Law Times

Law Times • January 27, 2014 Lawyers jarred by drug patent case Page 13 FOCUS commercial reality," she says. Phelan also ruled Takeda couldn't claim all other generics would have entered the patent case has provided fresh market and diminished Apotex' market insight on calculating damages share if there had been no patent hold. Consistent with the 2012 case of claims when generic drugs are subject to delays from entering Apotex Inc. v. Merck & Co. Inc. in constructing the "hypothetical world" for the market. Apotex Inc. v. Takeda Canada Inc. also calculating the damages claim, Phelan shines a light on the practice of rebates in didn't take into account Apotex' previwhich drug companies reward pharmacists ous notices of allegations. Without the notices, "Takeda would not for selling their products. The Federal Court decision came after have had warning of Apotex' intent to enter Apotex developed a generic alternative the market," he said. Takeda's own authorized generic would to a patented drug produced by Takeda known as Pantaloc and used to treat therefore have faced delays. The company wasn't ready to release it anyway and had stomach ulcers. Apotex served notices of allegation in "resisted the various [other] generics at ev2005 that claimed its generic equivalent, ery turn," Phelan added. He continued: "Takeda has also raised Apo-pantoprazole, didn't infringe any of the issue that since other generics could Takeda's patents. Takeda challenged Apotex' claims make claims under s. 8 of the patented medicines (notice of comand the generic was pliance) regulations, there placed on patent hold could be multiple recoverfrom March 2007. ies against Takeda which The Federal Court disexceed the total of real missed Takeda's challenge losses. on March 6, 2008. It held "There are several the company liable for methods by which this Apotex' loss of revenue problem may be allevicaused by the patent hold. ated but ultimately it is the Federal Court Justice loser's risk." Michael Phelan had the Gowling Lafleur Hentask of assessing how to derson LLP lawyers Chriscalculate the compensatopher Van Barr, Kiernan tion but didn't rule on the Murphy, and Alex Gloor actual level of damages. 'What's really striking about this highlighted that as one of His written decision on decision is it doesn't really accord Dec. 11, 2013, contained with commercial reality,' says the most remarkable asNEW PUBLICATION pects of the decision in an several surprises. Allyson Whyte Nowak. CORPORATE GOVERNANCE FOR FINANCIAL article on their firm's blog. Unusually, the deciINSTITUTIONS: GUIDELINES, BEST PRACTICES "The result of the court's finding is that sion didn't redact detailed information on the rebates pharmaceutical firms Takeda was deemed to have been 'taken AND OTHER RELATED RESOURCES TORYS LLP pay to pharmacies as an incentive to sell by surprise' by Apotex's market entry such that its own authorized generic would have their drugs. The likely level of rebate, had the drug been delayed in entering the market," they This timely collection of Canadian and international best practices gone to market in 2007, was one of the fac- wrote. will help your board identify and develop the most suitable policies But it's an unlikely situation, accordtors in the damages calculation. for strengthening accountability at your financial institution. Phelan quoted from a 2012 decision, ing to Whyte Nowak. "When you break it Apotex Inc. v. Merck Canada Inc., in which down, it's not a realistic scenario," she says. Corporate Governance for Financial Institutions: Guidelines, Best "The decision that an innovator Justice Roger Hughes said the rebates apPractices and Other Related Resources consolidates a broad peared to be "murky." "There seems to be wouldn't know about a generic coming on spectrum of corporate governance materials specific to Canadian no established figure for the rebates; nor the market is just absurd." financial institutions and public companies. Another part of Phelan's ruling that does one particular rebate necessarily, but not inevitably, apply to one particular prod- jarred with lawyers' expectations is his Since the financial crisis in 2008, best practices for corporate uct and another to another," wrote Hughes. decision not to let Apotex suffer double governance of financial institutions have evolved significantly. Canada's Office of the Superintendent of Financial Institutions In the more recent case, Takeda ramp-up costs. Ramp-up costs, he explained, relate to (OSFI) updated its Corporate Governance Guideline after conducting claimed generic companies always ofa cross-sector review of governance at larger federally regulated fered rebates and suggested Apotex "the initial period during which the generic financial institutions (FRFIs). would have given the same amount if it drug has to be made or acquired, orders were the sole generic on the market as it received from customers, and the drugs This new handbook includes both the new revised OSFI guideline would have paid had it faced competition shipped to those customers." and the Basel III requirements. In the real world, Apotex experienced from its generic counterparts. The rebates would have reduced the ramp-up costs after it was successful in amount billed to pharmacies by 44.7 per resisting Takeda's attempt to obtain a proORDER # 985683-65203 $150 Softcover approx. 520 pages December 2013 hibition order that lasted until it reached cent, according to Takeda. 978-0-7798-5683-1 But Apotex said it would offer no rebate a steady state. Shipping and handling are extra. Price subject to change As a result, the court shouldn't deem it where it was the sole generic. In a competiwithout notice and subject to applicable taxes. tive market, it would offer 44.7 per cent to to have also suffered ramp-up costs in the chains and up to 10 per cent to the inde- "hypothetical world," according Phelan; otherwise, it would be "double counting for pendents, it claimed. Phelan found the 44.7 per cent figure the same circumstance; a disadvantage to was "reasonable" in a multisource market Apotex and an advantage to Takeda." Order online: www.carswell.com The Gowlings team wrote: "In reachbut suggested the figure Apotex provided Call Toll-Free: 1-800-387-5164 In Toronto: 416-609-3800 ing this conclusion, the court departed for independent pharmacies was too low. The finding still underestimates phar- from the strict hypothetical world analymacists' bargaining power, according to Al- sis applied in the jurisprudence to assess lyson Whyte Nowak, a partner working in a generic's losses." However, Whyte Nowak points out that, Norton Rose Fulbright Canada LLP's intelAUTHORITATIVE. INNOVATIVE. TRUSTED. while significant, that approach is likely to lectual property litigation practice. "What's really striking about this face further scrutiny in the pending appeal LT decision is it doesn't really accord with in Apotex Inc. v. Sanofi-Aventis. BY CHARLOTTE SANTRY Law Times A CHECK YOUR GOVERNANCE PRACTICES AGAINST THE INDUSTRY'S BEST AVAILABLE RISK-FREE FOR 30 DAYS www.lawtimesnews.com

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