NOC s 8 Regime is Still a Complete Code

Apotex Inc v Pfizer Ireland Pharmaceuticals 2021 ONSC 6345 Diamond J

            2,163,446 / sildenafil / VIAGRA

This decision is one more short chapter in the saga of Apotex’s attempts to avoid the limitation on recovery of damages under s 8 of the NOC regulations. Bigger news will be coming in the new year, with the appeal of Schabas J’s decision in Apotex v Eli Lilly 2021 ONSC 1588 (here) scheduled for February [22]. In the meantime, Diamond J’s decision in this motion for summary judgment followed Schabas J in dismissing Apotex’s claims, on the basis that the NOC regime provides a complete code governing recovery in respect of the statutory stay provisions of the NOC regime.

Under the patent linkage system established by the PM(NOC) Regulations, a patent that is ultimately held to be invalid can keep competitors off the market for two years by operation of the statutory stay pursuant to s 7(1)(d). If the generic prevails, s 8 provides a remedy in the form of damages for the losses suffered from having been kept off the market by the statutory stay. But if the generic is unsuccessful in the NOC proceeding, it cannot claim s 8 damages, even if the patent is subsequently held invalid in an infringement action: 2013 FCA 282 (here). In an attempt to get around this and other limitations on s 8 recovery, a number of actions have been brought in provincial superior courts (mostly by Apotex), pleading a variety of causes of action other than s 8. So far these attempts have been largely unsuccessful, with the courts generally expressing the view that s 8 provides a “complete code” in respect of recovery pursuant to the statutory stay: see Low v Pfizer 2015 BCCA 506 [46]–[72], and see here, here and here. The most recent decision is that of Schabas J in Apotex v Eli Lilly / Zyprexa 2021 ONSC 1588, relating to olanzapine / ZYPREXA (see here), with an appeal to the ONCA scheduled for February 2022 [22].

The principle that the legislature intended s 8 to be a complete code governing the relationship between generic and innovators implies that the generic cannot recover under any cause of action other than s 8, even if the generic otherwise had a good claim under the alternative cause of action. This is apparent both in Schabas J’s decision, in which he held that the claims were not tenable even before considering the specific causes of action [122], as well as in Low v Pfizer, in which the BCCA [67] addressed the specific causes of action in the alternative, assuming that s 8 was not a complete code. Thus, while some causes of action have survived a motion to strike, they are doomed to fail if the complete code argument is accepted by the ONCA.

In this decision Diamond J came to the same conclusion as Schabas J, in a case related to sildenafil / VIAGRA. (The scheduled trial had been adjourned in light of Schabas J’s decision to allow the matter to be decided by a motion for summary judgment: see 2021 ONSC 1860.)

Diamond J relied on principles of comity, which indicate he should follow the decision of Schabas J unless it was clearly wrong: [15]–[26]. But comity did not play a pivotal role: Diamond J concluded that Schabas J’s decision was not clearly wrong, and “on the contrary, I agree with it” [28]. While Diamond J agreed generally with Schabas J’s analysis, he seemed to place particular emphasis on the point that all of Pfizer’s acts were legally permissible pursuit of the interest under the Patent Act and related legislation: eg “It is the provisions of the Patent Regime itself that precluded Apotex from competing with Pfizer through the development and sale of generic drugs, and not by reason of any alleged wrongful act or omission on the part of Pfizer” [30], and “There is no evidence in the record before me that Pfizer took any steps other than employing the regular legal process set out in the Patent Regime to its conclusion” [36].

Diamond J expressly noted that his conclusion that the patent regime is a complete code was sufficient to dispose of the matter even without the need to consider the merits of the specific causes of action that had been pleaded by Apotex [41]. He nonetheless briefly addressed the two additional common law causes of action advanced by Apotex which had not been raised in Schabas J’s Zyprexa decision, namely unjust enrichment and nuisance.

With respect to unjust enrichment, Diamond J noted that “[t]here is no causal connection between Pfizer’s alleged enrichment and Apotex’s alleged deprivation, as there was no ‘transfer of wealth’ from Apotex to Pfizer,” and more importantly, the patent regime provides a juristic reason for the enrichment [43]. With respect to nuisance, Diamond J stated that “There is nothing alleged to have been done on the part of Pfizer that substantially interferes with Apotex’s use and enjoyment of its property. The right to manufacture generic drugs is not a land right” [45].

Interpretation of CSP Provisions Must Take Into Account Their Purpose

Merck Canada Inc v Canada (Health) 2021 FC 1015 McHaffie J

            2,670,892 / suvorexant / BELSOMRA

A Certificate of Supplementary Protection (CSP) grants patent-like rights which effectively extends the term of the patent as it relates to the medicinal ingredient covered by the patent. The CSP “is intended to partly compensate for time spent in research and obtaining marketing authorization”: CSP RIAS (Background); CSP RIAS pdf p3294; [11]; and see 2020 FCA 135 [4]. An application for a CSP is permitted only if, inter alia, two requirements are satisfied: the patent pertains to a drug “for which an [NOC] was issued” —the “authorization for sale requirement”—and, if marketing authorization was sought first in a foreign country, “the application for the [NOC] sale was filed [within 12 months of the foreign application]”—the “timely submission requirement”: s 106(1)(c),(f); CSP Regs s 4, 6(1), [13]. The underlying issue in this case relates to the interaction of these two requirements.

The drug at issue is suvorexant, an insomnia medicine sold by Merck as BELSOMRA. Merck’s American affiliate filed an application for approval of BELSOMRA in the US in August 2012 (and the application was approved in 2014) [20]. This was before any Canadian application, so it set the clock running on the timely submission requirement. Merck then filed an NDS for Canadian approval in November 2012—well within the 12 month window [12]. So far, so good. However, in response to the NDS, Health Canada asked for more information that would require additional clinical trial data which Merck could not supply. Merck therefore withdrew that NDS in 2014 [22]. Two years later, after Health Canada indicated that other post-market data could satisfy the need for additional safety evidence, Merck filed a second NDS. It contained largely the same data and information that was in the first NDS, together with further safety evidence [23]. Health Canada ultimately issued an NOC for BELSOMRA based on the second NOC in 2018 [23].

Merck then applied for a CSP for the ’892 Patent in relation to BELSOMRA. The Minister initially refused, essentially on the view that “the [NOC]” in the timely submission requirement must be the same as “an [NOC]” in the authorization for sale requirement [27]. In response, Merck submitted to the Minister that the two NOC’s need not be the same, so long as an NOC was applied for in a timely manner, and an NOC was ultimately granted. Merck made submissions based on the text of the relevant provisions [30], but crucially for the purpose of this appeal, Merck also made purposive arguments supporting this interpretation. According to the CSP RIAS, the purpose of the timely submission requirement is “[t]o incentivize the early introduction of innovative drugs into the Canadian market,” and Merck noted that it had pursued the Canadian NOC diligently [29], even though the initial application had not been successful. More importantly, Merck noted that the purpose of the CSP requirements is to compensate for regulatory delay, and in this case, it was denied the CSP because of regulatory delay. Given the Minister’s refusal to grant an NOC based on the first application, it would be impossible for Merck to obtain a CSP for BELSOMRA, because the NDS that led to the NOC being granted was applied for outside the 12 month window [27]. The result, as Merck put is, is that “The [Minister]’s interpretation of the CSP regime results in a denial of CSP rights on the basis of the exact harm a CSP is intended to address” [29].

The Minister nonetheless issued a final decision refusing the CSP, again on the basis that both requirements must be satisfied by the same NOC [32]. Crucially, the Minister did not address Merck’s arguments related to the purpose of the provisions, either in the initial letter or in the final decision letter [41].

Merck appealed, and McHaffie J allowed the appeal on the basis that the Minister had failed to address Merck’s arguments related to the purpose of the provisions [41].

McHaffie J noted that according to Vavilov 2019 SCC 65 [127] “[t]he principles of justification and transparency require that an administrative decision maker’s reasons meaningfully account for the central issues and concerns raised by the parties”: [43]. If a decision maker “fails entirely to consider a pertinent aspect of [the provision’s] text, context or purpose” and this failure “may well” have affected the result, this can render a decision unreasonable: [42], quoting Vavilov [122]. McHaffie J held that Merck’s arguments regarding the object and purpose of the legislation were sufficiently material that a reasonable interpretation of subsection 106(1) had to take them into account [45].

While the Minister’s decision was unreasonable, this does not necessarily mean that the Minister’s interpretation was unreasonable. To hold that the Minister’s decision was unreasonable, it was enough for McHaffie J to conclude that purposive considerations “may well” have changed the result; he did not need to conclude that they would necessarily have done so. McHaffie J noted that “it may sometimes become clear in the course of reviewing a decision that the interplay of text, context and purpose leaves room for a single reasonable interpretation of the statutory provision”: [48], quoting Vavilov [124], but in this case, McHaffie J was “not satisfied the question is so clear that I should reach the conclusion that there is room for only a single reasonable interpretation” [50]. He therefore remitted the matter to the Minister for redetermination [51]. He deliberately refrained from making any comments on the reasonableness or correctness of either party’s interpretative arguments [51]–[52].

Consequently, while Merck won this battle, that doesn’t mean it has won the war. As McHaffie J noted, “Merck and the Minister each suggest that there is only one reasonable interpretation, namely their own” [49]. We’ll see if the Minister changes their mind on reconsideration.