from April 26, 2004 to December 12, 2006.
2. Attributes of the Hypothetical Market During the Section 8 Liability Period
The FCA agreed with the Trial Judge’s reasons rejecting the “open season” methodology for determining the hypothetical market wherein each competitor is assumed to enter the market free of the constraints of the PM(NOC) Regulations. [159] FC held that steps taken in the real world should be assumed to be taken in the hypothetical world, unless there is evidence to reasonably conclude that different steps would have been taken. [157]
The Trial Judge held that in the hypothetical market, Sanofi’s authorized generic drug manufacturer, Ratiopharm Inc., could have launched a competing generic product on July 24, 2004. The FCA held that the trial judge’s conclusion was reasonable. [173] The FCA also found to be reasonable the Trial Judge’s conclusion that Riva, another competitor generic ramipril producer, would not have entered the hypothetical market until after the end of the section 8 liability period. [175]
However, in regard to Teva, yet another competitor generic ramipril producer, the FCA held that the Trial Judge erred in principle in concluding that Teva would have entered the hypothetical market on August 1, 2006. The FCA held that based on the record, Teva would not have entered the hypothetical market during the section 8 liability period. [188] The FCA thus allowed Apotex’s appeal in this respect and ordered the redetermination of the quantum of damages.
3. Double Ramp-Up: Adjustment Rejected as Outside Liability Period
At trial, no adjustment was made for a double ramp-up. Ramp-up refers to the period of time that it takes a drug manufacturer after initial approval of its drug to reach its final level of sales. Apotex sought compensation in respect of its double ramp-up after it was issued its NOC in December. The Court of Appeal held that the trial judge did not err in rejecting the double ramp-up adjustment, as the ramp-up period was outside of the section 8 liability period to which section 8 damages are limited. [191]
4. Sale for Unapproved Indications: Adjustment not Precluded
At trial, no adjustment was made for sales made in respect of an unapproved indication. Ramipril was originally approved for hypertension, but further testing of ramipril revealed additional benefits for heart-related health issues, which were referred to as HOPE indications. As a result, Sanofi filed two further patents for Ramipril related to the HOPE indications. Sanofi argued that Apotex’s compensation under section 8 could not extend to sales of Apo-ramipril for unapproved indications, namely HOPE indications. The FCA found no error with the Trial Judge’s findings and conclusions in not precluding Apotex from recovering losses associated with the HOPE indications.
Commentary
Sanofi’s appeal to the Supreme Court of Canada was dismissed with costs for substantially the same reasons of the majority of the Court of Appeal (Sanofi-Aventis v Apotex Inc, 2015 SCC 20).