Teva Canada Limited v Pfizer Canada Inc
Eli Lilly Canada Inc v Teva Canada Limited
On March 30 and April 4 2017 the Federal Court released two decisions on the merits under Section 8 of the Patented Medicines (Notice of Compliance) Regulations regarding pregabalin (Pfizer's Lyrica) in Teva Canada Limited v Pfizer Canada Inc,(1) and olanzapine (Eli Lilly's Zyprexa) in Eli Lilly Canada Inc v Teva Canada Limited.(2) In both decisions, the court made factual findings that provided direction for a final calculation of Teva's damages. Notably, an adjustment for 'pipefill' was permitted in Teva, but not in Eli Lilly. Generally, 'pipefill' is the difference in a company's ex-factory sales and IMS Health retail sales.
Teva Canada Limited v Pfizer Canada Inc
This decision relates to damages arising out of prohibition applications commenced by Pfizer regarding Ratiopharm and Teva's pregabalin drug. Those proceedings were discontinued on February 14 2013. The parties agreed that Teva was entitled to damages.
Regarding the liability period, the parties agreed that the end date was February 14 2013, but disagreed on the start date. Teva argued that the start date should be May 1 2010 or alternatively August 26 2010. Pfizer argued that the earliest start date should be August 26 2010, but that Teva and Ratiopharm would be delayed in effectively launching due to operational problems including availability and stability of the active pharmaceutical ingredient (API). Justice Phelan concluded that the patent hold date was August 26 2010 and was not persuaded that an earlier date would be more appropriate. In particular, Phelan found that, although Health Canada had completed the examination of Ratiopharm's abbreviated new drug submission on April 14 2010, with a remaining issue of whether Health Canada would issue a conditional indication due to matters relating to Lyrica, Teva's assertion that Ratiopharm would immediately do everything possible to secure conditional approval and would have secured such approval by May 1 2010 was entirely speculative and inconsistent with relevant real-world events. The evidence showed that Ratiopharm took no steps in the real world to expedite the patent hold letter or even to inquire into its status or to expedite its product monograph.
Regarding the total size of the pregabalin market, Phelan preferred the approach used by Teva's expert, which provided a more balanced, real-world expert viewpoint rather than simply "running the numbers". Specifically, Phelan found that while both sides used econometric models, Teva's expert was less "slavish" in his acceptance of mathematical results from his model and applied his own judgement to adjust the numbers where the results seemed askew.
There was little disagreement between the experts in determining the generic share of the pregabalin market, which was to use real-world experience, adjusting the volumes based on assumed dates.
Regarding Teva's share of the generic market, Phelan again found the approach used by Teva's expert to be more useful as it treated new entrants equally where the differences between entrants were more broadly based, even though the approach tended to lessen Teva's share because some of the competitors were weak.
Phelan rejected Pfizer's arguments with respect to Teva's ability to enter the market and the timing of this entry, third-party generics, a GenMed product and an authorised generic, finding as follows:
- Ratiopharm had the ability to supply ratio-pregabalin on or about August 26 2010 and, even if there were problems with Teva's API after the merger of Teva and Ratiopharm, Teva would have been able to have launched the ratio-pregabalin in the 'but for' world.
- There was insufficient evidence to establish that third-party generics could and would have entered the pregabalin market during the liability period in view of:
- the questionable market conditions;
- the competitive battlefield; and
- the real or perceived legal and financial risks of launch.
- Pfizer would not have launched GenMed during the liability period and, even if it were launched, it would not be an effective competitor.
- While Pfizer entered into an authorised generic agreement with Mylan in the real world, it would not have had any authorised generics in the 'but for' world.
On formulary listings and pricing, Phelan concluded that in the 'but for' world, pregabalin would have remained an off-formulary drug throughout the liability period outside Quebec (where it would be listed), and that the best estimate of price in circumstances where price would not be set by provincial formulary was that Teva would have priced at 75% of the brand.
Regarding trade spend, Phelan found the objective analysis of Pfizer to be more compelling than the subjective and optimistic predictions of Teva and concluded that the single source trade spend rate was 35%.
Finally, Phelan accepted Teva's expert's pipefill adjustments, with the clarification that only pipefill or inventory adjustments that represent sales lost in the 'but for' world are appropriate; those that are a disguised method of compensating for double ramp-up are not.
Eli Lilly Canada Inc v Teva Canada Limited
This decision relates to damages arising out of a prohibition application commenced by Eli Lilly regarding Teva's olanzapine drug. That application was dismissed on June 5 2007.
As a preliminary matter, Justice O'Reilly agreed with Eli Lilly on two evidentiary issues. First, O'Reilly found that evidence of what companies would have done or what fact witnesses thought would have happened in the 'but for' world was inadmissible opinion evidence. O'Reilly commented that, in contrast, asking fact witnesses what they did in the real world and whether they knew of any reason why they would have acted differently in the 'but for' world would relate to admissible facts within the witnesses' knowledge. Second, O'Reilly concluded that a report prepared by Deloitte and a document purporting to contain information on trade spend were inadmissible as hearsay, since they did not meet the test for the business records exception.
Regarding the liability period, the parties agreed that the end date was June 5 2007, but disagreed on the start date. Eli Lilly argued that there was no period of liability as Teva had abandoned its claim to damages. In a first prohibition application commenced by Eli Lilly, Teva withdrew its notice of allegation. In the ensuing costs proceeding, Teva submitted that it had been prejudiced by the delay resulting from the withdrawal, in part, because it had "abandoned its claim to s. 8 claims". O'Reilly rejected Eli Lilly's position and found that, reading Teva's submission on abandonment in context, it related solely to the first proceeding and did not preclude Teva from seeking Section 8 damages in this action. O'Reilly also rejected Eli Lilly's argument that a start date of March 22 2007 was more appropriate than the minister's certified date of March 3 2006, finding that Teva would have had no difficulty entering the market once it obtained its notice of compliance on March 3 2006.
Regarding the size of the olanzapine market, the parties agreed that it would have been the same as it was in the real world.
Regarding the generics' share of the olanzapine market, the parties agreed generally on the methodology, but disputed the speed with which a generic company could have entered the market in each province and, in particular, the date on which the generic could have obtained approval and listing on the provincial formularies in British Columbia, Alberta, Saskatchewan and Manitoba.
In this regard, O'Reilly found that a number of real-world events in 2007 – including the impact of Bill 102 in Ontario, Eli Lilly's competitive offer to Ontario, Teva's corresponding agreement and the ongoing litigation between the parties – affected the listing of Teva's olanzapine in those provinces such that the 2007 real world did not reflect the situation in the 2006-2007 'but for' world.
As to Teva's share of the generic olanzapine market, O'Reilly concluded that Teva would have been the sole generic company on the market during the liability period. In the real world, Eli Lilly had succeeded in its prohibition application against Apotex. O'Reilly found that there was no basis for Eli Lilly's position that it would have discontinued its proceeding against Apotex in the 'but for' world in which Teva obtained its notice of compliance on March 3 2006. In fact, there was no evidence that Apotex was even in a position to come to market in 2006.
O'Reilly concluded that losses attributable to pipefill sales should not be included in Teva's damages:
"pipefill does not represent lost sales during the liability period. Rather, pipefill represents the differential between retail sales and the quantity of product leaving the factory. That differential represents sales that would have been made outside the liability period. It is true that pipefill may represent some lost sales in the sense that in the 'but for' world Teva would have moved a certain amount of inventory into the distribution stream which, in due course, would have sold to customers. In the 'but for' world, those sales would have been made, but they would have been made outside the liability period. Accordingly, for present purposes, they should not be included in Teva's losses."
O'Reilly reasoned that an approach that adjusts for pipefill would over-compensate Teva because it would not correspond with the amount of Teva's lost sales in the 'but for' world. The accumulation of product in wholesalers' warehouses would eventually be sold; given this, it could not constitute lost sales. O'Reilly considered prior cases and found that they were somewhat ambiguous on the issue of pipefill and in none of them was the issue seriously contested or a quantum specifically calculated.
However, O'Reilly distinguished pipefill from adjustments to retail data to appropriately deal with the issue of timing – the delay between manufacture and retail sales – finding that the appropriate adjustment, in effect, would be to award Teva an amount representing interest on the money involved. Agreeing with Eli Lilly's expert, O'Reilly concluded that a pipefill adjustment would over-compensate Teva.
With respect to trade spend, O'Reilly concluded that Teva's trade spend on olanzapine in the 'but for' world would have been at the low end of the scale at 29.4%, as it would have been the sole source of a generic version of olanzapine during the liability period. O'Reilly reasoned that trade spend on sole-source products is usually low and found that venlafaxine, a sole-source product in the same therapeutic class that was marketed during the relevant timeframe, was a good model for calculating the trade spend on olanzapine in the 'but for' world.
The parties may appeal to the Federal Court of Appeal, as of right.
For further information on this topic please contact Shirley Liang Komosa at Smart & Biggar/Fetherstonhaugh by telephone (+1 416 593 5514) or email ([email protected]). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
(2) Eli Lilly Canada Inc v Teva Canada Limited, 2017 FC 88.