On December 11, 2013, the Federal Court released its ninth decision on the merits under section 8 of the PMNOC Regulations. In Apotex Inc v Takeda Canada Inc, 2013 FC 1237 (pantoprazole, PANTOLOC), Justice Phelan determined certain issues, which provided direction from which the parties could arrive at the quantum of Apotex’s compensation. Failing agreement on quantum, the Court may be required to settle the specific amount of compensation.
The parties had agreed on a number of issues, including:
- Relevant period: the relevant period for the determination of the loss was approximately one year, from the patent hold date to the date of NOC issuance.
- Total pantoprazole market: the size of the total pantoprazole market during the relevant period was the quantity of pantoprazole sold by Takeda.
- Generic share in “but for” world: the size of the generic market during the relevant period would be the same as the real world experience following generic entry.
Justice Phelan followed the analytical framework provided by the Federal Court’s prior decisions in the ramipiril and alendronate quantification decisions (respectively, sanofi-aventis Canada Inc v Teva Canada Limited, 2012 FC 552 and Apotex Inc v Merck Canada Inc, 2012 FC 1235). In making findings on the issues below, the Court stressed the speculative and ‘revisionist’ nature of the exercise of determining what would have happened in the “hypothetical world” during the relevant period, and in certain instances had to take a “broad axe” in making determinations. The main issues considered by Justice Phelan included:
- Number and identity of generic entrants: Justice Phelan concluded that Takeda would have launched an authorized generic three months after Apotex had been the sole generic on the market, and that subsequent generics would have entered at the same time as they had in the real world.
- Apotex’s share of the generic market: Justice Phelan accepted the evidence of one of Apotex’s experts as the basis for calculating Apotex’s share in the hypothetical world, which included a finding that the authorized generic would take three months to reach a mature market position.
- Apotex’s lost revenue/pricing: During the period it was a sole generic, Apotex’s product would have been priced at 60-75% of the brand in various provinces. Upon subsequent generic entry, that price would have dropped to 50% in Ontario, Quebec and Newfoundland, and 63% elsewhere. In so finding, Justice Phelan preferred the evidence of fact witnesses from provincial formularies, over the “speculative and self-serving positions of the parties.”
- Double ramp-up: When entering the market in the real-world, Apotex experienced a period of time before Apo-pantoprazole achieved steady state sales, called the “ramp up.” In the determination of its sales in the hypothetical world, the calculation of Apotex’s loss reflects this ramp up, a factor Justice Phelan held to amount to “double counting for the same circumstance; a disadvantage to Apotex and an advantage to Takeda.” Justice Phelan reasoned there was nothing in law or equity that prevented the Court from adjusting Apotex’s compensation to not include a ramp-up in the relevant period, since a ramp-up was already experienced in the real world. In so reasoning, Justice Phelan distinguished from the ramipril and alendronate decisions, which had not allowed for a recovery of the second ramp-up period on the basis that these losses occurred after the relevant period (i.e., after the NOC proceeding was dismissed).
- Rebates: Justice Phelan took a “broad axe” approach to the competing positions advocated by the parties regarding the rebate rates, holding that in the single generic market, Apotex would have offered rebates of 8.9%, while in the competitive market, rebates of 44.7% applied to chains (55% of the market) and rebates of 15% to the independents/banners (45% of the market).
- Prejudgment interest: Justice Phelan awarded prejudgment interest at the rate in the quarter preceding the commencement of the section 8 action (3.3%), and that the prejudgment interest applied as of the patent hold date. This is consistent with the ramipril decision.
Takeda had argued that the Court ought to exercise its discretion and deny Apotex any damages as it breached an undertaking it had provided in its notice of allegation that it would not infringe the use-patent relating to pantoprazole. Justice Phelan disagreed, holding that Apotex had not provided an enforceable undertaking in the circumstances. Based on a review of cases in which undertakings were given, Justice Phelan reasoned that a bare pleading in an NOA does not constitute an enforceable undertaking, and that there must be something more. While he alternatively considered the evidence asserted to amount to a breach of the alleged undertaking, Phelan J. declined to speculate how the Court would exercise its discretion in light of the alternative findings.
Both Takeda and Apotex have appealed the decision (Federal Court of Appeal Files A-43-14 and A-45-14, respectively).
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