2014 FC, 2014 FC 1087

Date: 2014 1118 Docket: T-1930-98 Citation: 2014 FC 1087 BETWEEN: APOTEX INC. Plaintiff And HER MAJESTY THE QUEEN Defendant REASONS FOR JUDGMENT HUGHES J. [ 1 ] Apotex filed a submission with Health Canada on January 25, 1988 for approval to sell a generic version of a trazodone (sometimes called trazadone) drug in Canada. Seven years later, after much correspondence, telephone conversations, meetings, the institution of two lawsuits – including one resulting in a decision by this Court – and a settlement agreement, Apotex received that approval in February 28, 1995.

By that time, two generic competitors had already received approval to sell their versions of that drug in Canada. [ 2 ] In October 1998, Apotex commenced this action for damages, including punitive damages, based upon multiple causes of action, including negligence, breach of a settlement agreement, misfeasance in public office, and misrepresentation, whether negligent, fraudulent or innocent.

The Defendant, Her Majesty the Queen, has vigorously defended this action, including asserting that the claims are barred by limitation periods and statute; that Apotex has repudiated the settlement; that there was no duty of care owed and that Apotex did not mitigate its damages. [ 3 ] For the reasons that follow, I find that Apotex is entitled in tort to damages but was required to mitigate those damages.

The extent of those damages will be assessed at a later trial. [ 4 ] The following is an index, by paragraph number, to these Reasons: TOPIC PARAGRAPH NUMBER The Parties 5 and 6 The Evidence 7 to 13 Obtaining Drug Approval in Canada – 1988 to 1995 14 to 20 Usual Practices of Health Canada – 1988 to 1995 21 to 23 Innovator Filings 24 and 25 Generic Filings 26 to 33 Apotex’s Submission for an NOC – If A = B, and B = C, it follows that A = C 34 to 37 Apotex Files its Submission – Battle Lines are Drawn 38 to 48 Judicial Review #1: T-2276-90 49 and 50 Settlement Agreement 51 and 52

Ensuing Matters – Not All is Well 53 to 60 Judicial Review #2: T-1877-91 61 to 63 Apotex Mitigates on Apo-Zidovudine 64 to 66 Back to Judicial Review #2: T-1877-91 67 to 69 Justice MacKay’s Findings 70 and 71 After Justice MacKay’s Decision 72 to 89 What Does this Court Make of the Activity of Apotex and HPB Post the Decision of Justice MacKay? 90 to 97 After Apotex Got Its NOC 98 to 101 My Overall View of the Matter 102 to 108 Issues 109 to 111 Misfeasance in Public Office 112 to 119 Negligence 120 to 131 Misrepresentation 132 Breach of Contract – the Settlement Agreement 133 to 135 Limitation Period 136 to 143 Repudiation 144 to 146 When Do Apotex’s Damages Begin to Accrue 147 to 149 Mitigation 150 to 163 Punitive Damages 164 to 167 Conclusion and Costs 168 to 170

SCHEDULE A The Parties [ 5 ] The Plaintiff Apotex Inc. is an Ontario corporation, having its head office in the City of Toronto. Apotex carries on business principally as a manufacturer of generic prescription pharmaceutical products for sale in Canada and elsewhere. [ 6 ] The Defendant Her Majesty the Queen represents the Minister of Health and officials of the Ministry within the Health Protection Branch (HPB), responsible for examining pharmaceutical products before they are permitted to be sold or distributed in

Canada for the purposes of determining safety and efficacy of those products, all as more particularly provided for in the Food and Drugs Act , RSC 1985, c. F-27 (FDA) and Food and Drug Regulations , CRC, c. 870, under that Act . Throughout the period of time relevant to this action, essentially 1988 to 1995, the HPB was organized and re-organized within a Drug Directorate (DD) and various Divisions and Bureaus of that Directorate. The Evidence [ 7 ] I commend Counsel for each of the parties for their co-operation in organizing the evidence and presenting it in an efficient manner.

They agreed upon a large number of documents, which were produced in evidence without requiring formal proof of each and every one. Exhibit 1, which comprised four large volumes of documents – each identified with a numbered tab – were admitted into evidence by agreement, the full extent of which agreement is set out in Exhibit 4, but essentially provides that these documents will be received in evidence as being sent or authorized by the persons indicated on their face and received by persons so indicated on or about the date apparent from the document. The truth of the contents was not admitted.

A further single document, Exhibit 8, was admitted in evidence under the same terms. [ 8 ] Also provided were books containing certain documents filed with the court in Judicial Review proceedings instituted by Apotex in this Court, T-2276-90 (Exhibit 2) and T-1877-91 (Exhibit 3). [ 9 ] Certain facts admitted by the parties for purposes of this action were set out in Exhibit 5. [ 10 ] The parties each submitted a booklet containing excerpts from the examination for discovery of the opposite party, which were deemed to have been read into evidence.

The excerpts of the examination of the Defendant are found in Exhibits 14 and 21; and that of the Plaintiff in Exhibit 16. [ 11 ] The Plaintiff Apotex called one fact witness and one expert witness in chief both of whom were examined and cross- examined. No witness was called in reply. Called were: • Dr. Bernard Sherman , Toronto, Ontario, as a fact witness. He founded Apotex in 1977 and has been the controlling mind of that corporation ever since whether as President or as Chairman. He was personally involved in most of the events pertinent to this case from the Apotex side of things. • Dr. Arthur H.

Kibbe , Clarks Summit, Pennsylvania, as an expert witness. His qualifications are set out in an agreed statement provided on behalf of Counsel for each of the parties and marked as Exhibit 11. It says: Expert in pharmaceuticals (pharmaceutical dosage form design, development and manufacture), pharmacokinetics, pharmaceutical excipients, the evaluation of the physical and chemical composition and therapeutic equivalence of formulations . [ 12 ] The Defendant, Her Majesty, called six fact witnesses and one expert witness. Called as fact witnesses, all of whom were examined and, except for Dr.

Simon, cross-examined, were: • Dr. Craig Simon , Ottawa, Ontario. Associate Director, Bureau of Pharmaceutical Studies. He did not join the organization until after 1995 and could only provide general information as to the period in question, 1988 to 1995. He was the person offered by the Defendant for discovery. • Mike Ward , Ottawa, Ontario. Manager, International Programs, International Programs Division, Bureau of Policy, Science and International Programs Canada. • Bruce Rowsell , Russell, Ontario. Retired, Former Director, Bureau of Pharmaceutical Surveillance. • Dann Michols , Elgin, Ontario.

Retired, Former Executive Director, Drugs Directorate and Former Assistant Deputy Minister, Health Canada. • Mary Carman , Ottawa, Ontario. Retired, Former Director, Bureau of Nonprescription Drugs. During part of the relevant period, she was Mary Carman Kasparek. • Dr. Wayne Nitchuk , Ottawa, Ontario. Retired, Former Acting Chief, Division of Biopharmaceuticals Evaluation, Bureau of Pharmaceutical Surveillance. [ 13 ] Called as an expert witness for the Defendant was: • Dr. Isadore Kanfer , Toronto, Ontario. Emeritus Dean and Professor, Faculty of Pharmacy, Rhodes University, South Africa.

He was examined and cross-examined. His qualifications are set out in an agreed statement provided on behalf of Counsel for each of the parties and marked as Exhibit 17: Dr. Kanfer is an expert in the bioavailability and bioequivalence of drug products, including the scientifically valid methods for demonstrating bioavailability and bioequivalence, and the design, methods, Use (or application) of comparative dissolution studies in demonstrating bioavailability and bioequivalence. He is also an expert in biopharmaceutics.

Obtaining Drug Approval in Canada - 1988 to 1995 [ 14 ] In the period from 1988 to 1995 and up to today, approval from the Minister of Health was and is required before a drug could

be sold or distributed in Canada. That approval took the form of a Notice of Compliance (NOC) issued by the Minister. The Minister’s officials were required to abide by the terms of the Food and Drug Act and Regulations , supra. In addition, the Minister periodically published Guidelines and policy statements which did not have the force of law, but were intended to provide guidance to those seeking approval, and the Minister’s officials. [ 15 ] In the present case, we are dealing with the period from 1988 to 1995.

In late 1995, substantial amendments were introduced, which affect current practice, but not the practice during the relevant time period. [ 16 ] The overriding concern of the Minister is that drugs provided to Canadians should be safe and effective for the intended purpose. A party seeking approval for a drug not previously sold in Canada - often called an innovator - is required to provide sufficient information, usually including extensive clinical studies, to satisfy the Minister as to safety and efficacy of that drug for the stated purpose.

This is expensive and time consuming. [ 17 ] A second party – often called a generic – who wished to sell or distribute that drug in Canada, could avoid the provision of clinical studies, provided that it could demonstrate to the Minister’s satisfaction that its drug was sufficiently similar (and I use those words advisedly, because words such as identical and equivalent are important in this case) pharmaceutically and by way of bioavailability, so as to be a satisfactory substitute for the innovator’s drug. [ 18 ] I adopt and accept certain of the

definitions given by the Defendant’s expert, Dr. Kanfer, in his Report, Exhibit 18, in this regard: Bioavailability Bioavailability refers to the rate and extent to which the API (active pharmaceutical ingredient)t, or its AM ( therapeutic active entity) (substance), is absorbed from a pharmaceutical produce (dosage form) and becomes available at the site of action or biological fluids (plasma, serum or blood), representing the site.

Bioequivalence Two pharmaceutical (medicinal) products are bioequivalent if they are pharmaceutically equivalent and if their bioavailabilities in terms of the peak drug concentration in blood, serum or plasma (C max ) and time to reach the peak (T max ) and extent of absorption or total exposure expressed as the area under the drug concentration versus time profile (AUC) after administration of the same molar dose under the same conditions are similar to such a degree that their effects with respect to safety and efficacy can be expected to be essentially the same.

The U.S.A’s definition is: ...the absence of a significant difference in the rate and extent to which the active ingredient becomes available at the site of action when administered at the same molar dose under similar conditions in an appropriately designed study. Pharmaceutical equivalent Pharmaceutical products are pharmaceutically equivalent if they contain the same amount of the same API (active pharmaceutical ingredient) in the same dosage form, if they meet the same or comparable standards, and if they are intended to be administered by the same route.

It is important to note that pharmaceutical equivalence does not necessarily imply bioequivalence as differences in the excipients (inactive ingredients Used as formulation adjuncts) and/or the manufacturing process can lead to changes in drug release and/or absorption.

The U.S.A FDA’s definition is: ...drug products that contain the identical amounts of the identical active drug ingredient in identical dosage forms, but not necessarily containing the same inactive ingredients, and that meet the identical compendia or other applicable standard of identity, strength, quality, and purity, including potency and where applicable, content uniformity, disintegration times and/or dissolution rates.

Therapeutic equivalence Two pharmaceutical products are therapeutically equivalent if they are pharmaceutical equivalents and, if they can be expected to have the same clinical effect and safety profile when administered to patients under the conditions specified in the labelling.

Pharmaceutically equivalent products that are bioequivalent can be substituted for each other with the full expectation that the substituted product will produce equivalent clinical effects and safety profile as the original product. [ 19 ] The history of the use of bioequivalence by a generic as a substitute for clinical studies was discussed by Dr. Kanfer at paragraphs 15 and 16 of his Report: 15.

Generic medicines contain the same active pharmaceutical ingredient(s) (API) as the innovator product, where previously the innovator has shown their prescribable product to be safe and efficacious based on clinical data from their initial clinical studies in humans. During the ‘70s the U.S. FDA decided that it was unnecessary for pharmaceutical companies seeking approval for generic products which contained identical active ingredients previously approved as safe and effective by the innovator companies to duplicate those initial clinical safety and efficacy studies.

However, in lieu of those clinical studies in patients, a surrogate method known as comparative bioavailability (BA) or Bioequivalence (BE) studies comparing the genetic (TEST or “T”) product with the approved product of original research (REFERENCE or “R”) was introduced. This method focuses on the process by which the active ingredient is released from a dosage form and move(

s) to the site of action. 16. Such surrogate measures are justified by the presumption that concentrations of drug in the blood stream reflect concentrations at

site(

s) of action and that a relationship between the resulting systemic drug concentrations and the safety and efficacy of the drug is implied. Such studies circumvent the need to re-do time-consuming and costly studies in patients and involve an indirect measure of safety and efficacy where the concentration of the API in the blood of healthy human volunteers is measured following administration of the T and R products, each on different occasions in the same healthy human subjects.

In other words, each subject receives both the T and the R product on different occasions and blood samples are collected at various intervals of time and analysed for the API. The resulting data are then Used to generate drug concentration profiles where the concentrations of drug are plotted versus time and the profiles resulting from the T and R are compared and assessed for equivalence, i.e. BE.

The figure below is an example of a typical profile and associated parameters which are used to assess BE. [ 20 ] On occasion, a generic would offer evidence as to the dissolution rates of its drug as evidence of or in support of other evidence as to bioequivalence. A tablet would be dissolved in a liquid such as water, at different pH levels – and the dissolution over certain periods of time would be measured and often plotted on a graph. The drug at issue here was described as quick-dissolving, as it would be 95% dissolved within 15 minutes in water or 0.1 pH water solution.

The acceptance of dissolution data in the circumstances of the present case was controversial. Usual Practices of Health Canada – 1988 to 1995 [ 21 ] The Health Protection Branch (HPB) is the name generally used in these proceedings to indicate that branch of the Ministry of Health responsible for receiving and reviewing applications for a Notice of Compliance and issuing that Notice if the application were to be approved. [ 22 ] Evidence was given by Dr. Simon and other witnesses for the Defendant as to the general practices followed by HPB in this process in the period from 1988 to 1995.

An application would be received and given a brief review to ensure that the requisite documents, fees and so forth were provided. If that proved to be the case, a filing date would be assigned. Submissions would be examined in the order as received. There was a substantial backlog and significant delays in processing applications. [ 23 ] If a file was examined and, if not found to be unsatisfactory, a letter would be sent to the applicant pointing out deficiencies, requesting further information, and so forth.

The file would be put away and not looked at again until HPB received all the information requested and all deficiencies addressed. Only then would the file be looked at again and only in sequence having regard to other files requiring examination. It was a tedious practice. It appears that the quickest that a generic could expect approval and an NOC was one to two years from the date of original filing.

Innovator Filings [ 24 ] An innovator drug company, a name used to describe the company first to seek approval from HPB to sell a drug in Canada, was usually required to file data, including not only pharmaceutical information as to its drug; but in vitro (in glass – laboratory) testing, and in vivo (rats, etc) testing, and clinical testing on humans, of its drug.

Where the drug was obtained from a manufacturer outside Canada who had already obtained approval from the country of manufacture, such as the United States, where there were rigorous drug approval studies conducted, HPB would accept data as submitted; for example, to the United States Food and Drug Administration, in respect of that drug. [ 25 ] It was a policy of HPB not to look at the data submitted by the innovator for purposes of evaluating a submission by a generic who subsequently sought approval for the same drug.

The generic could “reference” that data in the sense that approval had already been given by HPB, but HPB would not actually look at the data itself in the course of evaluating the generic’s application. This policy does not appear to have a basis in law, as there is no provision in the Food and Drug Act or Regulations dealing with this matter. Generic Filings [ 26 ] It was a usual practice in the 1988 to 1995 period for a generic to test its product as against the innovator’s product as approved in Canada for bioavailability (i.e. blood sampling over intervals). However, this was not an invariable practice.

As the Agreed Facts (Exhibit 5) state, and the evidence of Dr. Sherman and several of the fact witnesses of the Defendants shows, there were at least a few instances where a product that had been approved for sale and sold in another country, such as the United States, was accepted during the period at issue as a reference product instead of a Canadian product.

No clear or consistent reason for accepting a foreign reference product is apparent. [ 27 ] The “policy” of Health Canada in respect of the use of a Canadian or foreign drug product as the reference product has a murky history. [ 28 ] Guidelines dated February, 1981 (Exhibit 1, Tab 2) published by the Health Protection Branch, state at page 4, only: …the bioavailability of the new generic drug product is compared to that of an acceptable standard… No definition of an “acceptable standard” was provided. [ 29 ] It appears that in the 1980’s, there was some general understanding, at least within HPB, that a Canadian reference product was required.

This understanding was not reduced to writing until a Memorandum was created by the Director General, Dr. Somers, on June 23, 1989 (Exhibit 1, Tab 28), which stated: STANDARD FOR COMPARATIVE BIOAVAILABILITY AND COMPARATIVE PHARMACEUTICAL STUDIES

In conformity with past Directorate practices, I wish to reiterate that New Drug Submissions (NDS) for ‘generic’ or synonym drug products should contain appropriate, adequate and validated data on comparative bioavailability studies.

Such comparative studies should be performed by the use of the corresponding currently marketed Canadian drug formulation as the essential reference standard. [ 30 ] It appears that this Memorandum was never released to the general public although Apotex was given a copy on November 30, 1988. [ 31 ] Some time in 1992, HPB published a “Guidance for Industry” concerning the Conduct and Analysis of Bioavailability and Bioequivalence Studies (Exhibit 10).

It is a 49 page document which provides, at page 15: 5.3 Selection of Reference Product For a new drug substance (i.e., the first market entry), an oral solution should be used as the reference product when possible. The oral solution can be prepared from an intravenous solution, if available. In bioequivalence studies, the reference product is: A drug product that has been issued a notice of compliance pursuant to

section C.08.004 of the Food and Drug Regulations , and is currently marketed in Canada by the innovator, or a drug product acceptable to the Director. [ 32 ] There is no guidance as to what might constitute “ a drug product acceptable to the Director ” . [ 33 ] It must be made clear that neither the “policy” nor the “Guidance” respecting a suitable reference product is to be found in the Food and Drug Act or Regulations .

Apotex’s Submission for an NOC – If A = B, and B = C, it follows that A = C [ 34 ] On January 25, 1988, HPB received a submission from Apotex for a Notice of Compliance for a drug it called Apo-Trazad (later called Apo-Trazadone), in both 50 mg and 100 mg tablet form. It was a generic form of tablets containing the drug trazodone as the active ingredient. [ 35 ] Apotex stated that its products would be manufactured in the United States by a company owned by it; Barr Laboratories.

Apotex stated that Barr had obtained approval from the relevant United States authorities to sell its drug in the United States by providing data comparing the Barr drug to a drug called Desyrel, approved for sale and sold in the United States by an innovator company, Mead Johnson. Apotex provided a letter dated December 22, 1987, from Bristol the Canadian company who had received approval to sell the Desyrel product in Canada from Health Canada, Bristol, to a Canadian doctor, Dr. Rein. The letter said that the Canadian and United States Desyrel products were identical.

In other words, in respect of a reference product, Apotex submitted that it would be selling the Barr product in Canada, that the United States authorities had approved the Barr product using the United States Desyrel product as a reference and, given that the Canadian and Untied States Desyrel products were identical, Apotex should be permitted to use the same bioavailability studies relied upon by Barr in its United States application in Apotex’s Canadian application. [ 36 ] Some seven years later, after voluminous correspondence, many meetings and telephone calls, two judicial reviews having been instituted and one of them decided by this Court, and a purported settlement along the way, Apotex got its Notice of Compliance on February 28, 1995.

The parties have admitted that two of Apotex’s competitors, Pharmascience and Novopharm, had received Notices of Compliance for their generic trazodone tablets before Apotex did. [ 37 ] It is useful to tabulate some of the more relevant documents and events provided in evidence. I attach this as

Schedule A. Apotex Files its Submission – Battle Lines are Drawn [ 38 ] Apotex’s submission for a Notice of Compliance for its Apo-Trazad 50 mg and 100 mg tablets was received by HPB on January 25, 1988 and received a preliminary screen. By letter dated April 25, 1988, HPB advised Apotex that the material would be reviewed “ as soon as possible ” . [ 39 ] The next substantive matter occurring within HPB was at a high level when the Director of the Bureau of Human Prescription Drugs, Dr. Johnson, sent a memorandum to the Director General of the Drugs Directorate, Dr.

Somers, which clearly draws the lines that have been followed throughout the history of this matter: namely, on the basis of science alone, Apotex’s submission makes sense; the decision to be made is one of policy. It is worthwhile repeating this memorandum received January 30, 1989 (Exhibit 1, Tab 21): NEW DRUG SUBMISSION FOR APO-TRAZAD – APOTEX INC. Apotex filed a New Drug Submission for Apo-Trazad on January 25, 1988, for the purpose of obtaining clearance for marketing the first generic Trazodone product. Trazodone is an antidepressant drug marketed for a number of years in this country by Bristol Labs.

As you are aware, generic manufacturers usually supply bioavailability data as evidence of the safety and efficacy off their product. In this particular situation, Apotex would be expected to provide in their submission evidence of the bioequivalence of their product as compared with that of the innovator’s brand marketed in Canada under the trade name of Desyrel.

A preliminary review of the Apotex Submission, indicates that they have provided instead the results of a bioavailability study comparing the Trazodone product manufactured by Barr Laboratories in the U.S., with the standard innovator’s brand manufactured in the United States by Mead Johnson. The comparative bioavailability study was carried out in Canada by BioResearch (Montreal) under a Canadian cleared IND. Since Barr Laboratories are owned by Apotex, they can presumably provide evidence that the Barr product and the proposed Apotex product are identical from a chemistry and manufacturing standpoint.

Furthermore, they have obtained a letter from Mr. Leo P. Fleming, Manager, Technical Services, Bristol Laboratories of Canada to Dr. A. Rein in Toronto indicating that the product Desyrel sold by Mead Johnson in the United States is identical to the same product sold by Bristol in Canada. Therefore, it is not illogical to conclude that the bioavailability study done on the Barr and Mead Johnson products is applicable to the Apotex and Bristol products marketed in Canada.

This point is further strengthened by the fact that the Mead Johnson product, in addition to being identical to the Bristol product, was in fact the product mainly used in carrying out pivotal studies performed in the U.S., which were also submitted in support of the Canadian NDS for Desyrel. Therefore, on the basis of science alone, I am inclined to accept the arguments advanced by Apotex. However, we should also examine the possibility that we may be establishing a precedent if we follow this course of action that could see us forced to accept similar arguments from around the world.

What is to prevent, for example, Apotex from commissioning a bioavailability study comparing the French brand of a product as the standard? If we accept the arguments advanced in this particular case, we could have a difficult time not allowing this type of study. This could be the start of a process that would see us lose control over the generic submissions. Before a decision is made in this particular case I suggest that you contact Mr. L.B. Rowsell.

In the future, his Bureau will be responsible for generic submissions and I do not want to take an action that might compromise his ability to carry out the duties that have been assigned to him. Perhaps when you have considered this memo you might wish to discuss it with Mr. Rowsell and give me your views on the issue. [ 40 ] Mr. Rowsell had, in 1988, assumed the role of Director of Bureau Pharmaceutical Surveillance within the Drug Directorate. His job was to oversee the people who did the actual evaluation of submissions for drug approval. He had an undergraduate degree in pharmacy.

He did not do any of the actual reviewing or evaluating himself. [ 41 ] The matter was apparently referred to Mr. Rowsell because on February 8, 1988, he wrote a memorandum to Dr. Somers (Exhibit 1, Tab 22) stating that he anticipated substantial difficulty in establishing that the United States reference product was identical to the Canadian product and that this “emphasizes the need for clear guidelines to express our requirements” . [ 42 ] There followed the internal policy statement of Dr. Somers of June 23, 1989, previously referred to, as well as internal memoranda involving Ms.

Mary Carman (Kasparek) and correspondence with Apotex (Dr. Sherman) as to the propriety in using a non- Canadian drug as the reference standard. Dr. Johnson provided his view to Ms. Carman in a memorandum dated July 10, 1989 (Exhibit 1, Tab 30): STANDARD FOR COMPARATIVE BIOAVAILABILITY AND COMPARATIVE PHARMACEUTICAL STUDIES I am in receipt of your memo of June 30 th on this topic together with the correspondence dated June 29 th and April 3 rd from Dr. Sherman. I would like to make the following comments: 1.

I believe that we should accept data comparing the generic product against the innovator’s brand as sold in a major market of the world if we have evidence that the innovator does not have manufacturing capabilities in Canada and must import his product from the major market country. 2. I do not believe we should accept studies conducted outside Canada against the innovator’s brand as sold in a major market area if the innovator has manufacturing capabilities in Canada and formulates his product in our country.

Although the innovator’s product may have the same master formulation throughout the world, differences in equipment and personnel may affect the overall performance of a product and we have no guarantee that the product manufactured by Merck, for example, in the United States is identical to a product bearing the same name and manufactured by the same company in Canada. 3.

It is correct that in many cases the originator has obtained his Canadian Notice of Compliance on the basis of data generated on a product sold in a major market, however, in the subsequent years it is the Canadian formulated product that has been accepted as being safe and efficacious in Canada on the basis of its track record in large numbers of Canadian patients. It must, therefore, remain our “gold standard” against which imitators should make their comparisons. [ 43 ] On June 29, 1989 (Exhibit 1, Tab 29) Dr. Sherman wrote to Dr.

Somers, re-iterating his position that a United States reference product was appropriate. In response, Dr. Somers wrote to Dr. Sherman on August 24, 1989,(Exhibit 1, Tab 32) rejecting this proposal, saying: In your letter of June 29 th , you proposed that if a series of conditions were met in their entirety, the Health Protection Branch could forego its normal requirement for Canadian sourcing of the reference dosage form.

The requirement for Canadian sourcing allows a manufacturer to establish, in very exact terms, that their test product releases drug into the systemic circulation at the same rate and extent as does the reference dosage form. Where the safety and efficacy profile of the reference drug product is acceptable, this offers a scientific basis to assert that, apart from possible effects from impurities or

excipients unique to the dosage form, the test product will also be acceptably safe and effective. The basis for the acceptability of the Canadian reference product stems from both premarket data on file with the Branch and the subsequent years of performance by the product in Canada. This aspect of performance is greatest for the first brand of that drug product to enter the Canadian market and therefore is the appropriate norm for comparison.

When the reference product cannot be conclusively proven to be identical to that marketed in Canada, parity of performance with a product known to the Branch can not be assumed. The alternative is for the manufacturer of the test product to abandon comparative bioavailability studies with marketed products and conduct original clinical research to establish the safety and efficacy of the test product. The conditions that you have proposed to forego Canadian sourcing of the reference product do not conclusively prove that a non-Canadian reference product is identical to the Canadian version.

Additionally two of the conditions bear special note. With respect to your condition 4., the Branch is not at liberty to consult the file of another manufacturer to determine the extent to which their data was generated using a product formulation that was sold in a different country. As well, subsequent Branch experience will have been with the formulation marketed in Canada and the Branch need not have been apprised of ensuing formulation changes made to the product in another country.

Secondly, stipulation to intend to sell the product in other countries, as noted in your condition 6., does not temper the mandate of the Food and Drugs Act for Canada. I trust that the preceding explanations clarify the Branch position on Canadian sourcing of the reference dosage form for comparative bioavailability studies. [ 44 ] It was clear by this time that the battle lines had been drawn. Apotex wanted to use a United States reference standard; HPB insisted on a Canadian standard, unless the United States reference product could be “ conclusively proven to be identical ” to the Canadian product.

The evidence before me is that it is almost impossible to demonstrate that any drug product is “identical” to another, even tablets taken from the same batch (e.g. Dr. Kibbe’s Report, Exhibit 12, para 38). Some measure of difference must be tolerated. [ 45 ] Apotex continued to press; HPB “reanalyzed” the data it had received from Apotex. A Mr. Michalko, Chief, Division of Biopharmaceutics Evaluation, came into the picture.

On November 30, 1989 (Exhibit 1, Tab 38) he wrote to Apotex a peculiar letter attempting to bootstrap HPB’s insistence on a Canadian reference product by reliance upon HPB’s unpublished policy that had been reduced to writing after Apotex had filed its submission. On December 18, 1989, Michalko wrote to a Mr. Jeffs, Assistant Director- Operations, Bureau of Human Prescription Drugs (Exhibit 1, Tab 39) asking whether the “policy” that HPB had respecting its refusal to look at third party information to gain information in order to verify if the submission – in this case, of Apotex – was correct.

On February 1, 1990, Michalko wrote to Apotex stating that HPB would not look at another party’s submission. [ 46 ] Here I pause to repeat what Apotex’s Counsel stated in argument before me. HPB already knew that the United States reference product relied upon by Apotex was identical to the Canadian drug sold by the innovator. They knew this because, in approving the innovator’s drug for sale in Canada, the innovator had provided the data from its United States product. If HPB had referred to the innovator’s file, it would know that the United States product was identical to the innovator’s Canadian product.

By refusing to look at this file, HPB was requiring Apotex to prove to HPB that which HPB already knew to be true. The only reason for refusing to look at the other file was “policy”. [ 47 ] In late 1989, and until August 1990, when Apotex filed its first Originating Motion for Judicial Review, there was an exchange of correspondence between Apotex and HPB.

I will not recite all of this; suffice it to say that each party stuck to its position as to whether a Canadian reference product was required and whether a United States reference product could be used. [ 48 ] Apotex filed an application for judicial review with this Court in August, 1990.

Judicial Review # 1: T-2276-90 [ 49 ] On or about August 13, 1990, Apotex filed an originating Notice of Motion (as was the practice then) with the Court seeking an Order directing that the Minister review Apotex’s Apo-Trazad applications without requiring that the reference product be purchased in Canada, and to issue a Notice of Compliance to Apotex. Court file number T-2276-90 was assigned to the matter. The pertinent requests were for an Order: (

a) Directing the Respondent Minister of National Health and Welfare (the “Minister”) to review the Applicant’s New Drug submission in respect of its drug product, Apo-Trazad, to determine whether same, and more particularly, the comparative bioavailability study, literature review and other data contained therein, adequately establish the safety and effectiveness of Apo-Trazad for use as a drug in Canada without regard to a condition precedent to such review that the reference product tested in the comparative bioavailability study be purchased in Canada; (

b) Directing the Respondent Minister, upon completion of the review of the Apo-Trazad New Drug submission, if such review is satisfactory, to issue a Notice of. Compliance in respect thereof; [ 50 ] Apotex discontinued that proceeding upon a settlement having been reached with the Minister. Settlement Agreement

[ 51 ] On November 5, 1990, Apotex, represented by Dr Sherman, and its lawyer Harry Radomski, met with Bruce Rowsell, representing the Minister and Marlene Thomas, a Department of Justice lawyer representing the Minister in order to settle the litigation in T-2276-90. The result was a letter from Ms. Thomas to Mr. Radomski dated November 26, 1990.

This letter is referred to as the Settlement Agreement and said: This letter confirms the agreement reached between the parties and counsel as to the settlement of this action, culminating in its withdrawal without costs before Jerome, A.C.J. in Motions Court of the Federal Court, Trial Division in Toronto on November 19, 1990. The Respondents hereby provide the following statement with respect to the subject matter of the litigation: Further to recent discussions, this confirms that the review of your Apo-trazad new drug submission is continuing and has not been completed for the purposes of

section C.08.004 of the Food and Drug Regulations . If there are any deficiencies, they will be identified upon completion of the examination. Any existing and further data provided by Apotex to establish that Apo-trazad is chemically and therapeutically equivalent to a drug product sold in Canada will be considered. For the purposes of a comparative bioavailability study, the Health Protection Branch is prepared to consider evidence to establish equivalency between Canadian and non-Canadian reference standards. I believe this concludes the matter. [ 52 ] Ensuing matters did not proceed well.

Ensuing Matters-Not All is Well [ 53 ] Things did not go well after the Settlement Agreement letter was signed by Ms. Thomas and given to Apotex. In his reasons given in the second judicial review, which I will discuss in some detail shortly, Justice MacKay set out at considerable length what went on within HPB and between HPB and Apotex. I refer in particular to paragraphs 17 to 30 and 38 to 87 of his reasons, reported at 59 FTR 85 . Having heard the witnesses, and having reviewed the documents in evidence in the case before me, I endorse and confirm his findings. [ 54 ] I accept Dr.

Sherman’s evidence as to the discussions leading up to the Settlement Agreement, and I reject Mr. Rowsell’s evidence in that respect. It is clearly evident from the discussions between Apotex and HPB that the only outstanding issue was that of bioavailability. The parties were apart in that respect, in that Apotex believed that it could demonstrate bioavailability by equivalency, whereas HPB was looking at identicality. The Settlement Agreement clearly states that HPB will look at the matters from the point of view of equivalency.

To say that the Agreement was ambiguous or that HPB didn’t know what the parameters were for equivalency is disingenuous. Sherman and Rowsell were at the settlement meeting; if HPB had any concerns respecting equivalency, they could have been raised then, and clarified then. HPB’s lawyer wrote the Settlement Agreement letter; if she or her client had any doubts about what she was writing, they should have expressed them at the time. HPB knew what the letter meant. [ 55 ] However, HPB did not follow the terms of the Settlement Agreement. It stayed on a path whereby they were insisting upon identicality.

HPB was less than full and forthright in its dealings with Apotex. I find that there was a deliberate attempt by HPB to stick to its position as to identicality while conveying to Apotex a sense that it was willing to be flexible, which it was not. [ 56 ] Apotex, correctly in my view, was led to believe that the submission to HPB of a bit more data; particularly with respect to dissolution, would be sufficient to satisfy HPB. It supplied such data. The uncontradicted evidence of Apotex’s expert Dr.

Kibbe (Exhibit 12, paras 38 to 65) is that this evidence should have been sufficient to satisfy HPB as to equivalency. [ 57 ] Dr. Sherman, on behalf of Apotex, wrote to Dr. Somers of HPB a letter dated April 25, 1991 (Exhibit 1, Tab 83). It said, inter alia : Your letter of March 8, 1991, reporting the results of review of our NDS, states under point 1 that there remains a requirement for a bioavailability study using a Canadian reference. Our submission was filed on January 25, 1988, over 3 years ago, and is one of the oldest uncleared submissions at HPB. We received a letter from Dr.

DaSilva dated May 1, 1989 stating that a Canadian reference was needed, and the matter has been under debate between Apotex and HPB since that time. It has been and remains our position that the reference need not be purchased in Canada; in fact, logically the preferred reference should be that to which the literature establishing safety and effectiveness most closely relates, that being the reference as sold in the originator’s home market. As you know, we brought an action in the Federal Court in August 1990, which was withdrawn only after we arrived at a settlement agreement.

The agreement was that the U.S. reference could be used, along with evidence to establish the equivalence of the Canadian and U.S. references. In the course of settlement discussions, we provided Mr. Rowsell with IR spectral comparisons and dissolution comparisons, as further evidence that the formulations of the U.S. and Canadian references were the same, and he confirmed that this data was the type of further data needed. In the course of settlement discussions, we received assurances that HPB would comply with the agreement and review our submission in good faith. . . .

If Mr Rowsell did not know that there were other examples of use of a reference not purchased in Canada, then it can only be because he failed to inform himself, in which case he should not have sworn in paragraph 3 of his affidavit that: “I have knowledge of the matters

herein stated”. Apotex is now suffering substantial damages from the delay in review and approval of Apo-Trazadone. We ask that you reconsider your position and confirm that our bioavailability study using the reference purchased in the U.S. will suffice. If we do not receive such confirmation within a matter of days, we will have no alternative but to initiate another action in the Federal Court founded, inter alia, on bad faith and on refusal to comply with the settlement agreement. We will also claim damages flowing from the delay in review and approval.

Please reply promptly, as time is of the essence. [ 58 ] On July 2, 1991, Dr. Sherman again wrote to Dr. Somers (Exhibit 1, Tab 102). This lengthy letter concluded: In

summary, we believe it clear that a policy that the reference must be purchased in Canada is not well-founded on several grounds. We believe HPB must abandon that position, or, or, in the alternative, comply in good faith with the Settlement Agreement, whereby the foreign reference may be used in cases in which the foreign and Canadian references appear to be the same and the lack of any significant difference is confirmed by laboratory comparisons.

I urge you to carefully reconsider your position in light of the contents of this letter and to confirm that our studies are now acceptable in accordance with the Settlement Agreement. In the event that your answer remains negative, which I hope will not be the base (sic), we will have no alternative but to promptly proceed with further steps in the Federal Court. In view of the severe damages now accruing, we will not limit our action to an Application for an Order in the nature of mandamus, but we will also pursue a statement of claim for damages.

I will phone you tomorrow to determine your answer. [ 59 ] Again, on July 31, 1991, Dr. Sherman wrote to Dr. Somers (Exhibit 1, Tab 111) a lengthy letter which concluded:

Summary I believe that each and every one of the “comments” made by you is untenable. Moreover, taken together they appear to demonstrate an intransigent refusal to act in good faith. Damages to Apotex are rapidly accruing, and I urge you again to immediately confirm the acceptability of our submissions, so as to avoid the need for us to pursue the Notice of Motion and a claim for damages. [ 60 ] Apotex filed its second judicial review application on July 17, 1991. Judicial Review #2: T-1877-91 [ 61 ] On July 17, 1991, Apotex filed a second originating Notice of Motion with the Court, assigned file number T-1877-91. Apotex sought in respect of the Minister, the following Order: (

a) Directing the Respondent Minister of National Health and Welfare (the “Minister”) to review the Applicant’s New Drug Submissions in respect of its drug products, Apo-Trazad and Apo-Zidovudine, to determine whether same, and more particularly, the comparative bioavailability study, literature review and other data contained therein, adequately establish the safety and effectiveness of Apo-Trazad and Apo-Zidovudine for use as a drug in Canada without regard to a condition precedent to such review that the reference product tested in the comparative bioavailability study be purchased in Canada or that there be a certification from the manufacturer of the Canadian reference product that it is identical to the non-Canadian reference product; (

b) Directing the Respondent Minister, upon completion of the review of the Apo-Trazad and Apo-Zidovudine New Drug Submissions, if such review is satisfactory, to issue a Notice of Compliance in respect thereof and if such review is unsatisfactory, to detail the deficiencies disclosed in such review; [ 62 ] Among other Affidavits, the Affidavits of Bernard Sherman and Bruce Rowsell were filed, both of whom were cross- examined.

It must be noted that Apotex put in issue not only its Apo-Trazad submission, which is the subject of this action, but also another submission,one for Apo-Zidovudine in which Apotex had also used a non-Canadian reference product. In his reasons, to which I will now turn, the late Justice MacKay of this Court identified the Apo-Trazad application as Apo-A, and the Apo-Zidovudine application as Apo-B, as there were at that time certain concerns as to confidentiality. [ 63 ] This application was heard by Justice MacKay on March 22 to 24, 1992. He delivered his decision, with reasons, on January 19, 1993.

His reasons, as reported at 59 FTR 85 , were put before me in the agreed evidence as part of Exhibit 3. Apotex Mitigates on Apo-Zidovudine [ 64 ] With respect to Apo-B (Apo-Zidovudine), subsequent to the hearing in March 1992, Apotex provided to HPB a bioavailability study using a Canadian originator product as a reference. Apotex was given a Notice of Compliance by the Minister on May 25, 1992. This matter was brought to the attention of Justice MacKay before he had given his decision. As a result, Justice MacKay dismissed Apotex’s application respecting Apo-B as moot.

His reasons in this respect are set out at paragraphs 31 to 37. I will not reproduce those reasons here.

[ 65 ] With respect to its Apo-Zidovudine application, Apotex wrote to Mr. Rowsell on May 10, 1991 (Exhibit 1, Tab 87) challenging the “policy” respecting the use of a Canadian reference product. The letter stated, in part: If we do not receive your prompt confirmation that the U.S. reference is acceptable and review has commenced, we will instruct our solicitors to apply to the Federal Court for an appropriate order.

We will also mitigate damages by commencing the repeat study and will seek to hold HPB liable, for both the cost of the study and damages from delay in review and approval. [ 66 ] In fact Apotex did conduct a study using a Canadian reference product and did receive approval for Apo-Zidovudine within a few months. When cross-examined on this point, Dr. Sherman provided the following answers at pages 474 to 477 of the Transcript: Q. It was your – was that – was that a statement of a – a real intention to do so? A. Yes. And I can tell you what happened.

We were in a real hurry for this one because it was a first generic opportunity of a substantial significance, but in addition, what distinguished this product was that Health Canada had a fast-track policy for antiretroviral drugs. So in this case we knew that if we did a repeat study and submitted it, it would not result in the long delay for – to put it back at the end of the line because the antiretrovirals immediately went to the front of the line so there would be no delay.

So as a pragmatic matter we recognized that doing the mitigation, doing the repeat study was the faster route because a judicial review would have taken a lot longer. There’d be no delay other than the delay of doing the study which, in this case, was relatively quick. It was a simple study we could do in a couple of months. So pragmatically the best way to do it was to do a repeat study for that reason of fast tracking. And at the end we didn’t bother suing for damages because it just wasn’t worth it. We really weren’t delayed much because for the very reason that I told you.

And also Health Canada was, in any event, because of the fast-track policy already reviewing the submission, in any event, even while we were doing the repeat study and to sue for a couple hundred thousand dollars and the cost of the study would have made no sense. That’s what happened in this case. Q. I thought apo-trazadone was an antidepressant? A. It is. We’re talking about AZT here, are we not? Yes, we’re not talking about AZT, zidovudine. Yes, we’re not talking about trazadone in this – in this letter. It was zidovudine, AZT. Q. I apologize, but the letter – A. You’re dealing with zidovudine which is AZT.

I guess AZT since we’re in Canada. Q. I see. So in this case you are advising Health Canada right from the start that if we can’t get this going we’re going to do a study – A. Yes, for the reason – Q. - and then come after you for damages? A. The reason I told you, but then the – it turns out that there was no significant delay as a result and the only damage would be the cost of the study which is only a couple hundred thousand dollars. Wouldn’t make sense to sue for that. Q. And in this case, I believe you said it pragmatically was the best thing to do? A. The suit, yes. Q. No, to do the bio – A.

In the case of AZT – Q. To sue, I’m sorry. Yes. A. In this case, the case of apo-trazadone if we’d done the repeat study it would have taken time and then we would have gone back to the beginning of the queue. It would – that would have delayed us another year. Back to Judicial Review #2: T-1877-91 [ 67 ] Justice MacKay dismissed the application with respect to Apo-A (Apo-Trazad). He did so having reviewed many of the facts and documents as put in evidence before me, including, what was done by HPB before and after the Settlement Agreement.

Apotex’s Counsel argues that Justice MacKay did not have the complete picture, since the matter was dealt with as an application where no discovery was available. Apotex’s Counsel argues that, as a result of Access to Information requests and the discovery process in this action, a much more complete picture as to what went on at HPB is in evidence before this Court.

[68] Justice MacKay provided extensive reasons. At paragraphs 8 to 16, he sets out the general procedure in effect in the early1990’s for obtaining a Notice of Compliance. At paragraphs 17 to 30, he reviewed, in general, Apotex’s application for approval of Apo-A (Apo-Trazad). He then dealt with the Apo-B Apo-Zidovudine) application, which I referred to earlier. He returned to the Apo-Aapplication at paragraphs 38 to 87.

I repeat paragraphs 85 to 88 of his Reasons, wherein he dismissed the application on the basis that thedeterminations of HPB were not “patently unreasonable”: In judicial review of specialized tribunals, such as labour relations boards or adjudicators whose decisions, based upon particularexpertise and experience, are to be final and binding and not subject to appeal or review, it is now accepted that a court will interveneonly where the decision maker has interpreted governing legislation in a manner that is so patently unreasonable that it demandsintervention by the court. (Canadian Union of Public Employees, Local 963 v.

New Brunswick Liquor Corp., (SCC),[1979] 2 S.C.R. 227, 97 D.L.R. (3d) 417 per Dickson J. as he then was). In view of the discretion here, requiring special expertise andinformed scientific judgment it seems to me a comparable sort of standard is appropriate for this Court to consider in this case. Put as aquestion, in view of the particular, specialized discretion here vested in HPB can it be said that its application of the governingregulation,

section C. 08.002, to require evidence of a bioavailability study comparing Apo-A and C (Can.) in the new drug submissionfor Apo-A is patently unreasonable? Is it so unreasonable that the governing regulation clearly will not support its application in thisway? Viewed against that standard, the evidence on behalf of the respondent Minister, particularly that of Dr.

McGilveray, though disputed byApotex, the fact that in many previous. submissions by Apotex itself bioavailability studies were included with reference to a Canadianstandard product, and HPB's reference to practices followed in some other countries, lead me to conclude that there is no basis for thisCourt to determine that the HPB requirement is patently unreasonable or beyond the discretion of the Director under

section C. 08.002of the regulations. Except for the refusal to consider the bioavailability study comparing Apo-A with C (U.S.), the Minister's responsibility to consider theApotex submission was met, ultimately by the letter of March 1991 advising that the new drug submission at that stage did not meetrequirements for compliance with the regulations.

Among other deficiencies then noted was the failure to establish the safety andefficacy of Apo-A in comparison to a Canadian reference standard, which Apotex concluded meant there was a requirement for abioavailability study using a Canadian reference, a conclusion borne out in subsequent correspondence with HPB. That requirement fora revised new drug submission has not been met by Apotex.

Until there is such a submission, no duty rests on the respondent Minister toagain consider the issuance of a notice of compliance for Apo-A. [69] On February 8, 1993, Apotex appealed from the decision of Justice MacKay (A-135-93: Exhibit 3 Tab 20); furtherdiscussions between the parties occurred. The appeal was withdrawn once Apotex received its Notice of Compliance for Apo-Trazad(Apo-

A) February 28, 1995. Justice MacKay’s Findings [70] In the course of his Reasons, Justice MacKay made a number of findings. While there was an appeal taken by Apotex, it wasultimately withdrawn. Therefore, those findings are final. I appreciate that those findings were based on the record before JusticeMacKay and the issues before him were in the context of a judicial review. I further appreciate that there is additional evidence beforeme, and that unlike Justice MacKay, I have seen witnesses in person.

I pause to note that it is agreed by counsel for each of the partiesthat Justice MacKay’s use of the word “discovery” in his Reasons is directed to transcripts of cross-examination of persons who had filedaffidavits in the proceedings before him and not on a discovery. [71] Having heard the witnesses before me, and having reviewed the evidence before me, I concur with a number of the findingsmade by Justice MacKay. This oral testimony of the witnesses, and these further documents, serve to confirm his findings, which I adoptas my own.

In particular, the following findings: • Apotex understood that the Settlement Agreement required that equivalency between the U.S. reference brand used by it inits bioavailability study and the Canadian originator brand, by laboratory tests; in particular chemical analysis and dissolution studies,was what the Settlement Agreement contemplated. HPB said it was prepared to “consider” information and, through Counsel, HPBconceded that it was satisfied as to chemical equivalency.

At paragraph 47 he wrote: Particularly after the settlement in 1990 of the first application for judicial review in relation to Apo-A, Apotex sought to establishequivalency, between the U.S. reference brand used for its bioavailability study and the Canadian originator brand, by laboratory tests,in particular chemical analysis and dissolution studies. That was what Apotex understood, as a result of the settlement agreement, wouldestablish equivalency. That understanding apparently was not shared by HPB.

Although HPB held out that, in accord with thesettlement, it was prepared to consider any information Apotex submitted, and that it had done so, the submissions by Apotex did notsatisfy HPB. At the hearing of this matter, counsel for the Minister conceded that HPB was satisfied with chemical equivalency of thetwo reference brands, but it was not satisfied that the test data submitted by Apotex established their therapeutic equivalence. • There was still controversy as to whether dissolution studies were sufficient so as to establish bioavailability.

He wrote atparagraphs 49 and 51: As I interpret these comments, they stress the difference between dissolution studies and bioavailability studies, a difference Apotexwould not deny, and they highlight, from HPB's perspective, the limitations of dissolution studies for purposes of establishing therapeuticeffectiveness when contrasted with bioavailability studies comparing the drugs under study in their use with human subjects by in vivotests. . . . In regard to these concerns Mr. Sherman, by affidavit in response, urged that HPB's concern with changes to drug products properly

related to drugs marketed in Canada. In examination on their affidavits both Mr. Rowsell and Dr. McGilveray, spokespersons for HPB,ultimately concede that, at least in theory, dissolution studies could be designed to indicate any significant differences in formulation andmanufacturing processes used for drugs compared in the studies. In fact, Mr. Rowsell professed no personal expertise in dissolutionstudies and deferred to Dr. McGilveray as an expert. The latter professed no personal knowledge of the Apotex studies and spoke todissolution studies on the basis of general principles.

He acknowledged that such studies were acceptable for purposes of comparingchemical and therapeutic equivalence in different batches of the same drug produced by one manufacturer, even, as I understand it,when produced in different factories. Yet he declined to accept Apotex dissolution studies as a basis for establishing therapeuticequivalence of C (Can.) and C (U.S.) even though, belatedly, chemical equivalency was accepted. Neither Mr.

Rowsell nor Dr.McGilveray were knowledgeable about the details of any review by HPB of the Apotex studies, though they were put forward asspokespersons on behalf of HPB and the respondent Minister.

It is apparent from their examination in discovery that their viewsreflected general considerations and circumstances rather than positions adopted after any personal consideration of the particulars ofthe Apotex submissions. • Despite its assertions to Apotex that HPB was prepared to accept evidence as to equivalency of the U.S. and Canadianproducts, in fact HPB was only prepared to consider evidence as to bioavailability with reference to a Canadian product.

He wrote atparagraph 55: My own review of this portion of the evidence leads me to conclude that, in the final analysis, HPB refuses to accept, for purposes ofestablishing safety and effectiveness of the Apotex brands, evidence of equivalency of U.S. and Canadian originator products.

Theemphasis, in Rowsell's affidavit, on comparing manufacturing processes used in preparation of the Canadian and U.S. originator brands,which ordinarily would be beyond the ability of Apotex to obtain, in my view makes clear that HPB was not prepared to considerequivalency of the two originator brands on the basis of any evidence Apotex could produce by laboratory tests.

Despite its protestationsthat it would consider, in relation to the Apo-A submission, any further information Apotex submitted, HPB was only prepared toconsider as sufficient a bioavailability study with reference to the Canadian originator product, C (Can.). HPB clearly stated that noother method satisfactory to it for establishing equivalency had been identified.

While formally HPB's position was open to considerApotex submissions, for all practical purposes only the submission of a satisfactory bioavailability study of Apo-A and C (Can.) wouldsatisfy HPB of the safety and effectiveness of Apo-A. • HPB was disingenuous in representing to Apotex that it was prepared to consider all other submissions. HPB remainedadamant that only a Canadian reference product would suffice.

He wrote at paragraph 56: If those responsible for HPB knew at the time of the settlement with Apotex in 1990 that there was no method satisfactory to HPBidentified to establish equivalency of the U.S. and Canadian reference brands, then, in my view, in the settlement HPB misrepresentedthat they were prepared to consider information to establish that equivalency.

If it became clear only after the settlement that no othermethod could establish equivalency to HPB's satisfaction, it seems to me disingenuous to continue to say they were prepared to considerall other submissions of Apotex for this purpose, when in effect only the submission of a bioavailability study with reference to C (Can.)would suffice to establish safety and effectiveness in human use of Apo-A. • There is little evidence to support HPB’s assertion that there was a “long-standing” policy requiring a Canadian referenceproduct.

He concluded at paragraphs 63 and 64: I find it surprising that the evidence offered in support of the existence of a policy, said to be of long-standing, is all of such recentorigin. Moreover, no explanation is offered of the interrelation of the policy, if it were of long-standing, with omission of any reference toit in Guidelines for New Drug Product Requirements published in February 1981 by the then Bureau of Human Prescription Drugs ofHPB.

These guidelines include reference to "General Requirements for Safety and Efficacy" and to "Bioequivalence", and bothreferences refer to studies relating to acceptable brands of the drug product under review. It is noted that drugs may be introduced indifferent countries. In relation to Bioequivalence the guidelines state that "Generally the bioavailability of the new generic drug productis compared to that of an acceptable standard, in studies in man using an ethically acceptable dose and a validated method". Noreference is made to any necessity for studies to be related to a Canadian reference brand.

Though these guidelines might be changed byHPB acting within discretion vested by regulation C. 08.002 (see, in relation to a change in regulatory policy regarding the definition of"new drug" under C. 08.001, C. E. Jamieson & Co. (Dominion) Ltd. et al. v. Canada (Attorney General) (1987), (FC),12 F.T.R. 167 at 213, 46 D.L.R. (4th) 582 at 644, 37 C.C.C. (3d) 193 at 255), there is no evidence that the guidelines were revised andpublished, as the 1981 version was, for the guidance of the industry.

If HPB policy was of long-standing, I find it extraordinary thatApotex, a major generic drug manufacturer, was unaware of it until the matter was brought to its attention by HPB in the latter part of1989 in response to an Apotex new drug submission other than for Apo-A. In its timing, the communication of HPB's policy statement toApotex was after its new drug submission for Apo-A, though Apotex apparently conceded it was aware of the policy before its new drugsubmission for Apo-B was put forward to HPB.

My conclusion is that HPB may well have had a practice, not followed dogmatically as we shall soon see, which practice was reducedto writing, as a policy statement, in June 1989, that bioavailability studies submitted in relation to new generic drugs where an originatorbrand is already available in the Canadian market should be done with reference to the brand currently sold in the Canadian market.That is what the internal policy memorandum of June 23, 1989, clearly says.

That may have implications for circumstances where ageneric brand is the first of a drug product to be brought to market in Canada, if those circumstances are possible, but those are notrelevant here. The use of the verb form "should be" in the policy statement may be intended to be mandatory, but it evidently is intendedas a directive for the future. • HPB was inconsistent in applying its “policy” with respect to insistence upon a Canadian reference product. However,there is no evidence that Apotex was subject to discrimination in this regard.

He wrote at paragraph 67: The record is one of less than consistency in the application of its stated policy or practice by HPB, though Apotex may well havebeen no worse off or no better off than any other manufacturer. The record does not depict an efficient, effective HPB in terms of itsrelations with Apotex, one of the manufacturers whose products it is required to approve for sale in Canada. Apotex was itself thebeneficiary of decisions accepting studies with reference to foreign originator products in other cases. Nevertheless, it is difficult to

agree that it was subject to discrimination or even unfairness from the requirement of HPB in this case on submission of a bioavailabilitystudy with reference to the Canadian product for the discretion of the Minister and his advisers is to be exercised in relation to eachapplication and I am not persuaded there is a firm basis here for comparing applications for similarities in all relevant respects. • While the Food and Drug Act and its Regulations vest discretion upon the Minister, that discretion is not unlimited andmust be exercised on consideration of the relevant factors set out therein.

He wrote at paragraph 75: In my view the regulations vest complete and exclusive discretion in the respondent Minister and the Director of HPB to determinethe requirements of a new drug submission in terms of the information or evidence to be provided by the manufacturer. That discretion isnot unlimited, for it must be exercised on consideration of factors that are relevant to the purposes of the Act and regulations.

Thosepurposes, in relation to new drugs, are to provide a process for approval of new drugs to be marketed in Canada that is "in the interestof, or for the prevention of injury to, the health of the purchaser or consumer" (the Act s. 30(1)(e)). • The refusal by HPB to consider Apotex’s full submissions on the basis that a Canadian reference product was required wasan unlawful fettering of its discretion. There was no lawful basis for refusing to do so.

He wrote at paragraphs 78 and 80: In my view, refusal to consider the full submission for Apo-A because of a claimed policy that bioavailability studies be done only withreference to a Canadian product, as for a time appears to have been the position of HPB following the letter of May 1989, andparticularly after written expression of its policy in June 1989, would be unlawful fettering of discretion. (See e.g., Griffin v. Canada(Agriculture Can., Inspections Division) (1989), 39 Admin. L.R. 215 (F.C.T.D.); Lloyd v. Superintendent of Motor Vehicles, (BC CA), [1971] 3 W.W.R. 619, 20 D.L.R. (3d) 181 (B.C.

C.A.); Re Lewis and Superintendent of Motor Vehicles for BritishColombia (1980), (BC SC), 108 D.L.R. (3d) 525 (B.C. S.C.)). Similarly, it would be unlawful to refuse consideration ofthe Apotex bioavailability study for the reason, suggested at the hearing by counsel for the respondent, that it did not demonstrateequivalence of C (Can.) and C (U.S.), for the study was not submitted for that purpose and Apotex never suggested that it was.

Finally, itwould be unlawful to refuse for the reason, also alluded to at the hearing, that Apotex was simply seeking a convenient method ofpreparing a new drug submission, relying upon a study of Barr Laboratories, its affiliate in the U.S., rather than undertaking a study ofits own. Surely convenient and efficient methods for seeking approval for a submission which meets the requirements of HPB should beencouraged, rather than discouraged, it seems to me. All of these reasons are irrelevant to the purposes for which the bioavailabilitystudy was submitted or to the purposes of the legislation. . . .

This leads me to conclude that Apotex is entitled to have the bioavailability study reviewed in relation to assessment of the safety andeffectiveness of Apo-A for marketing in Canada. It is relevant to that assessment and no lawful reason for refusing its review has beensuggested. (See Oakwood, supra.) • HPB’s manner of dealing with Apotex was maladroit, at times dissembling. HPB was intransigent, and less than full andforthright.

Having reviewed more evidence than Justice MacKay did, and having seen the witnesses in person, I find, unlike JusticeMacKay, that HPB misled Apotex into a belief that HPB would be willing to receive further data and review it on a basis of equivalency.It was not. He wrote at para 90: In the manner of its dealing with Apotex, HPB seems, in my view, to have been maladroit, at times dissembling if not actuallymisleading. I do not believe that it acted in bad faith or with malice.

Nevertheless, it relied for a time on a "long-standing" policy, ofwhich it could produce no written evidence antedating June 1989, after the Apo-A submission was initiated. HPB reached a settlement ofthe first application for judicial review undertaking "to consider evidence to establish equivalency between Canadian and non-Canadianreference standards" and later professed that there was no known methodology to establish this (presumably, aside from bioavailabilitystudies directly comparing those two brands).

It was intransigent in acknowledging it was satisfied of chemical equivalency of Canadianand U.S. reference standards until these proceedings were initiated and the matter heard; it failed to identify any particulardissatisfaction with dissolution studies, unlike its practice in other respects, until pleadings and discovery in these proceedings when itsreservations were articulated.

In my view it failed to reasonably explain other examples of accepted new drug submissions which reliedupon bioavailability studies with reference to a foreign product, some approved after its enunciation and espousal of a policy that wouldpreclude this. All these are instances of less than full and forthright dealing with Apotex. Perhaps these arose from some confusion orfrom re-organizations within HPB; perhaps some such circumstances are inevitable in a bureaucracy with its attendant difficulties ofcoordinating management of information and of people.

But that does not excuse what must have seemed to Apotex a stubborn positionsupported over time by differing explanations. In short, had HPB's relationship with Apotex been more open and cooperative, while stillsetting HPB's own requirements with rational explanations, it is quite possible that the first application, or this one, for judicial reviewwould not have been seen as necessary.

After Justice MacKay’s Decision [72] In the beginning of 1993, Dann Michols moved from his position as an Assistant Deputy Minister at Health Canada to takeover the responsibilities of the Drug Directorate for a period of time, as part of a reorganization going on in Health Canada. It wasrecognized that the processes within Health Canada were unconscionably slow, and were not as efficient as similar organizations in theUnited States, Britain and Europe. [73] Under Michols’ policies, including the use of a reference product, came under review, including consultation with“stakeholders”.

In December, 1995, a final policy was published requiring the comparator product to be a Canadian product alreadyapproved for sale in the Canadian market or another product meeting strict criteria. By that time, Apotex had received its NOC. [74] I have no doubt that Michols’ mandate was to shake up the bureaucracy at the Drug Directorate and get things done better. OnOctober 7, 1993, Michols met with Dr. Sherman to discuss the Apo-Trazadone situation, following which, on October 12, he sent a verystrong memorandum to Ms. Carman and Dr.

Iain McGilveray stating in no uncertain terms that Apotex was owed a full explanation. That

memorandum is worth repeating, as it is set out Michols instructions in clear and unmistakable terms, with a copy sent to Health Canada’s in-house lawyer, Mr. Stuart Archibald (Exhibit 8): Apo-Trazadone As you know, I met with Barry Sherman on October 7, 1993 with our respective legal advisors on the subject of Apotex’s submission for Apo-Trazadone. As a result, I have undertaken to write to Dr. Sherman, within the immediate future, a letter setting out: 1.

The results of our review analysis of the dissolution data submitted by Apotex in as detailed a manner as possible, setting out any problems, deficiencies, etc. we may have with it. 2. Our decision on where the Apo-Trazadone submission stands, ie. Why we cannot issue an NOC, or if we believe we can, what more is required before we do. I appreciate that there are perhaps scientific subtleties in this file which I do not fully grasp but from a public policy perspective, we owe Apotex a full explanation of what the deficiencies in its submissions are.

If these deficiencies are scientific, ie. dissolution data does not prove bioequivalency, then we should be prepared to say exactly why, or, if possible, how the deficiency analysis could be improved. If these deficiencies are of policy then we ought to be able to state definitively why we have the policy. Dr. Sherman gave several examples of cases where we have accepted dissolution data as the basis for a decision (Amoxi, Theophyline). If we can counter with a solid reaction as to why the cases were different, we should do so.

If it comes down to our agreeing that Apotex did the correct studies and we agree with the results but simply believe that bioequivalency is not proved then we should quote a few cases that lead us to be uncertain (eg. Gemfibrozil, maybe?). I would appreciate it if you and Iain would work together to provide me with a draft letter to Dr. Sherman. I have the feeling that our practices and maybe even our policies have been inconsistent in the past. We have new management across the board. I would like clear signals on what our policies and practices will be.

If I have not made myself clear on this matter, please call and we can discuss. I attach some documents that may be in the file but were given out at the meeting anyway. Once we have a draft that I understand, we will discuss with Stuart. You may want to involve Peter Jeffs in your discussions. Thank you for your dedication. [ 75 ] On January 14, 1994, Ms. Carman forwarded to Michols two different drafts of a letter that could be sent to Apotex. The thrust of the drafts was that dissolution data that had been submitted by Apotex could not be accepted as a means of establishing bioequivalence.

Such a letter was never sent. [ 76 ] HPB conducted a “re-review” of data previously submitted by Apotex. In a report from Mr. Ward, the evaluator, to Ms. Carman, dated April 8, 1994 (Exhibit 1, Tab 159), it was concluded that “ Apotex has not adequately established the bioequivalence of Canadian and U.S. Desyrel drug products .” That same day, Ms.

Carman wrote to Apotex (Exhibit 1, Tab 159) stating that a Notice of Compliance would not be issued as a result of this re-review, and inviting Apotex to contact her to arrange a discussion between Apotex’s technical people and the reviewer. [ 77 ] The meeting took place on May 16, 1994 between Apotex’s technical people and representatives of HPB. Minutes were kept (Exhibit 1, Tab 160). At that meeting Apotex undertook to conduct further dissolution studies and provide the results to HPB. [ 78 ] The further studies were conducted and the results provided to HPB, Ms.

Carman, by letter dated May 31, 1994 (Exhibit 1, Tab 162). The HPB reviewer, Mr. Ward, was immediately put to the task of reviewing this material, and on June 23, 1994, he prepared what is referred to as a “draft” or “unsigned” report (Exhibit 1, Tab 164), in which Mr. Ward stated, inter alia : DISCUSSION In light of the acknowledgement of chemical equivalence, the nature of the drug substance, and the results of comparative dissolution analyses in a variety of media over the physiological pH range, I have no outstanding concerns regarding the potential inequivalence of U.S. and Canadian marketed Desyrel. . . .

CONCLUSION The purpose of this review was to evaluate the adequacy of data filed to establish the equivalence of U.S. and Canadian marketed Desyrel. In my opinion, Apotex has provided sufficient evidence to allay any reasonable concerns that said products could in general perform differently in vivo . [ 79 ] However, HPB did not communicate these findings to Apotex, even though it was quite aware that Apotex was anxious to hear the results. It appears that Mr. Ward sent a communication to Ms. Carman (Exhibit 1, Tab 167) saying that he was ready to meet with her before he went on holidays to discuss the draft.

No such meeting took place. Ms. Carman does not know why; further, she could not recall receiving the draft. [ 80 ] In mid-October, Apotex contacted Ms. Carman to see what was happening. She replied by voicemail that the matter was “currently under discussion with legal counsel” (Exhibit 1, Tab 172).

[ 81 ] An exchange of memoranda between Ms. Carman and Mr. Jeffs occurred (Exhibit 1, Tabs 173 and 175), in which Jeffs stated that “we need to be very cautious”; Ms. Carman expressed urgency and the need to “provide guidance”. On December 6, 1994, Ms. Carman wrote to Apotex (Exhibit 1, Tab 171) to say that a review was scheduled to commence December 15, 1994. Dr. Sherman wrote to Ms. Carman on December 19, 1994 (Exhibit 1, Tab 182), again expressing urgency. [ 82 ] On December 16, 1994, Mr.

Ward signed a report (Exhibit 1, Tab 199), which contained only slight revisions from his report dated June 23, 1994, and sent it to Ms. Carman This signed report stated the same findings as the June report: DISCUSSION In light off the Crown’s acknowledgement of chemical equivalence, the nature of the drug substance, and the results of comparative dissolution analyses in a variety of media over the physiological pH range, I conclude that no basis remains for articulating concerns regarding the potential inequivalence of U.S. and Canadian marketed Desyrel. [ 83 ] For unexplained reasons, Mr.

Ward’s report of December 16 was not sent to Ms. Carman until a week later – December 23 – in the result that, given the Christmas v

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