Generic Damages in Life Sciences Patent Litigation: Strategic Considerations

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<ol><li> 1. Generic Damages in LifeSciences Patent Litigation: Strategic ConsiderationsChristopher C. Van BarrKiernan A. Murphy </li><li> 2. PresentersChristopher Van BarrPartner (Ottawa)613-786-8675christopher.vanbarr@gowlings.comKiernan MurphyAssociate (Ottawa)613-786-0273Kiernan.murphy@gowlings.com 2 </li><li> 3. Outline Brief background Recent developments regarding the scope of thesection 8 cause of action Recent developments regarding quantification ofgeneric damages Strategic considerations relating to genericdamages proceedings3 </li><li> 4. Brief Background:Regulatory Approval, the PMNOC Regulations and Section 8 Damages 4 </li><li> 5. Drug regulatory approval process Innovator Files new drug submission (NDS) Obtains notice of compliance (NOC) Submits patent list of eligible patents in respect of drug to Minister of Health for inclusion on patent register Generic Files abbreviated new drug submission (ANDS) referencing innovator drug demonstrate bioequivalence to innovator drug Market entry but subject to PMNOC Regulations 5 </li><li> 6. Patented Medicines (Notice of Compliance) Regulations PM(NOC) Regulations linkage regulations that replacedcompulsory licensing in 1993 Minister of Health maintains Patent Register on whichinnovators list relevant patents against drugs Generic must address listed patents by providing Noticeof Allegation and Detailed Statement Allegations include patent invalidity, non-infringement, etc 6 </li><li> 7. Patented Medicines (Notice of Compliance) Regulations Innovator may commence an application to prohibit theMinister from issuing a NOC within 45 days of receivingNOA Minister is temporarily prohibited from issuing the NOC (statutory stay) If generic allegations are justified, application isdismissed Minister may then issue NOC if approvable 7 </li><li> 8. Patented Medicines (Notice of Compliance) Regulations Merck v Apotex, 2009 FCA 187 The PM(NOC) Regulations had to be construed having regard tothe Patent Act read as a whole and the balance which it seeks tocreate between the effective enforcement of patent rightsthrough the use of the PM(NOC) Regulations (subsection55.2(4)) and the timely entry of lower price generic drugsthrough the use of the early working exception (subsection55.2(1)) (Biolyse, supra, para. 50). 8 </li><li> 9. Section 8 of the PMNOC Regulations8. (1) If an application made under subsection 6(1) is withdrawn or discontinued bythe first person or is dismissed by the court hearing the application or if anorder preventing the Minister from issuing a notice of compliance, madepursuant to that subsection, is reversed on appeal, the first person is liable tothe second person for any loss suffered during the period (a) beginning on the date, as certified by the Minister, on which a notice ofcompliance would have been issued in the absence of these Regulations, unlessthe court concludes that(i) the certified date was, by the operation of An Act to amend the Patent Act andthe Food and Drugs Act (The Jean Chrtien Pledge to Africa), chapter 23 ofthe Statutes of Canada, 2004, earlier than it would otherwise have been andtherefore a date later than the certified date is more appropriate, or(ii) a date other than the certified date is more appropriate; and (b) ending on the date of the withdrawal, the discontinuance, the dismissal or thereversal.(5) In assessing the amount of compensation the court shall take into account allmatters that it considers relevant to the assessment of the amount, includingany conduct of the first or second person which contributed to delay thedisposition of the application under subsection 6(1). 9 </li><li> 10. Validity of Section 8Section 8 Damages Challenges to s.8 by Innovators have been unsuccessful Merck v Apotex, 2009 FCA 187 not ultra vires Patent Act - falls within s.55.2(4) the Act is within the authority of Parliament pursuant to section91(22) of the Constitution Act, 1867 Court has jurisdiction to hear s.8 cases Apotex v AstraZeneca, 2012 FC 559; Sanofi v Apotex,2012 FC 551 Not unconstitutional for vagueness or harshness Not invalid delegated legislation Not invalid in the face of TRIPS and NAFTA10 </li><li> 11. Scope of Section 8 Damages Claims 11 </li><li> 12. Lost Future Profits are Not Available to Generics FCA held that generics lost future profits cannot beclaimed under s.8 (Apotex v Merck 2009) Damages are constrained by s. 8. The Governor in Council could have extended the measure of the losses to include those caused [as opposed to suffered] during the period, regardless of when they are suffered. However, it did not do that. Trial decision was the first decision on the merits fors.8 Trial judge had awarded lost future profits, considering them to be an issue of quantity and not injury12 </li><li> 13. Disgorgement of Innovator Profits Generic claims to Innovator profits Generic argue that Innovators charge more than generics and therefore obtain larger profits Because of that difference in profits (), it may be still beneficial to trigger the statutory stay even if payment of generic losses must be made Disgorgement of profit is therefore a necessary disincentive to triggering the statutory stay13 </li><li> 14. Evolution of Section 8Section 8 1993 : 8(1) The first person is liable to the second person for alldamages suffered by the second person 8(2) by way of damages or profits as the circumstancesrequire 1998 : 8(1) the first person is liable to the second person forany loss suffered 8(4) by way of damages or profits as circumstancesrequire 2006:8(1) the first person is liable to the second person forany loss suffered 8(4) by way of damages as circumstances require.RIAS: Government believes arguments re accounting ofprofits should no longer be open to generics invoking section 8 14 </li><li> 15. Not Entitled to Innovator Profits at Federal Court Innovator profits are not available as a measure ofdamages under s. 8 (Apotex v Merck 2009 FC/FCA) Apotex argued that inclusion of the word profits in subsection 4 could not be redundant with the word damages, and thus must refer to Mercks profits S.8(4) has since been amended to remove the wordprofits S. 8 compensated for having been kept off the market The reasonable interpretation was that the generic canseek only its own lost profit as a measure of its damages Subsequent lower court decisions came to similarconclusions15 </li><li> 16. Not Entitled to Innovator Profits at Federal CourtApotex v Eli Lilly, 2011 FCA No jurisdiction to award profits for causes of actionarising from section 8 including claims for equitable reliefarising from same facts Parliament considered this issue and removed the reference in s.8 to profits What about causes of action independent of facts givingrise to the operation of s.8? None was alleged in that case 16 </li><li> 17. Entitlement to Innovator Profits in Provincial CourtProvincial Courts Prior to Lilly, Generics moved the s.8 damages battle toprovincial courts to claim other remedies including equitableclaims such as unjust enrichment Reason: Provincial Superior courts are courts of inherentjurisdiction and do not require statutory grants of jurisdiction Ex. Courts of Justice Act, RSO 1990, c C-43, s 96(1) 17 </li><li> 18. Provincial Courts : The New BattlefieldApotex v Abbott 2010 ONSC (lansoprazole) Whitaker J.s Decision Motion to Strike unjust enrichment/disgorgement ofprofits Whitaker J. held that it was not plain and obvious thatthe PMNOC Regulations constituted a complete code None of the cases concerned the ousting of all common law causes of action or remedies Law is still muddy; in its infancy 18 </li><li> 19. Provincial Courts : The New BattlefieldApotex v Abbott 2010 ONSC (lansoprazole) Whitaker J.s Decision Enrichment and deprivation were pled Only issue concerned the juristic reasons branch of the test Disposition of law has been understood to mean enrichment and deprivation required by law Held - Abbott was not required to invoke the PMNOC Regulation for some purpose other than to protect the patents Would require an examination of all the circumstances Not plain and obvious that the claim would fail 19 </li><li> 20. Provincial Courts : The New BattlefieldApotex v Abbott, Takeda 2011 ONDivCt (lansoprazole) Leave to appeal Whitaker J. Decision (Swinton J) No decisions on whether unmeritorious commencement of NOC proceedings can give rise to a claim in unjust enrichment Not plain and obvious that reliance on permissive law constitutes a juristic reason Not plain and obvious that PMNOC Regulations are a complete code and that unjust enrichment would undermine its purpose20 </li><li> 21. Provincial Courts : The New BattlefieldApotex v Eli Lilly, 2012 ONSC (atomoxetine)Justice MacDonald : Motion to strike Law in respect of claims pursuant to s 8 is not fully settled Not plain and obvious that PM(NOC) Regulations limit claims or only remedies which s.8 provides are available21 </li><li> 22. Provincial Courts : The New BattlefieldThe Pending Decisions: Apotex v Abbott, Takeda ONSC(lansoprazole) Motion for summary judgement (Quigley J) Focus on Apotex pleadings wrongful invocation of the PMNOC Regulations Settlement Agreement Defendants argued that Apotex v Eli Lilly 2012 FCgoverned ie. no independent cause of action exists 22 </li><li> 23. Provincial Courts : The New BattlefieldThe Pending Decisions: Apotex v Abbott, TakedaONSC (lansoprazole) Plaintiff: pleadings re. wrongful invocation and SettlementAgreement supported unjust enrichment However: no further material facts presented, ex. regarding wrongful invocation, intent of the parties Apotex declined opportunity to conduct examinations for discovery Decision expected in early 2013 23 </li><li> 24. Provincial Courts : The New BattlefieldThe Pending Decisions: Apotex v Eli Lilly ONDivCt(atomoxetine) Leave to appeal MacDonald J decision (Ducharme J) Defendants argue that motions judge considered thewrong question Correct question: did Parliament intend on excludinginnovator profits, not whether Parliament intended onexcluding all other causes of action.24 </li><li> 25. Provincial Courts : The New BattlefieldTake-away points to date Ontario Superior Court has not conclusivelyheld that claims for unjust enrichment in section8 actions are proper They have merely delayed deciding the issue Availability of disgorgement of profits in thecontext of s.8 claims may be clarified in early201325 </li><li> 26. Quantifying Section 8 Damages26 </li><li> 27. Section 8 Damages Finally Quantified First quantification judgments issued 2012 Apotex v Sanofi-Aventis, T-1357-09, November 2, 2012 $215,529,129 awarded to Apotex Apotex v Merck, T-1144-05, December 4, 2012 $54,168,579 awarded to Apotex 27 </li><li> 28. The Main Issue in s.8 damages proceedingsHypothetical (But for) World The main issue is the hypothetical question: Whatwould have happened had the first person notbrought an application for prohibition? (Apotex vMerck 2011 FCA) Note issue below: Is hypothetical world one with noRegulations or no Notice of Application? In other words, Court must construct a hypothetical,or but for, world during a defined period of time inthe past in order to determine the market share thegeneric would have captured (Apotex v Sanofi; Tevav Sanofi 2012 FC)28 </li><li> 29. Quantifying Section 8 Damages Framework for quantifying s.8 damages 1. determine the Relevant Period; 2. determine the Drug Market; 3. determine the Generic Drug Market; 4. determine the Second Persons Lost Volumes; and 5. determine the Second Persons Lost Profits.(Apotex v Sanofi, Teva v Sanofi 2012 FC; Apotex v Merck 2012 FC) Overall burden on generic Generic: evidential burden re compensation Innovator: evidential burden re disqualifying compensation 29 </li><li> 30. Quantification of Damages Overall Market Generic MarketShare of Generic MarketLost Profits 30 </li><li> 31. Start Date of the Relevant Period Presumptive start date: patent hold date Court has discretion to select more appropriate date (Apotex v Merck 2008 FC; Apotex v Merck 2012 FC) Relevant period cannot start before statutorystay (Teva v Sanofi 2012 FC) Other factors (ex. infringement, manufacturingcapacity) likely fall under other inquiries31 </li><li> 32. End Date of the Relevant Period Court has no discretion? (s 8(1)(b)) Date of withdrawal, discontinuance, dismissal orreversal However: Multiple prohibition proceedings? Date of issuance of NOC? End date was issuance of NOC by Minister despite pending application (Apotex v Sanofi 2012 FC)32 </li><li> 33. Overall Size of the Market Overall volume sales in units for all manufacturers However, consider impact of genericization Overall market often decrease after genericization None or very little effect according to a report from PMPRB report Consider real world outcome Ex. did innovator stop promoting (Apotex v Sanofi, Teva v Sanofi 2012 FC) Court has come to opposite conclusions on the same drug(Apotex v Sanofi, Teva v Sanofi 2012 FC) 33 </li><li> 34. Generic Market Size% of overall volume made by all generic manufacturersReal world share is an important predictorFactors include: Market penetration Erosion rate, number of generic entrants Timing of formulary listings Number of market entrants and their timing might not impactthe generic market size (Apotex v Sanofi 2012 FC)34 </li><li> 35. Share of the Generic Market % of the specific generics volume Different hypothetical worlds may exist in differentcases Compare Apotex v Sanofi 2012 FC and Teva v Sanofi2012 FC Considerations: Competition from other generics Competition from Authorized Generic Generic manufacturing capacity Motivation (Willingness to assume at risk launch) Pipeline adjustment or channel stuffing35 </li><li> 36. Share of the Generic Market Competing Generics Generics market share must be assessed in light ofany competition that would have existed (Apotex vSanofi; Teva v Sanofi 2012 FC) Factual determination: competition not included/excludedby default Are there any regulatory or practical impediments togeneric competition? Impact of absence of underlying prohibition proceedings(Apotex v Sanofi 2012 FC) Competitors motivation (ex. at risk entry) (Apotex vMerck 2012 FC) Inability to manufacture drug 36 </li><li> 37. Share of the Generic Market Authorized Generic Authorized Generics are not excluded from thehypothetical world (Apotex v Sanofi; Teva vSanofi 2012 FC) Factors include: real world actions (ie. launch of AG upon genericization) importance of drug contemplation of AG prior to commencing prohibition proceedings37 </li><li> 38. Share of the Generic Market Authorized Generic Innovator will be caught of guard? (Apotex vSanofi 2012 FC) Regulatory process is confidential and generic need not provide NOAs in the Hypothetical world Would have required 3 months after generic launch Different hypothetical world for Authorized Generic? Absence of Regulations v Absence of application? Inconsistent with other aspect of s.8 decisions38 </li><li> 39. Generics Lost ProfitsDetermine Generics lost revenues Key determinant is pricing Public or private regime? Public regime is governed by the public formularies Maximum prices typically established...</li></ol>