Bayer Inc. v. Canada (Attorney General), docket T-1154-97

Date: 19981202

Docket: T-1154-97

BETWEEN:

     BAYER INC.,

     Plaintiff,

     - and -

     THE ATTORNEY GENERAL OF CANADA and

     THE MINISTER OF HEALTH,

     Defendants.

     REASONS FOR ORDER

MULDOON, J.

[1]      This is a motion brought by Apotex Inc. and Novopharm Ltd., two of Canada's largest generic drug manufacturers, for an order adding them as parties respondent to, or in the alternative granting leave for them to intervene in, this action, as well as in the appeal of the judgement rendered by Mr. Justice Evans on November 3, 1998 dismissing the plaintiff's motion for summary judgment. The applicants also seek an order varying or setting aside the confidentiality order of Mr. Justice Pinard dated July 13, 1998. The principal action was initiated by way of statement of claim filed on May 30, 1997 by the plaintiff Bayer Inc. for declaratory relief against the defendant Minister of Health (the Minister) in regard to the interpretation and application of C.08.004.1 of the Food and Drug Regulations, C.R.C., c.870, as amended (the Regulations).

Background

[2]      Bayer acquired the right to distribute so-called drug X, which is used in the treatment of human disease X, and filed a new drug submission (NDS) with the Minister in accordance with the procedure for obtaining a notice of compliance (NOC) concerning this drug. Drug X contains, among other things, active ingredient A. Drugs Y and Z contain this same active ingredient. Drug Y has been used outside of Canada for treatment of an unrelated human disease, while drug Z has been sold in Canada by Bayer as a veterinarian pharmaceutical product for treatment for an unrelated animal ailment. It should be noted that drug X is not the subject of a Canadian patent, and that Bayer is the drug's innovator.

[3]      Before a drug can be manufactured and sold in Canada, a NOC must be obtained from Health Canada, Therapeutic Product Programme (TPP). This will happen if the TPP decides that information contained within the NDS is complete and accords with Division 8 of the Regulations. The information that the manufacturer must provide related to the drug's safety and effectiveness, and includes pre-clinical data demonstrating such things as absence of toxicity, proof of therapeutic principle, and reports of clinical trials regarding the target population. The manufacturer must also provide a proposed product monograph, which would be included as an information package with the drug when it is sold to the public. The first manufacturer to receive an NOC is considered to be the drug's innovator.

[4]      A second manufacturer of the same drug, usually a generic manufacturer, may also seek and receive an NOC by submitting an abbreviated NDS (ANDS), comparing its drug with the innovator's. The second manufacturer must demonstrate that its drug is the pharmaceutical and bio-equivalent of the innovator's drug. Pharmaceutical equivalence involves showing that the drugs contain identical amounts of identical medicinal ingredients in comparable dosage forms; however, non-medicinal ingredients do not have to be identical in both drugs. Bio-equivalence is based on pharmaceutical equivalence, as well as any bio-availability characteristics the Minister considers necessary. The ANDS cannot be issued unless and until the first manufacturer has filed its NDS and received an NOC. When examining the ANDS, the Minister has the discretion to examine any material or information filed by any manufacturer in an NDS or an ANDS.

[5]      Bayer was informed by the TPP that it will be issuing an NOC to a second manufacturer. Bayer contends that the Regulations, in particular C.08.004.1(1), create a minimum five year period in which the innovator is free from competition by generic manufacturers, and thus the TPP's action is not in accordance with article 1711 of the North American Free Trade Agreement (NAFTA). This article provides protection for the submission of undisclosed data relating to, inter alia, pharmaceutical products, which submission is necessary to determine whether the pharmaceutical is both safe and effective. Article 1711 mandates a five year term of protection starting from the date on which approval is granted to market the product. After becoming a signatory to NAFTA, Canada introduced the current regulatory framework for the approval of drugs in Schedule 843 of SOR 95-411. The defendant contends that Bayer's drug does not fall within the scope of the Regulations, and even if it does, the protection sought by Bayer is granted only in highly unusual situations.

Status of the Main Action

[6]      On July 13, 1998, Mr. Justice Pinard issued a protective order following a motion filed by Bayer under Rule 369. The order effectively sealed certain documents, deemed restricted documents, produced by the plaintiff for the proceedings, ensuring their confidentiality. This motion was consented to by the defendant Minister.

[7]      On September 9, 1998, Bayer brought a motion for summary judgment, which was heard by Mr. Justice Evans. The day after this motion was heard, counsel for the Canadian Drug Manufacturers Association (CDMA) became aware of Bayer's action, and the following day gave notice to this Court's Administrator that although they had received no instructions from the CDMA or any of its individual members, a motion may be forthcoming regarding joinder under Rule 104(1)(b) or intervener status under Rule 109 of the Federal Court Rules, 1998. Subsequently, counsel for Apotex and Novopharm filed a notice of motion and supporting affidavits with the Court on October 23, 1998.

[8]      On November 3, 1998, Mr. Justice Evans released reasons for his decision denying Bayer's motion for summary judgment. Evans, J. held that drug X is a "new drug" within the meaning of C.08.001 of the Regulations, and it falls within the scope of C.08.004.1, despite the fact that active ingredient A is also found in another drug - drug Z - previously approved for sale in Canada in connection with treatment for an unrelated animal disease. The Court characterized the purpose of the overall scheme of the Regulations as facilitating the approval process for new drugs when sought by manufacturers other than the innovators, thus reducing the cost of drugs to provincial governments and the public. C.08.004.1 does not afford innovators a protection analogous to that of a patent. Furthermore, the Minister does not necessarily either rely on or examine the innovator's information contained in its NDS when considering an ANDS for an NOC; rather, the information contained in the ANDS forms the basis of the decision, and Ministry of Health officials are concerned mainly with ensuring that it established the pharmaceutical equivalence and bio-equivalence of the new drug to the innovator's drug (called the Canadian reference product).

[9]      During the course of oral argument in this motion, counsel for Bayer indicated that the decision of Mr. Justice Evans would be appealed on an expedited basis.

Pertinent Legislation

[10]      The pertinent provisions of the Federal Court Rules, 1998 are set out below:

104.(1) At any time, the Court may

(a) order that a person who is not a proper or necessary party shall cease to be a party; or

(b ) order that a person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined be added as a party, but no person shall be added as a plaintiff or applicant without his or her consent, signified in writing or in such other manner as the Court may order.

(2) An order made under subsection (1) shall contain directions as to amendment of the originating document and any other pleadings.

109.(1) The Court may, on motion, grant leave to any person to intervene in a proceeding.

(2) Notice of motion under subsection (1) shall

(a ) set out the full name and address of the proposed intervener and of any solicitor acting for the proposed intervener; and

(b ) describe how the proposed intervener wishes to participate in the proceeding and how that participation will assist the determination of a factual or legal issue related to the proceeding.

(3) in granting a motion under subsection (1), the court shall give directions regarding

(a ) the service of documents; and

(b ) the role of the intervener, including costs, rights of appeal and any other matters relating to the procedure to be followed by the intervener.

Applicants' Position

[11]      The applicants argue that because they are Canada's largest generic drug manufacturers, they are directly affected by the issues in this matter, viz. the process by which manufacturers of new drugs obtain the Minister's approval to sell such drugs in Canada, and the degree of protection afforded to the innovator. The ultimate decision in this action will affect when generic manufacturers may make submissions for generic drugs and obtain a NOC. The applicants contend that their interests diverge from those of the Minister. Neither of the defendants in the main action is capable of representing the generic manufacturers' interests adequately. Indeed, Apotex and Novopharm often find themselves facing off against the Minister in court. As "second" drug manufacturers, they argue that their perspective should be made available to the court. They cite Merck Frosst v. Canada, 72 C.P.R. (3d) 187 (F.C.T.D.) and Merck Frosst v. Canada, 72 C.P.R. (3d) 517 (F.C/A) to good effect.

[12]      Counsel for the applicants vigorously opposed the consent protective order. Any judgment rendered in concert with this order would create a law unknowable to those affected by it. The applicants argued that they need to know the facts and circumstances surrounding Bayer's drug X, in part because the Minister appears not to have disputed these facts, when indeed there may be cause for dispute. Moreover, Evans J. made it clear in his decision that the outcome of this litigation will be of potentially great significance for the entire pharmaceutical industry.

Respondents' Position

[13]      The Minister did not oppose the applicants' motion to be granted status, but did contend that the confidentiality order was necessary to protect Bayer's commercial interests in its trade secrets. Counsel for the Minister also averred that he strenuously argued opposed the motion for summary judgment before Evans J.

[14]      Bayer, however, argued against the inclusion of the applicants as either parties to or interveners in the main action. Bayer disputed the applicants' contention that they should have been served as parties, indicating that service on all generic manufacturers was practically impossible. Bayer objected to adding the applicants as parties because there is no triable issue in existence between them, which is required by Rule 104. The applicants should not be added as interveners because it is too late in the proceedings to allow them in, and they have failed to show sufficient reasons for so doing. Granting the applicants status at this stage would operate to greatly prejudice Bayer. Moreover, defining their rôle is almost impossible.

[15]      With regard to the consent protective order, Bayer argued that no need to vary or set it aside exists. Evans J. stated in his reasons that all that remained to be determined were questions of law, not fact. He also acknowledged the existence of the protective order, and stated that no further details relating to the secret drugs would be provided in his judgment because they were not material to the resolution of the issues in dispute. If the order were to be varied or set aside, Bayer would suffer irreparable harm; it relied on the protection afforded by the order when it produced various documents which contains trade secrets relating to drug X. Bayer wants to get away with keeping the composition of its drug, which it seeks to peddle for human consumption, a secret, but does not bother to seek patent protection for its drug. Patent protection would blow the secret, but protect Bayer's commercial interest.

Analysis

[16]      The respondent Bayer submits that before the applicants can be added as parties or interveners, the following test articulated by Mr. Justice Addy in Fishing Vessel Owners' Association of British Columbia v. Canada (Attorney General) (1985), 57 N.R. 376 (F.C/A) at 380 must be satisfied:

The test to be applied to enable a person to be joined as a party is that the action or at least part of the action must be maintainable as between the applicant and the party against whom the former is seeking to be joined.

This, of course, is not a test for intervention. In Apotex Inc. v. Attorney-General of Canada et al. (1994), 56 C.P.R. (3d) 261 (F.C.T.D.) at 266, Madam Justice Simpson lists five factors to consider in an application for party or intervener status:

1.      The status of the case. What is the procedural and substantive development of the matter to date? How well have the issues been defined?

2.      The impact of the decision. Who will be affected? Are the issues of interest to the parties, to a broader group such as an industry or to the public at large?

3.      The nature of the rights which the moving parties assert. Are they direct or remote? Are they substantive, procedural, economic?

4.      The nature of the evidence the proposed parties or interveners are in a position to adduce and whether it will assist the court in reaching its decision.

5.      The ability of the existing parties to adduce all the relevant evidence and their apparent enthusiasm for the task.

[17]      Mr. Justice Rouleau of this Court considered an application brought by the Institute of Canadian Advertising seeking an order which would allow it to participate or intervene in Rothmans, Benson & Hedges Inc. v. Attorney General of Canada [1990] 1 F.C. 84, and held:

. . . a number of criteria established by the jurisprudence must be taken into account in considering such a motion.

1.      Is the proposed intervenor1 directly affected by the outcome of the trial?

2.      Is the position of the proposed intervenor adequately defended by one of the parties to the case?

3.      Are the interests of justice better served by the intervention of the proposed intervenor?

4.      Can the Court hear and decide the case on its merits without the intervention of the proposed intervenor?

The Federal Court of Appeal approved of Mr. Justice Rouleau's formulation in the same case on appeal ([1990] 1 F.C. 90), and added that an organization which is genuinely interested in the issue raised and has special knowledge and expertise related to that issue may qualify for intervener status.

[18]      The criteria articulated by Rouleau J. were cited and applied by this Court in Holiday Park Developments Ltd. v. Canada (1994), 75 F.T.R. 76, where the applicant was granted limited intervener status, allowing her to bring motions to press the parties to proceed or, alternatively, to dismiss the action for want of prosecution. In that particular case, the Court noted that the applicant bears the onus of demonstrating that she ought to be accorded intervener status.

[19]      In the instant case, it appears that the outcome of the main action will necessarily have an impact on the applicants in that it may affect the manner in which they submit future ANDS to the Minister. The litigation, which involves the interpretation of the Regulations and article 1711 of NAFTA, concerns the very process by which manufacturers of new drugs obtain the Minister's approval to market their products in Canada. As Evans J. points out at paragraph 5 of his decision denying Bayer's motion for summary judgment:

The outcome of this dispute will be of potentially great significance for the pharmaceutical industry as a whole. If the plaintiff succeeds, companies that manufacture and market brand-name drugs stand to benefit from the absence of competition for five years from the time that they obtain approval to market a new drug. However, manufacturers of generic drugs, which do not conduct, analyze or finance the tests done to satisfy the Minister of the safety and effectiveness of the drug, will be commercially harmed if they are subject to this delay before they can be given approval by the Minister to market a drug that is the equivalent of a drug for which approval has already been given.

[20]      Mr. Justice Rouleau's second factor, and Madam Justice Simpson's fifth, ask whether the defendants will adequately advocate the applicants' position. As second drug manufacturers, the applicants' interests often diverge from those of the Minister. Under the regulatory scheme, the Minister assumes the rôle of decision-maker, while the applicants, and their corporate comrades in the pharmaceutical drug industry, adopt the posture of approval-seekers. Given this power differential, can it be said with confidence that the Minister will adequately defend the applicants' position?

[21]      As manufacturers of generic drugs, the applicants engage in direct competition with the brand-name drug manufacturers. While innovation in the drug industry, and indeed in most industries, is to be encouraged with such means as financial incentives, it is also important, if not equally so, that drugs be available to provincial governments and members of the public at prices regulated at least by competition in the marketplace, if not by the regulatory agencies of the State. Given the potential far-reaching effects of the outcome of the trial, input from the applicants will further serve the interests of justice, not only inter partes, but also as between the drug manufacturers as a class and the general public.

[22]      Mr. Justice Rouleau's, and Madam Justice Simpson's, fourth criterion involve the ability of the Court to hear and decide the case on its merits without the applicants' intervention. The material facts as between the originally named parties are not disputed. The applicants indicate that if they are allowed to participate in a meaningful and effective way, they may dispute a portion of the facts. This could result in added delay and costs in the matter; however, it could also result in the addition of relevant information being presented to the Court which could assist it in its determination of the issues. This matter raises an issue or issues of regulatory procedures, not necessarily the comparison of one drug's composition against that of another. That is the rationale of the would-be interveners' bid to be allowed into the litigation. They could possibly enhance public safety in regard to the secret drug X.

[23]      In response to Madam Justice Simpson's first factor, viz. the status of the case, Bayer contends that the applicants' motion should fail for want of timeliness. In Brick Warehouse Corp. v. Brick's Fine Furniture Ltd. (1992), 42 C.P.R. (3d) 158, 53 F.T.R. 133 (T.D.), the Court granted the applicant intervener status despite some delay in bringing the motion to intervene. The delay had not prejudiced any party and the intervener had a legitimate interest in the outcome of the action. In Wewayakum Indian Band v. Wewayakai Indian Band (1993), 65 F.T.R. 292 (T.D.) at 297, Mr. Justice Teitelbaum held that an applicant wishing to be added as a party or intervener must file its application in a timely manner so that no existing party to the proceedings will be prejudiced if the applicant's motion is granted.

[24]      In the instant case, the applicants' delay is attributable to their lack of knowledge of the action, despite their usual and customary vigilance of the Federal Court database. The circumstances of this case illustrate the vagaries of such an informal system, and cry out for the implementation of a more structured and formal means of notification, perhaps by mandating notification or service on the governing professional association, the CDMA, which can, in turn, disseminate the information to its members who may then chose appropriate courses of action as cases arise.

[25]      Of course, the Court can hear and decide the case on its merits without the applicants' intervention, since it is a matter mainly of construing regulation C.08.004.1, and article 1711 of NAFTA in the circumstances described by the original parties. With the applicants as limited interveners, however, it seems obvious to this judge that the Court can better hear and adjudicate the only issues - the issues of law - which are outstanding herein. What, however, of the general public's interest in all this?

[26]      Unfortunately, it is difficult to believe that the Minister's minions are effective guardians of the public interest having consented to a confidentiality order allowing Bayer to keep secret drug X, for human disease X. Will, and does, the public have a burning interest in knowing what it is that the Minister might permit Bayer to unleash in the market for profit? Human life and health are infinitely more important than anybody's profits. What if approval of that secret potion be "fast-tracked", just to please Bayer? What if it be deleterious to humans? So, O Canada do the Minister's bureaucrats stand on guard for thee? Recent revelations in the public domain, before the Senate Standing Committee on Agriculture and Forestry, and this Court's own decision Dept. of National Health and Welfare v. Chander, Joshi and CHRC (1998) 131 F.T.R. 301 especially paragraphs [11], [12] and [13], pp. 305-06, make one wonder. When profit-making schemes are proposed for approval in secret, at who knows what cost to human life or health, profit-making could well be little more than rotten, heartless greed. Unless this régime be altered by Parliament, the public can only hope.

[27]      Let no one think that Apotex's and Novopharm's interest is not also the scooping up of profits. They might, at least, bring to the controversy a vigilante's attention and a means of alerting the general public and the Health Protection Branch of the Minister's department to danger if the approval process be precipitous or otherwise inadequate. Unless this régime be altered by Parliament, the public can only hope.

[28]      With regard, however, to the applicants' desire to be accorded status at the appeal of Mr. Justice Evans's decision dismissing Bayer's motion for summary judgment, it appears that their ship has sailed. It is difficult, if not impossible, to define what rôle they would play at the appeal, since the appeal will be dealing with a question of law. But that decision is up to the Court of Appeal, not the Trial Division at this stage or proceedings.

[29]      The moving parties - applicants - herein can aid the Court, and the Minister by examining the safety of Bayer's potion X and commenting on it, but only by means of specially engaged outside experts, who will be subject to the confidentiality order, who must swear to keep the formula secret, except in confidential depositions to this Court. If there be insufficient time for such assessment, or for whatever other reasons, Apotex and Novopharm may forego the engagement of such outside expert or experts. The cost of engaging such expert or experts, if engaged, shall be borne equally by the moving parties and the Minister, who shall be informed of the expert's investigation, methods and results. Their scope shall be kept narrow and specific.

[30]      So, Apotex and Novopharm may intervene conditionally, if Bayer's appeal fail, and if Bayer thereafter decide to prosecute its action. Intervention may be upon the formulation of drug X, and upon questions of law. Apotex and Novopharm shall, if not represented by one counsel examining for discovery for both, decide between them which shall have carriage of discoveries, one only, but both shall be exigible to discovery at Bayer's instance; they shall be limited in total, but otherwise subject to rules 279-81, to two expert witnesses and no other at trial; they shall file a pleading, a joint statement of intervention to which the other parties may respond by a pleading called: answer to intervention; and one of the interveners, only, or both jointly may appeal the outcome of the trial, as if a party thereto; and they shall be exigible to any costs, but entitled, if so adjudged, to recover only party and party costs throughout; any party, or the interveners may apply under rule 109(3) for further and more specific directions if so advised.

[31]      The remaining issue to be dealt with is the confidentiality order issued by Pinard J. on July 13, 1998. Generally, the law abhors attempts to fetter the openness of proceedings, and rightly so, for it is a sine quo non of our legal system that trials take place in open courts in adversarial proceedings conducted according to the rules of natural justice. Canadian courts are by nature and by constitution open forums. However - and perhaps unfortunately - protective orders are not unknown in this sort of litigation: Novopharm Ltd. v. Glaxo Group (1998), 81 C.P.R. (3d) 185 (F.C.T.D.). This Court has the power to vary or set aside such orders, but to do so there must be a compelling reason that was not directly presented to the Court when the order was originally issued. In other words, there must be some changed circumstances. Since the applicants will not be granted by this Court status to intervene at the appeal of the summary judgment motion, this Court does not have to concern itself with varying or setting aside the protective order, except in the limited and conditional manner described above.

[32]      In the result, the application for leave to be granted status to intervene is permitted conditionally and in limited scope, and Mr. Justice Pinard's protective order stands, conditionally varied to cover the interveners' expert or experts.

[33]      Bayer shall pay each moving party one-half of its party-and-party costs hereof, as assessed or as agreed.

                                

                                 Judge

Ottawa, Ontario

December 2, 1998

__________________

1. The Supreme Court of Canada, and the 1998 rules, spell this: intervener.