Date: 19990421
Docket: T-2309-98
OTTAWA, ONTARIO, THIS 21ST DAY OF APRIL, 1999.
PRESENT: THE HONOURABLE MR. JUSTICE EVANS
BETWEEN:
HOFFMAN-LA ROCHE and
SYNTEX PHARMACEUTICALS INTERNATIONAL LIMITED
Applicants
- and -
THE MINISTER OF NATIONAL HEALTH AND WELFARE
and APOTEX INC.
Respondents
ORDER
The motion for a stay is dismissed.
John M. Evans
J.F.C.C.
Date: 19990421
Docket: T-2309-98
BETWEEN:
HOFFMAN-LA ROCHE and
SYNTEX PHARMACEUTICALS INTERNATIONAL LIMITED
Applicants
- and -
THE MINISTER OF NATIONAL HEALTH AND WELFARE
and APOTEX INC.
Respondents
REASONS FOR ORDER
EVANS J.:
[1] In an order dated April 7, 1998 I granted an application for judicial review brought by Hoffman-La Roche. I held that a notice of compliance issued by the Minister of National Health and Welfare to Apotex on November 9, 1998 in respect of sustained release naproxen 750 mg tablets was null and void, and set it aside; and that since the decision of the Minister on December 2, 1997 to withdraw the notice was consequently valid, I granted a declaration to that effect.
[2] The effect of this order was to affirm the view taken by the Minister of the legal position when he revoked the notice of compliance on December 2, 1997. It also determined that Apotex had been wrong in law in maintaining that the notice of compliance issued to it was valid and, since the notice was not revoked on grounds of health, safety or effectiveness pursuant to C.08.006(2) of the Food and Drug Regulations, the Minister"s purported withdrawal was null and void.
[3] Apotex intends to appeal my order to the Federal Court of Appeal on an expedited basis and has applied for a stay of this order pursuant to subsection 50(1) of the Federal Court Act R.S.C. 1985, c. F-7 and Rule 398(1) of the Federal Court Rules, 1998, SOR/98-106. The motion is vigorously opposed by both Hoffman-La Roche and the Minister.
[4] I should also add for the sake of completeness that after I heard this motion on Friday, April 16, 1999, Reed J. issued an order on Monday, April 19, 1999 declaring that Apotex"s formulation of controlled release naproxen tablets did not infringe Hoffman-La Roche"s patent, and that the patent itself was invalid.
[5] The parties are agreed on two matters. First, the tripartite test established in RJR- MacDonald Inc. v. Canada (Attorney General),_[1994] 1 S.C.R. 311 governs the exercise of the discretion to grant a stay pending the disposition of an appeal. Second, Apotex"s proposed appeal raises a serious issue.
[6] There was, however, no agreement on whether Apotex had demonstrated that it would suffer irreparable harm if my order were not stayed, and whether the balance of convenience favoured maintaining the status quo. Although I recognize that these aspects of the test are not to be addressed in a mechanical fashion, but should be considered holistically, or cumulatively, I shall nonetheless start by considering them separately.
(i) Irreparable harm
| (a) mootness and declaratory relief |
[7] Hoffman-La Roche argued that my order did not effect any change in the parties" legal position since I had found that the dispute about the validity of the notice of compliance was moot, because the respondent Minister had the same view as the applicant for judicial review, Hoffman-La Roche, namely, that the notice was invalid. Accordingly, Apotex would not suffer any harm, irreparable or otherwise, if the order were not stayed.
[8] This seems to me an unrealistic contention. Before I issued my order Hoffman-La Roche and the Minister, on the one hand, and Apotex on the other, took different views of the parties" respective legal rights. Hoffman-La Roche and the Minister maintained that, since no valid notice of compliance was ever issued to Apotex it was unlawful for Apotex to market its version of naproxen in Canada. Apotex, however, maintained that the notice of compliance was valid and its purported withdrawal was void; therefore, since the Minister had issued a notice of compliance to it, which he had no authority on the facts of this case to revoke, Apotex was in a position lawfully to market naproxen in Canada.
[9] The effect of my order is to resolve this dispute and to declare that the notice of compliance was invalid, and that therefore it is not lawful for Apotex to market its naproxen. While this order formally declares the parties" legal rights retrospectively, in reality it decides a legal question that was previously doubtful and prevents Apotex from marketing naproxen until it is set aside, or some other legal proceeding is instituted.
[10] For similar reasons, I reject Hoffman-La Roche"s contention that, since declaratory relief is not constitutive of the parties" legal rights and duties, it cannot be suspended. However, the declaration that the Minister"s withdrawal of the notice of compliance is valid does affect the legal position of the parties, and is thus capable of causing irreparable harm if not stayed pending the disposition of Apotex"s appeal.
[11] Finally, Hoffman-La Roche argued that a stay would not benefit Apotex because, even if granted, it would not enable it to market naproxen lawfully pending the appeal, because it would still not have a notice of compliance. Again, this seems to me to be based on a misconception. If a stay is granted, then, prior to the appeal, whether a notice of compliance has been issued to Apotex is the subject of a legal dispute. If Apotex"s appeal is successful, it will be held to have had a valid notice of compliance for its naproxen from the time when it was issued by the Minister on November 9, 1998.
| (b) financial and reputational harm |
[12] Apotex submits that if the order is not stayed it will suffer irreparable harm as a result of lost sales of its product, the return and destruction of tablets already supplied to pharmacists that have not yet been dispensed and, in the longer term, damage to its reputation as a reliable supplier of pharmaceutical products. It also alleges that it may lose forever its position as the generic market leader for naproxen and that, if not stayed, the order will cause serious dislocation to the distribution chain, to the detriment of Apotex and its customers. Moreover, there will be needless and harmful delays and other administrative inconveniences as a result of delisting Apotex"s naproxen from provincial formularies, and relisting it if the appeal succeeds.
[13] Prospective sales will be lost because provincial health authorities will be notified that Apotex has not been issued with a notice of compliance with respect to naproxen, and the product will be removed from provincial formularies, which identify generic drugs that are interchangeable with identified brand-name products.
[14] Apotex submitted that, while its sales of naproxen to date have been quite modest, it was only on April 15, 1999 that it was listed in the formulary of Ontario, which is expected to be by far the biggest market for its product, and to be well in excess of $10 million dollars.
[15] Counsel for Apotex pointed out that even a quantifiable financial lost may be irreparable when it is not recoverable: RJR-MacDonald, supra, at page 341. He submitted that, if its appeal succeeded, Apotex would have no cause of action against the Minister to recover the loss caused to it by the Minister"s unlawful withdrawal of the notice of compliance: North American Gateway Inc. v. Canada (CRTC) (F.C.A.; 97-A-47; May 26, 1997). Moreover, neither Hoffman-La Roche, nor the Minister has offered an undertaking to indemnify Apotex against any such loss in the event that its appeal is successful: Apotex v. Wellcome Foundation Ltd. (1998), 82 C.P.R. (3d) 429, 431-432 (F.C.A.).
[16] I am also prepared to accept that the disruption, delays and other inconveniences likely to be caused to Apotex and to others, including physicians and pharmacists, by the delisting and possible relisting of Apotex"s product, will constitute significant harm for which neither Apotex, nor anyone else, has a right to be compensated.
[17] However, since there was no evidence quantifying the volume and value of the tablets that would be returned and destroyed if Apotex"s naproxen were delisted from provincial formularies, this element of the claimed harm is merely speculative.
[18] In addition, I share the doubt expressed by Campbell J. in Apotex Inc. v. Wellcome Foundation Ltd. (1998), 81 C.P.R. (3d) 191 (F.C.T.D.) about the likelihood of reputational damage that will result from the delisting of Apotex"s naproxen. No doubt physicians, pharmacists and other customers might regard it as puzzling and unsettling if this product were put on the market, removed from it and put back on.
[19] However, it is known among physicians and pharmacists that litigation is rife in the pharmaceutical industry and that from time to time this leads to uncertainty about the legal status of particular medications that has nothing whatsoever to do with their safety or effectiveness. I expect that Apotex is well able to explain the situation that has arisen here in a way that will not result in long term damage to its general reputation as a reliable supplier of pharmaceutical products.
[20] Apotex was also concerned that, if no stay were granted, a competitor might enter the market before Apotex, including a "genericized" drug sponsored by Hoffman-La Roche, and that this would prevent Apotex from ever becoming the generic market leader for naproxen. However, in the absence of any evidence that a generic competitor is about to enter the market, I regard this claim for irreparable harm as speculative.
[21] My conclusion on this element of the tripartite test is that Apotex has made out a plausible, if not an overwhelming case for irreparable harm on the basis of the disruption of the distribution of naproxen and the likely loss of substantial sales, especially in Ontario, between now and the disposition of the appeal.
(ii) Balance of convenience
[22] Apotex relied on the following statement by Godman J.A. in International Corona Resources Ltd. v. Lac Minerals Ltd. (1986), 21 C.P.C. (2d) 252, 255 (Ont. C.A.) that he made in the context of a motion for the stay of an order pending an appeal:
I am of the view that as a general rule it is in the interest of justice that the status quo be maintained pending an appeal where such can be done without prejudicing the interest of the successful party.
[23] Counsel noted that Apotex had given an undertaking as to damages, so that Apotex will make good any loss sustained by Hoffman-La Roche as a result of sales of naproxen by Apotex between the making of my order and its unsuccessful appeal. Thus, maintaining the status quo would not cause any injustice to Hoffman-La Roche. The parties would simply be returned to the position in which they were prior to my order, when they took different views of the legal question of whether Apotex has a notice of compliance with respect to naproxen.
[24] However, to my mind the more difficult question for Apotex is that raised by counsel for the Minister in opposing the stay. He argued that there is a public interest in ensuring compliance by participants with the regulatory scheme created by the Food and Drug Regulations and the Patented Medicines (Notice of Compliance) Regulations. To grant Apotex a stay would in effect reward it for proceeding to market naproxen when it knew, or must have known, that no valid notice of compliance had been issued to it.
[25] The relevant public interest protected by the Minister, he contended, is not confined to issues of health and safety, although this is obviously at the heart of the regulatory scheme for approving the bringing to market of new drugs. There is also a public interest in the orderly administration of the scheme as a whole, including its provisions for the balancing through intellectual property rights of the competing public interests in more research and cheaper pharmaceutical products.
[26] Apotex"s principal response to this contention was that its conduct could not be characterized as a knowing and deliberate flouting of the law of the kind enjoined by the Court in Attorney-General for Ontario v. Grabarchuk (1976), 67 D.L.R. (3d) 31, 38 (Ont. Div. Ct.).
[27] Apotex submitted that, at the very least, it continued to market its naproxen after the Minister purported to withdraw the notice of compliance under an honest and genuine mistake of law. It believed that the notice of compliance issued to it was valid and accordingly acted under colour of right, even though, in the event, the Court subsequently held that the notice was invalid.
[28] However, Apotex pitched its case higher by relying on correspondence from which Dr. Bernard Sherman, the President and Chief Executive Officer of Apotex, inferred that the Minister of National Health and Welfare had agreed not to interfere with the continued marketing of naproxen by Apotex pending the disposition of Hoffman-La Roche"s application for judicial review that culminated in my order of April 7, 1999.
[29] Examining the correspondence in question I have come to the conclusion that there was no agreement as alleged by Dr. Sherman, and that the text of the correspondence does not reasonably support such a conclusion, except perhaps in the mind of a person who is strongly motivated by self-interest to believe that such an agreement existed.
[30] While I am prepared to accept that Apotex may have genuinely believed that it had right on its side, I am also driven to conclude that, when it decided to act on its view of the legal position, it did so in full knowledge that it might be proved wrong. Taking a calculated risk of this nature may not be the most obvious kind of "flouting of the law", but it is liable to erode the smooth administration of the regulatory scheme and its integrity, and is a form of self-help remedy that the Court should not encourage.
[31] As Pearce L.J. noted in Attorney-General v. Harris, [1961] 1 QB 74 at 95 (Eng. C.A.), a comment approved by Reid J. in Attorney-General for Ontario v. Grabarchuk, supra, at 39:
... a breach with impunity by one citizen leads to a breach by other citizens, or to a general feeling that the law is unjustly partial to those who have the persistence to flout it...
Litigation is always available to a company that believes that the Minister has acted unlawfully, and the pharmaceutical industry can hardly be said either to be strangers to the litigation process, or to lack the means necessary to retain first-class legal counsel.
[32] To support its claim of an agreement between the Minister and Apotex, counsel for Apotex relied in particular on two letters from a Mr. Dann Michols, Director General, Therapeutic Products Programme, Health Canada, written in response to letters from Dr. Sherman promptly protesting the withdrawal of the notice of compliance.
[33] In a letter dated December 14, 1998, responding to a letter from Dr. Sherman of December 3, 1998, Mr. Michols stated that he had considered Dr. Sherman"s comments, but remained of the view that the notice of compliance was void. And in a letter of December 31, 1998, in response to a letter dated December 14, 1998 written by Dr. Sherman in reply to Mr. Michols" letter earlier that day, Mr. Michols reiterates health Canada"s position on the issues, and concludes: "as you have noted, this matter is before the Federal Court for resolution".
[34] It is from this last comment, and the surrounding circumstances, that Dr. Sherman states that he inferred that Health Canada had agreed to permit Apotex to continue to market naproxen and would simply abide the outcome of Hoffman-La Roche"s application for judicial review.
[35] Dr. Sherman further stated that his belief in the existence of an agreement was also based on the fact that the Minister knew that Apotex was marketing and selling naproxen, despite the withdrawal of the notice of compliance on December 2, 1992. The following evidence supported Dr. Sherman"s view that the Minister was aware of Apotex"s activities.
[36] First, in his letter dated December 14, 1992, Dr. Sherman had warned Mr. Michols that Apotex would regard as slander of goods any statements by him to a third person that Apotex"s notice of compliance was invalid. Second, Apotex had given notice to the Minister, as required by the Regulations, that it was marketing naproxen. Third, an employee of Hoffman-La Roche stated in an affidavit filed on December 17, 1998 on behalf of Hoffman-La Roche for the purpose of its application for judicial review that Apotex was already marketing naproxen. And, since this affidavit would have been served on the Minister as the respondent to the application for judicial review, the Minister must be taken to have known what Apotex was doing.
[37] However, an affidavit was filed on behalf of the Minister for the purpose of the motion for a stay by a Ms. Anne Bowes, who holds the position of Regulatory Specialist - Patents in the Therapeutic Products Programme of Health Canada. She states, first, that she only learned that Apotex was marketing naproxen on reading Dr. Sherman"s affidavit of April 11, 1999 and, second, that Apotex had not given the Minister written notice of the marketing of its naproxen tablets.
[38] The first statement does not seem to me to be particularly damaging to Apotex"s position, which is that it had reasonable grounds to believe that the Minister knew that it was marketing naproxen, even if, as it turns out, this belief was mistaken.
[39] On the other hand, I regard as more serious the fact that Apotex did not notify the Minister, in accordance with C.01.014.3 of the Food and Drug Regulations, that it was selling naproxen. Apotex cannot explain why the notification form that it says that it completed and dated November 9, 1998 was not received by the Minister. I would have thought that, if Apotex had been really anxious to ensure that it was acting lawfully, it would have taken the steps necessary to see that its notification was received by the Minister. At best, Apotex can be said to have exhibited a lack of care, if not a somewhat cavalier attitude, towards regulatory compliance.
[40] I am not satisfied that the balance of convenience favours maintaining the status quo pending Apotex"s appeal of my order. I find that it was in breach of its statutory duty to notify the Minister that it was marketing naproxen, and that on the basis of Mr. Michols" letters, and the surrounding circumstances, it was not reasonable for Apotex to believe that the Minister had agreed that it could continue to market and sell naproxen, without incurring any sanction, pending the determination of Hoffman-La Roche"s application for judicial review.
[41] Finally, I must take into account the order that Reed J. issued on April 19, 1999. Mr. Radomski, counsel for Apotex, made a written submission after the hearing to the effect that this order made it pointless not to grant the stay. This is because there is no patent interest to protect, and health and safety have never been a concern with respect to Apotex"s naproxen.
[42] On the view of the matter that I have taken, Reed J."s order is not determinative of the motion to stay because it does not address the principal ground on which I have based my judgment. That is, the public interest in ensuring that those who do not comply with the law should not thereby benefit. Moreover, Reed J."s order may well be appealed and, conceivably, reversed.
[43] However, I also recognize that there is a public interest in ensuring speedy access to cheaper alternatives to brand-name drugs. In a written submission Mr. Woyiwada, counsel for the Minister, stated that, in light of Reed J."s order, the Minister would consent to orders setting aside the prohibition granted by Reed J. in March 1996, and varying accordingly the order of MacKay J. dated January 8, 1997. This would enable a notice of compliance to be issued to Apotex.
[44] This seems to me to be an attractive solution, because it provides a principled and pragmatic legal accommodation of the heads of public interest relevant here: respect for the law and competition.
[45] While Apotex cleared the irreparable harm hurdle, any harm that it may suffer will be largely the result of its "eyes open" decision to market naproxen despite the doubtful legal status of the notice of compliance (Lubrizol Corp. v. Imperial Oil Ltd. (1989), 22 C.P.R. (3d) 493, 507-509 (F.C.T.D.)), and its failure to ensure that it had properly notified the Minister that it was marketing naproxen.
[46] While the interests of justice may normally favour the grant of a stay pending an appeal when the applicant has given an undertaken as to damages and the appeal raises a serious issue, in this case the public interest in promoting compliance with the regulatory scheme tips the balance the other way.
[47] For these reasons, the motion for a stay is refused.
OTTAWA, ONTARIO John M. Evans
April 21, 1999. J.F.C.C.
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