Inducement in the Pharma Context is an Inherently Hard Problem

Apotex Inc v Janssen Inc 2023 FCA 220 Locke JA: Mactavish, Monaghan JJA affg 2022 FC 996 (reasons) 2022 FC 995 (judgment) Pallotta J

            2,659,770 / macitentan / OPSUMIT / NOC

This brief decision, affirming Pallotta J’s finding at trial that Apotex’s sale of Apo-Macitentan would induce infringement of Janssen’s 770 patent, deals with a difficult issue of inducement in the pharma context. Two main doctrinal points emerge: first, explicit instructions to infringe are not necessary to establish inducement, and second, it may sometimes be effectively impossible for a generic to avoid inducement by scrubbing its product monograph (PM) clean of references to the infringing use. More broadly, this case illustrates why indirect infringement in the pharma context is an inherently difficult problem that does not appear to have any good solution.

As discussed here, this is in many ways a typical ‘skinny label’ case, in which a generic seeks to sell a drug that is itself unpatented, but which may be used in a manner that is patented. In this case, Janssen’s 770 patent covers the use of macitentan in a combination therapy with a PDE5 inhibitor in the treatment of pulmonary arterial hypertension (PAH). Apotex sought to sell macitentan, which is itself unpatented, for monotherapy treatment of PAH. Combination therapy is about 80% of the market and monotherapy is about 20% [FC 162].

In such cases, the generic is not a direct infringer, so infringement by inducement must be established under the three-part Corlac test, 2011 FCA 228 [162]. This typically reduces to the question of whether the generic’s PM will induce infringement by prescribing physicians, who will read the PM and thereby be induced to prescribe the generic product for use in an infringing manner. A central question is therefore whether the generic’s skinny label has been sufficiently scrubbed clean of any reference to the infringing use. This turns on the details of the generic PM.

In this case, the details are a bit difficult to follow because of redactions, but the key point is that much of the information in the Apo-Macitentan PM is clinical trial data from a landmark SERAPHIN study, which established the efficacy of macitentan for both monotherapy and combination therapy [12], [FC 186]. PAH is a rare disease and macitentan can only be prescribed by about 30 specialists who work in recognized PAH centres [FC 184]. All of these specialists would be aware of the landmark SERAPHIN study and so even though the Apotex PM was scrubbed clean of explicit references to combination treatment, specialists reading the Apotex PM would recognize it referenced the SERAPHIN and so would understand that Apo-Macitentan is also suitable for combination therapy. This was the basis on which Pallotta J found that Apotex’s PM would induce infringement.

The first key doctrinal point is that explicit instructions to infringe are not necessary to establish the second prong of the Corlac inducement test:

[17] The weakness of Apotex’s position in this regard is that it assumes that an absence of explicit instruction and of intention that direct infringement should result equals an absence of influence sufficient to satisfy the second prong. That is not necessarily the case. While explicit instruction and intention may be relevant to the issue of influence, I do not accept that either is required. Even without explicit reference to combination treatment, the Federal Court was entitled to find that the Apo-Macitentan PM would influence use of macitentan in that way.

In Novopharm 2007 FCA 167 [11], the FCA remarked that “an inducement to infringe generally cannot be inferred from a mere reference to the new use in the product monograph, for example, in the course of explaining contraindications or drug interactions, or as part of a list of scientific references.” Locke JA [13]-[14] distinguished this on the basis that in Novopharm the unpatented use of the drug in question was for an entirely different use, whereas in this case, the unpatented use was for the same indication. This is consistent with the qualifier “generally” in Novopharm and this holding may be explained by the unusual expertise of the end-users in this case who would recognize the indirect allusion. Nonetheless, the point remains that in some cases a “mere reference” to an unpatented use may indeed suffice to establish inducement.

The second doctrinal point is implicit. So far as I can tell, there is nothing that Apotex could have done to avoid inducement. Certainly there was no suggestion in either the FC or FCA decision that Apotex could have done more to scrub its PM of references to the combination therapy. And in this case, there was no suggestion that there would have been any way for Apotex to have avoided such a reference. The implication is that it is simply not possible for Apotex to sell macitentan for the unpatented use.

The broader point illustrated by this case is that the problem of inducement in the pharma context is inherently very difficult. Ideally we want to allow free generic entry in the market for the unpatented use while at the same time giving the patentee exclusivity in the market for the patented use. The obvious way to do that is to sue the direct infringer, which allows the patentee to control how the product is used after it is sold. But sometimes it is not practical or desirable to sue the direct infringer, as is particularly the case with respect to pharma. That is when inducement is most important.

The law of inducement tries to target the direct infringer indirectly. The theory underpinning the Corlac test is that the product sold by the defendant will be used in accordance with the instructions, so the product will only be used to infringe if the instructions supplied by the defendant instruct infringement. This is a second-best solution, but it can work tolerably well if the end-users generally read and follow the instructions provided by the defendant. But that theory appears to be substantially wrong in the pharma context. The basic problem is that physicians are to some extent experts, with their own independent sources of information. The situation in this case, where there are only a handful of prescribing physicians who are truly expert in this area, is just an extreme version of a pervasive problem. Of course, there will be some people who are experts in almost any field, but the problem of general end-user (physican) expertise means that the standard theory is particularly weak in the pharma context.

The result under the Corlac approach is that the generic will only be allowed to sell its unpatented product if it scrubs its PM clean of any references to the infringing use. The generic will also argue that even if its PM does instruct an infringing use, that doesn’t constitute infringement because the prescribers don’t pay any attention to the generic PM in any event, though I don’t believe that argument has ever prevailed on the facts. This approach has an air of unreality about it. I can’t help but imagine a scenario in which no doctor ever reads the PM for a generic product, except one scrupulous physician in a rural community where there is nothing else to do, who compulsively reads and follows the PM for any drug she prescribes. If the generic PM instructs infringement, she will be induced, so it is essential to scrub the generic PM clean in order to avoid liability. And then one day she retires, and now the generic PM can say whatever it wants.

In any event, even if there is some substantial number of physicians who pay attention to the generic PM, it seems clear enough that most do not. (And my understanding is that physicians normally prescribe generically and pharmacists do not normally know the indication, so even if the physician knows that the generic drug is not indicated for the patented use, it may be dispensed for that use nonetheless.) This means that if the generic is permitted to sell its product, we will get desirable competition in the unpatented market, but at the price of substantial infringement in the market for the patented use.

What can be done? One approach would be to favour one side or the other. In AB Hassle v Apotex 2002 FCA 421 [57], the FCA gave a strong policy statement suggesting we should favour competition in the unpatented market:

Thus [the defendant] cannot be prevented from obtaining [marketing authorization] solely on the basis that it will sell [the known compound]. If it were otherwise, then serious policy issues would arise. If there was any likelihood that a patient would consume a generic product for a patented use, then the generic product would not be approved. This would prevent new uses from being approved for existing drugs because there is always the possibility that someone somewhere will use the drug for the prohibited, patented purpose. This would result in a real injustice: since a generic company cannot possibly control how everyone in the world uses its product, the prevention of the generic from marketing the product would further fortify and artificially extend the monopoly held by the patent holders. The patent holder would, therefore, effectively control not just the new uses for the old compound, but the compound itself, even though the compound itself is not protected by the patent in the first place. The patent holders, as a result, would obtain a benefit they were not meant to have. In the end, society would be deprived of the benefit of new methods of using existing pharmaceutical medicines at a lower cost.

This logic is sound, but we have to keep in mind that we are striking a balance between the right of the patentee to exclusivity for its patented use and the need to incentivize development of new and useful treatment, and the right of the generic to sell the unpatented product for unpatented purposes and the desirability of competitive prices in the unpatented market. That balance is easy to strike if the only problem is that “someone somewhere will use the drug for the prohibited, patented purpose.” But what if the problem is that everyone everywhere will use the drug for the patented purpose?

Suppose a drug has long been generic, like aspirin, and the patentee invents a new use that represents 0.1% of sales. It seems clearly wrong as a matter of policy to prohibit the generic from selling aspirin, even if we know with certainty that it will be used for the infringing purpose. The benefit to the public of allowing generic prices for 99.9% of uses more than outweighs need for an incentive to innovate for niche uses. But conversely, if the patented use represents almost all of the market, it seems wrong to undermine that exclusivity simply because there is an unpatented niche use. The need to provide an incentive to develop major innovations that constitute the primary use for the compound outweighs the desire to allow generic prices in the niche market. So, if we can’t control direct infringement either through a direct action against the end-user or by restrictions on the product instructions, it is reasonable on policy grounds to say that the generic should be allowed to sell the product if the unpatented uses predominate but should not be permitted to sell the product if the patented uses predominate.

If we apply that reasoning to the facts of this case, in which the unpatented use is only about 20% of the market, it seems reasonable on policy grounds to prohibit the sale of the generic product. Yes, this is a bad solution and it shuts down competition in the market for the unpatented use, but all the solutions are bad—the question is which solution is the least bad. In my post on Pallotta J’s decision, I suggested that her finding may have been motivated by “the fact that combination therapy is the primary use for macitentan, with only 10–30% of patients getting monotherapy [162]. If the opposite were true, so that eg only 10% of the use was in the patented combination, then I wonder if it would have gone the other way.” This view is consistent with the two doctrinal points emerging from Locke JA’s decision on appeal. Taken on its own, the idea that a mere indirect reference to the patented use can support a finding of inducement is novel and somewhat extreme, as is the notion that it may be impossible for Apotex to sell a generic version of this drug. But both are readily understandable if the FCA was stretching existing doctrine in order to strike an appropriate balance by protecting the primary market.

I don’t really know where to go from there. I am reluctant to suggest abandoning the Corlac approach, which focuses on the instructions, even in the pharma context. The Corlac approach is logical and principled, and it works reasonably well in many contexts. The rule just doesn’t work as well in the pharma context, where most physicians do not get their information about how to use a generic drug from the manufacturer’s instructions. But it would be difficult to implement a market share approach in the pharma context, even if this could be done doctrinally. If the market shares for the patented and unpatented uses are 1%/99% or vice versa, it seems easy to say whether we should allow the generic sales. But where is that line to be drawn? Any firm line—50/50? 30/70?—seems arbitrary, but any line that turns on the facts will likely be both arbitrary and unpredictable. All I can say is that this case illustrates that the problem of inducement in the pharma context is very difficult, and I don’t see any easy solution.