Canada: New Guideposts For The Fact-Intensive Hypothetical World Of Generic Damages Claims

The past year has seen significant evolution in the Canadian law of generic pharmaceutical damages claims under section 8 of the Patented Medicines (Notice of Compliance) Regulations. Such claims are calculated by considering the generic manufacturer's loss in a hypothetical world where it starts selling without the alleged delay occasioned by the regulations. Recent s.8 damages decisions have highlighted the highly factual and circumstance-specific nature of this calculation. However, these recent decisions also shed some light on how the Court will attempt to quantify generic damages claims going forward.

Most notable among these decisions, the Federal Court of Appeal issued on March 14, 2014 its highly anticipated decisions1 concerning generic damages claims by Teva and Apotex. Those claims followed prohibition proceedings involving Apotex and Teva related to generic versions of ramipril, marketed by Sanofi as ALTACE®. The Court of Appeal grappled with the unique facts presented by the appeals and ultimately dismissed all innovator appeals and all but one the generics' appeals. The successful appeal varied a trial judgment to exclude a generic competitor from Apotex's hypothetical market and thus increase Apotex's claim. The ramipril liability appeals were not without controversy, and both were issued with lengthy dissenting reasons.

The Court of Appeal majority held that both generic claimants and generic competitors are subject to the regulations in the hypothetical world, except for the sole purpose of determining the start date of the period of liability. Majority and dissenting reasons on this issue recognized that this approach could serve to inflate each generic claimant's hypothetical market share thus providing a potential windfall to the generics beyond the loss they suffered during the period of liability.

However, having held generic claimants to be subject to the regulations, the Court of Appeal held that generics would send Notices of Allegation to address patents listed against the drugs they sought to copy. Innovators would thus have notice of the generic claimants impending hypothetical market entry. The Court of Appeal therefore largely did away with the notion that innovators would be taken by surprise by a generic launch in the usual circumstances, a notion applied recently for example in the Federal Court's pantoprazole decision.2 In effectively rejecting this notion, the Court of Appeal may have facilitated the hypothetical market entry of innovators' authorized generics. 

This decision may be contrasted with the recent venlafaxine decision,3 which was rendered without the benefit of the ramipril liability appeals. In that case, a unique fact was that the innovator lost the benefit of any notice because the generic claimant waited until after it was approvable to issue its Notice of Allegation. Further, the potential competing generics suffered unrelated impediments to their own market entry. The unique factual circumstances therefore conspired to prevent the innovator from capitalizing on the notice the Court of Appeal later held that innovators would usually receive in the hypothetical world.

In the ramipril liability appeals, the Court of Appeal also refused to discount the reduction in revenues for "ramp-up" in the hypothetical world on the basis that the generic claimant would also have suffered a ramp-up reduction in the real world. "Ramp-up" refers to the period of time that it takes a drug manufacturer to penetrate the market to its full potential. In reducing damages due to the hypothetical ramp-up, the Court of Appeal again rejected the contrary conclusion in the pantoprazole decision. 

The Court of Appeal was not, however, required to address the Federal Court's refusal in the pantoprazole decision to reduce damages because the generic allegedly breached an undertaking in its NOA in an underlying prohibition proceeding. In that case, the Court held that a bare pleading in a NOA does not constitute an enforceable undertaking and ultimately found that, notwithstanding the generic's clear statements in its NOA, no undertaking was actually provided. In so doing, the Court simultaneously elevated the evidentiary requirement to establish an undertaking, and also weakened the notice function of the NOA by suggesting that statements therein regarding future generic behaviour may not be relied on unless the word "undertaking" is used.


1 Teva Canada Limited v Sanofi-Aventis et al, 2014 FCA 67 and Apotex Inc v Sanofi-Aventis et al, 2014 FCA 68 (March 14, 2014) [the "ramipril Liability Appeals"];  Teva Canada Limited v Sanofi-Aventis et al, 2014 FCA 66; Teva Canada Limited v Sanofi-Aventis et al, 2014 FCA 69

2 Apotex Inc v Takeda Canada Inc, 2013 FC 1237

3 Teva Canada Limited v. Pfizer Canada Inc., 2014 FC 248

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