Teva Canada Ltd v Sanofi-Aventis Canada Inc [Teva s 8 Liability Appeal] 2014 FCA 67 Sharlow JA, Dawson JA concurring, Mainville JA dissenting, var’g 2012 FC 552 Snider J (blog blog)
ramipril / ALTACE
My two previous posts on these companion cases have dealt with the construction of the hypothetical world, and the start and end dates for the liability period. This post deals with some remaining miscellaneous issues, which are important as a practical matter, but which can be dealt with more briefly. Unless otherwise indicated, paragraph references will be to the Teva decision.
Double ramp-up
When a generic enters a new market, it takes some time to “ramp up” from zero to its full volume. At trial, the expert reports accepted by Snider J took account of this ramp-up period in constructing the hypothetical world, thus resulting in lower hypothetical sales volume, and lower hypothetical to the generic [250fcT]. The generics argued that this resulted in under-compensation because when they finally did launch in the real world, they experienced an actual ramp-up period of lower sales, which they would not have experienced at that time had they not been prevented from entering earlier by the statutory stay. In effect, the generics were subject to “double ramp-up” – once in the hypothetical world, and once in the real world. The generics argued that in order to avoid under-compensation due to double ramp-up, in the hypothetical world they should be assumed to have been able to enter immediately, without ramp-up. Snider J rejected this argument on the basis that it would amount to compensation for losses suffered after the end of the s 8 period, and this was prohibited by the FCA Alendronate 2009 FCA 187 decision, in which the FCA held, as Mainville J described it, “that section 8 of the NOC Regulations does not include compensation for losses suffered outside the section 8 liability period” [131].
It is not disputed that the generic’s argument is logically correct, and that a ramp-up period in the hypothetical world does result in under-compensation to the generics. The difficulty is that that the Alendronate decision, which refused to allow springboard losses to the generic (losses for reduced market share after the end of the s 8 liability period, resulting from late entry), clearly results in under-compensation. The FCA in Alendronate justified its conclusion on the text of the Regulations, and not on any point of principle. Consequently, the only question regarding double ramp-up is whether it is covered by Alendronate. Snider J held it was [253fcT], and the majority of the FCA agreed [189A]- [193A], even though Sharlow J expressly acknowledged “that not recognizing the double ramp-up represents a windfall for Sanofi. Indeed, it may well represent a windfall for other innovator drug companies in future cases. However, in my view that is the inevitable consequence of the decision of the Governor-in-Council to limit section 8 damages to losses incurred within the section 8 liability period” [192A]. Mainville J would have distinguished Alendronate, essentially on its facts [134]. I am sympathetic to Mainville J’s position, as I am inclined to think that Alendronate was wrongly decided, but given that it is established law, which even Mainville J did not seek to overrule, I have to agree with the majority that double ramp-up is covered by the Alendronate principle.
As Mainville J noted, there has been some controversy over double ramp-up in FC decisions by Phelan J and Hughes J. Mainville J agreed with Phelan J’s analysis [135].
Authorized generic [100T]
The FCA held that entry by an authorized generic could be considered as part of the hypothetical world, for the reasons given by Snider J in coming to the same conclusion (blogged here) [100]-[103].
Off-label indications
The FCA held that the generics were entitled to compensation for lost sales attributable to off-label indications, in this case the so-called HOPE indications, which were developed after the initial marketing authorization for ramipril for other indications.
Sanofi argued that sales attributable to the HOPE indications should not be compensable losses because they would have infringed Sanofi’s HOPE patents, which had not been challenged by Teva [311fcT]. Teva had also withdrawn the HOPE indications from its product monograph. Snider J rejected this argument for several reasons, summarized by Mainville J [67]:
(a) generic products are not promoted for specific uses, but rather sold as drug products;
(b) off-label prescribing and substitution commonly take place and there appears to be
nothing illegal about this practice; (c) Sanofi has not opposed in the real world the listing
of Teva’s generic version of ramipril as fully interchangeable with its own product
ALTACE; and (d) the availability to Sanofi of an action for patent infringement with
respect to the HOPE patents:
In affirming Snider J, the FCA relied primarily on point (c): “Sanofi has taken no measure to enforce its HOPE patents, and has not opposed the listing of generic versions of ramipril as substitutes to ALTACE for any indication. . . . If Sanofi is not enforcing its HOPE patents in the real market, and is allowing the sale of generic versions of ramipril for HOPE indications in the real market without any serious opposition, I fail to understand why the situation should be deemed different in the hypothetical market” [115]. This leaves open the possibility that notwithstanding Snider J’s other points, losses from off-label indications might not be recoverable if the patentee had been opposing them through an infringement action in the real world.
Miscellaneous
Teva also raised a number of specific challenges to Snider J’s assessment, which were all rejected on the facts: [119]-[129]. The are two points of some more general interest. One is that the FCA rejected Teva’s claim for lost business value, on the basis that it “is essentially a claim for lost future profits which is precluded by the decision of this Court in Alendronate” [119]. The other related to Teva’s claim for its lost opportunity to reinvest the profits it would have made during the liability period. Affirming Snider J, Mainville J rejected this, pointing out:
[123] Moreover, as a matter of law, to the extent that Teva has lost an opportunity to
invest the profits it would have made during the liability period, the Trial Judge was
correct in concluding that pre-judgment interest was the accepted method for
compensating this loss unless there is clear and non-speculative evidence of a lost
opportunity that would exceed the interest otherwise payable:
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