Canada: A Paradigm Shift in Patent Law

This article first appeared in the April issue of Managing Intellectual Property, Life Science Focus 2006.

Recent disputes between research-based pharma companies and generics have addressed the viability of use patents in PMNOC proceedings. Bill Richardson of McCarthy Tétrault LLP examines the cases and asks whether the Regulations need to be changed.

Patent law is based on a compact between the patentee and the public in which the patentee receives a limited monopoly in return for providing a new, useful invention whose content is open to the public. A patent, however, is not necessarily a new thing. It does not have to be a new mechanical device or a chemical composition. Instead, a patent can be a new beneficial use or indication for a previously known mechanism, object or compound (see, for example, Shell Oil Co v Commissioner of Patents (1982), 67 CPR (2d) 1 (SCC)). In the pharmaceutical industry, the public gain from "new use patents" is well-documented as they have been a main driving force for pharmaceutical innovators to research new treatments, cures and preventions based on pre-existing drugs. For instance, many of the medications on the market for arthritis were originally designed to treat other illnesses. To cite a recent example, in March 2006, the US Food and Drug Administration approved Rituxan, a drug used to treat non-Hodgkin’s lymphoma since 1998, to treat rheumatoid arthritis in patients who had not responded to conventional therapies. In many cases, these new uses for old chemical compounds become the gold standard for previously untreatable patients.

A pharmaceutical innovator can prevent a generic drug from being marketed if the innovator can prove that members of the public would use the drug for the new use that is covered by a valid patent. In the leading case in this area, Procter & Gamble Pharmaceuticals Canada Inc v Canada, [2003] 1 FC 402 (FCA), the generic manufacturer (Genpharm) alleged that its product would not infringe P & G's patent for a new way of using an existing drug (etidronate) for the treatment of osteoporosis. Although Genpharm assured the court that its generic etidronate would not be used for this new indication, P & G put forward evidence that, inter alia:

1. some pharmacists would interchange the etidronate drugs for all uses;
2. if the etidronate drugs were interchanged in a manner that constituted infringing use, Genpharm would not take any positive action to stop this infringing use;
3. Genpharm's product monograph did not include any precaution against the infringing use and, in fact, included bioequivalent studies with the intermittent cycle use product (covered by the use patent).

Based on this evidence, the Court found that Genpharm's intentions and actions would inevitably lead to infringing use by third parties. In this regard, the Federal Court of Appeal held that a generic manufacturer infringed an innovator's use patent if there was evidence that the innovator's patent would be infringed by third parties, such as patients or pharmacists, even if there was no express inducement or procurement by the generic producer. In the words of Justice Rothstein (as he then was), if a generic markets a product and there will be unlawful use of that product by members of the public,

Soon after the Procter and Gamble decision was rendered, Justice Rothstein and the Federal Court of Appeal once again had an opportunity to consider the disconnect between a generic manufacturer's assurances of non-infringing use in the NOC proceedings and the reality of infringing use in the marketplace after the NOC was issued. In Genpharm v AB Hassle, (2004) 38 CPR (4th) 17 (FCA), the Court had to consider whether Genpharm's omeprazole drug for (ostensibly) treating stomach acid secretion would, in fact, infringe a use patent for omeprazole in which it was used to treat stomach bacteria. As in the earlier etidronate proceeding, Genpharm assured the court that it would not be marketing its omeprazole to treat stomach bacteria.

In considering the veracity of this submission, Rothstein J. focused on the fact that, in the original Product Monograph filed in the NOC Proceeding, Genpharm only referred to treating stomach acid. However, after all the evidence had been filed in the NOC Proceeding, Genpharm amended its Product Monograph to include studies relating to stomach bacteria infections. When asked to explain this ex post amendment, Genpharm's response was circumscribed: it stipulated that it would label and market its omeprazole simply for treating acid indigestion and that it would not induce any infringement. Not surprisingly, the Court of Appeal was not satisfied with this response and held that – since the facts indicated that Genpharm's omeprazole drug would be used for treating stomach bacteria by third parties – Genpharm was prohibited from selling or marketing the drug until the term of the use patent had expired.

The courts, however, have been careful to emphasize that there is a positive burden on the innovator to demonstrate that, if the generic drug entered the marketplace, third parties would in fact infringe the innovator's use patent. Mere speculation is not sufficient. Instead, as held in AB Hassle v Canada (Minister of National Health and Welfare), (2002) 22 CPR (4th) 1 (FCA), the innovator has to submit concrete facts that the marketing of a generic drug would infringe a use patent vis-à-vis the unlawful use by members of the public.

This balanced approach, in which the courts will only prohibit generics from entering the marketplace in circumstances where the innovator can prove that the use patent would be infringed by third parties, is critical to the viability of use patents. Otherwise, a generic manufacturer could simply make bald assertions in the NOC proceeding that its drug will only be promoted for non-patented uses and then, after the Notice of Compliance has been issued, simply turn a blind eye (or give a gentle nudge) to unauthorized uses by third parties. Indeed, the problem is exacerbated by the fact that provincial formularies often provide incentives for doctors and pharmacists to exchange generics for innovator drugs with little or no guidance concerning the appropriate legal uses (see, for example, Astrazeneca Canada Inc v Apotex Inc, [2006] MJ No 38 (Mn Ct A)). In this regard, a brief word on provincial formularies is warranted.

After Health Canada issues a Notice of Compliance, the drug then gets registered on provincial formularies. These formularies are governed by various provincial legislation and regulations that determine which drugs can be interchanged and the level of their maximum price. Under some provincial formularies, pharmacists are required to substitute the lowest-priced interchangeable drug in the formulary unless a doctor specifically writes a "no substitution" script. Further, at least in Ontario, the price of the drug sets the amount of reimbursement to the pharmacist if the drug is dispensed to selected categories of customers, such as senior citizens (see Apotex v Ontario (Minister of Health), (2002) 17 CPR (4th) 1 at para 2 (Ont Ct A)). In this context, bioequivalent drugs are frequently interchanged in an unfettered manner without any limitation on approved uses.

Accordingly, it is not surprising that — contrary to their assurances during the NOC proceedings — a number of generic drug manufacturers have attempted to have their drugs listed on drug formularies as completely interchangeable, even though their legal ability to sell the drug is circumscribed to specific non-patented uses.

The most notable example of this occurred in Apotex v Ontario (Minister of Health), (2002) 17 CPR (4th) 1 (Ont Ct A), in which Pfizer marketed sertraline for the treatment of depression, compulsive disorder and panic disorder. While Pfizer's patent for the treatment of depression expired, it still held use patents for compulsive disorder and panic disorder. In serving its Notice of Allegation, Apotex alleged that it would not make, construct, use, or sell sertraline for the valid patented uses. As a result, Pfizer did not file a Notice of Allegation, but allowed Apotex to enter the market solely to treat depression, and a Notice of Compliance was issued by Health Canada that strictly prohibited Apotex from selling sertraline for compulsive disorder and panic disorder (Apotex Inc v Ontario (Minister of Health) (2000) 10 CPR (4th) 166 at para 14 (Ont Sup Ct)).

Upon receiving the Notice of Compliance, Health Ontario listed Apotex's sertraline on the Ontario formulary as interchangeable strictly for the treatment of depression. Due to Apotex's limited ability to sell the drug legally, Health Ontario placed an asterisk on Apotex's sertraline listing on the formulary specifying that it was only for the treatment of depression. In response to this indication of limited use, the president of Apotex sent a letter to the pharmacists of Ontario in which he urged pharmacists to dispense Apotex's sertraline without regard to indications. Indeed, in sharp contrast with the assurances of limited use in its NOA, Sherman wrote that the Ontario Drug Benefit Formulary had taken the "unprecedented step" of stating that

interchangeability is for treatment of depression, thus suggesting non-interchangeability for other uses. ... This statement by the Ministry is not only unprecedented, but unlawful. ... Why has the Ministry done this? It appears that Pfizer has told the Ministry that use of generic products other than for depression would violate Pfizer's patents for such indications. It is irresponsible for the Ministry to submit to such pressure from Pfizer (Apotex v Ontario (Minister of Health), 10 CPR (4th) 166 at para 17 (Ont Sup Ct).

Soon thereafter, Apotex brought an application for judicial review to force the Ontario Formulary to remove the restriction on the interchangeable use of sertraline, despite the fact that it was only allowed to be sold for depression pursuant to Health Canada's NOC. Both the Divisional Court and the Ontario Court of Appeal rejected Apotex's arguments, holding that Apotex's sertraline was only legally sold to treat depression and that Apotex's attempt to sell sertraline for other disorders would be illegal and in breach of the Canada Food and Drugs Act . In short, the courts of Ontario held that it was well within the government's rights that the formulary for interchangeable drugs only lists those drugs that are legal to sell (Apotex v Ontario (Minister of Health), (2002) 17 CPR (4th) 1 at paras 13-14 (Ont Ct A)).

On December 11 2004, the Canadian government published proposed changes, inter alia, to the Patented Medicines (Notice of Compliance) Regulations (NOC Regulations) under the Patent Act. One of the proposed amendments would allow a generic company a new ground in its Notice of Allegation that will potentially strike a blow to new use patents. Under proposed Section 5(1)(b)(v), a generic company can allege that it will not be seeking approval for a patented use. Essentially, this proposed amendment will allow a generic company to bypass new use patents simply by asserting that the generic will only be expressly marketing the drug for old uses. In the context of past wilful blindness by generics to infringing third party uses, coupled with the trend to make all bioequivalent drugs interchangeable on provincial formularies, innovator companies have reason to be concerned about possible abuses to the proposed amendment.

William H. Richardson is a partner in the litigation department, co-chair of the intellectual property group, and industry group leader of the pharma and life sciences practices at McCarthy Tétrault. Richardson specializes in trial and appellate advocacy, as well as ADR, focused exclusively on intellectual property. He has been counsel on a number of the largest IP cases in Canada, and, consistent with the nature of intellectual property, is frequently consulted on multi-jurisdictional disputes.

Richardson represents clients from a broad range of industries including broadcasting, publishing, entertainment, consumer home and personal care products, foods, pharmaceuticals, biotechnology, petrochemical/energy, internet, clothing and footwear and automotive. He is on the Board of Directors of Street Kids International, a Canadian not-for-profit specializing in the education, support and survival of street youth around the world.

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