Date: 20060525
Docket: A-232-06
Citation: 2006 FCA 198
Present: EVANS J.A.
BETWEEN:
APOTEX INC.
Appellant
and
MERCK & CO., INC., MERCK FROSST CANADA & CO.,
MERCK FROSST CANADA LTD., SYNGENTA LIMITED, ASTRAZENECA UK LIMITED and ASTRAZENECA CANADA INC.
Respondents
REASONS FOR ORDER
EVANS J.A.
[1] This is a motion by Apotex Inc. for an order staying a judgment of Hughes J. of the Federal Court, dated April 26, 2006, pending the disposition of its appeal of the judgment to this Court. The Judge made the order at the end of a 14-week trial of a patent infringement action, which had commenced in 1996. He found that, by making and selling its product, Apo-Lisinopril, Apotex had infringed Canadian Letters Patent Number 1,275,350 (the "'350 patent") in respect of the medicine lisinopril, a compound said to be useful for the treatment of hypertension. The '350 patent expires in 2007.
[2] Hughes J. granted an injunction against future infringement by Apotex and awarded damages to the plaintiffs, who include the patent owner, Merck & Co., Inc. ("Merck"), and licensees, Merck Frosst Canada Inc. ("Merck Frosst"), and AstraZeneca Canada Ltd. ("AstraZeneca"). He rejected Apotex' defence that the '350 patent was invalid. The Judge granted a 30-day temporary stay of his order, which expires on May 26, 2006, pending Apotex' determination of whether to appeal. Apotex has now filed a notice of appeal.
[3] At the start of the hearing, I indicated that the appeal would be expedited, to which counsel assented. All counsel stated that they would be available in the week commencing September 11, 2006, for a hearing of the appeal in Toronto.
[4] Stays pending the disposition of an appeal are granted on the same bases as interlocutory injunctions. That is, the moving party must establish that there is an arguable issue to be decided on the appeal, adduce clear evidence that it will suffer irreparable harm if the stay is not granted, and demonstrate that the balance of convenience favours the grant of a stay.
[5] I would only add that a stay is a discretionary remedy awarded, ultimately, in the interest of justice. It is also an extraordinary form of relief, in the sense that, when a court has issued a judgment finding a defendant liable, the plaintiff is normally entitled to have access to its remedy without further delay.
[6] It is conceded that Apotex' grounds of appeal include arguable issues. This motion turns principally on whether the moving party has produced clear evidence that, without a stay, it will suffer irreparable harm, an issue which I now consider. Apotex relied on various kinds of irreparable harm.
Irreparable Harm
(i) financial loss
[7] Apotex says that if the order of Hughes J. is not stayed and it wins the appeal, it will not able to recover the profits lost as a result of being enjoined from selling Apo-Lisinopril between May 26, 2006 and the disposition of the appeal. Since it has no right of action to recover this loss it is irreparable. However, this argument was undermined when an undertaking in damages was offered on behalf of the respondents.
[8] The undertaking was calculated to indemnify Apotex against irrecoverable financial loss that it may suffer, in the event that a stay is not granted and its appeal is successful. It is modelled on that accepted by Noël J.A. in AstraZenceca Canada Inc. v. Canada(Minister of Health), 2005 FCA 208 at para. 19, as a "full answer to Apotex' argument that it does not have a legal claim for its losses." I see no reason not to come to the same conclusion in the present case.
[9] I invited counsel to propose the wording of the undertaking, and indicated that, if they could not agree, I would formulate the undertaking. I have received submissions; the parties do not agree. My wording of the undertaking differs somewhat from those proposed by the parties, and tracks that accepted by Noël J.A. in AstraZeneca. It is as follows:
The respondents undertake to abide by any order that the Court may make concerning damages if the appeal of Apotex Inc. of the judgment of Hughes J., dated April 26, 2006, in Court File No. A-232-06 is allowed and it ultimately appears that this judgment has caused damage to Apotex for which the respondents ought to compensate Apotex during the time period beginning on the day that this Court dismisses the motion for a stay and ending on the day that this Court grants Apotex' appeal.
(ii) disruption of the market
[10] Apotex observes that it has been in the market in Canada for lisinopril since 1996 and has a 75% share of it, and that sales of Apo-Lisinopril represent more than 5% of Apotex' annual sales. In contrast, the lisinopril products of Merck and AstraZeneca comprise a much smaller percentage of their sales. Apotex argues that the absence of a stay of the order of Hughes J. before its appeal is decided will have serious implications.
(a) the listing and de-listing process
[11] Provinces maintain formularies which list interchangeable pharmaceutical products. Pharmacists may be required to fill a prescription with the cheapest interchangeable drug, which is generally that of the generic manufacturer. Being listed on a formulary is critical to the commercial success of a generic product.
[12] Apotex submits that, if Apo-Lisinopril is de-listed from the formularies because the order of Hughes J. prevents Apotex from supplying its product, it will have to be re-listed if Apotex wins its appeal. However, re-listing can take several months and might not even happen before the expiry of the patent in 2007. In addition to depriving the public of access to cheaper drugs, the listing, de-listing and re-listing of Apo-Lisinopril will cause confusion among pharmacists and patients, damage Apotex' reputation, and threaten its ability to regain its previous market position because other generic companies may enter the market, or innovator companies may produce a "pseudo-generic".
[13] Dr Sherman states in his affidavit that a refusal to stay the order of Hughes J. will cause Apo-Lisinopril to be de-listed from provincial formularies "almost immediately" and that, if Apotex is successful in its appeal, there will be a reluctance to re-list it, especially since the '350 patent will expire in 2007, and consequential delays. Dr Sherman's statements regarding the likelihood of delays in re-listing were supported by an affidavit from Kenneth Brown, a pharmaceutical consultant based in Winnipeg, Manitoba.
[14] There has not been time for the respondents to cross-examine Apotex' affiants on their affidavits. Their persuasiveness is also reduced by the affidavit of Ms Donoahue-Walker. She challenged Dr Sherman's assertion that Apo-Lisinopril will be de-listed almost immediately following the judgement of Hughes J., pointing out that the judgment does not order de-listing, that de-listing requires a regulation, and that it can take several months for a generic product to be de-listed as a result of litigation.
[15] She also stated that, in the largest markets for generic drugs in Canada, streamlined systems are in place for ensuring the expedited listing, and re-listing, of generic drugs, in order to contain drug costs. Ms Donoahue-Walker said that it now takes only a month for an interchangeable drug to be listed in Ontario, and that similar procedures are in place in British Columbia, Alberta, and Saskatchewan. She was not aware of any instances of the "reluctant to list" attitude on the part of provincial authorities, as alleged by Dr Sherman. After all, in order to cut costs, provincial agencies have an interest in including in their formularies cheaper, interchangeable drugs. The listing process in the Atlantic region is different and takes between one to three months. She noted that Mr Brown's experience was largely limited to Manitoba, a relatively small market.
[16] Ms Donoahue-Walker's affidavit is more detailed and precise than the evidence adduced on behalf of Apotex on these issues. On the basis of the material before me, I am not satisfied that, in Apotex' largest markets, Apo-Lisinopril will be de-listed as rapidly as Dr Sherman asserts, or that re-listing will take as long. Consequently, any disruption to the market is unlikely to be to the extent alleged by Apotex.
[17] Further, in these circumstances, given Apotex' current position of market dominance, the goodwill associated with Apo-Lisinopril, and the absence of a current generic or "pseudo-generic" competitor, it is not probable that, without a stay, Apotex' position in the lisinopril market will be permanently damaged.
(b) impact on pharmacies
[18] Dr Sherman and Tom McAnulty, a pharmacist who owns and operates a pharmacy in St. Catherines, Ontario, state that if a stay is not granted, pharmacists will be confused, they will stop selling Apo-Lisinopril, and will return their unsold inventory to Apotex, much of which will be incapable of resale and, hence, wasted. Further, as a result of the uncertainty and confusion caused by the listing, de-listing and re-listing of the drug, pharmacists will be reluctant to re-stock Apo-Lisinopril if Apotex succeeds in having Hughes J.'s order overturned on appeal. This will cause financial loss to Apotex and damage its reputation. They also say that Apotex' inability to supply Apo-Lisinopril to pharmacists will result in a lisinopril shortage, which Merck Frosst and AsraZeneca will not be able to fill.
[19] In response, Donald McCracken, a Merck Frosst employee, states in an affidavit that the order of Hughes J. does not forbid pharmacists from selling their existing stock of Apo-Lisinopril, which Apotex can explain to them. And, when informed by Apotex that the order does not call into question the safety or effectiveness of the drug, pharmacists will not necessarily return their existing stock of Apo-Lisinopril. The listing of new drugs, de-listing and re-listing are now sufficiently common in the pharmaceutical industry as a result of patent litigation that it does not cause confusion among pharmacists when they receive the manufacturer's explanation.
[20] As for the alleged lisinopril shortage, Mr McCracken says that pharmacies typically carry a month's supply of drugs, that it is likely that, in the 30-day grace period given by Hughes J., Apotex ensured that pharmacists have a larger than normal supply of Apo-Lisinopril, and that Merck Frosst and AstraZeneca will have enough time to ramp up the production of PRINIVIL and ZESTRIL. Mr McCracken's evidence was supported on these issues by the affidavit of Ms Nenadovich.
[21] On the basis of the affidavits filed, Apotex' evidence on this issue, in my view, falls short of discharging its onus of proof.
[22] To summarize, I have accepted the respondents' undertaking to compensate any loss suffered by Apotex that should be compensated, in the event that its appeal is successful, as an answer to Apotex' allegations of financial loss flowing directly from its compliance with the order of Hughes J. I am not satisfied that Apotex has proved that it, or the public, would suffer other forms of irreparable harm if a stay is denied pending the hearing of the appeal in the week commencing September 11, and its subsequent disposition.
[23] Since Apotex' evidence on the question of irreparable harm is too flimsy and speculative to warrant granting a stay, this is sufficient to dispose of the motion. Nonetheless, I shall briefly examine the parties' arguments on the balance of convenience.
Balance of convenience
(i) pricing
[24] Apo-Lisinopril is cheaper than the interchangeable Merck lisinopril product, PRINIVIL, and AstraZeneca's ZESTRIL. In his affidavit, Dr Sherman, the chair of Apotex, says that Apo-Lisinopril sells at 70% of the price of the Merck and AstraZeneca drugs, a differential that represents an annual saving of $25 million. However, Tama Donoahue-Walker, an employee of Merck Frosst, states in an affidavit that, although Apo-Lisinopril is listed in provincial formularies at 70% of the price of PRINIVIL, in fact it was sold between 1996 and 2004 at an average price of 94% of the price of PRINIVIL and ZESTRIL. The affiant attaches supporting data.
[25] While I am not in a position to resolve the evidential dispute on this motion, I am not satisfied on the basis of the material before me that Apotex has shown that de-listing Apo-Lisinopril will result in savings of the magnitude asserted by Dr Sherman, especially in view of my conclusions below on the time taken to list and de-list generic drugs.
(ii) health issues
[26] Apotex argues that de-listing and re-listing will prejudice public health. Douglas Weir, a psychiatrist practising in Toronto, stated in an affidavit that the literature indicates that the refusal by a significant percentage of patients to comply with the instructions pertaining to prescribed medicine is an important barrier to effective treatment. This is likely to be increased by a change of medication caused by the de-listing of drugs from the formularies, and their subsequent re-listing. Many patients do not react well to changing from a pill of one colour or shape to one with a different appearance. The benefit of the "placebo effect" may also be lost when medication is different in appearance from that to which the patient is accustomed.
[27] However, Dr. Weir's experience is with patients who are taking medicine for psychiatric disorders, which may have unpleasant side-effects. It cannot necessarily be generalized to medications prescribed for other medical conditions, such as hypertension. He has never prescribed lisinopril.
[28] Maria Nenadovich, a practising retail pharmacist for more than thirty years in various settings and locations in Ontario, said in an affidavit that, in her experience, changes in the appearance of medication do not increase patient non-compliance with instructions for taking prescribed medication. Moreover, it is far from clear that Apo-Lisinopril will be de-listed prior to the disposition of Apotex' expedited appeal in this matter.
[29] I have included the price and health factors on the assumption, but without deciding, that the public interest is relevant to the exercise of discretion to grant a temporary stay of a judgment in private law litigation, including a patent infringement action.
(iii) comparative harms to the parties
[30] The respondents are not likely to suffer significant harm by being kept from their remedies for another few months. The concern that they expressed about Apotex' willingness and ability to satisfy what is likely to be a very large award of damages was not substantiated nor, as far as I could tell, related to the issue of the stay.
[31] Nonetheless, the respondents have obtained a judgment in their favour in a matter that was commenced ten years ago, and are entitled to their remedies. While immediately complying with the order of Hughes J. may be unattractive from Apotex' point of view, Apotex took a calculated risk that its challenge to the validity of the '350 patent would prove a good defence to an infringement action.
[32] If it had been necessary, I would have found that the balance of convenience does not point clearly in either direction.
[33] Consequently, Apotex' motion for a stay will be denied on the basis of the undertaking in paragraph 9 of these reasons, with costs in the cause.
"John M. Evans"
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