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How to Claim Real Damages in a Hypothetical Market: a Guide for Generic Drug Manufacturers in Canada

2014-10-02

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HOWTOCLAIMREALDAMAGESINAHYPOTHETICALMARKET:AGUIDE
FORGENERICDRUGMANUFACTURERSINCANADA

J
ASONMOSCOVICI*
ROBIC,
LLP
L
AWYERS,PATENTANDTRADE-MARKAGENTS

OnMarch14th2014,ahottrioofhighlyanticipatedpatentdecisionswererendered
bytheCanadianFederalCourtofAppeal,clarifyingtheenvironmentunderwhicha
GenericDrugManufacturer(“Generic”)canclaimtheprofitsitwouldhavemadehad
itnotsufferedthedelaysbroughtonbyaNoticeofComplianceproceedingtakenby
theinnovatordrugcompany(“Innovator”).Moreparticularly,thesedecisionsrelated
toclaimsforlossesfollowingthedismissalofprohibitionproceedingstakenby
SANOFI-AVENTIS(“Sanofi”),whereTEVACanadaLimited(“TEVA”)andAPOTEX
Inc.(“APOTEX”)wereseekingtomarketgenericversionsofRAMIPRIL,using
Sanofi’sALTACE®brandRamiprildrugasareference(collectively“Ramipril
proceedings”).SanofifiledforapplicationsseekingtoprohibittheMinisterofHealth
fromgrantingmarketapprovalstoTEVAandAPOTEX,alleginginfringementof
patentscoveringthissubjectmatterthatwerelistedonHealthCanada’spatent
register.[ApotexInc.v.Sanofi-Aventis,2014FCA68;TevaCanadaLimitedv.
Sanofi-Aventisetal,2014FCA67;TevaCanadaLimitedv.Sanofi-Aventisetal,
2014FCA69].

NOCProceedings
InordertomarketadruginCanada,anoticeofcompliance(“NOC”)mustfirstbe
obtainedfromtheMinisterofHealth,incompliancewiththeFoodandDrug
Regulations
1.However,ifthedrughasapatentlistedagainstitonHealthCanada’s
patentregister,theGenericwouldneedtoaddressthispatentbeforeobtainingits
approval,bywayofa“NoticeofAllegation”(“NOA”),allegingeithernon-infringement
orinvalidityofthelistedpatent.TheInnovatorwhoownsthelistedpatentcanthen
takeanactionbyfilingaNoticeofApplication,seekingaprohibitionorderprohibiting
theMinisterofHealthfromissuinganNOCtotheGeneric,untilexpiryofthelisted
patent.

©CIPS,2014.*FromROBIC,LLP,amultidisciplinaryfirmofLawyers,andPatentandTrade-markAgents.Published
in[2014]IntellectualProperty(FederatedPress).Publication173.030.
1C.R.C.,c.870

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Ifsucharequestforaprohibitionorderisdismissed,theInnovatorbecomesliablefor
thelossestheGenericsufferedbynotbeingabletobringadrugtomarketduringthe
prohibitionproceedings.
SanofihadfiledsuchapplicationstoobtainprohibitionordersagainstTEVAand
APOTEX,prohibitingtheMinisterofHealthfromissuingmarketapprovalsforgeneric
versionsofRAMIPRIL,underthebasisofpatentsthatwerelistedagainstthisactive
ingredientonHealthCanada’spatentregister.Attrial,theCourtultimatelydismissed
Sanofi’sapplications;APOTEXANDTEVAbothfiledsubsequentmotionstobe
granteddamagesforthelossofprofitanddelaycausedbytheseproceedings.
Thesedecisionswereappealedandarebediscussedbelow.

Section8Damages:AgeneralOverview
Section8ofthePatentedMedicines(NoticeofCompliance)Regulations
2NOC
regulationsprovidesamechanismbywhichmonetarylossescanbeclaimedbya
partywhowasimpededfromenteringthemarketfollowinganunsuccessfulNOC
proceeding.AGenericisthereforeentitledtobecompensatedforanylossesstarting
fromtheperiodwhereitwouldhavereceiveditsNOCfromtheMinisterofHealth,
endingontheperiodwheretheinnovatorcompany’sNOCprohibitionproceeding
waseitherwithdrawn,discontinuedordismissed,(“LiabilityPeriod”).

Inoneofthefirstcasestoawardsuchdamages
3,theCourtnotedthataGeneric
couldnotclaimdamagesforfuturelossescausedbyerosionofmarketshare.Only
compensationsfordamagessufferedduringtherelevantperiod,couldbegranted.

TheawardingofdamagesunderthisprovisionisrelativelynewinCanadaandthe
Courtshavehadlittleguidancetohelpthemwiththequantificationoftheselosses,
ortheidentificationoftheLiabilityPeriod.
Subsequentcases
4allowedapartytoclaimdamagesresultingfromalossofmarket
share,butonlyiftheyarewithintheLiabilityPeriod.Nocompensationforlosses
duringaGeneric’s”rampingup”phasecouldthereforebeawardedifthisrampingup
occurredaftertheliabilityperiod,noranyothersuchpermanentorresiduallosses.

Itwasunclearwhatdamageswereeligibleforcompensation.Muchofthis
uncertaintywasbasedontheassessmentofthe”potential”profitsthattheGeneric
mayhavelost.Tocalculatepotentialprofits,theCourtcreatesa”hypotheticalworld”
inwhichthegenericcompanywasgrantedanNOC,unimpeded.However,the
componentsofthishypotheticalworldwereopentointerpretation(doesthisworld
alsocomprisetheInnovatorand/orothercompetitors?).

2SOR/93-1333ApotexInc.v.Merck&Co.Inc2008FC11854Sanofi-AventisCanadaInc.v.NovapharmLtd2011FCA149.

Assuch,theseRAMIPRILdecisionsshedalightontheframeworkforestablishing
theselossesandprovideguidancewithregardstotheconstructionofthis
“hypotheticalworld”.
RAMIPRILDECISIONSA)ApotexInc.v.Sanofi-Aventisetal.,2014FCA68

TheCourthadtostudythe“liabilityperiod”oftheclaiminthisappeal.Summarily,
ApotexseemedtohavehadtwokicksatthecanwithregardstoobtaininganNOC
forRAMIPRIL.DuringafirstNOCproceeding,Apotexallegednon-infringementof
thelistedpatent,andwasunsuccessful.Aprohibitionorderwassubsequently
granted.Paralleltothis,ApotexservedanewNOA,alleginginvalidityandwas
successful;thefirstprohibitionorderwasneverreversed.Assuch,Sanofialleged
thattheliabilityperiodshouldonlystartaftertheinitialprohibitionorderexpires,as
Apotexwouldnothavegonetomarketbeforethen.TheCourtwasnotinagreement
andconsideredbothfilesasawhole.The”neteffect”wasthatApotexwasnot
impededfromgoingtomarketandtheliabilityperiodshouldthereforenotbedelayed
untiltheexpiryofthefirstprohibitionorder.
Regardingtheenddateofthisliabilityperiod,multiplepatentswerelistedonHealth
Canada’spatentregisterbySanofi.Eachproceedingrelatingtothesepatentsalso
haddifferentdismissaldates.Thequestionthereforewaswhichofthesedismissal
datesshouldbeconsideredtocalculatetheenddateofliability.TheCourtchosethe
earlierdate:”once[…]issued,allpendingprohibitionproceedingsrespectingthe
HOPEpatentsbecamemoot,andthewithdrawal[…]ofthoseproceedingsunderthe
meaningof[section8]oftheNOCregulationswasconcomitanttotheissuanceof
theNOCtoApotex”
5.

InadditiontothedebatesurroundingthestartandenddatesoftheLiabilityPeriod,
theCourtconsideredthecharacteristicsofthe”hypotheticalworld”,andgave
guidanceastowhatfactorsmustbetakenintoaccountfora”hypotheticalmarket”.A
Courtassessingahypotheticalmarketneedstoconsiderwhencompetinggeneric
manufacturersalsoenterthemarket.Inthiscontext,theCourtoverturnedthetrial
judge’sfindingswithregardstothedatewhenTeva,anotherGeneric,wouldhave
enteredthemarketwithApotex.Initsassessment,theCourtdeterminedthatTeva,
alsoinvolvedinNOCproceedings,wouldhavelikelyasoughtsummarydismissalof
theseprohibitionproceedings,assoonasitwouldhavedeterminedthatithadafair
chanceofsuccess.Factuallyhowever,Tevawouldnothavebeenabletoobtain
summarydismissalanysoonerthanithadintherealworld,andTevawouldonly
haveenteredthemarketafterApotex’sLiabilityPeriod.

5ApotexInc.v.Sanofi-Aventisetal.,2014FCA68,par97

4
B)TevaCanadaLimitedv.Sanofi-AventisCanadaInc.,2014FCA67

ThisappealrelatestoTevaCanada’sclaimfordamages,afteranunsuccessful
attemptbySanofiatobtainingaprohibitionorderunderapreviousNOCproceeding.
ThetrialjudgeassessedthedamagesawardedtoTevabyexaminingahypothetical
scenario,whereSanofihadnotrequestedaprohibitionorderagainstTeva.

Onappeal,theCourtconsideredthefollowingseriesofquestions:
1)Periodforcalculatingdamages:theCourtconsideredthedurationof
theperiodthatTevacouldhavesoldthedrughaditnotbeenfortheprohibition
proceedings,aswellasthegenericdrug’shypotheticalmarketshare.Teva
arguedthatthestartdateoftheLiabilityPeriod(whenitwouldhavereceivedan
NOCfromtheMinisterofHealth)wasbeforethe“statutorystayperiod”(once
anNOCproceedingistaken,theMinisterofHealthcannotissueanNOCfora
periodof24months,thisisknownasthe“statutorystayperiod”).TheCourt
confirmedthattheliabilityperiodbeginsonthedateanNOCwouldhavebeen
issuedintheabsenceofanNOCproceeding,andthatnothingpreventsthis
periodfromstartingbeforethestatutorystay.
2)HypotheticalMarket:IntheCourt’sconsiderationoftheattributesof
thehypotheticalmarket,itwasagreedthatthemarketshareofotherGenerics
shouldbeconsidered,aswellastheirmarketentrydate.Theevaluationof
Teva’sentryintothehypotheticalmarketshouldbewithoutconsiderationofthe
regulations;however,fortheotherGenericscomprisingthishypotheticalworld,
thedelaysbroughtonbytheregulationsshouldapply.

3)AuthorizedGenerics:theCourtassessedifthehypotheticalmarket
shouldaccountforthepresenceofgenericsthatwereauthorizedbythe
Innovatoritself.AsSanofihadlaunchedanauthorizedgenericoneyearbefore
a“realworld”genericwasauthorizedtodoso,theCourtconcludedthatthe
hypotheticalmarketmusttakethisintoconsiderationinitsassessment.

4)UnapprovedIndications:TheCourthadtoconsiderifcompensation
couldbegrantedforlossesassociatedwithanunapprovedindication.Tevahad
notincludedanyreferencetoalternativeusesofthedruginitsapplicationfor
anNOC,exceptforuseinthetreatmentofhypertension,whichwasthesubject
ofthepatentheldbySanofi.However,Sanofihadregisteredseveralother
patentsrelatingtotheuseofRamiprilinpreventingotherheartdiseases.Given
thatTevahadnotincludedtheseotherusesinitsNOCapplication,itcouldnot
sellthedrugforthoseuseswithoutinfringingSanofi’sotherpatents.TheCourt
rejectedSanofi’sargumentandconcludedthatTevawouldhavebeenableto
sellitsgenericversionofRamiprilfortheunapprovedindications,withoutany
seriousobjectionsfromSanofias,inthe“realworld”,Sanofiwasnotenforcing
thosepatents.

5
TheCourtaddedthataGenericcannotalwaysbecompensatedinsucha
manner.Thisisdependsonthemeasurestakenbytheinnovatortoprevent
suchsalesandtoprotectitsotherpatentsintherealworldmarket.

5)Lossofbusinessvalue:theCourtagreedthatacompany’slossof
valueisafutureinjurythatcannotbecompensated,asonlycompensationfor
lossesincurredduringtheliabilityperiodisallowed.Similarly,thelossof
indirectprofits,orthelossofopportunitytoreinvestprofits,isadequately
compensatedbypre-judgmentinterests.
6)Ramp-Up:Ontheissueofdoublingtheassessmentofthetime
requiredtopenetratethemarkettoitsfullpotential(oneinthe“realworld”,one
inthe“hypotheticalworld”:double”ramp-up”),Tevaallegedthatwhenitwas
finallyallowedtosellthegenericversionofRamipril,ithadexperienceda
ramp-upperiodandshouldthereforebecompensated.AccordingtoTeva,it
wouldbeunfairtoreducethenumberofpotentialsalesduringtheentryintothe
hypotheticalmarketwithoutcompensatingforlossesinthereal-worldmarket
duringthatsametimeframe.TheCourtdidnotagree.Compensatingthe
genericmanufacturerforlossesduringtheramp-upperiodiscontrarytothe
establishednotionthatonlylossesincurredduringtheliabilityperiodcanbe
compensated.
C)Sanofi-AventisCanadaInc.v.TevaCanadaLimited,2014FCA69

Summarily,thisappealalsoaddressedthequestionifcompensationforlossesof
salesforunapprovedindicationscanbegranted.Tevasoughtdamagesforsalesit
wouldhavemadeinconnectionwithotherusesofthedrugthanwhatwasfoundon
theproductmonograph.
ThetrialCourtfoundthatevenifthemonographmadenoreferencetopurposes
otherthanforthetreatmentofhypertension,saleswouldhavebeenmadeanyway
forotherusesofthisdrug,sinceintherealmarket,Sanofihadnotobjectedtothe
interchangeofgenericversionofRamiprilforeachoftheotheruses.

TheCourtreiteratedthatthevalidityofsection8wasalreadyestablishedbycaselaw
andfurtherstatedthatitpermitsthegrantingoflossesrelatedtounapproved
indications.Adecisiongrantingdamagesonsuchsalesdependsonthe
circumstancesofeachcase.
Conclusion
FollowingtheRamiprildecisions,theCourtsnowhavemoreguidancewithregards
totheevaluationofthelossesthatcanbeclaimedbyaGenericmanufacturerinthe
contextofasection8proceeding.Whileeachofthesecasescansurelybethe

6
subjectoffurtherdetaileddiscussions,someofthemorerelevantteachingscan
neverthelessberesumedasfollows:
1)ina“hypotheticalworld”,theNOCregulationsapplyequallytothe
Generic,andtothecompetition.Whenquantifyinglosses,theNOCregulations
areonlysetasideforthedeterminationoftheliabilityperiod.Thecourtneeds
totakeintoaccounttheadministrativedelaysthateachgenericcompanywill
havewhentryingtoenterthemarketundertheregulations.

Assuch,theCourtdetermineswhenthegenericmanufacturerwouldhave
enteredthemarketduringtheliabilityperiod,andwhatcompetitionitwould
havefaced.ItisnotpresumedthatthecompetitionreceivesitsNOC
unimpeded.AGeneric’smarketshareisalsonotautomaticallysplitwithother
generics.
2)SinceGeneric’smuststillserveNOAsintheassessmentofa“hypothetical
world”,theInnovatorwillstillreceivenoticethataGenericisseekingmarket
approval.Theinnovatorcanreactandbringitsowngenerictomarketsooner.
TheCourtthereforetakestheinnovator’sstrategies,aswellasthe
competition’s(forexample:ifcompetinggenericsweretryingtoenterthe
market),intoaccountinthishypotheticalworld.Sincethepresenceofother
genericsmustbeconsideredinthehypotheticalmarketandalsothepresence
ofgenericsauthorizedbytheinnovator,theCourtmayconcludethatinthe
hypotheticalmarket,theinnovatorwouldhavelaunchedanauthorizedgeneric
beforeitactuallydidintherealworld.
2)AGenericissubjecttoa“ramp-up”inthehypotheticalworld.This
reduceslosses,astheywouldnothavebeenmakingtheir“fullpotential”profits
rightoutofthegate.Thisreiteratesthepriordogma:damagescanonlybe
awardedforlossessufferedduringtheliabilityperiod.Therealworldramp-up
constitutesdamagessustainedaftertheprohibitionproceedingsarecompleted,
andarethusoutsidetheliabilityperiod.Thefactthatthegenericwillalsobe
facingaramp-upintherealworldisnotcausetodisregardtheramp-upinthe
hypotheticalworld.
3)Theperiodforcalculatingoflossesbeginswhenanoticeofcompliance
wouldhavebeenissuedtoagenericintheabsenceoftheNOCproceeding.
Nothingpreventsthisperiodfrombeginningbeforetheimpositionofa“statutory
stay”undertheRules,subjecttothediscretionoftheCourttochooseamore
appropriatetime.
4)Lossofprofitscanberecoveredforsalesrelatedtounapprovedindications.
Thedecisionastowhetherornottograntdamagesforsuchsalesdependson
thecircumstancesofeachcase.

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