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OSTILL / SHUTTERSTOCK.COM
3 March 2015AmericasGunars Gaikis

Generics in Canada: The race for market exclusivity

The Supreme Court of Canada has tentatively set April 20, 2015 as the date for the hearing of Sanofi’s appeal against a court’s decision that the company is liable for generic drug maker Apotex’s lost sales of ramipril based on section 8 of the Patented Medicines (Notice of Compliance) Regulations (NOC Regulations).

This will be the Supreme Court’s first consideration of section 8, which imposes liability on an innovator when it is unsuccessful in seeking an order of prohibition under the NOC Regulations. The case is important for its potential impact on the strategies employed by, and dynamics between, innovators and generics jockeying for market exclusivity or share within Canada’s pharmaceutical marketplace.

The NOC Regulations link patent rights to the timing of generic market entry where approval of the generic product is sought based on a comparison or reference to the innovator’s product. When the NOC Regulations apply, the entry of a generic product is delayed until patent expiry unless the generic’s allegations, for example of patent non-infringement and invalidity, are determined to be justified in a summary court proceeding.

These regulations are vitally important to innovators. This is because they serve to defer generic entry pending a preliminary determination of patent rights, in circumstances where a preliminary injunction is, for all practical purposes, not available and generic companies typically are prepared to enter the market at risk of patent infringement.

Section 8 is designed to balance the respective players’ rights. If a generic’s market entry is delayed and its allegations regarding relevant patents are held to be justified, the innovator is liable for the generic’s resulting losses. In this respect, Canada is unique in having a specific regulatory provision that exposes a pharma innovator to liability when it seeks to rely on its patent rights to prevent a generic’s approval based on a comparison to the innovator’s product.

The NOC Regulations

Since 1993, the NOC Regulations have linked generic marketing approval to patents listed on the ‘patent register’. Generally, a patent is eligible for listing on the register if it includes a claim directed to a qualifying medicinal ingredient, formulation, dosage form or use. Not all patents relating to an innovator’s marketed product are eligible for listing: there are strict subject matter and timing requirements.

The Food and Drug Regulations allow a generic competitor to facilitate and expedite the regulatory approval of a generic equivalent by relying on the established safety and efficacy of the innovator’s marketed product, and bioequivalence testing, in an abbreviated new drug submission (ANDS).

Where a patent is listed on the patent register at the date of an ANDS filing (or a submission for a subsequent entry biologic), the NOC Regulations are triggered. The marketing approval—a NOC—of the generic product is then delayed until the expiry of all patents listed on the register, subject to the generic company serving the innovator with a qualifying allegation, such as non-infringement or invalidity, in respect of each listed patent.

The innovator has 45 days from the date of the service of the notice of allegation to commence a court proceeding in which it seeks an order prohibiting the grant of a NOC to the generic on the basis that none of the allegations is “justified”. The court proceeding is summary in nature and preliminary in effect. It is based on a written evidential record containing fact and expert affidavits and cross-examination transcripts. A judge decides the case based on the record
and the counsels’ written and oral submissions.

During the proceedings, which may take up to 24 months, the generic’s NOC is precluded. If the innovator fails to establish that all of the generic’s allegations are not justified, the court application is dismissed and section 8 liability is triggered. If the innovator prevails in the proceeding, the generic’s NOC is delayed until patent expiry. But that is subject to a reversal on appeal or to an earlier determination in a full-blown court action (which includes discovery and live testimony, and finally determines patent rights between the parties) that the patent is invalid or will not be infringed by the generic product. This is an example of the ‘dual litigation’ inherent in the regulatory and legislative pharma framework existing in Canada.

"As a preliminary injunction is typically not available to innovators in Canada, the generic will normally keep selling and ‘genericise’ almost the entire market."

If the innovator does not challenge the notice of allegation by a summary court proceeding, there is no potential liability to it and the generic can enter the marketplace ‘at risk’ once its ANDS is approved. The innovator can still sue for patent infringement in a court action, but as a preliminary injunction is typically not available to innovators in Canada, the generic will normally keep selling and ‘genericise’ almost the entire market by the time a decision after a trial is available.

While the issue remains to be determined where an innovator fails under the NOC Regulations but prevails in a later action, any section 8 liability should, logically, be washed away on the basis that the generic could not have lawfully sold its product without infringing the patent (as determined by the action).

Section 8 provides that if an application [to prohibit the generic’s NOC] … is dismissed by the court … the first person [the innovator with the NOC] is liable to the second person [the generic] for any loss suffered during the period:

Beginning on the date, as certified by the minister, on which a notice of compliance would have been issued in the absence of these regulations, unless the court concludes that … [another] date is more appropriate; and Ending on the date of the … dismissal … [the section 8 damages period].

The jurisprudence has interpreted this provision as compensatory and limiting the generic to its damages actually incurred during the section 8 damages period. The generic cannot recover the innovator’s profits, nor is it entitled to future losses (eg, long-term loss of market share due to delayed entry/loss of first mover advantage).

Case study

Under the NOC Regulations, in the case of ramipril Sanofi was successful against one generic and unsuccessful against three others: Apotex, Teva and Riva. Sanofi (as licensee) and Schering (as patentee) sued Apotex and Teva in an action for infringement after they entered the market at risk. The subject patent was found invalid, resulting in multiple individual generic section 8 claims.

A generic’s potential losses may be illustrated as shown in Figure 1 (below).

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