Canada: Apotex Denied Damages For The Delay It Experienced In Bringing Its Generic Version Of The Medicine Lovastatin To Market

In a recent decision in Apotex Inc. v. Merck & Co., Inc., 2010 FC 1264, the Federal Court denied Apotex damages resulting from the delay it experienced in bringing its generic version of the drug lovastatin to market as a result of Merck's prohibition application. This is an important decision which resolves an action commenced nearly 10 years ago and will provide other pharmaceutical companies involved in similarly long-lasting litigation with insight into the scope of section 8 in the 1993 version of the Patented Medicines (Notice of Compliance) Regulations (NOC Regulations).

Both current and past versions of section 8 of the NOC Regulations purport to permit a company whose product has been kept off of the market due to a prohibition application to recover damages from the applicant for any loss resulting from the delay. Although Apotex's statement of claim was filed in 2001, subsequent to significant amendments in 1998, the Court determined that the 1993 version of the NOC Regulations would apply. Section 8 was amended again in 2006 and 2010 and, as a result, will remain ripe for further litigation as to its interpretation. In any future disputes, it will be useful to note the preference demonstrated by the Court in this case for textual interpretations of the NOC Regulations' technical provisions.

This case was heard contemporaneously with another case which we have discussed here

Background

Merck held rights to Canadian Patent No. 1,161,380 (the '380 Patent), which related to a process for manufacturing the drug lovastatin. The '380 Patent issued in 1984 and expired in 2001.

In 1993, Apotex desired to enter the market with a generic version of lovastatin and, to that end, applied to the Minister of Health (Minister) for a Notice of Compliance (NOC). In accordance with the NOC Regulations, Apotex alleged that the manufacture of its product would not infringe the '380 Patent, as its process for producing lovastatin would allegedly not fall within the scope of the claims of the '380 Patent.

Shortly thereafter, Merck commenced an application seeking an order prohibiting the Minister from issuing a NOC to Apotex. According to the NOC Regulations in place at that time, as a result of the commencement of the prohibition application, the Minister was automatically prohibited from issuing a NOC to Apotex for up to 30 months or until such earlier time as a determination could be made as to whether Apotex was justified in its claim that its generic drug would not infringe the '380 Patent.

The 30-month statutory stay expired on December 1, 1996 without a decision being rendered, and the Minister subsequently issued a NOC to Apotex allowing it to market its generic version of lovastatin.

Following this sequence of events, two actions were commenced: one by Merck against Apotex for patent infringement, and the other by Apotex against Merck for damages under section 8 of the NOC Regulations as a result of its delayed entry into the lovastatin market.

The Decision respecting s. 8 of the NOC Regulations

The Court's decision turned on two main issues: (1) whether the 1993 or the 1998 version of the NOC Regulations applied; and (2) whether Apotex was entitled to compensation under s. 8 of the applicable version of the NOC Regulations.

The 1993 NOC Regulations Applied

In determining which version of the NOC Regulations applied, the Court looked to the transitional provisions in s. 9 of the NOC Regulations as amended in 1998. Section 9(6) stated that the 1998 version of the NOC Regulations would apply to "an application pending on the coming into force of these Regulations."

The Court found that it was arguable that the expiry of the 30-month statutory stay period on December 1, 1996, which extinguished any further right of application, was the determinative date. Given that this event was prior to the coming into force of the 1998 version of the NOC Regulations on March 11, 1998, the 1993 version of the NOC Regulations applied (i.e. the application was clearly not "pending").

Apotex is Not Entitled to Damages

The 1993 version of the NOC Regulations stipulated that an innovator pharmaceutical company would be liable under s. 8 for all damage suffered by a generic pharmaceutical company where, because of a prohibition application commenced by the innovator, the Minister delays issuing a NOC "beyond the expiration of all patents that are the subject of an order pursuant to subsection 6(1)."

Merck submitted that the '380 Patent, which did not expire until 2001, was extant during the full period in which Apotex claimed it was kept off the market as a result of Merck's prohibition application (April 1996 to March 1997). As such, Merck argued that Apotex had no valid claim for damages.

Apotex asserted that Merck's interpretation of s. 8 would be inconsistent with the intent of the Governor-in-Council, as reflected in the Regulatory Impact Assessment Statement (RIAS) that accompanied the 1993 version of the NOC Regulations. The RIAS specified that the costs of delays arising from the NOC Regulations would be minimized by the fact that "a patentee will be liable for all damage suffered from the delay." According to Apotex, any interpretation of s. 8 that accorded with the RIAS would necessarily permit Apotex to recover its damages for being wrongly kept off the market.

The Court disagreed with Apotex's position, however, and found that as of the date of its NOC, the '380 Patent had not "expired" as that term would be understood, i.e. by the natural end of its term, by lapse such as failure to pay maintenance fees, or by operation of law such as a declaration of invalidity. In the result, because of the wording employed in s. 8 of the 1993 version of the NOC Regulations, Apotex was unable to recover damages.

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