Date: 20050602
Dockets: A-536-04
A-535-04
Citation: 2005 FCA 208
PRESENT: NOËL J.A.
A-536-04
BETWEEN:
ASTRAZENECA CANADA INC.
Appellant
and
THE MINISTER OF HEALTH, THE
ATTORNEY GENERAL OF CANADA and
APOTEX INC.
Respondents
A-535-04
BETWEEN:
ASTRAZENECA CANADA INC.
Appellant
and
THE MINISTER OF HEALTH, THE
ATTORNEY GENERAL OF CANADA
Respondents
and
APOTEX INC.
Intervener
Heard at Toronto, Ontario, on May 27, 2005.
Order delivered at Ottawa, Ontario, on June 2, 2005.
REASONS FOR ORDER BY: NOËL J.A.
Date: 20050602
Dockets: A-536-04
A-535-04
Citation: 2005 FCA 208
PRESENT: NOËL J.A.
A-536-04
BETWEEN:
ASTRAZENECA CANADA INC.
Appellant
and
THE MINISTER OF HEALTH, THE
ATTORNEY GENERAL OF CANADA and
APOTEX INC.
Respondents
A-535-04
BETWEEN:
ASTRAZENECA CANADA INC.
Appellant
and
THE MINISTER OF HEALTH, THE
ATTORNEY GENERAL OF CANADA
Respondents
and
APOTEX INC.
Intervener
REASONS FOR ORDER
NOËL J.A.
[1] On May 18, 2005, this Court rendered judgments (Sharlow J.A. dissenting) setting aside two earlier decisions of the Trial Division and quashing the Notice of Compliance (NOC) granted by the Minister of Health to Apotex Inc. (Apotex) in respect of its generic version of omeprazole 20 mg capsules sold under the brand name Apo-Omeprazole.
[2] The next day the Supreme Court released its decision in 2005 SCC 26">Bristol-Myers Squibb Co. v. Canada (Attorney General), 2005 SCC 26 wherein it set forth the proper interpretative approach to the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133 (the NOC Regulations). Apotex maintains that the majority decisions of this Court are inconsistent with this approach and asks that they be stayed pending the disposition of applications for leave to appeal to the Supreme Court which it undertakes to file without delay, and if allowed, pending the disposition of the appeals.
[3] The Minister of Health, represented by the Attorney General of Canada supports the applications and the respondent AstraZeneca Canada Inc. (AstraZeneca) resists them.
[4] In order to obtain the requested stays, it is incumbent upon Apotex to demonstrate that its proposed leave applications and appeals raise a serious question, that it will suffer irreparable harm in the absence of a stay and that the balance of inconvenience favours their issuance.
Serious Issue
[5] With respect to the first demonstration, it is not usually useful to dwell into the seriousness of the question. Once an arguable case has been made out, the Court should move on to assess the other considerations (RJR-MacDonald Inc. v. Canada (Attorney General), [1995] 3 S.C.R. 199).
[6] Turning to the leave applications, it is arguable in my view that the Supreme Court could conclude, despite its recent pronouncement, that confusion remains with respect to the interpretative approach to the NOC Regulations so as to give rise to a question of public importance.
[7] As to the appeals themselves, the dissenting reasons of Sharlow J.A. when read with those of Kelen J. who disposed of the initial applications are sufficient to establish the existence of a serious issue.
Irreparable Harm and Balance of Inconvenience
[8] The issue thus becomes whether in respect of each application irreparable harm has been demonstrated and whether the balance of inconvenience favours the issuance of a stay. In support of its allegation of irreparable harm, Apotex submits that since the issuance of the NOC on January 27, 2004, it has committed an extraordinary amount of time and energy obtaining the interchangeable designation for its drug with AstraZeneca's LOSEC 20 mg capsules; that orders have been solicited and accepted; that many patients have purchased its drug; that its drug is considerably less expensive than AstraZeneca's product.
[9] Apotex adds that in the absence of a stay, it risks losing its formulary listings with a number of provinces, substantial sales, market shares and that even if it is successful on appeal, no one will be liable to it for these damages. Although Apotex recognizes that this harm is monetary in nature, it will be irrecoverable and therefore the loss will be irreparable.
[10] In contrast, Apotex submits that if a stay is granted, AstraZeneca will simply be subject to a further period of competition in respect of which it will have a corresponding further claim for damages in the infringement action which it has already filed in the Federal Court (T-1409-04).
[11] Apotex further argues that in the absence of a stay, the Canadian public will be deprived of its cheaper version of omeprazole thereby putting additional pressures on the Canadian health system. Apotex submits that this will result in irreparable harm to the Canadian public and tilts the balance of inconvenience in favour of the issuance of a stay.
[12] In this regard, the Attorney General submits that the status quo is represented primarily by the fact that Apotex received its NOC in January 2004, and Apo-Omeprazole has been capable of being lawfully marketed in Canada since then. Hospitals, pharmacies and other dispensers of the drug would have been purchasing, holding, and distributing stock, and patients would have been receiving prescriptions to be filled (and refilled) with the drug; in many cases these activities would have been funded by provincial governments.
[13] The Attorney General adds that with the quashing of the NOC, sale of the drug suddenly became unlawful, notwithstanding the effect on members of the public other than the parties in the litigation. The situation will be returned to the pre-judgment status quo if the judgments are overturned on appeal. However, if the stay is not granted, there will be a temporary interruption in the status quo. Resulting problems in the delivery of health care in Canada would include substantial difficulties for provincial formularies, health care professionals and patients, involving inter alia concerns for forecasting, budgeting and alternative therapies.
[14] Thus, any temporary interruption in the status quo can only create disruption, confusion, and additional costs in the health care system and among its participants. According to the Attorney General, the public interest will be better served if the status quo is not interrupted.
[15] AstraZeneca for its part argues that allowing Apotex to continue sales of Apo-Omeprazole despite the fact the NOC has been quashed will result in a significant loss of sales of its LOSEC. Such loss will have a greater impact on AstraZeneca than the loss to Apotex if the judgment is enforced. LOSEC is AstraZeneca's single most important brand and its sales comprise a greater percentage of AstraZeneca's total sales than Apo-Omeprazole sales are as a percentage of Apotex' total sales.
[16] In any event, AstraZeneca is ready to indemnify Apotex with respect to damages which may result from the implementation of the judgment of this Court between now and the ultimate disposition of the appeal.
[17] Finally, AstraZeneca submits that the alleged public cost savings as a result of the presence of Apo-Omeprazole in the marketplace is not a relevant consideration under the NOC Regulations. According to AstraZeneca, the same can be said for all generic products, which would suggest that any order removing or preventing a generic from entering the marketplace should be stayed pending appeal.
Disposition
[18] The irreparable harm claimed by Apotex itself is irreparable in the sense that Apotex can look to no one for compensation. However, the question of whether the Court should exercise its discretion in favour of Apotex on this ground alone need not be answered in light of the undertaking which has been formally made by AstraZeneca as follows:
AstraZeneca Canada Inc. ("AstraZeneca") undertakes to abide by any order concerning damages that the court may make if Apotex is granted leave to appeal the Order of the Court of Appeal dated May 18, 2005 in Court Files Nos. A-536-04 and A-535-04 (the "Order") and such appeal is allowed and it ultimately appears that the granting of the Order has caused damage to Apotex Inc. ("Apotex") for which AstraZeneca ought to compensate Apotex, during the time period beginning on the date that this Court dismisses Apotex' motion for a stay and ending on the date that the SCC grants Apotex' appeal.
[19] In my view, this undertaking is a full answer to Apotex' argument that it does not have a legal claim for its losses.
[20] The irreparable harm claimed in the name of the Canadian public is more compelling. While I do not accept that patients and doctors would be "confused" by restricting the market to AstraZeneca's product pending appeal or that this would somehow "disrupt" the system, I am satisfied that irreparable harm would result if indeed the NOC Regulations are intended to facilitate generic entry and promote access to cheaper drugs. On that assumption, I am also satisfied that the balance of inconvenience would favour continued access to Apotex' cheaper drug for Canadians.
[21] If on the other hand, the overriding purpose of the NOC Regulations is the prevention of infringement, there is a public interest in ensuring that this objective is achieved pending appeal, even though it results in higher drug costs. The protection of patent rights, if that be the overriding consideration, brings with it increased drug costs for Canadians and it follows that the balance of inconvenience cannot be tilted in favour of keeping Apotex' product on the market only because it is cheaper.
[22] The relationship between these two competing interests under the NOC Regulations is at the heart of the decision of the Supreme Court in Bristol-Myers Squibb, supra. I have given serious consideration to whether I can comment on this case given that Apotex relies on it to support its serious issue argument. The conclusion I have reached is that this cannot preclude a consideration of that decision under the other branches of the test.
[23] In Bristol-Myers Squibb, supra, Binnie J. for the majority spoke of the "balance" underlying the NOC Regulations:
1. Our Court has often spoken of "the balance struck under the Patent Act" in which the public gives an inventor the right to prevent anybody else from using his or her invention for a period of 20 years in exchange for disclosure of what has been invented. As a general rule, if the patent holder obtains a monopoly for something which does not fulfil the statutory requirements of novelty, ingenuity and utility, then the public is short-changed. See Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067 , 2000 SCC 67">2000 SCC 67 ; and Free World Trust v. Électro Santé Inc., [2000] 2 S.C.R. 1024 , 2000 SCC 66">2000 SCC 66.
2. In the present appeal, the Court is required to consider this "balance" in the much-litigated field of patented medicines, where Parliament is concerned not only with the balance between inventors and potential users, but between the protection of intellectual property on the one hand and, on the other hand, the desire to reduce health care costs while being fair to those whose ingenuity brought the drugs into existence in the first place.
Later, he stated (paragraph 47):
It seems clear that the NOC Regulations were introduced to help generic drug companies and at the same time to curb potential patent abuse by them.
[24] The issue in that case was whether the NOC Regulations were to be applied so as to protect Bristol-Myers Squibb's patent rights. This in turn depended on which side of the "balance" best achieved the statutory purpose.
[25] At the beginning of his analysis, Binnie J. noted that facts are always important (paragraph 34). The important fact in that case was that the product in issue was an innovator drug which means that the related NOC had been obtained without reliance on Bristol-Myers Squibb's patented drug or on its "Canadian reference product" when the matter is considered in the perspective of the Food and Drug Regulations, S.R.C., c. 870. This is highly significant as absent such reliance, there is no basis for suspecting or inferring that a "copycat drug" is in the making, and no basis for triggering the application of the NOC Regulations when regard is had to their reason for being.
[26] Against this background, one can see why the Supreme Court saw fit to discard an interpretative approach focussed on patent protection, as it was clear that no infringement could be suspected nor inferred on the facts of that case. However, I believe that I am giving this decision a fair reading in saying that when a comparison is made by a generic manufacturer to a patented drug or reliance is in fact placed on a patented drug so as to facilitate or accelerate the issuance of a NOC, the NOC Regulations must be construed to achieve their stated objective (paragraph 69).
[27] In his analysis, Binnie J. provided a very useful history of patented medicine legislation in Canada:
8. Until 1993 the Minister of Health was not directly concerned with patent issues. Indeed, Parliament's policy since 1923 had been to favour health cost savings over the protection of intellectual property by making available to generic manufacturers a scheme of compulsory licencing of an "invention intended or capable of being used for medicine or for the preparation or production of medicine" under s. 39(4) of the Patent Act. The compulsory licencing scheme gathered momentum after 1969 when it was extended to imported drugs. A compulsory licence could invariably be obtained from the Commissioner of Patents, and a notice of compliance ("NOC") from the Minister of Health, providing the generic manufacturer could establish pharmaceutical equivalence of its product with the innovator drug ("the Canadian reference product"). In determining the terms of the licence and amount of royalty payable, the Commissioner of Patents was required to "have regard to the desirability of making the medicine available to the public at the lowest possible price consistent with giving to the patentee due reward for the research leading to the invention and for such other factors as may be prescribed" (s. 39(5)). The royalty payable to the patent owner was generally fixed at 4 percent to 5 percent of the net selling price of the drug in posological form, or 15 percent of the net selling price of the drug in bulk (T. Orlhac, "The New Canadian Pharmaceutical Compulsory Licensing Provisions" (1990), 6 C.I.P.R. 276; G.F. Takach, Patents: A Canadian compendium of law and practice (1993), at p. 119; and see Imperial Chemical Industries PLC v. Novopharm Ltd. (1991), 35 C.P.R. (3d) 137 (F.C.A.), at pp. 139-40). Linking licence fees to the cost of the "research leading to the invention" did not cover the cost of massive research programs required by the innovators to produce the few "winners" from the many false starts and failed research projects that never came to market.
9. Section 39(14) of the Patent Act simply required the Commissioner of Patents to notify the Department of National Health and Welfare of all compulsory licence applications.
10. In a reversal of policy, Parliament in 1993 repealed the compulsory licence provisions of the Patent Act by what became known as Bill C-91 (S.C. 1993, c.2) and extinguished all compulsory licences issued on or after December 20, 1991. In part, these changes flowed from international obligations accepted by Canada under the Agreement on Trade-Related Aspects of Intellectual Property Rights, 1869 W.N.T.S. 299 ("TRIPS"). More immediately, perhaps, it was thought that Canada's compulsory licensing system would be declared incompatible with Canada's obligations under the North American Free Trade Agreement, Can. T.S. 1994/02, in particular art. 1709(10), signed at the end of 1992.
11. However, having agreed to respect the 20-year monopoly granted by patents, Parliament wished to facilitate the entry of competition immediately thereafter. It acted to eliminate the usual regulatory lag of two years or more after expiry of a patent for the generic manufacturer to do the work necessary to obtain a NOC. Parliament did so by introducing an exemption from the owner's patent rights under which the generic manufacturers could work the patented invention within the 20-year period ("the early working exception") to the extent necessary to obtain a NOC at the time the patent(s) expired (s. 55.2(1)) and to "stockpile" generic product towards the end of the 20-year period to await lawful market entry (s. 55.2(2)). In order to prevent abuse of the "early working" and "stockpiling" exceptions to patent protection, the government enacted the NOC Regulations that are at issue in this appeal.
[28] That, it seems, is precisely what was intended. The early working exception was inserted in subsection 52.2(1) of the Patent Act, R.S.C. 1985, c. P-4 and Parliament provided in subsection 55.2(4) the authority for the making of regulations for the stated purpose of "preventing the infringement of a patent". Binnie J. later explained that where no infringement was inferred or suspected, a construction which nevertheless results in the NOC Regulations being applied could not be sustained. The statutory scheme also had to be considered (Elmer Driedger (Construction of Statutes (2nd ed. 1983) at page 247) as quoted by Binnie J. at paragraph 38) and part of that scheme (subsection 52.2(1)) is to allow generic manufacturers to enter the market without delay after the relevant patent has expired.
[29] Binnie J. was not thereby suggesting that the NOC Regulations can have as an overriding purpose the entry of generic products on the market. Allowing a generic manufacturer to put itself in a position to enter the market without delay after the relevant patent has expired, while helpful to generic drug companies, is consistent with the patent protection provided under the scheme and does not allow for the making of regulations for any purpose which would override patent protection.
[30] Indeed, Binnie J. relies on the fact that the NOC Regulations can have no other purpose to point out that applying them where no infringement is inferred or suspected would give the NOC Regulations an effect that is ultra vires the regulation making power (paragraphs 67-68).
[31] Facilitating generic entry on the market and providing access to cheaper drugs are statutory objectives which can trump patent protection so long as the NOC Regulations are not brought into play. However, when the operation of the NOC Regulations is triggered, patent protection must be the overriding consideration.
[32] If I am right in this regard, it would follow that there is a public interest in giving effect to the judgments of this Court pending appeal, and no basis for the argument that irreparable harm will result from the temporary removal from the market of Apotex' cheaper product.
[33] That being said, I must acknowledge that this conclusion is based on my reading of the decision of the Supreme Court and that an argument could be made that this decision gives generic entry and access of cheaper drugs more importance that I have given them. I should add that I have not had the benefit of counsels' views on this point as none of them saw fit to consider the impact of this decision on irreparable harm and the balance inconvenience. I am therefore left on my own on this issue and time is of the essence.
[34] In the circumstances, I have concluded that the best exercise of my discretion is to maintain the status quo, but only until the Supreme Court disposes of the leave applications and conditionally upon Apotex filing its leave applications forthwith and moving to expedite their disposition. Apotex will be entitled to a single set of costs.
[35] The order will thus read:
Conditionally upon Apotex filing its leave applications forthwith and moving to have them expedited, the judgments of this Court dated May 18, 2005 in files A-535-04 and A-536-04 are stayed pending the disposition of the leave applications by the Supreme Court. If leave is denied, the stays will automatically terminate. If leave is granted, Apotex will have a period of 30 days to apply for a continued stay in which case the stays hereby given will remain effective until the Supreme Court disposes of the stay applications. Apotex shall have one set of costs.
"Marc Noël"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-535-04
STYLE OF CAUSE: ASTRAZENECA CANADA INC v APOTEX INC et al
DOCKET: A-536-04
STYLE OF CAUSE: ASTRAZENECA CANADA INC v APOTEX INC et
PLACE OF HEARING: TORONTO, ONTARIO
DATE OF HEARING: MAY 27, 2005
REASONS FOR JUDGMENT: NOËL J.A.
DATED: JUNE 2, 2005
APPEARANCES:
Mr. H.B. Radomski FOR THE INTERVENER/RESPONDENT - APOTEX
Mr. Andrew Brodkin INC.
Mr. Gunars Gaikis FOR THE APPELLANT - ASTRAZENECA
Ms. Nancy Pei CANADA INC.
Mr. F.B. Woyiwada FOR THE RESPONDENT - MINISTER OF HEALTH & AGC
SOLICITORS OF RECORD:
Goodmans LLP FOR THE INTERVENER/RESPONDENT - APOTEX
Toronto, ON INC.
Smart & Biggar FOR THE APPELLANT - ASTRAZENECA
Toronto, ON CANADA INC.
John H. Sims, Q.C. FOR THE RESPONDENT - MINISTER OF HEALTH
Deputy Attorney General & AGC
Ottawa, ON
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