APOTEX INC. Plaintiff v. SANOFI-AVENTIS, 2012 FC 553

Date: 20120523 Docket: T-1357-09 Citation: 2012 FC 553 BETWEEN: APOTEX INC. Plaintiff and SANOFI-AVENTIS SANOFI-AVENTIS DEUTSCHLAND GmbH AND SANOFI-AVENTIS CANADA INC. Defendants PUBLIC REASONS FOR JUDGMENT (Confidential Reasons for Judgment released May 11, 2012) SNIDER J. I. Introduction [ 1 ] Apotex Inc. (Apotex), the Plaintiff 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 in this action, holds or has held patent rights to a brand-name version of ramipril – ALTACE. [ 2 ] In spite of the fact that Apotex received certain regulatory approvals from Health Canada in 2004, it was unable to commence sales of Apo-ramipril until December 12, 2006, when it received its Notice of Compliance (NOC) 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 Apotex. In this action, Apotex claims that Sanofi, Sanofi-Aventis (Sanofi France) and Sanofi-Aventis Deutschland GmbH (Sanofi Germany) are liable to Apotex for the loss it suffered during the period from April 26, 2004 to May 2, 2008, as provided for in s. 8(1) of the PM (NOC) Regulations . [ 3 ] The Defendant, Sanofi, is a Canadian corporation and a manufacturer, vendor and distributor of pharmaceutical products.

Sanofi has several corporate predecessors, including Hoechst Marion Roussel Canada Inc. (Hoechst), Rhône-Poulenc Rorer Canada Inc., and Aventis Pharma Inc. (Aventis). The name “Sanofi” will be used in these Reasons for Judgment to refer to Sanofi and its corporate predecessors, unless the context suggests otherwise. [ 4 ] Subject to validity issues raised in its pleadings, Sanofi acknowledges and accepts that Apotex is entitled to damages under s. 8. However, Sanofi disputes many elements of Apotex’s claim, including: (

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

b) the

various assumptions and projections built into the assessment of damages. [ 5 ] Sanofi’s claim of invalidity of s. 8 of the PM (NOC) Regulations was separately argued in a hearing involving this action and similar issues in Court File No. T-1161-07 ( Teva Canada Limited v Sanofi-Aventis Canada Inc and Sanofi-Aventis Deutschland GmbH ). Separate Reasons have been rendered in respect of the validity issues ( see 2012 FC 551 ). In addition, by Order of Prothonotary Milczynski, dated May 31, 2011, all of the claims of Apotex with respect to Sanofi France and Sanofi Germany have been bifurcated.

Thus, these Reasons do not include a consideration of the invalidity claims of Sanofi or of Apotex’s claims against Sanofi France and Sanofi Germany . [ 6 ] My overarching objective is to assess the amount of compensation to be awarded to Apotex. 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 Apotex 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 involves an examination of 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. [ 7 ] 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) for the assessment of Apotex’s losses is April 26, 2004 to December 12, 2006. 2. The Court should have regard to the possibility of multiple market entrants during the Relevant Period, but is not required to establish a single “but for” world that will apply to all possible s. 8 claims.

On the facts of this case, it is more likely than not that a generic authorized by Sanofi (an authorized generic or AG) would have entered the generic market on July 26, 2004, with Teva Canada Limited [Teva] following on August 1, 2006. 3. In assessing Apotex’s damages, no adjustment should be made for: (

a) a second “ramp-up”; or (

b) sales made in respect of an unapproved indication. [ 8 ] This action was one of three s. 8 damages actions brought against Sanofi by generic manufacturers with respect to ramipril. This was the second action heard. The first action was Teva Canada Limited v Sanofi-Aventis Canada Inc and Sanofi-Aventis Deutschland GmbH (Court File No. T-1161-07). The trial of that action took place immediately before the commencement 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 is yet to take place. [ 9 ] I have set out a brief overview of the many fact and expert witnesses who appeared in this 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. Table of Contents [ 10 ] To assist the reader, the following Table of Contents is provided. The paragraph number for the beginning of each noted

section is set out. I. Introduction ........................................................................................... [1] II. Table of Contents...................................................................................... [10] III. Issues ......................................................................................... [11] IV. Essential Background................................................................................ [13] A. Statutory framework under the PM (NOC ) Regulations .............. [13] B. Ramipril patents............................................................................ [26]

C. Apotex’s regulatory submissions and litigation ............................... [29] V. Relevant Period......................................................................................... [37] A. Commencement date..................................................................... [37] B. End date....................................................................................... [56]

(1) Apotex’s date: May 2, 2008............................................. [59]

(2) Sanofi’s date: June 27, 2006 ............................................ [65]

(3) Alternative date: December 12, 2006 ............................... [81] C. Conclusion on Relevant Period ..................................................... [83] VI. Overall Size of the Ramipril Market........................................................... [84] VII. Size of the Generic Market...................................................................... [105] A. Market penetration...................................................................... [107] B. Formulary listings........................................................................ [115] C.

Conclusion on Generic Market ................................................... [123] VIII. Apotex’s Share of the Generic Market.................................................... [124] A. Sanofi’s view of the “but for” world............................................. [128] B. Other generics ............................................................................ [140]

(1) Teva............................................................................... [151]

(2) Riva................................................................................ [161]

(3) Authorized generic.......................................................... [169] (

a) Do the Regulations preclude an AG?.................. [174] (

b) Would Sanofi have decided to launch an AG? .............................................................. [181] (

c) When would the AG have entered the market?......................................................... [191]

(4) Conclusion on other generics in the “but for” world ............................................................... [203] C. Apotex’s share of the Generic Market......................................... [204]

(1) Apotex’s percentage share ............................................. [204]

(2) Pipeline adjustment.......................................................... [221] IX. Apotex’s Lost Gross Sales ..................................................................... [227] X. Apotex’s Net Lost Profits....................................................................... [237] A. Sales returns............................................................................... [241] B. Trade spend ............................................................................... [244] C. Cost of API................................................................................ [255] D. Other potential costs or adjustments............................................ [260]

(1) Medichem ...................................................................... [261]

(2) Plant capacity.................................................................. [262]

(3) Subsequent ramp up........................................................ [265] XI. Unapproved Indications ......................................................................... [272] XII. Conclusions ....................................................................................... [296] Appendix A – List of Witnesses III.

Issues [ 11 ] In very general terms, the assessment of Apotex’s damages involves five steps: 1. determine the duration of the period of liability (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 Ramipril 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 Apotex (Apotex’s Lost Volumes); and 5. quantify the damages that would have been suffered by Apotex in respect of Apotex’s Lost Volumes (Apotex’s Net Lost Profits). [ 12 ] 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 date for the commencement of the Relevant Period for which loss can be claimed by a second person under s. 8 of the Regulations : a. April 26, 2004, the date Health Canada ’s review of Apotex’s drug submission was completed and Apotex 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 1, Tab 2); or b.

December 13, 2005, the date of expiry of Canadian Patent No. 1,246,457 (the ' 457 Patent), which was the subject of a Prohibition Order (the Prohibition Order or the Order) granted by Justice Simpson in Aventis Pharma Inc v Apotex Inc , 2005 FC 1381 , 281 FTR 233 [ Ramipril NOC #2 (FC) ] ; 2. What is the appropriate date for the ending of the Relevant Period, having regard to whether Apotex was a “second person” for purposes of the Regulations : a. May 2, 2008, the date of the dismissal of the last prohibition proceeding in Court File No. T-87-06 by Order of Prothonotary Aalto;

b. June 27, 2006, the date of dismissal of Court File No. T-1499-04; or c. December 12, 2006, the date of Apotex’s NOC for ramipril? 3. What would have been the size of the Ramipril Market over the Relevant Period? 4. What would have been the size of the Generic Market during the Relevant Period? 5. What would have been Apotex’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 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 Teva, 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 have been captured by Apotex during the Relevant Period? In other words, what would have been Apotex’s Lost Volumes? 6.

Based on my finding as to Apotex’s Lost Volumes, what is Apotex’s Lost Gross Sales, having regard to the pricing of Apo- ramipril during the Relevant Period, considering the provincial formularies? 7. Based on my finding as to Apotex’s Lost Volumes, what is Apotex’s Net Lost Profits, having regard to relevant matters, including: a. sales returns; b. likely trade spend (including discounts and allowances) that would have been paid by Apotex to pharmacists and distributors to stock Apo-ramipril; c. likely price of the active pharmaceutical ingredient (API); and d. other potential adjustments? 8.

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 A. Statutory framework under the PM (NOC) Regulations [ 13 ] This action arises solely out of the operation of the PM (NOC) Regulations . Quite simply, Apotex 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 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 background to the PM (NOC) Regulations remains a valuable tool. Rather than restate this history here, I commend the identified passages to the reader. [ 14 ] The damages suffered by Apotex 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 Apotex’s claim. Ms.

Anne Bowes, the Director of the Office of Patented Medicines and Liaison Therapeutic Products Directorate, 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 ].

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. [ 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)). [ 20 ] The specific circumstances during which the Minister may not issue the 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 paragraph 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 drug identification number (DIN) ( F&D Regulations , above at s. C.01.014.2.(1)).

However, no NOC will be issued until the relevant patents on the Patent Register either expire (assuming an election to await expiry) or until all such patents 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 ] The 24 months referred to in s. 7(1)(

e) of the Regulations is referred to as a “statutory stay” or “automatic stay”; the Minister is enjoined for a period of up to 24 months from issuing the NOC while the first person pursues its rights in the Federal Court. [ 23 ] After hearing the application, the court may dispose of an 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 quickly receive its NOC. 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: 8.

(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). 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) 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 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.

(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.

(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. B. Ramipril patents [ 26 ] 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 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 protect those patents through listings on the Patent Register.

Sanofi describes these subsequent patents and the measures it took, through litigation and under the PM (NOC) Regulations , as “Altace Lifecycle Management” (Exhibit 89, Tab 373 at 23). Others – including generic manufacturers – have referred to the subsequent patents as “evergreening”. [ 27 ] The following chart describes those 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 Composition-of-matter patent 2,055,948 (the ' 948 Patent) November 12, 2002 June 25, 2004 Use of ramipril together with a calcium antagonist for the treatment of proteinuria

2,023,089 (the ' 089 Patent) January 14, 2003 November 10, 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 in the prevention of stroke, diabetes and/or congestive heart failure Canadian Patent No.

Issue Date Patent Register Listing Subject Matter/Indications [ 28 ] 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 . C. Apotex’s regulatory submissions and litigation [ 29 ] Between July 2003 and May 2008, Apotex was continuously engaged in litigation under the PM (NOC) Regulations with respect to ramipril. The chart that follows describes this history: Patent No. Notice of Allegation Notice of Application/Court File No.

Outcome ' 206 Patent June 20, 2003 September 23, 2003/T-1742-03 Mactavish J. dismisses on September 20, 2005 ( Aventis Pharma Inc v Apotex Inc , 2005 FC 1283 , 278 FTR 1 [ Ramipril NOC #1 (FC) ] ) ' 457 Patent August 20, 2003 (non- infringement) October 8, 2003/T-1851-03 Simpson J. issues Prohibition Order until expiry of ' 457 Patent on October 6, 2005 Ramipril NOC #2 (FC) ' 457 Patent November 10, 2003 (invalidity) December 29, 2003/T-2459-03 Tremblay-Lamer J. dismisses on November 4, 2005 ( Aventis Pharma Inc v Apotex Inc , 2005 FC 1504 , 283 FTR 171 [ Ramipril NOC #3 (FC) ] ) ' 089 Patent November 17, 2003 January 5, 2004/T-11-04 von Finckenstein J. dismisses on October 27, 2005 ( Aventis Pharma Inc v Apotex Inc , 2005 FC 1461 , 283 FTR 1 [ Ramipril NOC #4 (FC) ] ) ' 948 Patent June 28, 2004 August 16, 2004/T-1499-04 Order of Dismissal, on Consent, dated on June 27, 2006 [ Ramipril NOC #5 (FC) ] ' 549, ' 387 Patents (HOPE Patents) November 29, 2005 January 17, 2006/T-87-06 By Order, Aalto P. dismisses as moot on May 2, 2008 [ Ramipril NOC #6 (FC) ] [ 30 ] Even though Justice Mactavish, in Ramipril NOC #1 (FC) , dismissed Sanofi’s Notice of Application in respect of the ' 206 Patent, there were other patents on the Patent Register that needed to be addressed before an NOC could be issued to Apotex.

In particular, Apotex had to clear the hurdles caused by Sanofi’s decision to commence prohibition proceedings with respect to the ' 457, ' 089, ' 948, ' 549 and ' 387 Patents. [ 31 ] Ultimately, and as a result of the decision of the Supreme Court of Canada in AstraZeneca Canada lnc v Canada (Minister of Health) , 2006 SCC 49 , [2006] 2 SCR 560 [ AstraZeneca (SCC) ], the Minister of Health determined that Apotex did not need to address the HOPE Patents.

An NOC was issued to Apotex on December 12, 2006. [ 32 ] The following day, Sanofi filed an application for judicial review (T-2196-06), seeking, among other things, an order quashing the decision to issue an NOC to Apotex, an order prohibiting the issuance of an NOC to Apotex, a declaration that the Minister had misinterpreted AstraZeneca (SCC) and s. 5(1) of the PM (NOC) Regulations , and an interim order pursuant to s. 18.2 of the Federal Courts Act , RSC 1985, c F-7, staying the effect of the decision to issue the NOC.

In an Interlocutory Order dated December 29, 2006, Justice von Finckenstein granted the stay. The Order stayed the operation of the NOC and required Apotex and the Minister to comport themselves as if the NOC had not been issued. A stay of Justice von Finckenstein’s Order was granted on January 8, 2007 by the Court of Appeal ( Sanofi-Aventis Canada Inc v Apotex Inc , 2007 FCA 7 , 54 CPR (4th) 402 ), thereby removing any impediment to the operation of the NOC which had issued on December 12, 2006.

Other than the short period between Justice von Finckenstein’s Order on December 29, 2006 and the Court of Appeal’s stay of that Order on January 8, 2007, Apotex’s NOC has been in full force and effect since December 12, 2006. [ 33 ] At the end of the litigation, Sanofi was only ever successful in one proceeding; that is, Ramipril NOC #2 (FC) , where Justice

Simpson issued an Order of Prohibition to be in force until the expiry of the ' 457 Patent. Apotex commenced an appeal of that decision (Court of Appeal File No. A-494-05), which appeal was discontinued on October 13, 2006. [ 34 ] To provide a complete picture, it should be noted that Apotex was not the only company challenging the “evergreening patents”; beginning in February 2003 and continuing up to December 2006, Pharmascience, Riva, Teva, Cobalt Pharmaceuticals Inc. (Cobalt) and Sandoz Canada Inc. served notices of allegation.

In each and every case, except for Cobalt’s notice of allegation in August 2006, Sanofi chose to commence prohibition applications under the Regulations . [ 35 ] After its loss in Ramipril NOC #1 (FC) , Sanofi commenced an action against Apotex claiming that Apotex had infringed the ' 206 Patent (Court File No. T-161-07). In a decision dated June 29, 2009, this Court dismissed the action and a companion action against Teva (then Novopharm Inc.), in Court File No. T-1161-07, and declared the ' 206 Patent to be invalid ( Sanofi-Aventis Canada Inc v Apotex Inc , 2009 FC 676 , 350 FTR 165 ).

This 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. [ 36 ] This discussion of the statutory framework, the ramipril patents and the relevant NOC proceedings forms the context for these Reasons for Decision. V. Relevant Period [ 37 ] A critical determination for the Court is the commencement and end dates of the Relevant Period. The parties do not agree on either the beginning or the end date for the Relevant Period. A.

Commencement date [ 38 ] As set out in s. 8(1)(

a) of the PM (NOC) Regulations , a first person (Sanofi) is liable to a second person (Apotex) 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; [ 39 ] 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. [ 40 ] Here, the parties appear to agree that “the date, as certified by the Minister, on which a notice of compliance would have been issued” is April 26, 2004.

This patent hold date is set out in a letter dated April 29, 2004 from Health Canada to Apotex (Exhibit 1, Tab 2). Apotex submits that this should be the date used for the commencement of the Relevant Period. Sanofi disagrees, arguing that December 13, 2005 is the appropriate date for the commencement of the Relevant Period.

[ 41 ] Sanofi’s argument is founded on the existence of a Prohibition Order of Justice Simpson arising from her decision in Ramipril NOC #2 (FC) . The Prohibition Order prohibited the Minister from issuing an NOC to Apotex until the expiry of the ' 457 Patent. Since the application upon which the Prohibition Order was based was never withdrawn, discontinued, dismissed or reversed on appeal, Sanofi claims that Apotex cannot allege that it has a s. 8 claim in respect of this application. Sanofi’s principal argument is that I cannot ignore the Prohibition Order.

Based on that Order, regardless of what transpired with respect to other notices of application, Apotex would not have been able to come to market until December 13, 2005, when the ' 457 Patent expired. [ 42 ] I do not accept Sanofi’s arguments on this point. In light of the subsequent decision of Justice Tremblay-Lamer in Ramipril NOC #3 (FC) , the Prohibition Order of Justice Simpson had, in my view, no effect on either the issuance of an NOC to Apotex or Apotex ’s s. 8 claim.

This is due to the unusual facts of this case. [ 43 ] As set out above, Apotex served a first notice of allegation with respect to the '457 Patent, alleging non-infringement, in August 2003. In response, Sanofi commenced a prohibition application in Court File No. T-1851-03. On October 6, 2005, in Ramipril NOC #2 (FC) , Justice Simpson found that Apotex’s allegation of non-infringement was not justified and issued the Prohibition Order, prohibiting the Minister from issuing an NOC to Apotex until after the expiry of the '457 Patent.

Apotex commenced an appeal of Justice Simpson’s Order, but abandoned it in October 2006, following the expiry of the '457 Patent. [ 44 ] In November 2003, Apotex served a second notice of allegation with respect to the '457 Patent, this time alleging invalidity. On December 29, 2003, Sanofi commenced a prohibition application in Court File No. T-2459-03. On November 4, 2005, in Ramipril NOC #3 (FC) , Justice Tremblay-Lamer dismissed Sanofi’s application, concluding that Apotex’s invalidity allegation based on obviousness was justified.

Sanofi appealed. [ 45 ] The '457 Patent then expired, and Apotex moved to dismiss Sanofi’s appeal on the ground of mootness. Apotex’s arguments found favour with the Court of Appeal which, in Aventis Pharma Inc v Apotex Inc , 2006 FCA 328 , 354 NR 316 [ Ramipril NOC #3 (FCA) ], dismissed the appeal as moot.

Moreover, the Court of Appeal refused to exercise its discretion to hear the appeal in any event, because Sanofi had failed to show that the decision would have any practical effect. [ 46 ] In support of its assertion that Apotex could not have entered the market prior to the expiration of the '457 Patent, Sanofi relies on the words of the Court of Appeal in Ramipril NOC #3 (FCA) , above at paragraph 20, where the court stated, “Simpson J.’s prohibition order has remained in effect until the expiration of the '457 patent”. Sanofi’s reliance on this sentence, however, ignores the context of that decision.

Apotex brought its motion to dismiss Sanofi’s appeal after the expiry of the '457 Patent. In Ramipril NOC #3 (FCA) , the court was not asked to rule on whether the Prohibition Order was enforceable or of practical effect before the expiry of the '457 Patent, because of Justice Tremblay-Lamer’s decision in Ramipril NOC #3 (FC) . When the Court of Appeal stated that the Prohibition Order “remained in effect”, it was not expressing any opinion on the enforceability of the Order after the decision in Ramipril NOC #3 (FC) .

That is the precise question before me. [ 47 ] In my view, the second '457 Patent decision in Ramipril NOC #3 (FC) effectively “unlocked” the door for Apotex to receive an NOC vis-à-vis that particular patent. The logical result was that the first decision was subsumed or “trumped” by the second.

As of the decision of Justice Tremblay-Lamer, Apotex had addressed the '457 Patent; the Prohibition Order of Justice Simpson was no longer enforceable or of any practical effect. [ 48 ] Stated differently, although Justice Simpson’s Prohibition Order regarding Apotex’s allegation of non-infringement of the '457 Patent was neither a nullity nor void ab initio , as a result of Justice Tremblay-Lamer’s subsequent finding that Apotex’s allegation of invalidity was justified, the Prohibition Order nonetheless could not be acted upon.

In particular, it cannot be used as a basis for holding that Apotex could not have entered the market until after the expiry of the '457 Patent. [ 49 ] The logic of this result is reinforced when one considers what the outcome would have been if Apotex had served one notice of allegation raising both its non-infringement and invalidity allegations. Had that happened, a court would have likely found that: • the allegation of non-infringement was not justified (as Justice Simpson found); and • the allegation of invalidity was justified (as Justice Tremblay-Lamer concluded).

Even though Apotex would likely have been unsuccessful on one of its allegations, Sanofi’s Application would have been dismissed.There would have been no Prohibition Order. [50] There is no principled reason why the result should be any different just because Apotex served and pursued two notices ofallegation rather than one. [51] Sanofi argues that Apotex, having pursued two separate notices of allegation in respect of the '457 Patent, should live with theresult of its litigation strategy. This argument is without merit.

Certainly, it would have been more efficient to serve one notice allegingboth non-infringement and invalidity. However, this inefficiency does not mean that the Prohibition Order remains in force and effectuntil the expiry of the '457 Patent. Indeed, one could argue that Sanofi’s litigation strategy in responding to the second notice ofallegation – which turned out to be without merit – contributed to or even caused the “mess” that we are now in.

Apotex’s litigationstrategy is not to blame for Sanofi’s unsuccessful challenge to the second '457 allegation. [52] Both parties put forward case law that they argue supports their respective positions.

The problem, of course, is that none ofthe jurisprudence directly answers the question of the enforceability of a “prohibition order” after a subsequent application is dismissedwith respect to the same patent. [53] For its part, Apotex points to several cases which it says support the proposition that a second person who has been prohibitedon one notice of allegation may receive an NOC if it succeeds on a subsequent, discrete allegation.

In this regard, Apotex places the mostreliance on the decision in Apotex Inc v Canada (Minister of National Health and Welfare) (1997), (FC), 129 FTR300 (TD), aff’d (1997), (FCA), 153 DLR (4th) 68 (CA), leave to appeal to SCC refused, [1997] SCCA No 528[Nizatidine].

While Nizatidine is authority for the proposition that a prohibition order “must be confined to the specific allegationsadvanced in those proceedings” (Nizatidine, above at para 24), that case does not directly address the practical effect of an earlierprohibition order with respect to the same patent, as the first notice of allegation in Nizatidine was based on non-infringement due to alicence, while the second alleged a non-infringing process.

Apotex’s reliance on the decisions regarding the drug norfloxacin, which aresummarized in Apotex Inc v Merck & Co, 2010 FC 287 at paras 2-3, 363 FTR 137 [Norfloxacin (FC)], is similarly wide of the mark. Inparticular, and as Apotex acknowledged in argument, none of those decisions explicitly considered the effect of a prohibition order on asubsequent notice of allegation. [54] Sanofi relies on AB Hassle v Apotex Inc, 2008 FCA 416, 384 NR 372 [AB Hassle].

In that case, both the Federal Court andthe Court of Appeal held that Apotex could not use its success in a third NOC case to set aside two prohibition orders in prior NOCcases, involving different patents. In other words, a second person cannot “unlock” the NOC door until and unless all patents areaddressed. AB Hassle was a situation where the extant prohibition orders were in respect of different patents for the same drug; thesecond person had failed to address those different patents.

That is not the same – despite Sanofi’s arguments to the contrary – as thesituation where the subsequent dismissal is in respect of exactly the same patent that is the subject of the prohibition order. In the casebefore me, Apotex “unlocked” the door by fully addressing the '457 Patent in a subsequent proceeding; there were no prohibition orderswith respect to other patents. [55] In sum on this point, I conclude that the Prohibition Order, as of the date of Ramipril NOC #3 (FC), could not have preventedApotex from obtaining an NOC with respect to the '457 Patent.

It follows that December 13, 2005 is not an appropriate date for thecommencement of the Relevant Period. I find that April 26, 2004, the date of the “patent hold”, is the appropriate date to begin theliability period. B. End date [56] I now turn to a discussion of the proper “end date” for the Relevant Period. As set out in s. 8(1)(b), a first person is liable to asecond person “for any loss suffered during the period . . . ending on the date of the withdrawal, the discontinuance, the dismissal or thereversal”.

The drafters of the Regulations may have contemplated a much simpler scenario than has been placed before me. In the“normal” circumstances, the NOC would issue as soon as an application for prohibition is “withdrawn or discontinued by the first personor is dismissed by the court hearing the application”. [57] Here, there are five different dismissal dates relating to five separate prohibition applications.

This case also presents the veryunusual situation in which the second person received an NOC prior to the disposition of the last prohibition proceeding. [58] The parties disagree on the question of the end date. Apotex would like me to conclude that the Relevant Period ends on May2, 2008; Sanofi argues that June 27, 2006 is the correct end date. For the reasons explained below, neither Apotex’s nor Sanofi’spreferred date can be accepted. The Relevant Period must end on December 12, 2006.

(1) Apotex’s date: May 2, 2008 [ 59 ] Apotex submits that the Relevant Period ends on May 2, 2008, that being the date of the dismissal of the last prohibition proceeding in Ramipril NOC #6 (FC) . In Apotex’s view, “[t]he plain wording of

section 8 entitles Apotex to claim its damages to this date”. [ 60 ] The sequence of events in the ramipril history under the Regulations led to some unusual results. As described in

Part IV.C of these Reasons, Apotex filed its sixth and final notice of allegation with respect to ramipril and the HOPE Patents on November 29, 2005. Sanofi commenced prohibition proceedings on January 17, 2006 (Court File No. T-87-06). On December 8, 2006, the Minister advised Apotex that Apotex was not required to address the HOPE Patents. However, the Minister determined that Apotex could not receive an NOC until Apotex had disposed of the prohibition proceeding in T-87-06, as the Minister held that he remained bound by the 24-month stay imposed by the Regulations (Exhibit 37, Tab 11).

On December 12, 2006, after receiving representations from counsel for both Apotex and Sanofi, the Minister decided that Apotex was “no longer considered to be a ‘second person’” in respect of the HOPE Patents, and that therefore s. 7 of the Regulations was “not applicable to prohibit the issuance of the NOC”. Apotex accordingly received an NOC for Apo-ramipril on December 12, 2006, and proceeded to launch its product following a brief delay (described earlier in these Reasons).

However, the prohibition application in T-87-06 was not technically disposed of until May 2, 2008, when, upon motion by Sanofi, Prothonotary Aalto dismissed the application ( Ramipril NOC #6 (FC) ). [ 61 ] As correctly pointed out by Apotex, s. 8(1)(

b) of the Regulations requires that the liability period end on the date of the dismissal (or withdrawal, discontinuance, or reversal) of the relevant prohibition application. In Alendronate (FC) , above at paragraphs 106-109, Justice Hughes observed that, although s. 8(1)(

a) allows the Court to choose a more appropriate date for the beginning of the liability period, s. 8(1)(

b) does not give the Court any discretion to choose an end date other than “the date of the withdrawal, the discontinuance, the dismissal or the reversal”. In this case, Apotex argues that the end date is May 2, 2008, the date on which T-87-06 was dismissed. I do not agree. [ 62 ] In his Order ( Ramipril NOC#6 (FC) ), Prothonotary Aalto concluded that the underlying prohibition application in respect of the HOPE Patents was moot as of the date of the issuance of the NOC to Apotex.

As stated by Prothonotary Aalto, “[t]here is little doubt that this Application is moot and became moot when the NOC was issued to Apotex”. Stated differently, the prohibition application was effectively dismissed as of that date. [ 63 ] Moreover, May 2, 2008, being the date of Ramipril NOC#6 (FC) , has no rational meaning within the context of the Regulations . It is merely an arbitrary date on which Prothonotary Aalto dealt with a motion before him. This order could just as easily have been brought on December 13, 2006 or as late as today.

Nothing changes the fact that the prohibition application became moot on December 12, 2006. Even if a motion for dismissal had never been brought, I cannot imagine that the situation would be any different. Surely, Sanofi’s liability does not stretch to infinity merely because neither party thought to bring a motion in respect of a matter that had become moot. [ 64 ] Thus, for the purposes of s. 8(1)(

b) of the Regulations , December 12, 2006 – and not May 2, 2008 – must be considered to be the date of dismissal of the prohibition application. ( 2) Sanofi’s date: June 27, 2006 [ 65 ] Sanofi argues that the end date of the Relevant Period should be June 27, 2006, on the basis that Apotex ceased to be a second person as of that date . [ 66 ] The ability to claim damages under s. 8 of the Regulations is undeniably linked to a claimant being a “second person” under the Regulations . Subsection 8(1) states that the first person’s liability is “to the second person”.

Under s. 8(2), a “second person” may apply to the court for an order requiring the first person to compensate “the second person for the loss referred to in [s. 8(1)]”. [ 67 ] Sanofi submits that, with respect to NOC proceedings related to the HOPE Patents (T-87-06), Apotex was never a second person. Accordingly, it argues, Apotex can have no claim under s. 8(1) related to any period involving the NOC proceedings in T-87-06.

Accepting that Apotex was a second person for all other patents on the Patent Register, Sanofi then asserts that Apotex ceased to be a second person as of the date of the dismissal of the final prohibition application where it was a second person; that was on June 27, 2006,

the date when the prohibition application related to the ' 948 Patent was dismissed ( Ramipril NOC#5 (FC) ). [ 68 ] This argument amounts to an assertion that the HOPE Patent NOC Proceedings were void ab initio and is founded on Sanofi’s

interpretation of the jurisprudence in AstraZeneca (SCC) and Ferring Inc v Canada (Minister of Health) , 2007 FC 300 , [2008] 1 FCR 19 , aff’d 2007 FCA 276 [ Ferring ] . [ 69 ] Contrary to the submissions of Sanofi, neither AstraZeneca (SCC) nor Ferring goes so far as to declare that Apotex was never a second person or that the HOPE proceedings were void ab initio . [ 70 ] The question before the Supreme Court in AstraZeneca (SCC) was whether the Regulations required a generic manufacturer to address patents on the Patent Register that had been listed subsequent to the drug “copied” by the generic manufacturer (in that case, Apotex).

In concluding that the later patents did not need to be addressed, Justice Binnie stated at paragraph 39 that: In my view, s. 5(1) of the NOC Regulations requires a patent-specific analysis, i.e. the generic manufacturer is only required to address the cluster of patents listed against submissions relevant to the NOC that gave rise to the comparator drug, in this case the 1989 version of Losec 20 . [ 71 ] The Supreme Court was not asked to consider, nor did it consider, whether its decision would strip Apotex of its claim to damages under s. 8.

Nor did the Supreme Court declare that Apotex was never a second person or that the prohibition application initiated by Astrazeneca was void ab initio . In effect, all that the Supreme Court decided was that the Minister could issue an NOC to Apotex. [ 72 ] In Ferring , Justice Hughes was faced with five separate applications for judicial review, all of which dealt with actions taken by the Minister following the release of AstraZeneca (SCC) , above.

In addition to ruling on the five individual applications for judicial review of the Minister’s decisions, Justice Hughes provided general remarks on the application of AstraZeneca (SCC) ; in other words, he provided further guidance on when a generic manufacturer was obligated to address a patent on the Patent Register. In his decision, Justice Hughes framed the question in terms of when a generic is a “second person” for the purposes of s. 5(1) of the Regulations .

For example, at paragraph 61, he states: If section 5(1) is not triggered, then the generic is not a “second person” and is not required to file a notice of allegation. The NOC Regulations do not come into play. The Supreme Court said [in AstraZeneca (SCC) ], at paragraph 41 of its Reasons: 41. However, it is clear that AstraZeneca did not market any product pursuant to the subsequent NOCs and that the preconditions to any obligations of Apotex under s. 5(1) were therefore not triggered. [Emphasis in original] [ 73 ] I acknowledge that Ferring appears to support Sanofi’s view.

However, I think that Ferring unnecessarily frames the issue in AstraZeneca (SCC) (i.e. whether a generic needs to address a subsequently listed patent) in terms of whether the generic is a “second person”. In particular, at paragraph 26 of Ferring , Justice Hughes states that a generic will be placed on “patent hold” until it has either successfully dealt with the listed patents, the patents expire, or “as AstraZeneca points out, the generic can demonstrate that it is not a ‘second person’ as described in the Regulations and thus does not need to address the patents at all”.

Again, at paragraphs 59-60, Justice Hughes writes that: [59] [...] Section 5(1) of the NOC Regulations are specific in stating that a person is only required to take steps to issue a notice of allegation to the innovator who has listed patents (thus become a “second person”) if: • that person has filed for an NOC; • that person has compared reference or made reference to another drug; • for the purposes of demonstrating bioequivalence; • and that other drug has been marketed in Canada pursuant to an NOC; and

• there is a patent list pertinent to that NOC. [60] These requirements are cumulative. Thus, if there is no comparison or reference for the purpose of bioequivalence, section 5(1) is not triggered. [ 74 ] However, the Supreme Court did not frame this as an issue of being a “second person”.

Rather, Justice Binnie wrote at paragraph 39 that “s. 5(1) of the NOC Regulations requires a patent-specific analysis, i.e. the generic manufacturer is only required to address the cluster of patents listed against submissions relevant to the NOC that gave rise to the comparator drug”. [ 75 ] In Ferring , Justice Hughes was not asked to consider, nor did he consider, whether his decision would strip Apotex of its claim to damages under s. 8. Nor did he declare that Apotex was never a second person or that some of the prohibition applications initiated by Ferring Inc. or Sanofi, in that case, were void ab initio .

In effect, all that Justice Hughes decided was whether or not the Minister could issue an NOC in the circumstances. [ 76 ] As I read these two decisions, the impact of AstraZeneca (SCC) and Ferring is two-fold: • in respect of newly-initiated submissions for generic drug approval under the PM (NOC) Regulations , a generic manufacturer is no longer required to address certain patents on the Patent Register; in which case, it will never be a second person vis-à- vis those patents; and • for prohibition applications commenced before the decisions in AstraZeneca (SCC) and Ferring , and where certain patents on the Patent Register do not now need to be addressed, the generic will immediately receive its NOC (assuming that all other relevant patents have been addressed), in which case, it will cease being a second person upon the issuance of the NOC.

In no way do I interpret AstraZeneca (SCC) and Ferring as stripping generic manufacturers who have been kept off the market due to the actions of a brand company of their right to claim s. 8 damages. [ 77 ] While Apotex raised the additional argument that the doctrines of election and estoppel apply to prevent Sanofi from arguing that Apotex was not a second person, I do not need to consider this argument given my conclusion that Apotex was a second person in relation to the HOPE Patents. [ 78 ] I also note that Apotex was treated by the Minister as a second person in relation to the HOPE Patents until December 12, 2006, when the Minister decided to issue an NOC to Apotex.

The Minister’s letter of December 8, 2006, in which it advised Apotex that it was not required to address the HOPE Patents, does not contain any determination that Apotex was not a “second person”. In the Minister’s letter of December 12, 2006 the Minister stated simply that Apotex was “ no longer considered to be a ‘second person’ in respect of the ' 387 and ' 549 patents” [emphasis added]. This carefully-worded statement by the Minister is, in my view, a correct

interpretation of the teachings of the Supreme Court in Astrazeneca (SCC) . [ 79 ] Finally, rejecting June 27, 2006 as an end date is consistent with the fact that s. 8 compensates a second person for the loss occasioned by the operation of the statutory stay (see Alendronate (FCA) , above at para 71). In this case, Apotex did not receive an NOC until December 12, 2006. The dismissal of the proceeding in T-1499-04 on June 27, 2006 did not allow Apotex to enter the market at that time. Accordingly, June 27, 2006 cannot be accepted as the end of the Relevant Period. [ 80 ] In sum, I am satisfied that there are no grounds to support Sanofi’s view that June 27, 2006 is the “end date”.

(3) Alternative date: December 12, 2006 [ 81 ] Both parties point to December 12, 2006 as an alternative end date for the Relevant Period. Apotex notes that this is the date on which it received an NOC for Apo-ramipril, while Sanofi submits that, if Apotex was a second person, then its status as such terminated when it was no longer required to address the HOPE Patents and received an NOC.

[ 82 ] As discussed above, in my view, December 12, 2006 is the correct end date for the Relevant Period. C. Conclusion on Relevant Period [ 83 ] I find that the Relevant Period for the assessment of Apotex’s losses is April 26, 2004 to December 12, 2006. VI.

Overall Size of the Ramipril Market [ 84 ] Having determined the Relevant Period of April 26, 2004 to December 12, 2006, three major steps remain before I can begin an assessment of Apotex’s Lost Profits: 1. estimate the size of the total ramipril market during the Relevant Period (i.e. the Ramipril Market); 2. estimate the portion of the Ramipril Market that would have been acquired by generic manufacturers during the Relevant Period (i.e. the Generic Market); and 3. estimate the share of the Generic Market that would have accrued to Apotex. [ 85 ] The first step requires me to estimate 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. In this task, I was assisted by two economists, Dr. Aidan Hollis (produced by Apotex) and Dr. Robert Carbone (produced by Sanofi). Each of these experts prepared forecasts to estimate the overall Ramipril Market, the share of the market that would have been captured by the generic manufacturers and Apotex’s share of that market. Dr.

Hollis, in a simple and effective diagram, depicted the general problem as follows: [ 86 ] In addition, I had the evidence of Dr. Iain Cockburn, whose mandate was, as I see it, to do no more or less than to criticize Dr. Hollis’s expert opinion. Dr. Cockburn made no estimates of the size of the Ramipril Market. He had a myriad of criticisms of Dr. Hollis, referred to by Apotex in final argument quite aptly as a “scorched earth attack”. Most of Dr.

Cockburn’s criticisms were addressed during the course of the testimony of all of the experts. [ 87 ] We know what the actual sales for ALTACE were between April 26, 2004 and December 12, 2006. The key question is what

impact the entry of generic manufacturers, or “genericization”, would have had on those actual sales. Dr. Carbone’s opinion on the size of the Ramipril Market reflects a considerable impact of genericization, while Dr. Hollis concludes that the “estimated effect of generic entry on ramipril sales is very modest” (Exhibit 44, vol 1 at para 37). [ 88 ] For each of a series of possible scenarios, Both Dr. Carbone and Dr. Hollis began their tasks using the actual ramipril sales made by Sanofi for the period April 26, 2004 to December 12, 2006.

Both experts used a time series forecasting model to estimate the sales that would have been made after December 2006 in the absence of genericization. This enabled the experts to come up with a “generic effect”. In his responding report, Dr. Hollis explains the overall approach as follows (Exhibit 47 at para 16): [Dr.] Carbone’s report and my report take a similar approach in estimating the total ramipril volume during the damages period, had a generic entry taken place in 2004.

In order to do this, we both construct a model to predict the likely sales volume of ramipril, had there been no generic entry . . . in December 2006. We then compare these predicted values to the actual values to try to estimate the effect of generic entry on total sales of ramipril. [ 89 ] Although the overall approach of each expert was similar, there were substantial differences in the details of their analyses. [ 90 ] Dr. Carbone’s methodology 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 December 12, 2006, assuming that no generics ever entered the market. • Phase Two : Dr. Carbone next subtracts the forecasted sales of ramipril after the formulary listing date (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. The results at this point of the analysis are presented in Table 7 of Dr. Carbone’s report. He observes that generic competition reduced the size of the ramipril market over time for all formulations, with the exception of the 1.25 mg strength (Exhibit 94, vol 1 at paras 65-66). • Phase Three : Dr. Carbone constructs an “impact model” using a process called Bass Diffusion modelling (the Impact Model).

This technique estimates the change in ramipril sales over time based on how demand reacts to influences on product diffusion such as advertising, media coverage and word of mouth by customers already using the product ( Exhibit 94, 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 (see Exhibit 94, vol 1 at Appendix K for the modelling results.) • 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. [ 91 ] Overall, Dr. Carbone concludes that there would be a significant reduction in the size of the Ramipril Market during the Relevant Period. Dr. Carbone attributes much of this reduction to the cessation of promotion by Sanofi (Exhibit 94, vol 1 at paras 67-70).

This particular factor, however, may not be as relevant in the case of ramipril as it is in other instances. [ 92 ] While I accept that an innovator will usually stop promoting a product after its genericization, this did not happen immediately or completely in the case of ALTACE. As acknowledged by Mr. Benoit Gravel, Sanofi’s vice president of sales, promotion of ALTACE continued until the end of March 2007 – some three months after genericization.

In addition, Sanofi introduced a combination formulation – ALTACE HCT – into the market in November 2006 and continued promoting that product after the genericization of ramipril. Dr. Carbone agreed that there would be a benefit to ALTACE sales arising from promotion of ALTACE HCT. [ 93 ] In addition, Dr. Carbone’s rationale does not accord with a recently published report of the Patented Medicine Prices Review Board (PMPRB), entitled “The Impact of Generic Entry on the Utilization of the Ingredient”, September 2011 (the PMPRB Report) (Exhibit 48).

The purpose of the study carried out by the PMPRB was to determine whether, upon genericization, a drug continues to be utilized to the same extent. This is exactly the question that Dr. Carbone and Dr. Hollis addressed in their reports. The authors of the PMPRB Report studied seven top-selling – “blockbuster” – drugs that had lost patent protection in the period between 2000 and 2006. The conclusion of the PMPRB at page 25 was: Generally, this research shows that there is very little change in the trend in utilization once the first generic version is launched.

Typically the number of claims and market share following generic entry continue the trend established by the brand name under market exclusivity. In most cases the changes in utilization that are identified cannot be directly and/or solely attributable to generic entry. (PMPRB Report, above at 25). [ 94 ] During his oral testimony, Dr. Carbone expressed very negative views of every aspect of the PMPRB Report. I give little weight to his criticisms, most of which were seriously undermined during cross-examination.

In any event, I am not relying on the PMPRB Report as the foundation of my decision on the Ramipril Market. Rather, the PMPRB Report simply shows that, directionally, the conclusion of Dr. Hollis is preferable to that of Dr. Carbone. [ 95 ] One of the more significant criticisms of Dr. Carbone’s work was of his use of the proprietary “Futurcast” system to forecast the size of the non-genericized ramipril market after December 2006 in Phase One of his analysis. Dr.

Hollis opined that, while Futurcast might be perfectly appropriate “to prognosticate into the future”, where one is attempting simply to predict future sales of ramipril, the software is not as useful to predict “sales in the past”, because it fails to take into account actual information over the Relevant Period that is pertinent to the analysis. This, says Dr. Hollis, “constrains the utility and accuracy of Futurcast” (Exhibit 47 at para 18). [ 96 ] In contrast, Dr. Hollis’s approach was much simpler and did not rely on proprietary software. [ 97 ] At this stage of his analysis, Dr.

Hollis uses an econometric (regression analysis) model to estimate the Ramipril Market size in the “but for” world pre-December 2006 using nationally aggregated data from the actual ramipril market in and after December 2006. He finds that his model estimates track very closely the actual effects of genericization post-December 2006. Dr. Hollis also performs an “alternative” modelling analysis using time series and provincially disaggregated data as a “check” on his preferred method. In contrast to Dr. Carbone, Dr.

Hollis also uses additional available data – including the total volume of sales of other ACE inhibitors – to refine his forecasts. [ 98 ] The simplicity of Dr. Hollis’s approach at this stage has much to recommend it. Rather than attempting to construct a complex econometric model that might account for the direct influence of advertising behaviour, diffusion of product information, the introduction of alternative formulations (such as ATLACE HCT) or other explanatory variables, Dr.

Hollis uses a relatively simple model based on the assumption that the overall Ramipril Market can be predicted mainly by the time after generic entry. Given the accuracy of this simple model in predicting trends in the real world ramipril market, and absent any apparent differences in the “but for” world that would affect total market size, it is likely unnecessary to include more explanatory variables to create a reliable model. [ 99 ] One potential drawback of Dr. Hollis’s approach is that he cannot distinguish the individual causal factors that drive changes in the size of the Ramipril Market.

This “drawback”, however, is significant only if there is reason to believe that some factor would have operated in the “but for” world that did not operate in the real world, or vice versa. Since the goal here is not to explain market dynamics but to make an accurate quantitative prediction about the “but for” world, I do not see this “drawback” as a reason to reject Dr. Hollis’ approach. [ 100 ] Another criticism of Dr. Hollis’s analysis was his use of national data. In the face of vigorous cross-examination, Dr. Hollis was clear and consistent in defending his approach. Dr.

Hollis explained that the use of national data is appropriate where there is nothing “very different” happening across provinces between the Relevant Period and the time period that was being modelled after December 2006: So if there isn’t, in fact, a substantial change in what’s happening across the provinces, if you expect things are going to be materially the same, there is no reason to add extra complication by worrying about the provinces. [ 101 ] Nonetheless, it is significant that, although Dr.

Hollis’s estimates closely track real world trends at the aggregate national level, they diverge to a greater degree once they are disaggregated at the provincial level. For example, Dr. Hollis’s graphs showing the predicted and actual doses of ramipril for Prince Edward Island and Saskatchewan demonstrate that the “fitted values” tend to be a poorer predictor of the growth of the Ramipril Market post-generic entry at the provincial level than they are at the national level (Exhibit 44, vol 1 at Tab 6). [ 102 ] My final criticism of Dr.

Hollis’s approach at this stage concerns his explanation of his model’s “conservative” estimate of the effect of generic entry on the Ramipril Market (Exhibit 44, vol 1 at para 38): In this model, greater sales of other ACE inhibitors is found to increase ramipril sales. Thus, if there is a reduction in promotion of ramipril after generic entry that leads to an increase in sales of other ACE inhibitors, the effect will be to increase the predicted values,

relative to actual values. And this will, by definition, increase … the estimated impact of genericization on ramipril sales. [ 103 ] This explanation, in my view, is entirely speculative. Dr. Hollis has provided no evidence to suggest that a reduction in the promotion of ramipril, if it occurred in the real world, would cause sales of other ACE inhibitors to increase. He offers no justification for presuming that his estimates are conservative on this basis. [ 104 ] Even with the above concerns in mind, I am satisfied that Dr.

Hollis’s analysis represents a sound approach to predicting the size of the Ramipril Market in the “but for” world. I prefer his model – and hence his results – to quantify the size of the Ramipril Market. VII. Size of the Generic Market [ 105 ] Having determined the size of the overall Ramipril Market for the Relevant Period, I must now establish the size of the Generic Market. The notion that generics will acquire a portion of the Ramipril Market is described as “market penetration”. Looking at this from Sanofi’s perspective, Dr. Carbone referred to this as market “erosion”.

Stated in different terms, the issue is to determine how ALTACE and generic versions of ramipril would have shared the Ramipril Market. [ 106 ] Once again, Drs. Hollis, Carbone and Cockburn provided expert opinions on this step of the analysis. The different views of the parties on the size of the Generic Market appear to relate to two significant areas: (1) modelling to account for the degree of market penetration; and (2) timing of formulary listings. I will consider each issue in turn. A. Market penetration [ 107 ] In predicting the size of the Generic Market, Dr.

Hollis uses the same conceptual foundation as he applied to determine the size of the Ramipril Market. In other words, Dr. Hollis begins with the presumption that the available observed data from the ramipril market post-generic entry is an accurate predictor of the “but for” world, unless there is good reason to believe that there are significant differences between these two worlds. [ 108 ] Although Dr.

Hollis’s opinion was harshly criticized, I see little reason to doubt either his approach or his conclusion that the regulatory conditions would have been the same or very similar between the real world and the “but for” world. [ 109 ] Dr. Carbone’s prediction of erosion in the “but for” world differs from Dr. Hollis in one significant regard. In particular, Dr. Carbone opines that markets with fewer generic entrants will demonstrate a slower erosion of the brand name manufacturer’s market share. The basis of Dr.

Carbone’s opinion is a multivariate regression analysis set out at Appendix O to his report (see Exhibit 94, vol 1 at Tab O). I agree with Apotex that there are “methodological and logical flaws that make the[se] results difficult to rely upon”. [ 110 ] A serious problem that I have with Dr. Carbone’s opinion is his use of over 100 “Bass Diffusion” estimations. These estimations were performed with a formula that was not provided in his reports. Indeed, as we discovered in Dr.

Carbone’s cross-examination, the Bass Diffusion formula set out in Appendix J to his report was not the formula that he (or his assistants) actually used to reach his predictions. [ 111 ] A further problem arose with the number of discrepancies found in the coefficients contained in Appendix P when compared with the coefficients for the same molecules in Appendices L and N.

As pointed out by Apotex: For the 53 of 112 values where the source variables were provided, at least 8 (or 15%) of the values did not correspond to the values in the source Appendices. [ 112 ] These and other problems identified by Apotex give me reason to discount – at least to some extent – the final opinions of Dr. Carbone on the important question of erosion during the Relevant Period.

[ 113 ] That is not to say that Dr. Hollis’s evidence is perfect. Dr. Hollis responds, in part, to Dr. Carbone’s claim that markets with fewer generic entrants will demonstrate a slower erosion by indicating that Dr. Carbone has inferred a causal relationship between the number of generic entrants and the erosion rate that is not supported by the evidence. Dr. Hollis posits that the important explanatory variable is not the number of entrants but the size of the overall market. He argues that larger markets can be expected to generate faster erosion rates, which may explain the differences observed by Dr.

Carbone. In my view, Dr. Hollis’s presumed causal relationship between market size and the erosion rate is subject to the same criticism that he directs at Dr. Carbone. Dr. Hollis performs no statistical analysis to test his hypothesis. He could have attempted to model this relationship in his responding report, but he opted not to do so. [ 114 ] Having said that, I find Dr. Hollis’s logic that, in effect, other determinants beyond the number of generics in the market must explain why some drug markets support multiple generic entrants, while others motivate only one generic entrant, to be reasonably persuasive.

Some “other” factor or factors must underlie generic manufacturers’ choices to enter a given market or not. It follows that Dr. Carbone’s attempt to distinguish between the “but for” world and the real world based on the number of generic entrants is at best an incomplete explanation and, in my view, insufficient to deviate from the baseline assumption that the size of the generic market in the real world is a good predictor of that market in the “but for” world. B. Formulary listings [ 115 ] The second substantial area of difference between the parties is the question of formulary listing dates. Dr.

Hollis carried out his own inquiries into formulary listing dates. In contrast, Dr. Carbone relied on the formulary listing dates provided to him by Mr. Palmer. Mr. Palmer’s assumptions differed from Dr. Hollis’s. [ 116 ] As stated by Dr. Hollis in his Expert Report, “[ a]n important determinant of sales of pharmaceuticals in Canada is listing on provincial formularies” (Exhibit 44, vol 1 at para 62) . Dr.

Hollis explained why this was so ( Exhibit 44 at paras 62-63 [footnotes omitted]): 62. [. . .] The reason for this is that, generally speaking, across Canada, the cost of prescription pharmaceuticals for seniors and the indigent is covered by the provincial drug benefit plans once the drugs achieve formulary listing. Collectively, this makes the provincial drug benefit plans the largest payers for prescription pharmaceuticals, accounting for approximately 40% of expenditures in 2005.

For generic pharmaceuticals, the listing on formularies is even more critical because, typically, formulary listings permit and, in some cases require, the pharmacist to substitute a lower-priced generic version of the branded drug product. 63. For ramipril, as for most other drugs, retail sales increase markedly when listed on provincial formularies (although significant wholesale sales can occur before then in the expectation of formulary listings). In constructing the hypothetical sales data, therefore, it is important to account for the likely listing dates on provincial formularies. [. . . .] [ 117 ] Dr.

Hollis’s analysis of this factor is again built on the reasonable assumption that the available observed data from the ramipril market post-generic entry is an accurate predictor of the “but for” world unless there is good reason to believe that there are significant differences between the two worlds. Dr. Hollis “tested” this assumption against the average listing delays for Apotex products for the period 2004 to 2006. [ 118 ] Having carried out his analysis, Dr.

Hollis concludes that: (1) there is no significant difference between the average speed of formulary listing in 2004 as compared to 2006; (2) there is no difference in the average number of days on which the provinces approved Apotex products between 2004 and 2006; and (3) the same speed of approval for Apo-ramipril as actually happened would have

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