Canada: Pharmacapsules @ Gowlings - July 27, 2009

Last Updated: July 29 2009

Edited by Jennifer Wilkie and Chantal Saunders

  • New Website Offers Cancer Patients Information And Resource
  • In An Economic Downturn Biotechnology Companies Should Consider Intangible Migration
  • Apotex Alleges It Is Injured By Ranbaxy's Ability To Launch On Schedule
  • Outsourcing Failure Causes Generic Drug Recall In The U.K
  • Britain's Office Of Life Sciences Announces Blueprint
  • Protection Of Biologics In The U.S.
  • U.S. Bill Considers Access To Canadian Pharmaceuticals
  • New Proposed Requirements For Non-Medicinal Ingredients On Non-Prescription Drug Labels
  • Recent Cases

New Website Offers Cancer Patients Information And Resource

By: Scott Robertson

The Canadian Partnership Against Cancer has recently launched a new website for Canadians at which offers a centralized resource for learning about the latest cancer clinical trials or connecting with other patients suffering from the same disease.

The new portal offers a wealth of information and resources to patients, healthcare workers, and anyone who may be dealing with some form of cancer. The website is unique because it enables users to access a number of different resources and perspectives all in one location.

The website offers users a trustworthy source of information as opposed to searching results which may or may not be useful and credible.

Among the resources available on the new portal include: access to Canada's cancer trial database, online and telephone directory services, a community service locator which allows users to find patient services and support programs in their area.

Currently there are over 640 clinical trials being conducted which are posted and accessible to patients using the site.

For more information, please see:

In An Economic Downturn Biotechnology Companies Should Consider Intangible Migration

By: Dale Hill, CMA - National Transfer Pricing Partner, Mark Kirkey, CGA - Senior Director, Dr. Jamal Hejazi, PhD - Chief Economist

Seeking Tax Savings In Troubled Times

The current downturn in the global economy has had a dramatic impact on several industry sectors including the biotechnology sector. This new economic environment makes it understandably difficult for companies to contemplate the implementation of long term tax strategies, when the focus is strictly on meeting profitability targets. Given that a corporation must function as a going concern, corporations owe it to their shareholders and other stakeholders to engage strategies which maximize short term operations and long term value. One such relatively inexpensive strategy which serves to minimize the level of global taxes a corporation must pay, involves intangible migration, including technology and other intellectual property (IP) transfers.

Migrating Intangibles: What Does It Entail?

Some biotechnology companies may have incurred or will incur this coming year business losses that can be carried forward 20 years or back 3 years. Such loses, if not utilized, eventually expire and can serve no future benefit, and if carried forward the company may need to wait several years to see the refund. One strategy that Canadian corporations should consider when such losses exist, and where valuable intangibles (such as patents, copyrights, trade marks and trade names) are present, is migrating such intangibles to low tax jurisdictions such as Barbados.1 While many considerations are relevant when deciding to which country intangibles should be migrated, the key benefit to consider is that profits generated from such intangibles will be taxed at a lower rate.

Tax Implications

The sale of an intangible asset from one tax jurisdiction to another will result in exposure to capital gains taxes. The benefit of migrating intangibles during these difficult times is that you may be able to offset the capital gain, on the sale of the intangibles, by your operating losses. In the future as the economy improves the revenues derived from the intangibles will be reported offshore at a much lower rate. Another benefit relates to valuation. During an economic downturn business risks increase and the valuation of the intangibles may be much lower resulting in a lower capital gain. Consideration should be given to the capital gain that will be created versus the losses carried forward, and those expected for the current year, to ensure they are sufficiently high to offset capital gains that will result from the sale of intangible assets.

Legislative Guidance

Many countries including Canada and the U.S. require that intangible transfers, along with most intercompany transactions, occur at arm's length prices. Generally speaking, approaches to valuing intangibles include the Comparable Uncontrolled Price (or Market Approach), the Cost Approach, and the Income Approach. Biotechnology companies must illustrate what the fair market value of such intangibles are in order to justify what the related party in the lower tax jurisdiction will pay for such intangibles. Valuation is generally performed by commissioning an expert report, and by reference to industry comparables.


In these tough economic times Biotechnology companies should consider migrating intangibles to lower tax-rate jurisdictions as future profits that such intangibles generate would then be taxed at a significantly lower tax rate. The usually contentious issue of valuation is reduced since the availability of operating losses allows the transferor to be conservative towards the source country in valuing the intangibles. It is important to note, however, that intangible transfer prices must represent arm's length consideration.

Apotex Alleges It Is Injured By Ranbaxy's Ability To Launch On Schedule

By: Isabel Raasch

In two different cases before the US District Court for the Middle District of North Carolina Apotex has alleged that Ranbaxy's inability to launch its generic versions of donepezil hydrochloride (sold by Eisai Co. under the brand Aricept®) and valacyclovir hydrochloride (sold by GSK under the brand Valtrex®) on time will injure Apotex. Ranbaxy was the first generic company to file for permission to market the generic versions of Aricept and Valtrex in the United States. As such it is entitled to a 180-day exclusivity period before other generics, including Apotex, can bring their versions of the drugs to market. Because it is now uncertain when Ranbaxy will be able to obtain approval for the two products from the USFDA, Apotex claims that it cannot properly plan the launch of its own products. If Apotex is successful, Ranbaxy's 180-day exclusivity period for the drugs will begin immediately, regardless of whether or not Ranbaxy can actually market the drug (due to USFDA constraints).

For more information, please see: or

Outsourcing Failure Causes Generic Drug Recall In The U.K

By: Natalie Rizkalla-Kamel

"Serious" deficiencies in manufacturing practices at a single contract manufacturer in India, MJ Biopharm, forced eight pharma companies to recall generic products in the UK. Although pharma outsourcing is becoming more popular these days, incidents like this will remind companies that outsourcing contracts demand vigilant supervision in order for them to be successful and worthwhile.

For more information, please see:

Britain's Office Of Life Sciences Announces Blueprint

By: Natalie de Paulsen

On July 14, 2009 the Office of Life Sciences of the British Government announced its Blueprint intended to promote life science companies and ensure faster patient access to innovative therapies. Key initiatives described in the blueprint include:

  • The Innovation Pass - a three year initiative that will allow selected innovative drugs to be available through the National Health Service (NHS) without being subject to a National Institute for Heath and Clinical Excellence (NICE) appraisal. NICE will have a key role in selecting the therapies eligible for the Innovation Pass.
  • Review of Incentives - NHS will review incentives to encourage the uptake of new medical technologies.
  • Accreditation - the Society of Biology will accredit undergraduate bioscience degrees to ensure graduates have the level of skill and competency required by employers.

For more information or to download a copy of the Blueprint, please see the Office for Life Sciences' web-site at

Protection Of Biologics In The U.S.

By: Melissa Binns

By a vote of 16 to 7, the U.S. Senate health committee approved a minimum period of 12 years before generic versions of biotech drugs can be approved. The proposed bill recognizes that biotech medications (also known as biologics) are much more complicated to produce than traditional chemical based pharmaceuticals. The Senate committee rejected a shorter period of five to seven years proposed by generic drug makers in favour of a 12 year period which was felt to "strike an appropriate balance between promoting innovating and providing competition".

While the biotech bill must now to pass a vote on the Senate floor and the House of Representatives is still debating the issue, the committee approval was seen as an important victory for biotech manufacturers such as Amgen Inc. and Roche Holding AG.

For more information, please see:

U.S. Bill Considers Access To Canadian Pharmaceuticals

By: John Norman

Recently, the U.S. Senate amended the $43 billion Department of Homeland Securities Bill to allow Americans to purchase prescription drugs from Canadian internet pharmacies. However, many feel that the amendment will be stripped from the Bill before it becomes law because it is not germane to the purpose of the legislation and that the cost savings to American citizens under the $43 billion Bill will make importation of prescription drugs unnecessary. Nevertheless, the amendment has once again opened up the debate as to whether Americans can purchase pharmaceutical products from Canadian internet pharmacies.

For more information, please see:

New Proposed Requirements For Non-Medicinal Ingredients On Non-Prescription Drug Labels

By: Lewis Retik

On June 6, 2008, proposed amendments to the Food and Drug Regulations were made to require the inclusion of non-medicinal ingredients on non-prescription drug labels. This is the fourth time Health Canada has proposed an amendment to the Food and Drug Regulations to include non-medicinal ingredients on labels, the first time was in 1994. Interested parties have 75 days from the publication date to provide comments to Health Canada regarding the proposed amendments. Currently the inclusion of non-medicinal ingredients is required on Natural Health Product labels, a subset of non-prescription drugs. The proposed amendment would allow for "flavour" and "fragrance" to each be listed as an ingredient, which would include most flavour ingredients (excluding ingredients which provide a sweet flavour) or fragrance ingredients. It should be noted that many non-prescription drug labels include non-medicinal ingredients on a voluntary basis.

The full text of the proposed amendment can be found at:

Recent Cases

By: Beverley Moore

Apotex v. ADIR; Appeal of an infringement action; 2009 FCA 222; perindopril; June 30, 2009

The Court of Appeal upheld the decision of the Trial Division finding that the patent was both valid and infringed. A summary of the trial decision can be found here.

The Court upheld the trial judge on construction and the nature of the invention; found that Apotex cannot succeed on its allegation that the ADIR scientists were not the first inventors; and also found no error in the trial judge's decision with respect to the allegations of a lack of utility.

The Court found that many of Apotex' arguments relating to obviousness were the same as those made before the trial judge. As obviousness is a largely factual inquiry, it was open on the evidence for the trial judge to make the conclusions that she did. Furthermore, although the case was decided before the Supreme Court decision in Sanofi, the factual determinations are equally relevant to Sanofi analysis. The Court of Appeal found that the trial decision was consistent with the Sanofi framework and there was no error in concluding that the obviousness challenge should fail.

With respect to the allegations of a lack of sound prediction, Apotex argued that there needed to be a sound prediction that the invention could be made. The Court of Appeal rejected this allegation saying that sufficiency is a separate allegation. According to the Supreme Court's test in Wellcome, utility is the only relevant inquiry in regard to sound prediction and utility of the class of compounds can be soundly predicted by reference to the architecture of that class.

The Court of Appeal also dealt with Apotex' challenge to the corrections made to one of the claims in the application, holding that the trial judge had made factual determinations. Thus, the Court of Appeal will not interfere in the absence of palpable or overriding error, which had not been shown.

Finally, the Court addressed Apotex' Competition Act allegations. ADIR and two other parties had engaged in a conflict proceeding regarding this patent and others. This proceeding was appealed to the Federal Court, where the parties settled their differences and the patents issued pursuant to that settlement. Apotex had asserted that that settlement agreement was anti-competitive. The Court held that, in order for the allegation to succeed, there must be something more than a mere exercise of rights under the Patent Act. There was nothing "more" in this case. Furthermore, an undue impairment of competition cannot be inferred from the evidence of exercise of rights under the Patent Act alone. Apotex' arguments in this case were based on speculation. Furthermore, there was no suggestion that the Federal Court could not have awarded the claims precisely as they were allocated in the settlement.

The full text of the decision can be found at:

Apotex v. Janssen ; Appeal of an NOC Proceeding; 2009 FCA 212; levofloxacin; June 22, 2009

The Court of Appeal overturned the decision of the applications judge in issuing a prohibition order and sent it back for reconsideration. A summary of the decision below is found here.

Previously, another generic company, Novopharm, had sent a Notice of Allegation (NOA) regarding the same patent. That allegation had related to invalidity and was found to be justified. No appeal could be taken from that decision as it was rendered moot by the issuance of an NOC to Novopharm. Janssen then sued Novopharm for patent infringement and Novopharm counterclaimed with allegations of invalidity. At trial, the patent was found to be valid and infringed. This decision was upheld on appeal.

Apotex then sent its NOA. The applications judge granted prohibition partially on the basis of abuse of process, holding that Apotex should be bound by the trial decision in the Court of Appeal in Novopharm. The applications judge held that there was no basis for allowing Apotex to contest the validity of the patent unless it has better evidence or more appropriate legal argument.

Although there were many grounds of appeal, the Court of Appeal only considered the abuse of process argument. The Court found the applications judge's decision in this regard to be in error as there was nothing in its previous decision in sanofi-aventis that supported the judge's conclusion. Because there was no abuse of process on the part of Apotex, the judge was required to assess the evidence put before him by both parties independently of the findings made by the Court in the Novopharm trial.

The Court of Appeal then found that all of the judge's reasons were tainted by his misunderstanding of the principles set out in sanofi-aventis. Thus, the matter was sent back to the applications judge for consideration on the basis that there was no abuse of process. The judge was also instructed to assess the evidence independently of the findings made by the Court in the Novopharm trial.

The full text of the decision can be found at:

Canada v. Pharmascience; Appeal of a judicial review; 2009 FCA 183; ramipril; June 1, 2009

The Court of Appeal upheld the decision of the trial judge holding that the generic company was not required to address the patents listed on the patent register against submissions filed after it had purchased its comparator drug.

The generic company had purchased its comparator drug and submitted an ANDS on the basis of asserted bioequivalence. It withdrew its ANDS in respect of one of the strengths due to a lack of stability but then refiled it two and a half years later. During the intervening timeframe, additional patents had been listed on the Patent Register. The Minister tried to require the generic company to address these patents. The Court found that this was not appropriate under the Supreme Court decision in Astra Zeneca.

The Minister argued that the generic company should be required to address any patent that is notionally available for early marketing, which means any patent listed prior to the ANDS or SANDS. However, the Court of Appeal did not accept this argument, finding that it is the Minister's responsibility to conduct a patent-specific analysis and identify the precise patents that are relevant to the generic manufacturer's early working of a copycat product. The date the comparator drug was purchased is the starting point. The Minister must then evaluate the evidence to determine whether the generic company is taking advantage of any of the teachings of any after listed patents.

As the Minister failed to conduct this analysis, it was open for the trial judge to do so. In this case, the Court found that Pharmascience had never sought approval of the new uses claimed in the after-listed patents. Thus, they did not need to be addressed.

The full text of the decision can be found at:

Apotex v. Pfizer; summary judgment motion in a s.8 proceeding; 2009 FC 631; fluconazole; June 12, 2009

The Court dismissed a motion by Pfizer for summary judgment in a s.8 proceeding. The Court found there was strong support in the case law for the proposition where the question of law in relation to s.8 is raised in relation to facts, summary judgment is not appropriate.

Pfizer argued that a unique set of factual circumstances relating to cross-referenced submissions and a failure of the generic companies to update their ANDSs should lead to the conclusion that Pfizer is not responsible for any portion of the delay between Apotex' ANDS filing and the issuance of an NOC. Furthermore, Pfizer argued that Apotex could not establish any causal relationship between the damages and the NOC proceeding.

The Court accepted Apotex' argument that there is a genuine issue for trial with respect to whether a Notice of Compliance would have issued in the absence of the Regulations at an earlier date. Thus, summary judgment was not appropriate in this case.

The full text of the decision can be found at:

Sanofi v. Apotex/Novopharm; Patent infringement proceeding; 2009 FC 676; ramipril; June 29, 2009

The Court found the patent infringed, but invalid and thus dismissed two actions for infringement.

The Court considered the issue of sound prediction, holding that under the test in Wellcome, when looking at whether a sound prediction has been made, the knowledge, activities and endeavours of the inventors must be considered. In this case, the Court found there was a factual basis for a sound prediction as the inventors' own work showed that some of the compounds that fell within the claims, were inactive at the level tested. The Court also found that there was nothing in the literature that could have been used to predict the activities of these compounds or provide a sound line of reasoning.

The Court then went on to consider the disclosure element of sound prediction test and found there was no proper disclosure as there was no data included, no reference to publications in the art or other work done by the inventors that might disclose a sound line of reasoning in drawing its conclusions.

The Court, however, dismissed Apotex' allegation that there was a lack of sound prediction of the methodology for making a particular compound. This was seen as merely another attempt to circumvent the date for a sufficiency allegation. The Court clearly found that as of the relevant date, the date of publication, the patent disclosure was sufficient.

The Court, in its obviousness analysis, determined the inventive concept and held that it would have been obvious to try. The Court concluded that the skilled person would consider that the claimed compounds ought to work. Thus the invention was held to be obvious.

The Court dismissed Apotex' allegations as to best mode. This obligation to disclose the best mode only arises in the case of a patent to a machine. The allegations as to double patenting were also dismissed, as the priority filing date of the patent at issue is earlier than that of the alleged patent for double patenting. In addition, the Court recognized consistent jurisprudence that states that double patenting can only arise where the two patents are held by the same party. The argument as to the Gillette Defence was also dismissed. The Court found that absent a conclusion of anticipation, the Gillette Defence is not available. Finally, the Court dismissed Apotex' allegations that Schering was not the first to invent ramipril.


1. Barbados is particularly appealing for Canadian companies due to the existence of a tax treaty, low tax rates on profits, of approximately 2.5%, and the ability to repatriate most of the after-tax profits without additional taxation.

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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