When a generic drug claims damages against a brand name drug, what limits should be put on calculating compensation? Section 8 of the Patented Medicines (Notice of Compliance) Regulations was designed to answer just that question, but it left some questions unanswered. A pair of twin judgments by Justice Snider, Teva Canada Ltd. v. Sanofi-Aventis Canada Inc., and Apotex Inc. v. Sanofi-Aventis Canada Inc. released at the end of May 2012, provided insight into some of the issues.
Damages under Section 8
Under section 8 of the Regulations, if a brand name’s patent claim falls through, the brand name owes damages to the generic company for money lost during what is called the “Relevant Period.” This is the period that the generic company would have had the right to sell the product if the Regulations – in place to protect the rights of the original brand name patent owner – did not exist. The period ends on the date that the patent ownership claim is dismissed.
Sanofi held rights to seven Canadian patents for rampiril (a drug used to treat high blood pressure and congestive heart failure), marketing it as ALTACE. Two generic brand companies, Teva and Apotex, wanted to sell the drug, but Sanofi exercised its rights under the Regulations, and the generics had to wait several years until they were allowed to commence sales.
The companies then claimed that Sanofi was liable for the losses they suffered when they were unable to sell their products. Sanofi acknowledged in both cases that it owed damages, but pointed out that the Relevant Period was being overestimated by the generics, and took issue with some of the assumptions that went into the generics’ assessments of damages.
Limits on Calculating Compensation
Justice Snider set out to determine “What would have happened if Sanofi had not brought an application for prohibition?” In answering this question, she determined that courts should consider the possibility of multiple market entrants, but only within a reasonable and fact-contextual limit.
Justice Snider also clarified that the Relevant Period cannot begin earlier than the day on which the generic brand’s prohibition triggers the statutory stay. ‘Ramp-up’ periods (between product development and maximum selling capacity) should be deducted in the assessment, and future lost profit calculations constitute an attempt to claim damages outside the Relevant Period, and should be excluded.
Though the law of section 8 claims is still developing, these two cases are helpful in clarifying the factors that will be considered when evaluating generic companies’ section 8 damages claims, including the commencement date of the “Relevant Period” and damage deductions for “Ramp-up.”