Docket: A-51-17
Citation:
2017 FCA 241
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CORAM:
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STRATAS J.A.
WOODS J.A.
LASKIN J.A.
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BETWEEN:
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ALEXION PHARMACEUTICALS
INC.
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Appellant
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and
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ATTORNEY
GENERAL OF CANADA
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Respondent
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REASONS
FOR JUDGMENT
LASKIN J.A.
I.
Overview
[1]
The appellant, Alexion Pharmaceuticals Inc., is
a party to a proceeding before the Patented Medicine Prices Review Board
relating to the pricing of its drug Soliris. Alexion wishes to challenge the
constitutional validity of the provisions of the Patent Act, R.S.C.
1985, c. P-4, that give the Board the authority to make remedial orders where
it finds that a patentee of an invention pertaining to a medicine is selling or
has sold the medicine at a price the Board determines is excessive. These
include orders directing the patentee to reduce the price at which the medicine
is sold in Canada, and to pay to Her Majesty in right of Canada an amount specified
in the order. Alexion says that these provisions amount to a price control
scheme that goes beyond the authority of Parliament under subsection 91(22) of
the Constitution Act, 1867 (“Patents of
Invention and Discovery”) and impermissibly intrudes on provincial
authority under subsection 92(13) (“Property and Civil
Rights in the Province”).
[2]
Rather than raising this issue before the Board,
Alexion commenced an application for judicial review in the Federal Court,
seeking a declaration of unconstitutionality and an order prohibiting the Board
from proceeding.
[3]
The Attorney General of Canada moved for an
order summarily dismissing the application on the ground that it was bereft of
any possibility of success. Prothonotary Aalto granted the motion, based on stare
decisis (2016 FC 716). He recognized the high threshold for granting a
motion to dismiss, but determined that this Court had decided the
constitutional issue in Canada (Attorney General) v. Sandoz Canada Inc.,
2015 FCA 249, 390 D.L.R. (4th) 691, and that the Sandoz decision was
binding authority against Alexion’s constitutional argument in the application.
Alexion’s appeal to the Federal Court was dismissed (2017 FC 22): Justice
Simpson agreed that Sandoz decided the constitutional issue and was binding
authority, and there was no basis to revisit it. Neither on the motion nor on
the appeal did either the Attorney General or the Federal Court raise the
propriety of Alexion bringing the constitutional issue directly to the Federal
Court without first raising it before the Board.
[4]
Alexion now appeals to this Court. It argues
that this Court did not decide in Sandoz the constitutional issue that
it raises, and that any comments this Court made on the issue in that case were
merely non-binding obiter. It also asserts that its application, in
contrast to the proceedings that culminated in the Sandoz decision, is
supported by a fully developed factual record, and that the Federal Court would
and should have the benefit of that record in deciding the constitutional
issue.
[5]
I would dismiss the appeal. In my view it was
incumbent on Alexion to raise the constitutional issue first before the Board. Having
failed to do so it was not entitled to bring the issue before the Federal
Court. In any event, the Federal Court was correct in concluding that this
Court’s decision in Sandoz represents a binding determination of the
issue.
II.
The proceeding before the Board
[6]
Alexion sells in Canada the breakthrough drug
Soliris, which is indicated for the treatment of two life-threatening
disorders.
[7]
In January 2015, staff of the Board filed a
statement of allegations alleging that the price of Soliris was excessive
between 2012 and 2014, and seeking an order from the Board requiring Alexion,
among other things, to reduce the price of Soliris and pay some $5.6 million to
offset cumulative excess revenues.
[8]
Following the Board’s issuance of a notice of
hearing and a lengthy series of interlocutory motions, a 20-day hearing was
held from January to April 2017 to determine whether Alexion is selling or has
sold Soliris at an excessive price and, if so, what orders should be made.
[9]
In September 2015, after the notice of hearing
was issued but before the hearing began before the Board, Alexion commenced in
the Federal Court the application for judicial review that is the subject of
this appeal.
[10]
The Board released its decision on the merits in
September 2017, after the decisions of the Federal Court and not long before
this appeal was argued. The Board found that the price of Soliris was and is excessive.
It ordered Alexion to reduce the price and to pay to Her Majesty in right of
Canada an amount approved by the Board, to be calculated by Board staff and
Alexion in accordance with parameters set by the Board. The Board’s decision
is now the subject of a separate application for judicial review in the Federal
Court.
III.
The constitutional issue
[11]
In its application for judicial review that has
led to this appeal, Alexion sought a declaration against the Attorney General
and a writ of prohibition prohibiting the Board from proceeding with the
hearing or making any order concerning the price at which Alexion is selling or
has sold Soliris in any market in Canada.
[12]
The declaratory judgment Alexion sought related
to sections 83 to 86 of the Patent Act, and the words “in any proceeding under section 83” in subsection
87(1) of the Act. Alexion’s notice of application asked for a declaration that
these provisions are ultra vires the Parliament of Canada
in that the price regulation scheme created
by the impugned provisions exceeds the powers granted to Parliament under s.
91(22), or other federal power, of the Constitution Act, 1867 and
improperly intrudes into provincial jurisdiction over property and civil rights
in the province under s. 92(1) of the Constitution Act, 1867.
[13]
Alexion did not raise this constitutional issue
before the Board.
[14]
In support of its application Alexion filed two
affidavits and an “Applicant’s Legislative History
Brief.” One of the affidavits was sworn by Lionel Bently, the Herchel
Smith Professor of Intellectual Property Law at the Faculty of Law of the
University of Cambridge in England. As he described it, the subject of his
affidavit was “the purpose and effect of patent schemes
and the relationships, if any, between patent regulation and price controls on
patented products, particularly in the area of pharmaceutical products.”
The other affidavit was sworn by Dr. Jonathan D. Putnam, an expert in
international economics as applied to intellectual property. He provided what
counsel for Alexion described as an “economic analysis
[…] directed to the purpose and effect of the impugned provisions within the
administrative framework of the Patent Act.”
[15]
The Legislative History Brief included an
opinion prepared for the Canadian Drug Manufacturers Association in 1992 by the
Honourable James C. MacPherson, then Dean of Osgoode Hall Law School and now a Justice
of the Court of Appeal for Ontario. The opinion concluded that if the
provisions now challenged were enacted, their constitutionality would be “a serious question.”
IV.
The challenged provisions
[16]
The provisions whose constitutionality Alexion challenged
in its application for judicial review were added to the Act in 1993 (Patent
Act Amendment Act, 1992, S.C. 1993, c. 2, s. 7) and appear under the heading
“Excessive Prices.” They follow provisions of
the Act that empower the Board to require a patentee of a medicine to provide
it with information so that it can investigate the price at which the medicine
is being or has been sold.
[17]
Section 83 authorizes the Board, where it finds
that the patentee is selling the medicine in any market in Canada at a price
that in the Board’s opinion is excessive, to make an order directing the
patentee to cause the price to be reduced. Where the Board finds that the patentee
has sold the medicine at a price the Board considers was excessive, the Board
may make an order directing the patentee to take one or more measures that will
offset the amount of the excess revenue that the patentee derived – to reduce
the price of the medicine, to reduce the price of another medicine to which a
patented invention of the patentee pertains, or to pay to her Majesty in right
of Canada an amount specified in the order. The Board may also require a former
patentee to take one or both of the latter two measures. Where the Board is of
the opinion that the patentee or former patentee has engaged in a policy of
selling the medicine at an excessive price, the Board may order that the
patentee or former patentee take one or more measures that will offset up to
twice the excess revenues. No order may be made under section 83 without
first providing the patentee or former patentee a hearing.
[18]
Sections 84 to 86 of the Act set a time limit
for compliance with any order, specify factors that the Board is to consider in
determining whether a price is excessive, and regulate certain aspects of the
hearing. Subsection 87(1) includes the words “in any
proceeding under section 83” in providing that certain information and
documents provided to the Board are privileged and shall not be disclosed.
V.
The predecessor legislation
[19]
From 1923 until the coming into force of the
1993 amendments, the Act contained provisions authorizing compulsory licensing
of drug patents. Beginning in 1987, the Act also included provisions empowering
the Board to monitor drug prices and grant remedies if it concluded that prices
were excessive. A helpful summary of these provisions and their evolution can
be found in this Court’s decision in ICN Pharmaceuticals, Inc. v. Canada (Staff
of the Patented Medicine Prices Review Board), [1997] 1 F.C. 32 at paras. 3-12,
68 C.P.R. (3d) 417 at pp. 423-425; see also Manitoba Society of Seniors Inc.
v. Canada (Attorney General) (1991), 77 D.L.R. (4th) 485 at pp. 487-489,
35 C.P.R. (3d) 66 (Man. Q.B.), affirmed (1992), 96 D.L.R. (4th) 606, 45 C.P.R.
(3d) 194 (Man. C.A.).
[20]
The Act as it stood in the period from 1987
until the enactment of the 1993 amendments continued to provide for compulsory
licensing of patents applicable to medicines, but gave patentees a period of
exclusivity by prohibiting licensees from exercising rights obtained under a
compulsory licence for periods varying from seven to ten years. To address
concerns that prices during the exclusivity period might be unacceptably high
from the consumer’s perspective, the legislation provided for the establishment
of the Board to monitor and review patented drug prices. If the Board concluded
that a medicine was being sold at an excessive price, it could put an end to
the exclusivity by lifting the prohibition on licensees. It could also lift the
prohibition on licensees of one other patent, or direct the patentee to reduce
the price of the medicine. The 1993 amendments abolished compulsory licensing
and gave the Board its current suite of powers.
VI.
Challenge to the predecessor legislation
[21]
The 1987 amendments were the target of
constitutional attack in Manitoba Society of Seniors, above. The attack
was based on grounds very similar to those that Alexion now seeks to advance – that
the amendments established what was in pith and substance a scheme of price
regulation, and therefore exceeded federal authority in relation to patents and
intruded on provincial jurisdiction in relation to property and civil rights.
[22]
The Manitoba Court of Queen’s Bench rejected
this argument. It noted (at p. 489) that the regulatory scheme administered by
the Board had been put in place because of “legitimate
concerns […] that, from the consumer’s standpoint, prices might escalate to
unacceptable levels during the exclusivity period.” It concluded (at p. 492)
that the amendments were in pith and substance patent legislation:
As the legislation reestablishes exclusivity
for patented medicines to an extent not enjoyed since 1931, Parliament also
provided for a mechanism to deal with price abuse that may incidentally occur
as a result of these monopolies it created.
[23]
The Manitoba Court of Appeal affirmed the
decision of the Queen’s Bench. In concise reasons, it agreed that the
amendments were in pith and substance patent legislation.
VII.
This Court’s decision in Sandoz
[24]
This Court’s decision in Sandoz arose
from proceedings before the Board involving two drug companies, Sandoz and
ratiopharm. Both were selling generic versions of patented medicines under
arrangements that gave them no ownership rights in the patents. The Board had
made an order directing ratiopharm to pay some $65.9 million to offset excess
revenues. The proceeding against Sandoz was at an earlier stage: the Board had
ordered Sandoz to provide it with pricing information.
[25]
The companies argued before the Board that they
were not “patentees” within the meaning of subsection
79(1) of the Act, and were therefore not subject to the Board’s jurisdiction. Subsection
79(1) defines a “patentee” for the purposes of
sections 79 to 103; the definition includes, in addition to the person for the
time being “entitled to the benefit of the patent”
for an invention pertaining to a medicine, any other person who “is entitled to exercise any rights in relation to that
patent other than under a licence continued by subsection 11(1) of the Patent
Act Amendment Act, 1992.”
[26]
The companies also argued before the Board that
sections 79 to 103 of the Act exceeded federal constitutional authority in
relation to patents. Sandoz qualified this position with the proviso that the
legislation was unconstitutional “at least insofar
as generic pharmaceutical products are concerned” (Sandoz,
above, at para. 110 [emphasis in original]). When the Board rejected these
arguments, the companies sought judicial review in the Federal Court.
[27]
The Federal Court allowed the companies’
applications, concluding that the companies were not “patentees”
within the meaning of subsection 79(1) (Sandoz Canada
Inc v. Canada (Attorney General), 2014 FC 501; Ratiopharm Inc. v. Canada (Attorney
General), 2014 FC 502). It went on nevertheless to
consider the constitutional issue. It saw the 1993 amendments as enhancing the
Board’s remedial powers, rather than altering the purpose of the legislation.
It did not accept the argument that the 1993 amendments provided a basis for
departing from the conclusion reached in Manitoba Society of Seniors,
and held the provisions to be a constitutional exercise of Parliament’s
authority in relation to patents.
[28]
The Attorney General appealed both judgments to
this Court; the two appeals were heard together.
[29]
At the outset of the hearing of the current
appeal, counsel for Alexion sought to file a “Brief of
Materials from Sandoz/ratiopharm (now Teva Canada Limited) Appeal,”
comprising copies of the notices of constitutional question filed in this Court
in Sandoz, together with the responses of the Attorney General and the
replies to those responses. Counsel for the Attorney General objected to its
filing on the basis that it did not represent a complete picture of what was
before the Court in Sandoz and would be of little if any assistance to
the Court. The Court ruled that the material could be filed for whatever
assistance it might provide; it is open to the Court to take judicial notice of
the contents of its own records (Canada v. Olumide, 2017 FCA 42 at
para. 11; Craven v. Smith (1869), L.R. 4 Ex. 146). I will return
later in these reasons to the question of what was before the Court in Sandoz.
[30]
As this Court noted in Sandoz (at para.
110), and as the “Brief” confirms, the notices of
constitutional question filed by Sandoz and ratiopharm in this Court encompassed
sections 79 to 103 of the Act, and reiterated the position that these
provisions amounted to “an unconstitutional extension
of Parliament’s authority over patents, at least insofar as generic
pharmaceutical products are concerned.” The notices also recognized that
the constitutional issue would become a live one if this Court concluded that
Sandoz and ratiopharm were “patentees.” Sandoz
and ratiopharm took the position that the constitutional issue should in that
event be remitted to the Federal Court for determination, but both they and the
Attorney General put forward considerable argument on the merits of the issue.
[31]
This Court saw the “central
issue” in the Sandoz appeals as whether the Federal Court
properly set aside the Board’s conclusion that Sandoz and ratiopharm were “patentees” within the meaning of subsection 79(1) even
though they were not patent owners (at para. 2), and devoted most of its
reasons to this issue. But it also appreciated that if the answer to this
question was in the negative, the constitutional validity of subsection 79(1) would
require determination (at para. 54).
[32]
The Court did indeed answer the interpretive
question in the negative: it concluded that the Board’s determination that Sandoz
and ratiopharm were “patentees” within the
meaning of the definition in subsection 79(1) was reasonable, and that there
was no basis to interfere with it.
[33]
The Court then turned to the constitutional
question. The Court’s approach to the question was first to consider whether
sections 79 to 103 of the Act were constitutionally valid as they related to
patent holders or owners, and then to consider whether the application of the
scheme to non-patent holders and owners rendered it unconstitutional.
[34]
In addressing the first point, the Court
rejected (at para. 115) the contention by Sandoz and ratiopharm that the
Board’s power under the 1987 amendments to lift the exclusivity provided to the
patent owner if it found the price to be excessive was at the heart of the
decision in Manitoba Society of Seniors, so that the removal of this
power in the 1993 amendments rendered the provisions unconstitutional. The
Court stated that from a constitutional perspective, the amendment removing the
power to lift patent exclusivity was of no consequence; price control remained,
as it was when Manitoba Society of Seniors was decided, an integral part
of the scheme.
[35]
The Court went on (at para. 116) to confirm the
constitutionality of the scheme as applied to patent holders and owners:
In my view, the Federal Court judge and the
Board before him correctly held that the control of prices charged for patented
medicines comes within the jurisdiction conferred on Parliament over patents
under subsection 91(22) of the Constitution Act 1867 when applied to a
patent holder or owner.
It noted that
Sandoz and ratiopharm had in effect accepted this proposition in submitting
that the Federal Court’s interpretation of “patentee”
(which they had defended on appeal) maintained the necessary connection to the
federal head of power.
[36]
The Court then turned (at para. 117) to the “remaining question” – “whether
this price control scheme [retained] its constitutional validity when applied
to non-patent owners or holders.” The Court held that it did.
[37]
Based on the definition of “patentee” as it stood when Manitoba Society of
Seniors was decided, the Court saw the decisions in that case as
sanctioning the validity of the scheme as it applied to non-patent holders (at
para. 119). It also saw no basis for the argument that “the
connection with the patent ceases to be sufficient to meet the constitutional
imperative when the person targeted holds a licence to sell a patented medicine
without holding the patent” (at para. 121). It explained that “the harm which the Act seeks to prevent arises by reason of
the existence of the patent pertaining to the medicine being sold […], with the
result that nothing turns on the fact that the person exercising the selling
rights does not hold the patent itself” (at para. 121).
[38]
The Court expressed its conclusion as follows: “I therefore conclude that the Board correctly held that
including persons who exercise selling rights under a patent within the ambit
of subsection 79(1) does not bring that provision outside the scope of
subsection 91(22) of the Constitution Act [1867]” (at
para. 122).
[39]
Sandoz and ratiopharm filed a motion for leave
to appeal to the Supreme Court of Canada. However, the motion was discontinued
as part of a settlement.
VIII.
The Attorney General’s motion to dismiss
Alexion’s application for judicial review
[40]
The Attorney General moved in the Federal Court for an order summarily
dismissing Alexion’s application. The basis for the motion was that the application
was bereft of any possibility of success because this Court had recently
considered and rejected, in Sandoz, the same constitutional arguments.
[41]
The prothonotary granted the motion. He
recognized the high burden on a party who brings a motion to strike, but found
this Court’s decision in Sandoz sufficient to dispose of the motion: “[t]he conclusion of that Court is definitive and […] the
doctrine of stare decisis applies” (2016 FC 716 at para. 44).
[42]
The Federal Court judge dismissed Alexion’s appeal.
She described the “sole issue [as] whether the
Prothonotary was correct when he struck out the [application] as being bereft
of any possibility of success because the Sandoz decision is binding
authority” (2017 FC 22 at para. 18). She concluded that Sandoz was
binding authority, and that the prothonotary was correct.
[43]
As noted above, neither the prothonotary nor the
Federal Court judge adverted to the possibility of declining to hear the
application on the basis that it was inappropriate for Alexion to bypass the
Board and raise its constitutional challenge for the first time in the Federal
Court. The Attorney General did not raise this issue either. This is
particularly surprising when another application by Alexion for judicial review
in relation to the proceeding before the Board, based in part on constitutional
grounds, was struck out by the Federal Court as premature (Alexion
Pharmaceuticals Inc. v. Canada (Attorney General), 2017 FC 21).
IX.
Alexion’s appeal to this Court
[44]
Alexion’s appeal is narrowly framed. In paragraph
29 of its memorandum it states that “[t]he sole issue
before this Court is whether Justice Simpson correctly concluded that the Sandoz
decision was ‘binding authority’ disposing of the constitutional issues raised
by Alexion in the Application.” It reiterated this position in opening
its oral argument. In oral argument it also accepted that its appeal would fail
if the Court were to conclude that the determination by this Court in Sandoz
that the price control scheme is valid as it applies to patent owners and
holders was essential to the Court’s decision.
[45]
At no point in its response to the Attorney
General’s motion did Alexion advance the potential alternative argument that
even if the Sandoz decision would be dispositive if not overruled, this
Court should depart from it based on the criteria set out in Miller v.
Canada (Attorney General), 2002 FCA 370 at paras. 8-10, 220 D.L.R. (4th)
149. Nor did it argue in the alternative that since this Court’s decision in Sandoz
would not of course bind the Supreme Court of Canada, Alexion should be
permitted in the exercise of the court’s discretion to develop a record for
possible consideration by the Supreme Court, and to try to persuade this Court
to characterize the decision in Sandoz as legally problematic (see Canada
(Attorney General) v. Bedford, 2013 SCC 72 at paras. 41-45, [2013] 3 S.C.R.
1101; Canada v. Craig, 2012 SCC 43 at paras. 18-22, [2012] 2 S.C.R. 489;
R. v. Déry, 2017 CMAC 2 at paras. 31-32 per Cournoyer and Gleason JJ.A.).
[46]
I will therefore not comment on the viability of
other potentially available arguments, but will address only (1) the issue as
Alexion has framed it – whether Sandoz is binding authority – and (2)
the question, raised by this Court of its own motion in oral argument, whether
Alexion was entitled to bypass the Board and bring its constitutional challenge
directly to the Federal Court on judicial review. I will start with the latter
issue.
X.
Was it appropriate to bypass the Board?
[47]
The normal rule is that parties to an administrative
proceeding may proceed to the court system only after all adequate remedial
recourses in the administrative process have been exhausted. This means that, ordinarily, a party to an administrative proceeding
must put to the administrative decision-maker all arguments that it has the
jurisdiction to hear, and must obtain its decision, before launching an
application for judicial review (Canada (Border Services Agency) v. C.B.
Powell Limited, 2010 FCA 61 at paras. 30-31, [2011] 2 F.C.R. 332; Halifax
(Regional Municipality) v. Nova Scotia (Human Rights Commission), 2012 SCC
10 at paras. 35-37, [2012] 1 S.C.R. 364).
[48]
The rule applies to constitutional issues as it
does to any other. If the administrative decision-maker has jurisdiction to
hear constitutional arguments, those arguments should be made in the first
instance to it (Okwuobi v. Lester B. Pearson School Board; Casimir v. Quebec
(Attorney General); Zorrilla v. Quebec (Attorney General), 2005 SCC 16 at
paras. 38-55, [2005] 1 S.C.R. 257). An administrative decision-maker has
jurisdiction to hear constitutional arguments when it has power to decide
questions of law (Nova Scotia (Workers’ Compensation Board) v. Martin,
2003 SCC 54, [2003] 2 S.C.R. 504). As this Court recognized in Sandoz (at
paras. 57-64), the Board here has the power to decide legal questions. It did
so, for example, in determining the statutory interpretation and constitutional
issues at first instance in Sandoz and in determining the scope of its
authority under the Act in a manner approved by the Supreme Court in Celgene
Corp. v. Canada (Attorney General), 2011 SCC 1, [2011] 1 S.C.R. 3.
[49]
Many of the good reasons that animate this rule and
show it to be in the public interest are summarized in C.B. Powell,
above at para. 32. Among them is avoidance of multiplicity of proceedings, avoidance of the waste
associated with interlocutory judicial review applications when the applicant
for judicial review may succeed at the end of the administrative process
anyway, ensuring that the court has the benefit of the administrative
decision-maker’s findings, and judicial respect for the legislative decision to
invest administrative agencies with decision-making authority. Where the issue is a constitutional issue,
proceeding first to court also risks depriving the court of the views of the
administrative decision-maker based on “its factual
appreciations, insights gleaned from specializing over many years in the myriad
complex cases it has considered, and any relevant policy understandings” (Forest Ethics Advocacy Association v.
Canada (National Energy Board), 2014 FCA 245 at
paras. 42, 45, [2015] 4 F.C.R. 75). The strength of the rule and its underlying
rationales is reflected both in its regular invocation as a basis for a motion
to strike (Wilson v. Atomic Energy of Canada Limited, 2015 FCA 17 at paras. 32-33, [2015] 4 F.C.R. 467) and the court’s
entitlement to raise the rule on its own motion (Forest Ethics, above at
para. 22).
[50]
Exceptions to the rule are rare; they include
urgency (Okwuobi, above at para. 50) and truly exceptional circumstances
(C.B. Powell, above at para. 33). Many of these
exceptional circumstances reflect those where prohibition lies (Forner v. Professional Institute of the Public Service of Canada, 2016 FCA 35 at para. 15).
[51]
In this case this Court raised the rule of its
own motion. Alexion argued in response that it would have been pointless to
raise the constitutional issue before the Board given its decisions in Sandoz.
It also argued that the Board’s inability to grant a declaration of invalidity
– in contrast to the ability of a court – was a proper reason to bypass the
Board.
[52]
In my view neither of these reasons justifies an
exception to the rule. The Board panel seized of the current proceeding is
differently composed than the panel that dealt with the challenges by Sandoz
and ratiopharm. It might well have had further insights to offer. The Supreme
Court has confirmed that the power of an administrative decision-maker to
disregard a provision it finds inconsistent with the Constitution is an
adequate remedy at the administrative level and is not a sufficient reason to
bypass its jurisdiction (Okwuobi, above at paras. 44-45).
[53]
In addition, while Alexion’s notice of
application included a request for prohibition, it is very doubtful that
prohibition would have been granted. The Supreme Court, citing C.B. Powell
among other authorities, has called on courts to show restraint in granting prohibition
that “short-circuits” the decision-making role
of a tribunal (Halifax (Regional Municipality) v. Nova Scotia (Human Rights
Commission), above at paras. 35-37). This Court’s decision in C.B.
Powell (at para. 33) makes it clear that the assertion of a constitutional
argument, without more, does not constitute an urgent or exceptional
circumstance warranting immediate recourse to courts, bypassing the
administrative decision-maker.
[54]
Although the Attorney General could have
objected to Alexion proceeding on the constitutional issue directly in the
Federal Court, no objection was made. In the hearing before us, counsel for the
Attorney General explained that there was no objection because they considered
their position on the merits of the constitutional challenge to be a strong
one. The Federal Court did not raise the objection on its own motion. In similar
circumstances in the future, it would be desirable if the objection were raised
by the respondent or, if need be, by the court on its own motion so that the
court can consider at the first opportunity whether the rule and the judicial
policies that underlie it are engaged.
[55]
In my view, this proceeding fully engages the
rule and these policies. Several practical and legal reasons favour the Board
hearing and deciding the constitutional issue at first instance. Among other
things, this proceeding has resulted in a multiplicity of proceedings – one for
the constitutional issue and a separate judicial review application now in the
Federal Court challenging the Board’s decision on the merits. In bypassing the
Board, the application has undermined its position as the first-instance forum for
decisions of fact and of law within its mandate, and deprived the reviewing
court of the Board’s insights on the purpose and operation of the challenged provisions.
[56]
It is not too late to give effect to the rule. On
my own motion, I would apply it and dismiss the appeal on this ground alone.
[57]
Since the appeal was fully argued on its merits,
and in the interest of judicial economy, I will nonetheless proceed to consider
the issue as framed by Alexion. As it turns out, whatever further insights the
Board might have had on the matter, this Court’s decision in Sandoz is
dispositive of the constitutional issue.
XI.
Is the Sandoz decision binding authority?
A.
Standard of review
[58]
The scope and application of the doctrine of stare
decisis is a question of law (Apotex Inc. v.
Pfizer Canada Inc., 2014 FCA 250 at para. 62, 465 N.R. 306, leave to appeal
refused, 2015 CanLII 20821). It follows that the prothonotary’s determination
of this question was, and the Federal Court judge’s decision is, subject to
review on the correctness standard (Hospira Healthcare
Corporation v. Kennedy Institute of Rheumatology, 2016 FCA 215 at paras. 66, 69, 72, 79, 83, [2017] 1 F.C.R. 331).
B.
What Sandoz decided
[59]
The extent to which a decision of this Court is
binding under the doctrine of stare decisis depends on what the Court
actually decided (R. v. Henry,
2005 SCC 76 at paras. 53-57, [2005] 3 S.C.R. 609). At the very least, an
appellate judgment will stand as authority for its own ratio decidendi,
or the “reasoning that was
necessary for the court to reach a result on the issues that were presented to
it for a decision” (Apotex Inc. v. Pfizer Canada Inc., above
at para. 114). In my view the Federal Court judge was correct in concluding that the
Court actually decided in Sandoz that the provisions of the Act Alexion
now seeks to challenge were validly enacted by Parliament.
[60]
The provisions that this Court considered in Sandoz
were sections 79 to 103. The provisions that Alexion seeks to attack are a
subset of these provisions. Once the Court held in Sandoz that as a
matter of statutory interpretation the scheme applied to non-patent holders and
owners, it had to address the constitutional issue raised by Sandoz and
ratiopharm – whether in its application to non-patent holders and owners the
scheme was constitutional. As explained above in my review of the Court’s
decision, the approach it took to that question was first to consider the
constitutionality of the scheme as it applied to patent holders and owners, and
then to consider the constitutionality of applying the scheme to non-patent
holders and owners.
[61]
The Court could not have been more explicit in
deciding on the first issue that the scheme was constitutional. As set out
above, it expressed its conclusion as follows (at para. 116):
In my view, the Federal Court judge and the
Board before him correctly held that the control of prices charged for patented
medicines comes within the jurisdiction conferred on Parliament over patents
under subsection 91(22) of the Constitution Act 1867 when applied to a
patent holder or owner.
[62]
It then proceeded to the “remaining question” – “whether
this price control scheme retains its constitutional validity when
applied to non-patent owners or holders” [emphasis added] (at para. 117).
This question too it answered in the affirmative, stating among other things
that “there is no basis for the argument that the
connection with the patent ceases to be sufficient to meet the
constitutional imperative when the person targeted holds a licence to sell
a patented medicine without holding the patent” [emphasis added] (at
para. 121).
[63]
It is thus apparent, in my view, that the Court “actually decide[d]” in Sandoz that the price
control scheme as a whole is constitutional. Its determination of that question
was essential to its decision of the appeal. To use the distinction drawn by
the Supreme Court in Henry, above (at para. 57), its conclusion on the
constitutional issue was an element of the “dispositive
ratio decidendi” rather than merely part of the “wider circle of analysis.”
C.
Alexion’s further arguments
[64]
In its written and oral submissions, Alexion put
forward a series of related arguments that in my view do not detract from this
conclusion. I will deal with the principal arguments in turn.
(1)
Extent of the constitutional analysis
[65]
First, Alexion argued that the Court in Sandoz
did not conduct a “full” pith and substance
or ancillary doctrine analysis. A pith and substance analysis calls on the
court to consider both the purpose and the effect of legislation to determine the head of power within which it falls (Kitkatla Band v.
British Columbia (Minister of Small Business, Tourism and Culture), 2002
SCC 31 at paras. 52-53, [2002] 2 S.C.R. 146). An ancillary doctrine analysis examines
whether legislative provisions that might otherwise be beyond the powers of the
enacting legislature are constitutional because they are sufficiently
integrated with a valid legislative scheme (Reference re Assisted Human
Reproduction Act, 2010 SCC 61 at para. 126, [2010] 3 S.C.R. 457).
[66]
There is no doubt that this Court addressed pith
and substance in the Sandoz decision (at paras. 115-121). While it
relied on the analysis in Manitoba Society of Seniors, its reliance on
relevant precedent was hardly unusual. It also specifically dealt with (at
paras. 114-115) the arguments made to it based on the ancillary doctrine, and
agreed with the Board and the Federal Court that price control is an integral
part of the statutory scheme. That the Court considered it unnecessary to
address these matters at length does not mean that its analysis was other than “full.” The “fullness” of a court’s analysis is in any event not a determinant of what it
decided.
[67]
In the same vein, Alexion also submitted that
this Court did not address in Sandoz the case law concerning the limits
on federal authority to regulate prices absent an emergency, to which Professor
Hogg refers in his leading text on constitutional law (Peter Hogg, Constitutional
Law of Canada (Toronto: Carswell, 2007) (loose-leaf revision 2015-1), at
pp. 15-47, 17-22, 17-25, 21-9, 21-10). But whether or not the Court referred
specifically to Professor Hogg’s text or all of the potentially applicable case
law cited there, the Court plainly recognized (at para. 113) that Sandoz and
ratiopharm were arguing that “the scheme is no longer
directed at patents but at the pricing of medicine and therefore intrudes upon
the provinces’ jurisdiction over property and civil rights.” The Court simply disagreed.
(2)
Confiscatory nature of the scheme
[68]
Second, Alexion argued that the Court in Sandoz
did not consider or address the confiscatory nature of the price control
scheme, as reflected in the authority section 83 gives the Board to require
payment to Her Majesty in right of Canada. But the Court in Sandoz specifically
referred (at paras. 55 and 123) to the Board’s order that ratiopharm pay some
$65.9 million to offset excess revenues. The Court was plainly aware of the
powers that Parliament gave the Board. It cannot be said that it overlooked any
of those powers in deciding the constitutionality of the statutory scheme.
(3)
Concession on the constitutional issue
[69]
Third, Alexion argued that the constitutionality
of the statutory scheme as applied to patent owners and holders was largely
conceded before this Court in Sandoz, so that the issue was never truly
decided. It relied in particular on the second sentence in paragraph 116 of the
Court’s reasons (the first sentence of which has been quoted above):
In my view, the Federal Court judge and the
Board before him correctly held that the control of prices charged for patented
medicines comes within the jurisdiction conferred on Parliament over patents
under subsection 91(22) of the Constitution Act 1867 when applied to a
patent holder or owner. The respondents recognize as much when they state that
the Federal Court judge’s interpretation of “patentee” maintained the
connection to the federal head of power, such that the reasoning in Manitoba
Society remained intact (respondents’ respective replies to the response by
the Attorney General of Canada to the Notice of Constitutional Question
(respondents’ replies) at para. 46).
[70]
The arguments put before the Court in Sandoz
appear to have been nuanced in a number of respects. Among other things, the
position of Sandoz and ratiopharm (referred to at para. 110) that the scheme
was unconstitutional “at least insofar as generic
pharmaceutical products are concerned” posed some challenges both for
them and for the Court: as the Court pointed out (at para. 111), Sandoz and
ratiopharm seemed to appreciate that “their argument,
if accepted, could result in the entire scheme devised by Parliament being
struck down.”
[71]
But these nuances did not determine the scope of
this Court’s decision. As already mentioned, the Court considered that to
address the arguments of Sandoz and ratiopharm that the scheme was invalid as
applied to non-patent owners and holders, it first had to address its validity
as applied to patent owners and holders. It proceeded to do so. It decided that
the scheme was constitutional as it applied to both patent owners and holders
and non-patent owners and holders. There is no basis, in my view, to conclude
that the validity of the scheme was not decided.
(4)
Differences in the record
[72]
Finally, Alexion argued that differences between
the record before the Court in Sandoz and the record that it
marshalled in this case required the conclusion that the Sandoz decision
was not binding. It relied for this proposition on the decision of this Court
in LJP Sales Agency Inc. v. Canada (National Revenue), 2007 FCA 114,
[2007] 3 C.T.C. 123. There, the Court dismissed an appeal from the decision of a
Federal Court judge upholding the striking out of an application for judicial
review as bereft of any possibility of success in light of a binding decision
on point. In doing so it stated (at para. 8):
First, the Minister’s motion to strike was
not inappropriate, even though, as this Court held in David Bull
Laboratories (Canada) Inc. v. Pharmacia Inc. […], motions to strike
applications for judicial review should only be brought in exceptional
circumstances because of the summary nature of the proceedings. However, the
presence of an authority which is directly contrary to the position on which an
application is based can be such an exceptional circumstance, when no further
development of the factual record is required.
[73]
Alexion submitted that this is a case in which “further development of the factual record is required.”
In paragraph 35 of its memorandum of fact and law, Alexion went so far as to
submit that in Sandoz “[t]here was no factual
record underlying the constitutional challenge” [emphasis added]. In
oral argument it acknowledged that there was a factual record in Sandoz,
but when pressed on the differences between that record and the record here it
could not specify them. However, it emphasized the particular importance in the
current case of the evidence of Professor Bently, Dr. Putnam and then-Dean
MacPherson. But as oral argument proceeded, it became common ground that the
record before this Court in Sandoz included both an affidavit of Dr.
Putnam and the opinion of then-Dean MacPherson. A cursory review of the affidavit
of Dr. Putnam filed in Sandoz indicates strong similarities to his
affidavit filed in this case.
[74]
Even if a comparison between the record in this
case and the record in Sandoz was relevant in determining whether Sandoz
is binding, it would in my view be necessary before the Court could
consider this factor for the parties to provide a much more definitive
comparison than that with which we were provided here. It is not for the Court
to sift through the record in past cases to assess the relative completeness of
the evidence underlying a decision that on its face is binding. In any event,
it appears to me that the availability of new or never-before-considered
evidence has greater relevance in considering a request by a party to develop a
record of the kind referred to in Bedford, above. No request of that
nature was made here.
Disposition
[75]
For these reasons, I would dismiss the appeal. In
accordance with the parties’ agreement, I would order that Alexion pay costs to
the Attorney General in the amount of $5,000.00, all-inclusive.
“J.B. Laskin”
“I
agree.
David Stratas J.A.”
“I
agree.
J. Woods J.A.”
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