Canada: Pharmaceutical Antitrust Issues In Canada: An Update

Last Updated: December 5 2014

Article by Anita Banicevic1

Recent actions and statements from the Competition Bureau confirm that it has set its sights on the pharmaceutical industry and is preparing for increased intervention and enforcement in this sector.

In recent speeches, Canada's Commissioner of Competition has repeatedly emphasized the importance of the health and pharmaceutical industry to Canada's economy and pinpointed this sector as one where the Competition Bureau would like to focus its advocacy and enforcement efforts.2 Consistent with this stated interest in increasing its enforcement and advocacy efforts, in early November 2013, the Bureau hosted a workshop to discuss antitrust issues in the Canadian pharmaceutical sector (the "Pharma Workshop"), a move that the Commissioner has explained "signaled to the pharmaceutical industry that competition issues in the health care sector are a current priority."3

As a follow-up to the Pharma Workshop and following calls for the Competition Bureau to provide its views regarding patent litigation settlement agreements in the pharmaceutical sector, the Bureau recently released a "white paper" that discusses the Bureau's "preliminary views as to how the Canadian competition law could apply" to such settlement agreements.4

As discussed in greater detail below, the Bureau's white paper stakes out a relatively aggressive enforcement position including the ability for the Bureau to pursue such agreements (under certain circumstances) under the per se criminal conspiracy provisions of the Competition Act (the "Act").5

Provided below is an overview of the most recent antitrust developments in Canada and possible implications for the Canadian pharmaceutical sector.

Patent Settlement Agreements in Canada

The European Commission and the Federal Trade Commission have both expended significant enforcement resources to address what are believed to be the negative antitrust implications of patent settlements or "pay for delay agreements" and life cycle management strategies in the pharmaceutical sector. Not surprisingly, it is these same issues that the Canadian Competition Bureau has also been grappling with. However, certain unique aspects of the Canadian antitrust legislation and regulatory process for pharmaceuticals means that the application of the antitrust legislation to this sector must be viewed from an angle that is specific to Canada.

With respect to patent settlement agreements, in Canada, such settlements typically arise as a result of a generic's challenge to an innovator's patent under the Patented Medicines (Notice of Compliance) Regulations ("PMNOC Regulations"). Pursuant to the PMNOC Regulations, a generic may apply for a Notice of Compliance or "NOC" and serve a Notice of Allegation on the innovator either challenging the innovator's patent or taking the position that the generic will not infringe the patent. Once served with a Notice of Allegation, the innovator may, within 45 days, commence a proceeding in Federal Court for an order prohibiting the Minister from issuing a NOC to the generic until the expiration of the relevant patent or patents. The Minister is precluded from issuing an NOC to the generic pending a disposition of the proceeding (in favor of the generic challenger) or the expiration of 24 months after commencement of the proceeding, whichever is earlier.

If ultimately the innovator is not successful in defending its patent under the PMNOC process, Section 8 of the PMNOC Regulations provides that the innovator will be liable to the generic entrant for any losses it sustained during the period it was excluded from the market. The possibility that an innovator could have to pay monetary damages to a generic entrant is a significant difference from the U.S. regulatory scheme (unless the U.S. generic supplier is in a position to enter at risk and the patent holder gets a TRO/PI to keep the generic off the market in exchange for committing to a bond payment should the patent prove to be invalid or not infringed) and may inform the rationale for an innovator to enter into a settlement agreement as well as the rationale for a monetary payment as part of such settlement.

It is also noteworthy that the PMNOC process does not entirely dispose of the issue of the validity of the innovator's patent. In fact, a generic could be successful at the PMNOC phase, launch its generic product and then find itself being sued by the innovator for infringement of the patent. In addition, unlike in the U.S. there is no exclusivity period that is granted to the generic. Even without this exclusivity period, it is widely recognized that there are significant benefits to being the first generic to launch in Canada. Despite the lack of exclusivity and high-stakes involved with bringing a challenge, the Federal Court docket shows that the PMNOC challenge process is alive and well in Canada.

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Footnotes

1 Anita Banicevic is a partner in the Competition & Foreign Investment Review practice

2 See Press Release, Competition Bureau, Remarks by John Pecman, Interim Commissioner of Competition (Feb. 7, 2013), http://www.competitionbureau.gc.ca/eic/site/cbbc. nsf/eng/03529.html.

3 See Press Release, Competition Bureau, Competition Law in a Global and Innovative Economy – A Canadian Perspective (Nov. 21, 2013), http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03631.html.

4 See Competition Bureau, Patent Litigation Settlement Agreements: A Canadian Perspective (Sept. 23, 2014), http://www.competitionbureau.gc.ca/eic/site/cbbc.nsf/eng/03816.html.

5 R.S.C. 1985, c. C-34.

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.

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