SANOFI-AVENTIS CANADA INC., SCHERING CORPORATION v. SANOFI-AVENTIS, 2012 FC 552

Federal Court Cour fédérale Date: 20120523 Docket: T-1161-07 Citation: 2012 FC 552 BETWEEN: SANOFI-AVENTIS CANADA INC., SCHERING CORPORATION and SANOFI-AVENTIS DEUTSCHLAND GmbH Plaintiffs and TEVA CANADA LIMITED Defendant AND BETWEEN TEVA CANADA LIMITED Plaintiff by Counterclaim and SANOFI-AVENTIS CANADA INC., SCHERING CORPORATION and SANOFI-AVENTIS DEUTSCHLAND GmbH Defendants by Counterclaim PUBLIC REASONS FOR JUDGMENT (Confidential Reasons for Judgment released May 11, 2012) SNIDER J.

I. Introduction [ 1 ] Teva Canada Limited (Teva), the Plaintiff by Counterclaim in this action, sells a generic version of ramipril – a drug used mainly to treat hypertension – into the Canadian market.

Sanofi-Aventis Canada Inc. (Sanofi), one of the Defendants by Counterclaim in this action, holds or has held patent rights to a brand-name version of ramipril – ALTACE. [ 2 ] In spite of the fact that Teva (or its predecessors in interest) received certain regulatory approvals from Health Canada in 2003, it was unable to commence sales of ramipril until May 2, 2007, when it received its Notice of Compliance (NOC) from Health Canada, pursuant to the Patented Medicines (Notice of Compliance) Regulations , SOR/93-133 (the PM (NOC) Regulations or the Regulations ).

In whole or in part, the delay was caused by the actions of Sanofi, which exercised its rights under the Regulations to a statutory stay of the issuance of an NOC to Teva. Teva claims that Sanofi and Sanofi-Aventis Deutschland GmbH (Sanofi Germany ) are liable to Teva for the loss it suffered during the period from July 18, 2003 to April 27, 2007, as provided for in s. 8(1) of the PM (NOC) Regulations . [ 3 ] Subject to validity issues raised in its pleadings, Sanofi acknowledges and accepts that Teva is entitled to damages under s. 8. However, Sanofi disputes many elements of Teva’s claim, including: (

a) the relevant dates for computing the loss; and (

b) various assumptions and projections built into the assessment of damages. [ 4 ] Sanofi’s claim of invalidity of s. 8 of the Regulations was separately argued in a hearing involving this and similar issues in Court File No. T-1357-09 ( Apotex Inc v Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH and Sanofi-Aventis Canada Inc ). Separate Reasons have been rendered in respect of the validity issues ( see 2012 FC 551 ). Moreover, by Order of Prothonotary Milczynski, dated August 15, 2011, all of the claims of Teva with respect to Sanofi Germany have been bifurcated.

Thus, these Reasons do not include a consideration of either the invalidity claims of Sanofi or Teva’s claims against Sanofi Germany . [ 5 ] My overarching objective is to assess the amount of compensation to be awarded to Teva. Following the teachings of the Court of Appeal in Apotex Inc v Merck & Co , 2011 FCA 329 at para 75 , 425 NR 279 [ Norfloxacin (FCA) ], this requires that I consider the hypothetical question: What would have happened if Sanofi had not brought an application for prohibition?

In other words, I must construct a hypothetical, or “but for”, world during a defined period of time in the past in order to determine what share of the ramipril market Teva would have captured if it had been able to sell its generic ramipril. In addition to some of the common issues arising on an assessment of damages, one of the key tasks before me is to examine various provisions of the PM (NOC) Regulations . Well-established principles of statutory

interpretation will guide me in establishing what I believe to be the correct meaning. [ 6 ] In the reasons that follow, I address the many issues raised by this action. Three of my key conclusions are as follows: 1. The period of liability (the Relevant Period) cannot begin before the date upon which a statutory stay provided for in s. 6 of the Regulation s commences and, on the particular facts of this case, a more appropriate commencement date is December 13, 2005. The Relevant Period is therefore December 13, 2005 to April 27, 2007. 2.

The Court should have regard to the possibility of multiple market entrants during the Relevant Period, leading to a result, on the facts of this case, that it is more likely than not, that both Apotex Inc. (Apotex) and a generic manufacturer sanctioned by Sanofi (known as an authorized generic, or AG) would have entered the generic ramipril market on or about December 13, 2005. 3.

In assessing Teva’s damages, no regard should be had to: (a) “lost business value” calculated as of the final day of the Relevant Period and based on future lost profits to Teva; or (b) “duplicate ramp-up”. [ 7 ] This case was one of three s. 8 damages actions brought against Sanofi by generic manufacturers with respect to ramipril. This was the first action heard. The second action is Apotex Inc v Sanofi-Aventis, Sanofi-Aventis Deutschland GmbH and Sanofi-Aventis Canada Inc . (Court File No. T-1357-09).

The trial of that action took place before me after the conclusion of this trial and has resulted in a decision released concurrently with these Reasons. The third action is Sanofi-Aventis Canada Inc et al v Laboratoire Riva Inc (Court File No. T-1201-08). The trial of this third action has yet to take place.

[ 8 ] I have set out a brief overview of the many fact and expert witnesses who appeared during the trial and the areas to which they testified in Appendix A. For the experts, I have described the matters in respect of which I found them to be qualified to provide me with their expert opinions. More detailed references to the witnesses’ evidence and testimony are contained in the appropriate sections of these Reasons. II. Contents [ 9 ] To assist the reader, I am including an outline of these Reasons. The paragraph number for the beginning of each noted

section is set out below: I. Introduction ............................................................................... [1] II. Contents ............................................................................... [9] III. Issues ............................................................................. [10] IV. Essential Background ............................................................................. [12] A. Statutory framework under the PM (NOC) Regulations ................ [13] B. Corporate background.................................................................. [27] C.

Ramipril patents............................................................................ [30] D. Teva’s regulatory submissions and litigation.................................... [33] V. Relevant Period ............................................................................. [36] A. Can the Relevant Period begin prior to the imposition of the 24-month statutory stay? [44] B. What is the appropriate commencement date for the Relevant Period?.................... [61] VI. Overall Size of the Ramipril Market........................................................... [77] VII.

Size of the Generic Market........................................................................ [93] VIII. Teva’s Lost Volumes ........................................................................... [107] A. Should the assessment be made on the basis that Teva would be the sole generic in the “but for” world? [113] B. Should the assessment be made on the basis that there is only one “but for” world?.................................................................... [124] C. What other generics would have entered the market? .................. [131]

(1) Burden ........................................................................... [132]

(2) Apotex ........................................................................... [143]

(3) Riva ........................................................................... [164]

(4) Authorized generic.......................................................... [172] (

a) The inclusion of an AG in the “but for” world.................................................................. [176] (

b) Decision to launch an AG.................................... [185] (

c) Timing of AG launch............................................ [196] (

d) Teva’s Lost Volumes.......................................... [209] IX. Teva’s Net Lost Profits [221] A. Sanofi’s motion to strike.............................................................. [225]

(1) Lost business value.......................................................... [241]

(2) Duplicate ramp-up adjustment......................................... [250]

(3) Conclusion on lost business value and duplicate ramp-up ......................................................................... [254] B. Pricing over the Relevant Period ................................................. [255] C. Trade spend ........................................................................... [269] D. Price of the active pharmaceutical ingredient ................................ [277] E. Indirect losses .......................................................................... [283]

(1) Lost profits on sales of other Teva products..................... [284]

(2) Lost indirect profits......................................................... [288] F. Pre-judgment interest.................................................................. [295] G. HOPE indications........................................................................ [301] X. Conclusion ........................................................................... [323] Appendix A- List of Witnesses III.

Issues [ 10 ] In general terms, the assessment of Teva’s damages involves five steps: 1. determine the duration of the Relevant Period; 2. determine the overall size of the ramipril market during the Relevant Period (the Ramipril Market); 3. determine the portion of the market that would have been retained by Sanofi and the portion that would have been held by generic manufacturers during the Relevant Period (the Generic Market); 4. determine the portion of the Generic Market that would have been held by Teva (Teva’s Lost Volumes); and 5. quantify the damages that would have been suffered by Teva in respect of Teva’s Lost Volumes during the Relevant Period (Teva’s Net Lost Profits). [ 11 ] In the case before me, these steps require consideration of a number of issues where the parties are in disagreement.

These issues are as follows: 1. What is the appropriate period for which losses can be claimed by a second person under s. 8 of the Regulations ? Given that the parties are agreed that the Relevant Period ends on April 27, 2007, the remaining sub-issues related to the Relevant Period are: a. Can the Relevant Period begin on the date when the second person would have received its NOC, even where that event occurred prior to the service of a notice of allegation and imposition of the statutory stay contemplated by the Regulations ?

b. On the facts of this case, is the appropriate date for the commencement of the Relevant Period:

i) July 18, 2003, when Teva received its drug identification numbers (DINs) for ramipril from Health Canada ; ii) October 14, 2003, the date Health Canada ’s review of Teva’s drug submission was completed and Teva was advised that an NOC would not issue until the requirements of the Regulations were met (referred to as the “patent hold” date; see Exhibit 9, Tab 8); iii) October 31, 2005, the date Sanofi served and filed a Notice of Application in respect of a notice of allegation served by Teva on September 12, 2005, thereby triggering the statutory stay provided for in s. 7(1)(

e) of the Regulations ; or iv) December 13, 2005, the date of expiry of the ' 457 Patent, which was the subject of the patent hold referred to in ii) above? 2. What would have been the size of the Ramipril Market over the Relevant Period? 3. How much of the overall Ramipril Market in the Relevant Period would have been captured by the generic participants? 4. What would have been Teva’s Lost Volumes during the Relevant Period? Subsidiary to this question are the following sub- issues: a.

In assessing Sanofi’s liability under s. 8, is Teva’s compensation to be assessed on the basis that the second person would be the sole generic supplier on the market for the entire Relevant Period? Alternatively, is Sanofi’s liability to be assessed on the basis of a single “but for” world which includes all potential generic manufacturers? b. What other generics would likely have come to market during the Relevant Period and when?

Specifically, would any or all of Apotex, Laboratoire Riva Inc. (Riva) and/or Pharmascience Inc. (Pharmascience or PMS), or an authorized generic have launched during the Relevant Period? c. What portion of the Generic Market would Teva have captured during the Relevant Period (i.e. Teva’s Lost Volumes)? 5. Based on my finding as to Teva’s Lost Volumes, what is Teva’s Net Lost Profits, having regard to: a. the admissibility of evidence of Teva’s “lost business value” and “second ramp-up” as set out in the report of Teva’s expert witness, Ms.

Suzanne Loomer, as losses that were not “suffered during the period” as contemplated by s. 8(1) of the Regulations ; b. the pricing of Teva’s ramipril during the Relevant Period, having regard to the provincial formularies; c. likely trade spend (including discounts and allowances) that would have been paid by Teva to pharmacists to stock Teva’s ramipril; d. likely price of the active pharmaceutical ingredient (API) for ramipril; e. the reasonableness and quantification of any indirect losses, such as the loss of sales of other products; and

f. the appropriate calculation of pre-judgment interest? 6. Is a second person entitled to recover under s. 8 of the Regulations for lost sales that would have been made as a result of prescriptions that were aimed at unapproved indications? IV. Essential Background [ 12 ] This action involves a complex statutory framework and a complicated set of facts. For ease of reference, I attempt to summarize the statutory framework and the most relevant (and undisputed) background facts related to the corporate identity of the parties, Sanofi’s patents for ALTACE, and Teva’s regulatory and litigation history on ramipril.

A. Statutory framework under the PM (NOC) Regulations [ 13 ] This action arises solely out of the operation of the PM (NOC) Regulations . Quite simply, Teva was kept off the market for a period of time by the actions of Sanofi that were ultimately found to be unsustainable. In his decision in Apotex Inc v Merck & Co , 2008 FC 1185 at paras 35-51 , [2009] 3 FCR 234 [ Alendronate (FC) ] , Justice Hughes provides a comprehensive history and rationale of the Regulations generally, and s. 8 in particular.

Although the decision in Alendronate (FC) was overturned in part by the Court of Appeal in Apotex Inc v Merck & Co , 2009 FCA 187 , [2010] 2 FCR 389 , rev’g 2008 FC 1185, leave to appeal to SCC refused [2009] SCCA No 347 [ Alendronate (FCA) ] , Justice Hughes’s description of the PM (NOC) Regulations remains a valuable tool. Rather than restate this history, I commend the identified passages to the reader. [ 14 ] The damages suffered by Teva are statutory in that they arise only because of the operation of s. 8 of the PM (NOC) Regulations .

The liability of Sanofi, in this case, is better understood if s. 8 is examined in the context of the entire statutory scheme. I will provide a brief overview of the statutory scheme that gives rise to Teva’s claim. Ms.

Anne Bowes, the director of the Office of Patented Medicines and Liaison of Health Canada , was helpful in explaining the operation of the applicable regulations and policies engaged on the facts of this case. [ 15 ] Before a pharmaceutical company can market a prescription drug in Canada , it must comply with the provisions of the Food and Drug Regulations , CRC, c 870 [ F&D Regulations ] to obtain a Notice of Compliance (NOC).

Section C.08.002 of the F&D Regulations provides, in part that:

(1) No person shall sell or advertise a new drug unless (

a) the manufacturer of the new drug has filed with the Minister a new drug submission, an extraordinary use new drug submission, an abbreviated new drug submission or an abbreviated extraordinary use new drug submission relating to the new drug that is satisfactory to the Minister; (

b) the Minister has issued, under

section C.08.004 or C.08.004.01, a notice of compliance to the manufacturer of the new drug in respect of the submission;

(1) Il est interdit de vendre ou d’annoncer une drogue nouvelle, à moins que les conditions suivantes ne soient réunies :

a) le fabricant de la drogue nouvelle a, relativement à celle- ci, déposé auprès du ministre une présentation de drogue nouvelle, une présentation de drogue nouvelle pour usage exceptionnel, une présentation abrégée de drogue nouvelle ou une présentation abrégée de drogue nouvelle pour usage exceptionnel que celui-ci juge acceptable;

b) le ministre a délivré au fabricant de la drogue nouvelle, en application des articles C.08.004 ou C.08.004.01, un avis de conformité relativement à la présentation; [ 16 ] As provided for in s. C.08.002(1)(

a) of the F&D Regulations , anyone who wishes to sell a drug in Canada must submit to the Minister of Health (through Health Canada ), either a new drug submission (NDS) or an abbreviated new drug submission (ANDS). An NDS is filed by an innovative drug company, or “first person”, seeking approval to market a new drug product. In contrast and in very general terms, an ANDS is filed by a generic manufacturer, or “second person”, that wishes to market a generic version of a drug that has already been approved.

The second person may rely on much of the technical, health and safety information originally filed as part of the NDS by the first person. In other words, it may compare its drug with, or make reference to, a brand name drug ( F&D Regulations , above at s. C.08.002.1. (1) ). [ 17 ] An essential element of the regulatory scheme is the “Patent Register”.

The PM (NOC) Regulations allow an innovator who has filed an NDS or a supplement to a new drug submission (SNDS) to submit a list of the associated patents to the Minister of Health (Minister) for inclusion on the register of patents (Patent Register or Register) (s. 4(1)). The Regulations require that the Minister maintain a register of all listed patents (s. 3(2)).

Subsections 4(2) and (3) of the Regulations describe the eligibility requirements for listing. [ 18 ] If a patent is listed on the Patent Register, s. 5 of the PM (NOC) Regulations provides that the second person, with respect to each patent on the Patent Register, must, in its application for an NOC: • state that it accepts that the NOC will not issue until the patent expires (s. 5(1)(a)); or • allege that: o the first person is not the patentee or licensee of the listed patent (s. 5(1)(b)(i)); o the patent has expired (s. 5(1)(b)(ii)); o the patent is not valid (s. 5(1)(b)(iii)); or

o the second person will not infringe the listed patent (s. 5(1)(b)(iv)). The second person identifies its election on the Form V submitted with its application. As accepted by everyone, the election can be changed at any time. [ 19 ] If a second person alleges that an NOC should issue in spite of the listed patents, it must serve a notice of allegation on the first person ( Regulations , above at s. 5(3)).

The first person may, within 45 days after service, apply to the Federal Court for an order prohibiting the Minister from issuing an NOC until the expiration of a patent that is the subject of the notice of allegation ( Regulations , above at s. 6(1)). This action triggers a “statutory stay” (also referred to as an “automatic stay”) which remains in place for up to 24 months ( Regulations , above at s. 7(1)(e)). [ 20 ] The specific circumstances in which the Minister may not issue an NOC are dealt with in s. 7(1) of the PM (NOC) Regulations .

Of relevance to these proceedings, the Minister may not issue an NOC to a second person before the latest of: • the day on which the second person complies with the requirements of s. 5 (s. 7(1)(b)); • the expiration of any patent on the Register that is not the subject of an allegation (s. 7(1)(c)); • the expiration of 45 days after the receipt of proof of service of a notice of allegation under s. 5(3)(

a) in respect of any patent on the Register (s. 7(1)(d)); • the expiration of 24 months after the receipt of proof of the making of any application under s. 6(1) (s. 7(1)(e)); and • the expiration of any patent that is the subject of an order of prohibition pursuant to s. 6(1) (s. 7(1)(f)). [ 21 ] Regardless of the election made by a second person under s. 5(1) of the Regulations , Health Canada will process the application for all health and safety considerations and will assign a DIN ( F&D Regulations , above at s. C.01.014.2(1)).

However, no NOC will issue until the relevant patents on the Register either expire or have been addressed through the PM (NOC) Regulations process. The day on which a generic drug product would have otherwise received its NOC is called the “patent hold date”. [ 22 ] At that stage, except for the completion of any proceedings under the Regulations , the NOC is ready for issuance. As stated by Ms. Bowes “. . . the NOC itself, full package is in the file cabinet waiting for its turn to go back out the door”. [ 23 ] As noted, the service of a Notice of Application triggers the statutory stay.

After hearing the application, the court may dispose of the innovator’s prohibition application in several ways. First, if the court finds that none of the generic’s allegations are justified, it must issue an order prohibiting the Minister from issuing an NOC to the generic ( Regulations , above at s. 6(2)).

In that case, the generic will not receive its NOC until patent expiry (unless the decision of the Federal Court is overturned on appeal). [ 24 ] Alternatively, the court may dismiss the innovator’s application in whole or in part ( Regulations , above at s. 6(5)), or the application may be withdrawn or discontinued by the first person. If an application is dismissed, withdrawn, or discontinued, the generic will receive its NOC almost immediately. Most relevant to this case, the generic will also be able to invoke s. 8 of the Regulations .

Section 8 allows a generic to bring an action against an innovator for compensation for the period it was kept off the market as a result of the innovator’s unsuccessful prohibition application. [ 25 ] The full text of s. 8 is set out below:

(1) If an application made under subsection 6(1) is withdrawn or discontinued by the first person or is dismissed by the court hearing the application or if an order preventing the Minister from issuing a notice of compliance, made pursuant to that subsection, is reversed on appeal, the first person is liable to the second person for any loss suffered during the period (

a) 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 (

i) the certified date was, by the operation of

An Act to amend the Patent Act and the Food and Drugs Act (The Jean Chrétien Pledge to Africa) ,

chapter 23 of the Statutes of Canada, 2004, earlier than it would otherwise have been and therefore a date later than the certified date is more appropriate, or (ii) a date other than the certified date is more appropriate; and (

b) ending on the date of the withdrawal, the discontinuance, the dismissal or the reversal.

(2) A second person may, by action against a first person, apply to the court for an order requiring the first person to compensate the second person for the loss referred to in subsection (1).

(3) The court may make an order under this

section without regard to whether the first person has commenced an action for the infringement of a patent that is the subject matter of the application.

(4) If a court orders a first person to compensate a second person under subsection (1), the court may, in respect of any loss 8.

(1) Si la demande présentée aux termes du paragraphe 6(1) est retirée ou fait l’objet d’un désistement par la première personne ou est rejetée par le tribunal qui en est saisi, ou si l’ordonnance interdisant au ministre de délivrer un avis de conformité, rendue aux termes de ce paragraphe, est annulée lors d’un appel, la première personne est responsable envers la seconde personne de toute perte subie au cours de la période :

a) débutant à la date, attestée par le ministre, à laquelle un avis de conformité aurait été délivré en l’absence du présent règlement, sauf si le tribunal conclut : (

i) soit que la date attestée est devancée en raison de l’application de la Loi modifiant la

Loi sur les brevets et la

Loi sur les aliments et drogues (engagement de Jean Chrétien envers l’Afrique) ,

chapitre 23 des Lois du Canada (2004), et qu’en conséquence une date postérieure à celle-ci est plus appropriée, (ii) soit qu’une date autre que la date attestée est plus appropriée;

b) se terminant à la date du retrait, du désistement ou du rejet de la demande ou de l’annulation de l’ordonnance.

(2) La seconde personne peut, par voie d’action contre la première personne, demander au tribunal de rendre une ordonnance enjoignant à cette dernière de lui verser une indemnité pour la perte visée au paragraphe (1).

(3) Le tribunal peut rendre une ordonnance aux termes du présent

article sans tenir compte du fait que la première personne a institué ou non une action en contrefaçon du brevet visé par la demande.

referred to in that subsection, make any order for relief by way of damages that the circumstances require.

(5) In assessing the amount of compensation the court shall take into account all matters that it considers relevant to the assessment of the amount, including any conduct of the first or second person which contributed to delay the disposition of the application under subsection 6(1).

(6) The Minister is not liable for damages under this section.

(4) Lorsque le tribunal enjoint à la première personne de verser à la seconde personne une indemnité pour la perte visée au paragraphe (1), il peut rendre l’ordonnance qu’il juge indiquée pour accorder réparation par recouvrement de dommages- intérêts à l’égard de cette perte.

(5) Pour déterminer le montant de l’indemnité à accorder, le tribunal tient compte des facteurs qu’il juge pertinents à cette fin, y compris, le cas échéant, la conduite de la première personne ou de la seconde personne qui a contribué à retarder le règlement de la demande visée au paragraphe 6(1).

(6) Le ministre ne peut être tenu pour responsable des dommages-intérêts au

titre du présent article. [ 26 ] This then is the context for these Reasons. B. Corporate background [ 27 ] The Plaintiff by Counterclaim, Teva, is an Ontario corporation and a manufacturer, vendor, and distributor of pharmaceutical products. Prior to February 16, 2010, Teva was known as Novopharm Limited (Novopharm). Teva’s Israeli parent company, Teva Pharmaceutical Industries (Teva Israel ), purchased Novopharm in April of 2000.

Teva amalgamated with Ratiopharm Canada Inc. and Ratiopharm Inc. (ratiopharm) on August 10, 2010. [ 28 ] Throughout these Reasons for Judgment, the name “Teva” will be used to refer to either Teva or Novopharm, unless the context requires greater specificity. Teva’s ramipril product, however, will be called “Novo-ramipril”, as that was the product’s initial name. [ 29 ] The Defendant by Counterclaim, Sanofi, is a Quebec corporation and a manufacturer, vendor and distributor of pharmaceutical products.

Sanofi has several corporate predecessors, including Hoechst Marion Roussel Canada Inc., Rhône-Poulenc Rorer Canada Inc., and Aventis Pharma Inc. The name “Sanofi” will be used in these Reasons to refer to Sanofi and its corporate predecessors, unless the context suggests otherwise. C. Ramipril patents [ 30 ] Sanofi, either as patentee or licensee, holds the rights to a series of Canadian patents that include claims to ramipril or its uses. The initial patent was Canadian Patent No. 1,187,087 (the '087 Patent) – a product-by-process patent for ramipril – issued May 14, 1985.

The '087 Patent was originally set to expire on May 14, 2002, after 17 years of patent protection. Sanofi, in efforts to extend patent

protection for ramipril, proceeded to obtain a further series of patents and to protect those patents through listings on the Patent Register. Sanofi describes these subsequent patents and the measures it took, through litigation under the PM (NOC) Regulations , as “product life cycle management”. Others – including generic manufacturers – have referred to the subsequent patents as “evergreening”. [ 31 ] The following chart describes the subsequent patents involving ramipril or its uses and identifies when each patent was listed on the Patent Register: Canadian Patent No.

Issue Date Patent Register Listing Subject Matter/Indications 1,246,457 (the ' 457 Patent) December 13, 1988 (expired December 13, 2005) February 21, 2001 Ramipril for the treatment of cardiac insufficiency 1,341,206 (the ' 206 Patent) March 20, 2001 April 11, 2001 The product ramipril 2,055,948 (the ' 948 Patent) November 12, 2002 June 25, 2004 Use of ramipril together with a calcium antagonist for the prevention and treatment of proteinuria 2,023,089 (the ' 089 Patent) January 14, 2003 November 1, 2003 Use of ramipril in the treatment of cardiac and vascular hypertrophy and hyperplasia 2,382,549 (the ' 549 Patent) March 15, 2005 March 17, 2005 Use of ramipril in the prevention of cardiovascular events. 2,382,387 (the ' 387 Patent) June 21, 2005 June 28, 2005 Use of ramipril for the prevention of stroke, diabetes and/or congestive heart failure. [ 32 ] The ' 549 and ' 387 Patents are referred to, collectively, as the HOPE Patents after the Heart Outcomes Prevention Evaluation study (HOPE study), discussed in more detail below.

D. Teva’s regulatory submissions and litigation [ 33 ] The following chart summarizes the steps involved in the approval of Novo-ramipril. DATE EVENT December 24, 2001 Teva files ANDS for Novo-ramipril capsules.

The ANDS include Form Vs, stating Teva would await expiry of the '087, '206 and '457 Patents July 18, 2003 Teva obtains DINs for Novo-ramipril 2.5, 5 and 10 mg capsules October 14, 2003 Teva is placed on “patent hold” September 12, 2005 Notice of allegation #1 – '206 Patent September 14, 2005 Notice of allegation #2 – '089, '948, '549 and '387 Patents October 31, 2005 Sanofi files a Notice of Application with respect to notice of allegation #1 (Court File No. T-1965-05) November 2, 2005 Sanofi files a Notice of Application with respect to notice of allegation #2 (Court File No.

T-1979-05) December 13, 2005 '457 Patent expires September 25, 2006 Federal Court dismisses T-1965-05 “as an abuse of process” ( Sanofi-Aventis Canada Inc v Novopharm Limited , 2006 FC 1135 , 306 FTR 56 )

December 8, 2006 The Minister of Health advises that Teva was required to address the '089 and '948 Patents, but not the '549 and '387 Patents December 15, 2006 Teva withdraws, without prejudice, portionsof notice of allegation #2 relating to the '549 and '387 Patents April 27, 2007 Federal Court of Appeal dismisses T-1979-05 (notice of allegation #2) as an abuse of process ( Sanofi-Aventis Canada Inc v Novopharm Ltd , 2007 FCA 167 , rev’g 2006 FC 1547 ) May 2, 2007 Teva receives an NOC for Novo-ramipril 2.5, 5 and 10 mg capsules DATE EVENT [ 34 ] To provide a complete picture, it should be noted that Teva was not the only company challenging the “evergreening patents”; beginning in February 2003 and continuing up to December 2006, Pharmascience , Riva, Apotex, Cobalt Pharmaceuticals Inc. (Cobalt) and Sandoz Canada Inc. (Sandoz) also served notices of allegation.

In each and every case, except for Cobalt’s August 2006 notice of allegation, Sanofi chose to bring prohibition applications under the Regulations . [ 35 ] Following the issuance of Teva’s NOC, Sanofi commenced an action against Teva claiming that Teva had infringed the '206 Patent (Court File No. T-1161-07). In a decision dated June 29, 2009, this Court dismissed that action and a companion claim against Apotex in Court File No. T-161-07, and declared the '206 Patent to be invalid ( Sanofi-Aventis Canada Inc v Apotex Inc , 2009 FC 676 , 350 FTR 165 ).

That decision was affirmed by the Court of Appeal ( Sanofi-Aventis Canada Inc v Apotex Inc , 2011 FCA 300 , 426 NR 196 ). At the time of writing, Sanofi’s application for leave to appeal to the Supreme Court of Canada remains pending. V. Relevant Period [ 36 ]

Section 8 allows a second person to claim compensation for the losses it suffered because it was kept off the market during the period of the automatic stay ( Alendronate (FC) , above at para 97; Alendronate (FCA) , above at para 71). A critical determination for the Court is thus the commencement and end dates of the period of liability, defined in these Reasons as the Relevant Period. The parties agree that the end date for the Relevant Period is April 27, 2007. There is no agreement on the appropriate commencement date. [ 37 ] As set out in s. 8(1)(

a) of the PM (NOC) Regulations , a first person (Sanofi) is liable to a second person (Teva) for any loss suffered during the period: (

a) 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 . . . (ii) a date other than the certified date is more appropriate . . .

a) débutant à la date, attestée par le ministre, à laquelle un avis de conformité aurait été délivré en l’absence du présent règlement, sauf si le tribunal conclut : . . . (ii) soit qu’une date autre que la date attestée est plus appropriée; [ 38 ] In Alendronate (FC) , above at paragraphs 106-116, Justice Hughes explained that s. 8 thus gives the Court discretion to select a more appropriate date for the beginning of the liability period, although the presumptive period begins on the patent hold date.

[39] Here, the parties appear to agree that “the date, as certified by the Minister, on which a notice of compliance would have beenissued” is October 14, 2003. This date is set out in a letter dated October 17, 2003 from Health Canada to Teva. [40] In spite of the certification date, each of Sanofi and Teva argues that I should find a different date for the commencement ofthe Relevant Period. Teva urges me to find a commencement date of July 18, 2003 or, at least no later than August 1, 2003, while Sanofiasserts that the Relevant Period should not begin until December 13, 2005.

From the evidence before me, it appears that the followingdates should be considered as possible commencement dates: 1. July 18, 2003, when Teva received its DINs for ramipril from Health Canada; 2. October 14, 2003, when Health Canada completed its review of Teva’s drug submission and Teva was advised that an NOCwould not issue until the requirements of the Regulations were met; 3. October 31, 2005, when Sanofi served and filed a Notice of Application in respect of a notice of allegation served by Teva on September 12, 2005, thereby triggering the statutory stay provided for in s. 7(1)(

e) of the Regulations; and 4. December 13, 2005, the date of expiry of the '457 Patent, which was the subject of the patent hold referred to in 2 above. [41] Teva submits that, but for the Regulations, an NOC would have been issued to it soon after July 18, 2003, when it received itsDINs for Novo-ramipril 2.5, 5 and 10 mg capsules. As of that date, Teva had satisfied all of the clinical and manufacturing requirementsset out in the F&D Regulations. As adamantly stated by Mr.

Windross, upon receipt of the DINs on July 18, 2003, Teva would havebeen “in a launch mode pending the receipt of the Notice of Compliance”. [Redacted] Thus, Teva asserts that either July 18, 2003 or –at the latest, August 1, 2003 – must be the beginning date contemplated by s. 8(1)(

a) of the Regulations. In addition, Teva argues that atthe very latest, the damages period should be calculated beginning on the certification date of October 14, 2003. As at any of those dates,in the absence of the Regulations, Teva argues that it would have been able to enter the market. [42] I have no reason to doubt Teva’s submissions that it could have physically been prepared to launch Novo-ramipril in the 2.5, 5and 10 mg strengths on or about August 1, 2003. The question, however, is whether that is the correct date for the assessment ofdamages under the PM (NOC) Regulations.

In particular, Teva’s arguments must be considered in light of the fact that, as of Teva’spatent hold date, Teva had agreed, through its election in its Form V, to await the expiry of the '457 Patent. Moreover, the statutory staydid not begin until October 31, 2005, when Sanofi filed its first of two Notices of Application in response to Teva’s notices of allegation. [43] This case thus presents the somewhat unusual situation in which the certified, or “patent hold” date precedes the beginning ofthe statutory stay.

The first sub-issue related to the commencement date is accordingly whether the Relevant Period can begin prior tothe statutory stay. A. Can the Relevant Period begin prior to the imposition of the 24-month statutory stay? [44] Whether the Relevant Period can begin prior to the imposition of the 24-month statutory stay is a question of statutoryinterpretation of the relevant provisions of the Regulations.

Once this determination is made, the question that follows is to determinewhat would be the appropriate date for the beginning of the period. [45] Teva’s argument for a date prior to both the certification date and the beginning of the statutory stay is premised on its claimthat the start date must be determined “in the absence of these Regulations”. According to Teva, the consequence of these words is “thatthe second person’s losses are to be assessed on the basis it was able to come to market as soon as the health and safety review of itssubmission had been completed”.

More specifically, Teva says that it means “the date on which the requirements of the Food and DrugsAct were complied with such that the second person would have received its NOC”. Teva asserts that factors such as the existence ofpatents on the Patent Register, Form Vs and the timing of notices of allegation are “irrelevant” in a world where there are no PM (NOC)Regulations.

Teva submits that, in the absence of the Regulations, the Minister would have had a “legal duty” to issue its NOC as of July18, 2003 (see Abbott Laboratories Ltd v Canada (Minister of Health), 2007 FC 622 at para 11, 57 CPR (4th) 450; Apotex Inc v Canada(Attorney General) (1993), (FCA), [1994] 1 FC 742, [1993] FCJ No 1098 (CA)).

[ 46 ] Teva buttresses its contention that all aspects of s. 8 damages must be calculated “in the absence of [the] Regulations” with a number of arguments. In

summary form, Teva points out that ss. 8(1)(a), 8(2), and 8(4) all refer to s. 8(1); and that Sanofi commenced proceedings in full knowledge of the fact that Teva had approval in July 2003, and thus knowingly accepted a “black box of liability”.

Teva also stresses that s. 8 must have a deterrent effect, and alleges that Sanofi’s arguments “co-mingle” real events with the “but for” world. [ 47 ] Teva expressly rejects the argument that the liability period cannot begin before the commencement of the statutory stay on the basis that such a position would require an impermissible “radical re-writing and reading in” of the Regulations . This, Teva says, is because the legislator clearly chose not to draft s. 8(1)(

a) to provide that the liability begins on the later of the certification date or the date of the commencement of a prohibition application. While acknowledging that an application is necessary, Teva maintains that it is “not determinative of the start date”. [ 48 ] At its heart, Teva’s argument is founded on a misinterpretation of the phrase “in the absence of these Regulations”, which inappropriately divorces s. 8 from the rest of the Regulations .

For the reasons explained below, Teva’s arguments must be rejected. [ 49 ] First, Teva’s claim that the start date must be determined “in the absence of [the] Regulations” overstates the effect of that phrase in s. 8(1)(a). As stated by the Court of Appeal in Alendronate (FCA) , above at paragraph 83, The words of

section 8 must be read in their entire context and in their grammatical and ordinary sense, harmoniously with the scheme of the PM(NOC) Regulations , their object, and the intention of Parliament ( Bell ExpressVu Limited Partnership v. Rex , 2002 SCC 42 , [2002] 2 S.C.R. 559 at paras. 29 and 30 , as applied in Biolyse , supra , at para. 43).

Where regulations are concerned, the purpose of the enabling statute must also be considered ( Biolyse , supra , para. 47). [ 50 ] The phrase “in the absence of these Regulations” appears only in s. 8(1)(a), and immediately follows the phrase “on which a notice of compliance would have been issued”. Read in their ordinary and grammatical sense, the phrase “in the absence of these Regulations” only modifies the certification date. While Teva points out that ss. 8(2) and (4) both refer to s. 8(1), it is notable that the phrase “in the absence of the Regulations” does not itself appear in any of those subsections.

Nor does it appear in s. 8(5), which describes the factors the Court may consider in assessing the amount of a second person’s compensation. [ 51 ] The decision in Norfloxacin (FCA) , above, also supports limiting the effect of the words “in the absence of these Regulations” to the certification date. In that case, at paragraph 75, the Court of Appeal defined the issue presented by s. 8 as “what would have happened had Merck not brought an application for prohibition ” (emphasis added). The Court of Appeal did not define the issue as “what would have happened if the Regulations did not exist”.

The phrase “in the absence of these Regulations” in s. 8(1)(

a) therefore logically refers to the absence of the s. 6 prohibition order, not to the absence of the PM (NOC) Regulations generally. [ 52 ] If accepted, Teva’s

interpretation would artificially separate s. 8 from the rest of the Regulations . While Teva rightly points out that the Regulations do not explicitly state that the liability period begins on the date that a first person commences a prohibition application, this, as Sanofi argues, is the necessary consequence of the fact that s. 8(1) makes a prohibition application a prerequisite for recovery.

Subsection 8(1) expressly refers to the statutory stay by predicating a first person’s liability upon the withdrawal, discontinuance, or dismissal of a prohibition application “ made under subsection 6(1) ” (emphasis added), or the reversal of a prohibition order. As described above, s. 6(1) allows a first person who has been served with a notice of allegation to apply to a court for an order prohibiting the Minister from issuing an NOC until after the expiration of the patent that is the subject of the notice of allegation.

It is this application by the first person that prevents the Minister from issuing an NOC to a second person ( Regulations , above at s. 7(1)(e)). Contrary to Teva’s suggestion, limiting a first person’s liability to some period following the commencement of the statutory stay would therefore not require a “radical re-writing and reading in” of the Regulations , as s. 8(1) already references the statutory stay. [ 53 ] This

interpretation of s. 8 is consistent with the Court of Appeal’s decision in Alendronate (FCA) . In determining whether Justice Hughes had erred in holding that he had jurisdiction to hear Apotex’s s. 8 claim, the Court of Appeal noted that s. 8 provides a remedy in respect of patents pursuant to s. 20(2) of the Federal Courts Act , RSC 1985, c F-7 by “allowing a second person to recover losses arising from the automatic stay triggered by a first person when the attempt to assert its patent rights fail” ( Alendronate (FCA) , above at para 71[emphasis added]).

Similarly, in assessing the constitutionality of s. 8, the Court of Appeal stated, at paragraph 66 of its decision, that “ an award of damages under

section 8 logically flows from the

section 6 prohibition proceedings ”. The period of liability is thus clearly linked to the operation of the automatic stay. [ 54 ] This conclusion is also reinforced by the Regulatory Impact Assessment Statement (RIAS) filed with the introduction of each of the 1993, 1998 and 2006 versions of the Regulations . In describing the anticipated impact of the Regulations , the 1993 RIAS explained that, although the Regulations may unjustifiably delay generics from entering the market (for example, where the patents are later found to be invalid or not infringed), “the frequency and costs associated with any such delays arising from these Regulations will

be minimized by the fact that such a patentee will be liable for all damage suffered from the delay” (Regulatory Impact Analysis Statement,

(1993) C Gaz II, 1387 at 1388 [1993 RIAS] [emphasis added]). The 1993 RIAS thus clearly links a second person’s damages to the operation of the stay. [ 55 ] A similar statement is found in the 1998 RIAS. That document explains that amendments to the Regulations clarified “the circumstances in which damages could be awarded to a generic manufacturer to compensate for loss suffered by reason of delayed market entry of its drug” (Regulatory Impact Analysis Statement,

(1998) C Gaz II, 1055 at 1056 [emphasis added]). The 2006 RIAS also links a first person’s liability to the operation of the stay by explaining that amendments to s. 8 “further specify the matters the court may take into account when calculating the period of delay for which an innovator may be held liable” and “remove the word ‘profits’ from the provision prescribing the remedies available to a generic manufacturer seeking compensation for any loss arising from that delay ” (Regulatory Impact Analysis Statement,

(2006) C Gaz II, 1503 at 1521 [2006 RIAS] [emphasis added]). [ 56 ] While Teva points to Alendronate (FC) in support of the proposition that the service of an NOA is “entirely irrelevant” to the commencement date, its reliance on that case is misplaced. Specifically, Teva points to paragraph 106, where Justice Hughes observed that “[t]here is nothing to suggest that the Minister knew about or even cared when the Notice of Allegation was served . . .”. However, the issue in Alendronate (FC) was whether another date was more appropriate under s. 8(1)(

a) in light of the fact that Apotex had allegedly delayed serving its notice of allegation for 66 days. Justice Hughes rejected Merck’s argument on the basis that there was no evidence to suggest that the date of service of Apotex’s notice of allegation impacted the sending of the Minister’s patent hold letter ( Alendronate (FC) , above at paras 112-116).

The issue of whether the liability period could begin prior to the statutory stay did not arise in Alendronate (FC) because, on the facts before Justice Hughes, the notice of allegation was sent and prohibition proceedings were commenced almost one year before Apotex’s patent hold date (see Alendronate (FC) , above at para 5).

The issue that arises in the case before me is not simply whether the patent hold letter would have been sent on some other date; rather, the question is whether the liability period can begin prior to the statutory stay. [ 57 ] Teva’s claim that it is “inequitable” to link causation to the commencement of the stay because “Sanofi benefited from having listed patents on the Patent Register for a much more extensive period” is similarly wide of the mark. The very purpose of s. 8 damages is to compensate a second person for “losses arising from the automatic stay” ( Alendronate (FCA) , above at para 71).

It is irrelevant whether, as Teva alleges, Sanofi would have commenced proceedings against Teva at whatever time Teva sent its notices of allegation. [ 58 ] Even if Teva’s

interpretation of s. 8 were accepted, ordinary damages principles would prevent a second person from recovering for any loss suffered prior to the beginning of the statutory stay. First, no conduct by Sanofi can be said to have “caused” any damage to Teva during that period. While Teva accuses Sanofi of incorrectly seeking to “narrowly tie causation to its commencement of proceedings under the Regulations ”, Teva does not point to any other conduct by Sanofi that can be said to have caused Teva’s alleged losses prior to the commencement of the stay.

Teva’s only argument appears to be that Sanofi benefited from listing successive patents on the Patent Register. However, Teva does not specifically link that conduct to any of its alleged losses. This is insufficient to establish causation. [ 59 ] Further, Sanofi correctly argues that any loss suffered by a second person prior to the service of a notice of allegation is unforeseeable, because, at that time, the first person has no knowledge of a second person’s confidential drug submission.

The evidence is clear that ANDS submissions and subsequent actions by Health Canada (such as the issuance of DINs and patent hold letters) are confidential. Ms. Bowes testified that ANDS are not typically disclosed, with the exception of portions disclosed pursuant to orders made under the Regulations and product monographs that become public. Prior to the service of the notice of allegation, then, Sanofi had no notice of Teva’s intentions.

If some conduct by Sanofi had been capable of triggering its liability during this period, then Sanofi would have had no opportunity to alter its actions so as to reduce or avoid liability. The fact that Sanofi knew, from the date it received Teva’s first notice of allegation, that Teva had approval in July 2003, is not enough. It would still be fundamentally unfair to hold Sanofi liable for any loss Teva suffered when Sanofi had no ability to control its liability. [ 60 ] For the foregoing reasons, Teva’s

interpretation of s. 8(1)(

a) and the effect of the words “in the absence of these Regulations” on the commencement date must be rejected. Reading the words of s. 8 in their entire context and in their grammatical and ordinary sense, harmoniously with the scheme of the PM (NOC) Regulations , their object, and the intention of Parliament results in a conclusion that the liability period cannot predate the statutory stay. B. What is the appropriate commencement date for the Relevant Period ? [ 61 ] Given that I have determined that the Relevant Period cannot begin prior to the date of a statutory stay imposed by the Regulations , the question is whether, on the facts of this case, the “more appropriate” date is: (

a) October 31, 2005, the commencement of the statutory stay; or (

b) December 13, 2005, the date of the expiry of the ' 457 Patent.

[ 62 ] Sanofi argues that December 13, 2005, the date of the expiry of the ' 457 Patent, is the appropriate commencement date. In support of its position, Sanofi relies on the facts surrounding Teva’s choices as to when and how it would approach regulatory approval for its ramipril. [ 63 ] As described above, Teva filed its ANDS for Novo-ramipril on December 24, 2001. In that filing, Teva included an acknowledgement in its Form V that it would await the expiry of the ' 087, ' 206 and ' 457 Patents before coming to market.

According to the Form V filed with the Minister, Teva had no intention of bringing its ramipril product to market until the expiry of several of the related patents. This situation did not change until September 12 and 14, 2005, when Teva filed its notices of allegation for ramipril. Even then, however, Teva did not allege invalidity or non-infringement of the ' 457 Patent. [ 64 ] I accept that the changing of a Form V is an administrative amendment. It is clear that Teva could have amended its Form V and proceeded to serve a notice of allegation with respect to the ' 457 Patent.

However, it never did so. [ 65 ] I also accept the evidence of Teva’s fact witnesses – most notably, Mr. Fishman, Mr. Windross and Dr. Denike – who spoke to the aggressiveness of Teva (then Novopharm) in and around 2003 in acquiring rights to new drugs. In particular, they spoke to the interest of the company in ramipril. Their evidence, however, rings a little hollow when the company indicated clearly on every administrative form (its Form V and its initial notices of allegation) that it would await the expiry of the ' 457 Patent.

Quite simply, Teva failed to take one of the most basic of steps – a notice of allegation with respect to the ' 457 Patent – in gaining the right to market ramipril. [ 66 ] In my view, the actions of Teva were more consistent with a decision to wait for the expiry of the ' 457 Patent before launching Novo-ramipril. [ 67 ] By not amending its Form V and by not, at any time, commencing a challenge of the ' 457 Patent, Teva implicitly agreed to live by the decisions made with respect to other companies (specifically, Apotex and Riva) who did challenge the ' 457 Patent.

Two of those decisions are of particular relevance in this case. [ 68 ] The first decision arose from Apotex’s notice of allegation alleging non-infringement of the ' 457 Patent served in August 2003. In a decision dated October 11, 2005, Justice Simpson determined that Apotex’s allegation of non-infringement of the ' 457 Patent was not justified and issued an Order of Prohibition, prohibiting the Minister of Health from issuing an NOC for ramipril to Apotex until the expiry of the ' 457 Patent ( Aventis Pharma Inc v Apotex Inc , 2005 FC 1381 , 281 FTR 233 [ Apotex ] ) .

Although Apotex commenced an appeal of this decision (Court of Appeal File No. A-494-05), the appeal was subsequently discontinued on October 13, 2006. In sum, on the evidence before me, Apotex was subject to an order of this Court that prohibited the Minister of Health from issuing an NOC to Apotex until December 13, 2005. [ 69 ] On June 9, 2004, Riva served a notice of allegation alleging invalidity of, inter alia , the ' 457 Patent.

The NOC proceedings related to Riva’s notices of allegation were heard and disposed of in a decision of Justice Harrington dated May 17, 2007 ( Sanofi-Aventis Inc v Laboratoire Riva Inc , 2007 FC 532 , 315 FTR 59 [ Riva ] ). This was after the expiry of the ' 457 Patent. While Justice Harrington dismissed the Application of Sanofi with respect to the ' 206 Patent, he refused Riva’s request to make any determination with respect to the ' 457 Patent ( Riva , above at paras 105-106 ). [ 70 ] In sum, both Apotex and Riva had the determination to address the ' 457 Patent head on.

In the case of Apotex , the result was a prohibition order that prevented Apotex from coming on to the market prior to the expiry of the ' 457 Patent. Riva’s challenge was wrapped up with the ' 206 Patent and was not decided prior to the expiry of the ' 457 Patent. [ 71 ] Another way of looking at this situation is to consider the behaviour of Teva in a hypothetical scenario that would exist in the total absence of the PM (NOC) Regulations . In that “but for” world, patents would exist.

The rights and obligations associated with those existing patents would be governed by the Patent Act , RSC 1985, c P-4 [ Patent Act ]. The patents are presumed to be valid. In the face of an existing patent, a third party seeking to use the patent may do a number of things; five that come to mind are as follows: 1. it may use the patented subject matter and await the consequences of an infringement action;

2. it may negotiate a licence agreement with the patentee; 3. it may commence an impeachment proceeding; 4. it may wait for the expiry of the patents; or 5. it may wait for another third party to succeed in impeaching the relevant patent. [ 72 ] While the evidence shows that Teva was aggressively attempting to bring new products to market in 2003, I have no evidence that Teva would have launched ramipril in the face of a valid ' 457 Patent. There is no evidence that Teva had obtained a legal opinion on the validity of the ' 457 Patent.

We know that Teva never attempted to negotiate a licence agreement; nor did it commence any impeachment proceedings on the ' 457 Patent. It seems to me that the facts demonstrate that, given the ' 457 Patent was set to expire in the not-too-distant future, on December 13, 2005, it is more likely than not that Teva was prepared to wait and to enter the market when the ' 457 Patent expired. Alternatively, Teva was waiting for another party to successfully challenge the ' 457 Patent. In either case, Teva would not have come on to the market until December 13, 2005. [ 73 ] Dr.

Denike, who testified on behalf of Teva, was intimately involved with all aspects of Teva’s litigation strategy in 2002 when the company was examining its ability to launch ramipril. The following exchange is highly telling of Teva’s strategy with respect to patent litigation: THE WITNESS: . . .

We do know once another generic started in litigation, the practice that I had while I was there and after I left was, seeing somebody else was already litigating, I might as well sit and learn what was happening there and react to what was happening, because they are going to allow the other generics to go forward anyway. So if there was a problem in the first generic litigation, I could take a different strategy, because I believe I was going to be released at the same time, there was no point in starting right away. I might as well sit back and get the free information that's there and deal with it.

JUSTICE SNIDER: On the basis of that assumption, you would not be first, you'd just be one of? THE WITNESS: One of. First or tied for first. JUSTICE SNIDER: And that was good enough? THE WITNESS: Tied for first -- first was always the golden chalice. But tied for first was clearly the expectation and always the number one target. If you can't be first, make sure you're tied.

JUSTICE SNIDER: So by sitting back, Novopharm was admitting, in a hypothetical because you weren't there at the time, but in general, based on your experience when you were there, by sitting back you were agreeing, well, can't be first, we're going to be tied? THE WITNESS: Tied for first . [Emphasis added] [ 74 ] Teva offered many excuses for initially indicating that it would await the expiry of the ' 457 Patent on its Form V. However, at the end of the day, Teva made a business decision. There are consequences to business decisions.

Teva voluntarily sat on the sidelines while others actively – and unsuccessfully – sought to gain market entry in the face of the ' 457 Patent. While Teva could have amended its Form V, it did not do so. While Teva could have challenged the ' 457 Patent through the PM (NOC) Regulations or through an impeachment action, it did not do so.

[ 75 ] Accordingly, I conclude that the appropriate commencement date, for the purposes of s. 8 of the Regulations , is the date of the expiry of the ' 457 Patent – December 13, 2005. [ 76 ] Indeed, even if I had found that the Regulations permit the period of liability to commence prior to the imposition of the statutory stay, I would still conclude that, on the evidence before me, the appropriate date for the beginning of the Relevant Period is December 13, 2005. VI.

Overall Size of the Ramipril Market [ 77 ] Having determined the Relevant Period of December 13, 2005 to April 27, 2007, the next step is to assess the size of the total ramipril market during this hypothetical period. Stated in different terms, I must estimate the total number of capsules of ramipril that would have been sold by all manufacturers during the Relevant Period. This figure represents the Ramipril Market. In this task, I was assisted by two economists, Dr. Anis (produced by Teva) and Dr. Carbone (produced by Sanofi).

Each of these experts prepared estimates of the size of the Ramipril Market, using very different modeling techniques. In addition, I had the evidence of Dr. Cockburn whose mandate was, as I see it, to do no more or less than to criticize Dr. Anis’s expert opinion. Dr. Cockburn made no estimate of his own. [ 78 ] Each of Dr. Anis and Dr. Carbone was asked to provide opinions on the size of the overall Ramipril Market in a number of scenarios. Each expert addressed one scenario that closely matches the Relevant Period of December 13, 2005 to April 27, 2007. Specifically: • Dr.

Anis defines his Scenario 5(ii) as “Teva Canada entered together with Apotex and another generic” for the period “December 2005 to May 2, 2007” (Exhibit 47 at para 65). • Dr. Carbone defines his Scenario 5 as simultaneous entry into the generic market by Teva, Apotex and an AG on December 13, 2005, prior to entry by PMS and Riva (Exhibit 86, vol 1 at paras 128-129). Dr. Carbone calculates the size of the anticipated market until April 27, 2007. [ 79 ] I note that Dr. Anis’s definition of Scenario 5(ii) differs from the “but for” world defined in these Reasons in two ways. First, Dr.

Anis’s evaluation period appears to be slightly longer than the Relevant Period. Second, Dr. Anis appears to indicate that the third generic (other than Teva and Apotex) is not an AG (I discuss competition in the Generic Market in

Part VIII. C, below). In spite of these two variances, it appears that this scenario most closely aligns with the “but for” world that I find in these Reasons and is, therefore, the best available comparison to Dr. Carbone’s results. [ 80 ] The experts arrived at different estimates of the size of the total Ramipril Market in the “but for” world. These differences resulted from their divergent conclusions regarding the effect of a cessation of promotion by Sanofi upon the entry of generic manufacturers into the ramipril market (also referred to as the “genericization” of the market). Both Dr. Anis and Dr.

Carbone conducted their analyses on the basis that Sanofi would have ceased its advertising efforts upon the genericization of ramipril (Exhibit 47 at para 113; Exhibit 86, vol 1 at paras 67-70). I would accept this as a reasonable assumption. [ 81 ] In his analysis, Dr. Anis assumes that the cessation of advertising would not have had a significant impact on the size of the Ramipril Market. Dr. Anis thus concludes that the total quantity of Ramipril sold in the “but for” world would have been equal to the actual quantity of Ramipril sold during the Relevant Period ( Exhibit 47,

Schedule “K” at 11) . Dr. Anis therefore uses actual monthly sales data for all ramipril products sold during the Relevant Period to calculate the Ramipril Market size. [ 82 ] To test his assumption, Dr. Anis performs a “sensitivity analysis” by constructing two regression models (Models S1 and S2) to estimate the effect of advertising on the size of the Ramipril Market. From these models, Dr. Anis concludes that ceasing promotion is not a statistically significant determinant of Ramipril Market size ( Exhibit 47,

Schedule “K” at 12) . [ 83 ] In contrast, Dr. Carbone assumes that the Ramipril Market would be influenced by Sanofi’s advertising behaviour. In support of his opinion, Dr. Carbone points out that the actual ramipril market did in fact shrink upon genericization (Exhibit 86, vol 1 at para 68). [ 84 ] Based on his assumption that a decline in advertising is significant, Dr. Carbone employs a time-series forecasting method to

estimate the impact of generic entry on the size of the Ramipril Market. This method involves four phases: • Phase One : Dr. Carbone uses market data for the period prior to the actual formulary listing of generic ramipril to forecast the size of the ramipril market after the formulary listing date, assuming that no generics entered the market. • Phase Two : Dr. Carbone subtracts the forecasted sales of ramipril after the formulary listing date (i.e. the quantity forecasted in Phase One) from actual sales of ramipril after the formulary listing date. He then divides this difference by the forecasted sales.

His calculation produces a series of “impact percentages” which represent the impact of generic competition on the size of the ramipril market (see Exhibit 86, vol 1 at Table 7). Dr. Carbone observes that generic competition reduced the size of the ramipril market over time for all formulations except the 1.25 mg strength (Exhibit 86, vol 1 at para 66). • Phase Three : Dr. Carbone constructs an “impact model” using a process called Bass Diffusion modelling.

This technique estimates the change in ramipril sales over time based on the manner in which demand reacts to influences on product diffusion such as advertising, media coverage and word of mouth by customers already using the product (the Impact Model) ( Exhibit 86, vol 1 at Appendix “J”) . The purpose of the Impact Model is to predict the (negative) linear trend in ramipril market size based on the impact percentages calculated in Phase Two. • Phase Four : Dr. Carbone subtracts the values generated by the Impact Model from the size of the ramipril market (without generic competition) forecasted in Phase One.

The result is the total forecasted size of the Ramipril Market over the Relevant Period. [ 85 ] It is important to note that, although Drs. Anis and Carbone were generally characterized as using contrasting “econometric” and “time-series forecasting” models, that distinction does not apply to this aspect of their analyses. That is because Dr. Anis does not use an econometric model to predict the size of the Ramipril Market. Instead, he assumes that ceasing promotion would not affect the overall size of the market, and uses his model to test that assumption.

The “time-series forecasting” and “econometric” methods used by the experts therefore do not conflict at this stage of the analysis. The question that I must instead answer is whether, based on the evidence before me, it is reasonable to assume that Sanofi’s decision to stop promoting ALTACE upon genericization would impact market demand for the drug. [ 86 ] Dr. Carbone criticized Dr. Anis’s conclusion that generic entry would have no impact on the size of the Ramipril Market. He argued that Dr.

Anis’s econometric model is of no statistical value because it does not include enough observations (data points) to render accurate predictions. In support of his argument, Dr. Carbone pointed out that Dr. Anis’s model failed to predict the known impact of the HOPE study on ramipril sales (Exhibit 87 at para 44). [ 87 ] Dr. Cockburn was also critical of Dr. Anis’s conclusion on this point. In particular, he criticized Dr. Anis for not including factors such as the availability of alternative treatments in his model, and reiterated Dr. Carbone’s concern that Dr.

Anis’s dataset is not sufficiently large to produce reliable estimates. In addition, Dr. Cockburn noted that Dr. Anis does not account for the persistent effect of advertising over time, and fails to explain how he constructs an average price for competing products (Exhibit 158 at paras 59-62). [ 88 ] In response, Dr. Anis offered the pragmatic observation that the differences in the Ramipril Market size estimated by himself and Dr. Carbone are “minimal and not significant” (Exhibit 48 at para 19). Dr. Anis quantifies these differences for Dr.

Carbone’s Scenario 5 in Table 2 of his Responding Report (reproduced below) and provides a visual representation of these differences in Figures 2.1 to 2.18. The percent difference between Dr. Anis’s and Dr. Carbone’s predicted Ramipril Market size for all years ranges from 0.58% to 3.2%, depending on the formulation, although these differences are higher in some years:

[ 89 ] While these differences may be relatively small, I find that the criticisms of Dr. Anis’s approach are valid and call into question the explanatory power of his econometric Models S1 and S2. All else being equal, the reliability of an econometric model increases with the number of observations included in the data set. Models that test a hypothesis or assumption on the basis of a small number of observations are statistically less reliable than those estimated using a large number of observations. From a methodological standpoint, Dr.

Anis’s models simply do not appear to contain enough information on which to make a reliable finding that ceasing or decreasing advertising would not affect the size of the Ramipril Market in the “but for” world. [ 90 ] I also accept Dr. Carbone’s observation that actual demand for ramipril did, in fact, decline after generic entry. To the extent that this observation is accurate, it supports Dr.

Carbone’s conclusion that Sanofi’s decision to cease advertising would have also led to a decrease in the size of the Ramipril Market in the “but for” world. [ 91 ] I am unable to draw any specific conclusions about the comparative validity of Dr. Carbone’s time-series forecasting approach to predict the size of the Ramipril Market. Dr. Anis does not offer any specific criticisms of this approach at this stage of the analysis. I can only conclude that Dr.

Carbone’s approach appears to provide one means to account for the effect of genericization on the size of Ramipril Market, assuming that such an effect would have occurred in the “but for” world and can be estimated using available data from the observed ramipril sales. For this reason, I am prepared to accept, as reasonable, Dr. Carbone’s estimate under his Scenario 5 as the size of the Ramipril Market during the Relevant Period. [ 92 ] The following table presents the total number of ramipril capsules (10, 5 and 2.5 mg formulations) calculated using Dr.

Carbone’s predictions for his Scenario 5 (Exhibit 88 at Supplemental Appendix S). This number represents the size of the total Ramipril Market: Total Number of Pills, Carbone Scenario 5 December 2005 - April 2007 Total Ramipril Market Size 611,122,083 VII. Size of the Generic Market [ 93 ] Having determined the size of the overall Ramipril Market during the Relevant Period, the next step is to establish the size of the Generic Market. This requires that I calculate the percentage of the Ramipril Market that generic entrants would have captured.

The notion that generic manufacturers would have acquired a portion of the Ramipril Market is described as “market penetration” or, from the

innovator’s perspective, “market erosion”. In either case, the issue is to determine how ALTACE and generic versions of ramipril would have shared the Ramipril Market. [ 94 ] Once again, I turn to the economists, Dr. Anis and Dr. Carbone, for assistance. Again, I focus on Dr. Anis’s Scenario 5(ii) and Dr. Carbone’s Scenario 5, both of which approximate the Relevant Period. [ 95 ] At this stage of the analysis, the experts took quite different approaches. Dr.

Anis assumed that the erosion curve for ALTACE could be approximated by the average erosion curve of drugs that enjoyed sales in the top 25% of all drug markets. In contrast, Dr. Carbone estimated ALTACE’s erosion curve using a time-series forecasting model. Again, I do not find that the difference between the experts turns on the distinction between econometric and time-series forecasting models, as Dr. Anis did not employ an econometric model for his analysis.

I must accordingly find some other basis for determining which approach, if any, is of assistance in determining the size of the Generic Market. [ 96 ] Dr. Carbone directed a number of criticisms at Dr. Anis’s method of constructing and selecting the appropriate erosion curve. These include: 1. Dr.

Anis has improperly calculated his average quartile erosion curves using post-genericization dollar sales (Exhibit 87 at paras 27-28); 2. erosion curves for individual provinces should have been estimated separately given provinces’ different formulary listing dates and observed differences in erosion rates for cardiovascular products between provinces (Exhibit 87 at para 18); 3. erosion curves based on the Canadian Drug Store and Hospital Purchases (CDH) audit data will tend to over-state the erosion rate at the beginning of the period after generic entry because it does not account for accumulated inventory after the formulary listing date (Exhibit 87 at para 21); 4.

Dr. Anis’s approach lacks transparency because it is impossible to link his average erosion curves to the underlying data. Dr. Anis does not present specific erosion rates (only the graphical curves) and his choice of the Q4 average erosion curve appears to be based only on a subjective visual evaluation; 5. Dr. Anis’s method fails to control for additional factors that may impact on the erosion rate of ALTACE; and 6. the Q4 erosion curve is not a “conservative estimate” of ALTACE’s erosion rate, as Dr.

Anis claims – particularly for Quebec , where the observed ALTACE curve is above the average Q4 curve for the first 24 months after initial generic entry. [ 97 ] In oral testimony, Dr. Anis clarified that Dr. Carbone’s first criticism is based on a misunderstanding of his method. Dr. Anis explained that: We looked at the sales of each one of the molecules in my sample and, according to the magnitude of the sales, companies or manufacturers got into different quartiles, depending on the size of the thing; this is the pre-genericization sales.

And subsequently, the erosion curves were made on physical units; it has nothing to do with dollars or adding sales volumes. [ 98 ] The third criticism involves Dr. Anis’s use of CDH data. By way of background, both experts prepared their reports using data provided by IMS, an independent firm that collects and provides audited drug consumption data. Two of those audits are the Canadian CompuScript audit and the CDH audit. Dr. Anis explained that the CompuScript audit tracks the number of prescriptions dispensed by Canadian retail pharmacies.

In contrast, the CDH audit provides the dollar value and unit volume of pharmaceutical and diagnostic products purchased by Canadian retail pharmacies and hospitals. Dr. Anis testified that transactions will appear in the CDH database as soon as the drug is shipped to the wholesaler or pharmacist; they will not appear in the CompuScript database until a prescription is dispensed. [ 99 ] In response to Dr. Carbone’s criticism, Dr.

Anis argues that the CDH dataset is appropriate because “the erosion process should be considered to have started as soon as the generic product is available” and not adjusted for the “inventory” factor. He argues that the relevant transaction for the purposes of calculating damages in this proceeding is between Teva and the supplier. Apart from this

issue, Dr. Anis does not offer any further criticism of Dr. Carbone’s time-series forecasting method for predicting the Generic Market size. [ 100 ] With respect to the fifth criticism, Dr. Anis testified that he did not expect matters such as therapeutic class, type of product, or provincial regulations to impact on his calculation of the average erosion rate. [ 101 ] Because, as Dr. Carbone points out, Dr.

Anis has failed to provide actual erosion rates for his calculated average Q4 erosion curve, it is not possible to quantify the extent to which the experts’ methods yield different predictions of the size of the Generic Market. Without this kind of quantitative comparison, it is difficult to draw any reliable conclusions as to the significance of Dr. Carbone’s remaining criticisms. [ 102 ] In light of Dr. Anis’s clarifications, there do not appear to be any significant flaws in his method of calculating average quartile erosion curves. However, I observe that Dr.

Anis has failed to provide a rigorous explanation to justify his choice of the Q4 curve. Dr. Anis puts forward the hypothesis that drugs with relatively large sales volumes prior to generic entry would attract greater generic interest and competition because they are potentially more profitable. Therefore, he expects branded drug sales to erode “faster” and “deeper” the larger the size of the market before generic entry (Exhibit 47 at paras 82, 88). Presumably, Dr.

Anis could have constructed an econometric model to test this hypothesis using an approach similar to the one he employed in estimating the size of the Ramipril Market. No such model was provided, nor did Dr. Anis offer an explanation for this choice. [ 103 ] Regrettably, I am unable to draw any specific conclusions as to the validity of Dr. Carbone’s time-series forecasting approach aside from the fact that accepting Dr. Anis’s claim that CDH data is more appropriate would mean that Dr. Carbone’s predictions may underestimate the size of the Generic Market. The only observation that I can make is that Dr.

Carbone’s use of a forecasting approach is conceptually consistent with his methodology in estimating the size of the Ramipril Market, whereas Dr. Anis apparently chose to rely on different methodologies at each of these stages. [ 104 ] Marginally, I therefore prefer the analysis and, hence, the results obtained by Dr. Carbone with respect to the size of the Generic Market. [ 105 ] The following table presents Dr.

Carbone’s estimates for both the Ramipril Market and the Generic Market (Exhibit 88 at Supplemental Appendix S): Total Number of Pills, Carbone Scenario 5 December 2005 - April 2007 Total Ramipril Market Size 611,122,083 Total Generic Market Size 374,092,845 [ 106 ] Having made this determination, I can move on to the two remaining issues – Teva’s share of the Generic Market (i.e. Teva’s Lost Volumes) and the calculation of Teva’s losses during the Relevant Period (i.e. Teva’s Net Lost Profits). VIII.

Teva’s Lost Volumes [ 107 ] The next step in the analysis is for me to determine Teva’s share of the Generic Market. [ 108 ] I begin by observing that Sanofi does not argue that Teva would have been unable to produce sufficient quantities of ramipril to supply whatever market share it would have acquired in the “but for” world.

The evidence before me is clear and compelling that Teva would have had the means to obtain sufficient quantities of API and incipient ingredients and sufficient plant capacity to meet market demand throughout the Relevant Period. [ 109 ] Having found that Teva could have supplied the entire market, the question is whether Teva would have captured the entire

Generic Market. Before I can quantify Teva’s share of the generic market, preliminary questions

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