Legal Report: Intellectual Property - Drug wars

Legal Report: Intellectual Property - Drug wars
With billions of dollars invested researching and marketing a successful drug, brand-name drug manufacturers are taking a hard-line approach to litigation. The question now facing the industry is whether recent changes to federal regulations involving patents and drugs will bring a truce to the sector or take the fight to a new level.

Few areas of practice have experienced the level of massive growth that intellectual property litigators have seen thanks to the ongoing wars among brand-name and generic drug manufacturers. However, the status of that boom — precipitated by the federal government’s 1993 enactment of Bill C-91 — is up in the air thanks to amendments aimed at levelling the playing field between the two warring sides.

Bill C-91 opened the floodgates to litigation between brand and generic drug manufacturers because it put an end to mandatory licensing provisions for generic drugs under the Patent Act and enacted the Patented Medicines (Notice of Compliance) [PM(NOC)] Regulations. That suddenly required a generic manufacturer to address an innovator’s patent before Health Canada would decide whether to issue regulatory approval for the generic version of the patented drug.  Prior to that legislation, “generics had an automatic right to get a licence, at a four-per-cent royalty rate” and produce cheaper versions of popular and profitable brand drugs, explains Sheldon Burshtein, an IP lawyer at Blake Cassels & Graydon LLP in Toronto.

“Although there was some litigation [prior to the PM(NOC) Regulations], there wasn’t nearly as much,” notes Burshtein.

It spurred a litigation boom felt by everyone. “Litigation in this area is as busy as ever,” says Gunars Gaikis of Smart & Biggar in Toronto. Adds David Aitken, a patent litigator with Osler Hoskin & Harcourt LLP’s Ottawa office, “In my experience, the amount of patent litigation under the PM(NOC) Regulations has continued to expand almost exponentially.”

Whether new patent litigation will continue to be filed at its current pace is uncertain following key changes to the data protection provisions of the Food and Drug Regulations (FD Regulations) and to the PM(NOC) Regulations that came into effect on Oct. 5.

Amendments to the data protection provisions of the FD Regulations now introduce an eight-year period of data exclusivity, which begins when the brand-name drug manufacturer issues its first Notice of Compliance for a new drug. (The eight-year period is extended by six months when it relates to data concerning pediatric studies.) A register will be created specifying when the data protection ends. As well, the new rules forbid generic drug manufacturers from filing a new drug submission (NDS) of any sort for the first six years during the eight-year term.

Meanwhile, the key changes to the PM(NOC) Regulations stipulate that only patents filed prior to the generics’ NDS may be added to the register in relation to the original form of the drug. In addition, generics need only focus on brand manufacturers’ patents that are on the register at the time they file the abbreviated NDS. “This means that the patent list is frozen when a generic makes its first filing,” Aitken explains. “Any subsequently listed patents don’t have to be addressed, meaning we’ll now see one litigation as opposed to several.”

These changes are significant because they’re aimed at preventing “evergreening” — a practice adopted by many brand manufacturers to limit the generic manufacturers’ access to their products, which essentially created longer monopolies. The changes are a compromise and should give generics a clearer idea of when they have the right to file a NDS of any sort (NDS, ANDS, or supplementary NDS), while providing brand manufacturers with a longer-term exclusivity period than they had under the previous regime.

According to the patent lawyers interviewed, these changes will certainly have an impact. “Brand manufactures are very creative, so [these amendments] will not spell the end of evergreening, but it will be significantly reduced,” says Aitken.

That reduction in litigation could also be bad news for brand manufacturers. “Generics came out marginally ahead even though innovators got extended protection for certain drugs,” says Gaikis. “But even though innovators will be guaranteed a certain period of protection, once it’s gone, generics will be able to get in more easily. Before, generics would have to go through many battles [and they] were kept out a long time.”

Nevertheless, the changes were sorely needed, says Judith Robinson, an IP lawyer with Ogilvy Renault LLP in Montreal. “Now, finally, in practice we have data exclusivity in Canada and we can catch up to our trade partners in the U.S. and Europe,” she says.

However, the combination of generics waging fewer legal battles to bring a drug to market and the six-year limitation period placed on generics that forbids them from filing an NDS will have a negative impact on litigators who practise in this area. “If generics can’t file for six years, then there will be no PM(NOC) litigation for the first six years (following the date at which the amendments came into effect) until a submission is filed,” says Robinson. “This will create a little hiccup where there’s a decrease in litigation for a few years, which is very significant.”

Even though these factors could cause some concern for litigators, there are other factors that ensure litigation in this area could remain significant. That’s because the amendments also include a transitional provision, which states that a drug that had a patent submitted for listing on the register before June 17 (the date draft regulations were published) remain subject to the previous PM(NOC) Regulations. “Even if the new amendments reduce litigation in the future, there is a large pipeline [of cases] that won’t be out for many years as all patents on the register prior to June have been grandfathered,” says Aitken.

As well, even though no generic company can file for six years, both brand and generic companies will thoroughly examine the new regulations and challenge any definitions they can. Says Burshtein: “Every time the regulations get re-jigged, it opens up new legal questions, which spawns more litigation.”

The role of precedents in this highly litigious area cannot be ignored either. “Case law has played an enormous role over the years under the PM(NOC) Regulations; there’s been a lot of movement generated by the case law,” says Robinson. And, as a result, the amendments to the legislation were implemented, in part, to keep up with developments taking place in case law, she adds. “This is definitely an area that is never still, it’s very dynamic because of the importance of the products.”

 And this year alone there have been cases that have had a notable impact on the level of litigation in this area and/or on the ever-changing nature of the law. For one, the Federal Court of Appeal’s decision on Feb. 10 in Apotex Inc. v. AB Hassle et al. set a precedent in that it “required the generic to make all allegations in respect of a particular medicine and patent at one time if it wishes to avoid the real risk of being precluded later from making further allegations in respect of the same medicine and patent,” says Gaikis.

This resulted in cases in which there were numerous different allegations of invalidity; so instead of one or two expert witnesses per side, there is now a multiplicity of experts. “This compelled generics to really do their homework. It put an end to sequential cases and it all came down to one big case,” says Gaikis.

Meanwhile, Robinson notes the Oct. 17 decision issued by Federal Court Justice Roger Hughes in Janssen-Ortho Inc. and Daiichi Pharmaceutical Co., Ltd. v. Novopharm Ltd., successfully argued by lawyers at Bereskin & Parr, in which the plaintiffs succeeded in the patent infringement action. The case was important for a few reasons. First off, it affirmed that a patentee that had been unsuccessful in a PM(NOC) proceeding — as Janssen-Ortho and Daiichi Pharmaceutical were — could still be successful in a patent infringement action in respect to the same patent. The case was also precedent-setting in the equitable relief area, she says.

Hughes refused to grant the plaintiffs an election. Rather, the judge only allowed damages because the parties took too long to sue the generic manufacturer, she says. “This could suggest a toughening up of the court’s position on remedy.”

The most recent case worth noting is the Supreme Court of Canada’s Nov. 3 decision in AstraZeneca Canada Inc. v. Canada (Minister of Health), which dealt with a situation in which the patentee’s drug was no longer marketed.

Although some of the case law decisions don’t have an immediate impact on the level of litigation taking place, they demonstrate that this is a highly litigious area.

While it’s not clear that the amendments will reduce litigation from current levels, what is clear is that within the next 15 years, baby boomers will begin retiring. As the population ages at an unprecedented pace, it means that drugs will be in greater demand.

The result? More companies on both sides will be aiming to get a bigger piece of the pie, regardless of changes to legislation or case law. “The government has created a scheme that provides an incentive to litigate,” says Gaikis. “[So] there’s no sign of anything letting up. It’s a sloped curve going up in terms of litigation; more and more lawyers are getting involved and firms that weren’t active in litigation [in this area] in the past have  become heavily involved.”

Burshtein says it best: “There will continue to be a significant amount of litigation in the pharmaceutical area, whether the numbers grow or decline slightly [in the near future].”



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