First Mover Exclusivity for First Generic to Serve an NOA Not Relevant to Procedure under PM(NOC) Regulations

Bayer Inc v Teva Canada Limited 2019 FC 1039 Pentney J
            2,547,113 / 2,624,310 / 2,823,159 / rivaroxaban

This motion to add defendants in a trial of common issues under the PM(NOC) Regulations raises the issue of whether the first generic to serve an NOA can get a practical head start in the market over later generics. Under the US Hatch-Waxman patent linkage system, the first applicant to challenge a drug patent is entitled to 180 days of exclusivity against subsequent generic applicants: 21 U.S.C. § 355(j)(5). The theory is that initiating and defending an action will be expensive for the first generic, but all subsequent generics will benefit at no cost or risk to themselves if the patent at issue is declared invalid with in rem effect. The 180 day exclusivity is intended to provide an incentive for the first generic to bear the cost of litigation. There is no equivalent statutory exclusivity period in the NOC Regulations, but the first generic to get its NOC will nonetheless get a practical head start. This means that whether a generic gets any period of exclusivity turns on the procedural details under the Regulations.

The background to this motion is that Teva and Apotex served NOAs on Bayer arising from their applications for an NOC for a generic version of rivaroxaban. These NOAs were served within a month of each other, and Bayer responded by launching actions against Teva and Apotex, again within one month of each other [4]. The claims relate to the same drug, the same patents, and same issues of invalidity [1] and in Bayer v Apotex 2019 FC 191 Tabib J ordered a common hearing of the common issues [2]. A few months later, Taro and then Sandoz also served NOAs on Bayer relating to the same drug, and Bayer commenced actions against them as well [4]. The claims in all four actions are “virtually identical” [34].

In this motion, Bayer, Taro and Sandoz sought to have Taro and Sandoz added as defendants in the trial of common issues already set for Teva and Apotex [1]. Teva and Apotex objected, on the basis, inter alia, that Taro and Sandoz were late in serving their NOAs, and Teva and Apotex should not be required to cede the potential commercial advantage they might gain by having their action decided first. “Adding Taro and Sandoz now as defendants to the common hearing would allow them, in effect, to ‘leapfrog’ the expected sequence of events within the 24-month timeline fixed by the Regulations, and thereby re-gain the commercial advantage they have lost” [7].

Pentney J rejected this argument, agreeing with Tabib J’s remarks at [7] in Bayer v Apotex [13]. Tabib J made two main points. First, the Regulations themselves do not provide any exclusivity period for the first generic to serve an NOA. The US model, including its 180-exclusivity period, must have been considered when the new Regulations were drafted, and as Taro argued, “the Court should not create such a guarantee by its procedural rulings” [15]. Further, as a practical matter, refusing to order a common hearing would not guarantee that the first generic to serve would be the first to come to market.

These are both compelling points. The question remains whether the Canadian system provides an adequate incentive to challenge a patent by serving an NOA. The answer to this question is not clear. While the theory behind the US approach is logical, I’m not sure exactly how different the systems are in practice. I understand that a full 180 day exclusivity can be quite elusive in the US, with the exclusivity often shared among multiple generics; and conversely, in this case Taro and Sandoz are not simply free-riding off the efforts of Teva and Apotex, but will have to bear some of the litigation costs as well. No doubt the US 180 day exclusivity does create some real practical differences, but there is no simple theoretical answer to which system is better.

With this argument rejected, Pentney J decided the matter by reference to the usual considerations of balancing judicial economy against potential prejudice to the parties, and he concluded by adding Taro and Sandoz as defendants in the hearing of common issues.