Case study
Under the NOC Regulations, in the case of ramipril Sanofi was successful against one generic and unsuccessful against three others: Apotex, Teva and Riva. Sanofi (as licensee) and Schering (as patentee) sued Apotex and Teva in an action for infringement aſter they entered the market at risk. Te subject patent was found invalid, resulting in multiple individual generic section 8 claims.
A generic’s potential losses may be illustrated as shown in Figure 1 (below).
Te trial judge in the Federal Court rejected Sanofi’s submission that one hypothetical market is to be shared among multiple generic claimants, finding each separate case should be assessed on its individual facts. In the two ramipril section 8 liability cases, heard one aſter the other, the judge assigned Apotex and Teva different market shares in overlapping ‘but for’ hypothetical worlds, resulting in an overall windfall gain to the generics. Specifically, the judge assigned shares of the generic ramipril market as follows: Apotex (70%), an authorised generic (AG) (30%), and Teva (33%), therefore exceeding the total size of the generic ramipril market. Te trial judge also determined that:
• In the Apotex case, Sanofi’s success in establishing infringement in an earlier proceeding under the NOC Regulations could be ignored because Sanofi failed to overcome an allegation of invalidity against the same patent in a later one;
• In the Teva case, as a matter of law, the start date for liability cannot predate the date on which the innovator commenced the proceeding, but even if it could, on the facts, a more appropriate start date for liability to Teva was much later;
• Teva and Apotex could recover lost ‘off-label’ sales (a use for which their products was not approved);
• Teva’s claim for ‘lost business value’ and Apotex’s claim for its ‘double ramp-up’ were rejected as beyond the eligible section 8 damages period;
• Teva could not recover damages for indirect losses (eg, lost profit on sales of other products and lost ability to use and reinvest profits that would otherwise have been available) without clear and non- speculative evidence; and
Figure 1: Lost sales of a generic due to delayed entry
• An AG’s role, if proven, was relevant to the allocation of generic market share.
Te three-member panel of the Federal Court of Appeal was unanimous in upholding the trial judge’s decisions on (i) the section 8 damages period determined on the applicable facts (although, as a matter of law, the court held the presumptive start date for liability was the date the generic’s regulatory file became approvable); (ii) the recoverability of losses due to lost sales for an unapproved use; and (iii) the relevance of market share assigned to an AG in reducing a section 8 damages claim. Te majority of the appeals court agreed with the trial judge that the generics’ total lost sales could exceed the total size of the generic market, but no compensation is available for a double ramp-up. Te majority concluded that each section 8 claim is to be determined on the basis that the hypothetical world is one in which the NOC Regulations can delay the entry of generic competitors. In the Apotex case, the majority reversed the trial judge’s conclusion that Teva would have entered the hypothetical market during Apotex’s section 8 damages period, thereby increasing Sanofi’s liability. Te dissenting judge found that the trial judge’s methodology was wrong—it “inherently leads to windfalls”—and is not one contemplated by the NOC Regulations. Te dissenting judge said that the ‘but for’ hypothetical market should resemble a real market to avoid overcompensation to generic claimants. However, the dissenting judge would have allowed compensation for a double ramp-up.
On the upcoming final appeal in the Apotex case (Sanofi did not seek leave to appeal in the Teva case), the Supreme Court is expected to consider the correct legal interpretation and framework for determining appropriate compensation owed under section 8.
Tis is likely to include the status and legal implications of the NOC Regulations in the ‘but for’ world; for example, whether the hypothetical market for an individual generic section 8 damages claimant should assume that its generic competitors are delayed by proceedings under the NOC Regulations or should such competitors be deemed to enter the hypothetical market shortly aſter the first successful generic’s ANDS was approved.
A = lost sales in the ‘but for’ hypothetical world due to an innovator initiating a proceeding under the NOC Regulations. The sloped curve above area A illustrates the ‘ramp-up’ in the generic’s sales from zero to steady state as the distribution chain pipeline is filled.
B = lost sales due to the generic experiencing a ramp-up to steady state sales (the ‘double ramp-up’ referred to later) in the real world after its NOC is no longer delayed.
C = permanent loss of market share where a generic fails to achieve 100% of its potential sales, eg. due to the loss of a first-mover advantage.
Apotex is expected to argue that section 8 liability should provide a financial deterrent to an innovator commencing a proceeding under the NOC Regulations that ultimately fails (ie, liability beyond simply the generic’s losses).
However, the mere fact that the innovator was unsuccessful in the summary proceeding does not establish that the proceeding lacked merit. Te merits typically involve complex issues and turn on the court’s assessment of conflicting expert evidence. In any event, the language of section 8 clearly contemplates only a compensatory remedy, which means that its proper application should not result in a monetary windfall to a successful generic claimant. In addition, it should be recalled that a generic voluntarily triggers the application of the NOC Regulations by pursuing the less expensive and time-consuming ANDS regulatory route. Given the prolific nature of litigation under the NOC Regulations, which invariably leads to some section 8 liability claims, and the potential financial significance of such claims, the upcoming Supreme Court appeal hearing is expected to be very closely watched by innovators and generics alike. Te outcome will affect the strategies employed by all sides in the quest for pharma market share.
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44