Canada: Pharma In Brief - Canada: Section 8: Federal Court Provides Insight Into The Determination Of Damages In The Hypothetical Market

Case: Apotex Inc. v. Takeda Canada Inc., 2013 FC 1237
Drug: Protonix ® (pantoprazole)
Nature of case: Damages action under section 8 of the Patented Medicines (Notice of Compliance) Regulations
Date of decision: December 11, 2013


On December 11, 2013 the Federal Court released an important decision pertaining to the determination of damages under section 8 of the Patented Medicines (Notice of Compliance) Regulations (the Regulations). This decision provides new insight into the construction of the hypothetical market in which generic damages are assessed. Most striking is the Court's acknowledgment that an innovator could face various section 8 claims that may exceed the total of real losses - a risk the Court dismissed as "the loser's risk." The true impact of this decision will have to await the release of the Federal Court of Appeal's decision in Ramipril (A-191-12), which was heard on October 30, 2013 and remains under reserve.

The issues at trial

This action involved the amount of compensation owed to Apotex for its delayed market entry for Apo-pantoprozole for the period March 9, 2007 to March 5, 2008. The trial judge was not asked to quantify the damages owed by Takeda Canada Inc. (Takeda) to Apotex, but rather to determine the following nine disputed issues which would assist the parties in arriving at the final calculation of damages.

1. Burden

The trial judge held that in constructing the hypothetical market from which Apotex's damages were to be assessed, the Court should "mirror as much as possible real world circumstances" and then "work out what likely would have happened" had the generic not been delayed. The Court rejected "the percentage weight approach" proposed by Apotex. The trial judge reiterated that a section 8 claimant bears the burden of proving its lost sales and the deductions to be made from those sales on a balance of probabilities, while a section 8 defendant bears the burden of proving any affirmative defence, including the presence of other generic competitors in the hypothetical market.

2. Number and identity of generic market entrants

Takeda argued that there would have been three other generic competitors as well as simultaneous entry by its authorized generic, Ranbaxy.

The trial judge considered real world evidence surrounding the motivation and timing of Takeda's decision to launch an authorized generic to determine when this would have occurred in the "but for" world. The Court held that although the approval for Takeda's authorized generic took about a year in the real world, the launch would have occurred 3 months after Apotex's market entry. The Court rejected the suggestion that Ranbaxy was a mere "stalking horse" designed to minimize section 8 damages.

The trial judge also considered whether other generic manufacturers that had served NOAs would have competed with Apotex in the "but for" world. The Court considered real world evidence and noted that Takeda resisted Teva's market entry "at every turn." This led the Court to conclude that Takeda would have asserted its patents against Teva in the "but for" world and that Teva would not have obtained an NOC until close to the hearing date. Other market entrants who settled section 6 proceedings against Takeda were considered to have entered the market as of their patent hold dates consistent with the Court's holding in Apotex Inc. v. Merck & Co., Inc. 2012 FC 1235 (Alendronate).

3. Apotex's market share percentage

This issue revolved around how long it would take Ranbaxy to gain market share upon entry and achieve "steady state" in sales. Apotex had the burden of proof. Experts from both sides presented econometric models, none of which found complete favour with the trial judge. The Court ultimately accepted the evidence of Apotex's expert who applied his "business judgment" to economic "data."

4. Apotex's lost revenue/pricing

Apotex had the burden of proving the formulary price at which Apo-pantoprazole tablets would have been sold in each of the provinces, whether as the sole market entrant or in a competitive market. As with the trial decision in Ramipril and Alendronate, the trial judge rejected as "self-serving" Apotex's evidence that its price would have been 80-90% of the brand price during the sole generic period. Instead, the trial judge relied on evidence from provincial formulary representatives from Ontario, Quebec and Alberta and held that during the period when Apotex was the sole generic market entrant, it would have had a 75% list price in Ontario and Alberta, a 60% list price in Quebec (reflecting its "most favoured nation" policy), and a 70% list price in the rest of Canada. In a competitive market, the trial judge found that Apotex's prices would have dropped to 50% of Takeda's price in Ontario, Newfoundland and Quebec and 63% of Takeda's price in the other provinces.

5. Inventory adjustment

The trial judge considered it appropriate to apply an inventory adjustment to reflect the initial "pipefill" that occurs in the real world, but which is not reflected in IMS data because of the delay inherent in the reporting of ex-factory sales. Since this reporting lag continues until inventory levels reach a steady state, the dispute between the parties' experts centred over the point at which "steady state" or "normalized sales" was achieved which drives the inventory adjustment period. The trial judge considered the methodology adopted by Takeda's expert to make more sense since he weighted the different provincial markets by population. The appropriate adjustment was held to be in the 11-13% range (by way of a reduction to total sales).

6. Double ramp-up

Perhaps one of the most surprising findings in this case was the Court's decision to award "ramp-up" losses to Apotex, a loss squarely rejected by the Federal Court of Appeal in Apotex Inc. v. Merck & Co., Inc. 2009 FCA 187 and the trial decision in Ramipril and Alendronate. The trial judge held that he was not bound by stare decisis or comity, as the previous decisions did not focus on "the economic loss of not being able to ameliorate "ramp up" which occurs in the relevant period and which he was of the view he could consider under subsection 8(5) of the Regulations which permits the Court to take into account all matters that it considers relevant in assessing the amount of compensation owed. The trial judge concluded that it is a proper exercise of its discretion not to include "ramp up" in the relevant period where "ramp up" was experienced in the real world.

7. Rebates

Apotex had the burden of proving what rebates it would have offered in the sole and competitive markets. For the first time, the Court also distinguished between rebates paid to chain pharmacies and those paid to independent (aka banner) pharmacies. Also for the first time, the rebate levels were not redacted from the public version of the decision providing new insight into what has been referred to as a "murky" practice.

The trial judge considered Apotex's evidence that in a sole source market it would have offered little or no rebates to be overstated and self-serving . The trial judge also rejected Takeda's argument that Apotex would have paid the same rebates in a sole and competitive market, as this failed to draw a distinction between the buying power of the various purchasers. The trial judge accepted Apotex's evidence with respect to rebates that would have been paid in a single generic market (8.9%) based on a "comparator drug." The trial judge held that a rebate of 44.7% would have been paid to chains drug stores in a competitive generic market (representing 55% of the market) based on real world experience. The Court applied a "broad axe" approach in determining that Apotex would have paid a 15% rebate to banner pharmacies in the "but for" world.

8. Prejudgment interest

The Court held that Apotex is entitled to simple interest in accordance with Ontario law. Section 127 of the Ontario Courts of Justice Act defines "prejudgment interest rate" as "the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced." That rate was 3.3% which the trial judge applied as of Apotex's patent hold date, being the date the cause of action arose.

9. Discretion to reduce damages

Takeda asked the trial judge to reduce Apotex's damage award on the basis of its breach of an undertaking given in the underlying prohibition proceeding not to market or promote Apo-pantoprazole in combination with one or more Helicobacter inhibiting anti-microbial agents for the treatment of H. pyloric diseases. Takeda argued that Apotex had given this undertaking in order to shield itself from an infringement claim only to breach that undertaking upon its entry into the market. The trial judge agreed that the allegation was grave – amounting to a form of contempt – but he was not prepared to characterize the statements in Apotex's notice of allegation as an undertaking. The Court held that "while statements in an NOA may rise to the level of an undertaking to be relied on by a court, such statements must be clear and unequivocal" and "bare pleadings" in an NOA do not constitute enforceable undertakings.


This decision provides new insight into the construction of the hypothetical market upon which section 8 damages may be calculated. What remains to be seen, however, is whether it will accord with the Federal Court of Appeal's highly anticipated Federal Court of Appeal decision in Ramipril which is expected to weigh in on critical section 8 issues such as "double ramp up" and the generic market entry "in the absence of the Regulations."

Read the decision

Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global legal practice. We provide the world's pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members ('the Norton Rose Fulbright members') of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions