In an October 12 2016 decision (Teva Canada Limited v Pfizer Canada Inc, 2016 FCA 248) the Federal Court of Appeal upheld two decisions of the minister of health to issue notices of compliance to generic drug manufacturers without addressing the requirements of the Patented Medicines (Notice of Compliance) Regulations. Importantly, the court held that the minister's decisions were to be reviewed on a standard of reasonableness, unlike prior Supreme Court jurisprudence, which had applied a correctness standard to the minister. The court found both of the minister’s decisions to be reasonable, overturning the Federal Court’s finding that they were incorrectand effectively granting the minister the right to be wrong.

Facts This appeal involved two different notices of compliance for different products. The first notice of compliance was obtained by Teva Canada for a generic version of the AROMASIN product marketed by Pfizer Canada. Teva had filed an abbreviated new drug submission without any data establishing bioequivalence between its generic product and AROMASIN. Instead, Teva included a certification that its drug product was identical in all respects to a previously approved generic version of AROMASIN. Teva did not serve a notice of allegation on Pfizer to address the patents listed on the Patent Register against AROMASIN. Nevertheless, the minister issued a notice of compliance to Teva.

A second notice of compliance was issued to Hospira Healthcare Corporation for its generic version of the REMICADE product marketed by Janssen Inc. Unlike AROMASIN, REMICADE is a biologic. Generic versions of biologics are approved by filing an new drug submission demonstrating similarity to the reference biologic drug, rather than by filing an abbreviated new drug submission. However, Hospira’s new drug submission contained no data. Instead, Hospira certified that it had entered into a licence agreement to take over the marketing of a previously approved generic REMICADE product. The previous generic manufacturer would no longer market the drug. Hospira did not issue a notice of application to Janssen to address the patents listed against REMICADE, yet still received a notice of compliance.

Pfizer and Janssen filed separate judicial review applications relating to the minister’s decisions to issue notices of compliance without addressing the listed patents listed against their respective drugs.

Federal Court decisions Pfizer’s application was heard and decided first (Pfizer Canada Inc v Canada (Health), 2014 FC 1243). The Federal Court found that the minister’s decision to issue a notice of compliance to Teva was incorrect. In determining the standard of review for correctness, the Federal Court started with the presumption that the standard is reasonableness, but found that presumption was rebutted based on a contextual analysis of the case. In particular, the Federal Court found that the regulations do not afford the minister any discretion as to when to issue a notice of compliance. Rather, that decision is mandated by the regulations and is left to the courts during prohibition applications under those regulations. Both Teva and the minister appealed, and the appeals were later consolidated.

The Federal Court’s decision was released while Janssen’s judicial review application remained pending. The Federal Court, on consent of the parties, set aside the decision of the minister to issue the notice of compliance to Hospira, without prejudice to any right of appeal. Hospira and the minister appealed the judgment, and these appeals were consolidated with those in the case involving Pfizer.

Shift to deferential standard of review The standard of review was the critical issue before the Federal Court of Appeal. Indeed, the Federal Court had commented that the “[s]election of the appropriate standard of review in this case determines the outcome as… there is more than one reasonable interpretation of the regulations. However, there is only one correct interpretation”.

The Federal Court of Appeal began by discounting prior jurisprudence applying a standard of correctness to decisions of the minister. For example, the court found that two Supreme Court decisions applying this standard to decisions of the minister made under the regulations in similar factual circumstances (Bristol-Myers Squibb Co v Canada (Attorney General), 2005 SCC 26; AstraZeneca v Canada (Minister of Health), 2006 SCC 49) were not binding because they were decided without regard to the presumption of reasonableness later articulated by the Supreme Court. The appeal court found no applicable binding jurisprudence on the standard of review and thus found that the accepted presumption of reasonableness applied.

The appeal court added that the presumption arises when the administrative decision maker is interpreting both its home statute and statutes closely connected to its function. In the appeal court's view, the regulations are closely connected to the minister’s function.

The appeal court then disagreed with the Federal Court’s conclusion that the presumption was rebutted. First, the appeal court found that the regulations do not suggest that Parliament intended the minister’s interpretation of the regulations to be reviewed on a less deferential standard.

Next, the appeal court disagreed with the Federal Court that the decision to issue a notice of compliance is left to the courts. The court held that the minister has exclusive jurisdiction to determine whether a drug submission makes a direct or indirect comparison to a Canadian reference product such that the generic drug manufacturer must address any listed patents. According to the finding, the courts can be involved only if the minister decides in its discretion that a direct or indirect comparison has been made. They do not, the appeal court found, decide during prohibition applications under the regulations whether the minister ought to have subjected the generic submission to those regulations at all.

The appeal court also found, without further explanation, that the question at issue was one of mixed fact and law, and thus the reasonableness standard applied.

For these reasons, the appeal court found that the deferential standard of reasonableness applied. The court ultimately found that the minister’s decision was reasonable, as the Federal Court had acknowledged. The minister’s decisions were therefore reinstated such that the notices of compliance granted to Teva and Hospira were upheld.

Future implications The appeals follow a recent juridical trend away from the consideration of whether decisions made by the minister of health are correct. For example, after years of consistently applying the correctness standard in judicial review applications involving data protection – with the minister accepting this standard in most cases (eg,Takeda Canada Inc v Canada (Minister of Health), 2013 FCA 13) – the Federal Court recently accepted the minister’s argument that the reasonableness standard ought to apply (Photocure ASA v Canada (Health), 2015 FC 959). This trend is also apparent in other analogous contexts. For example, the Supreme Court recently questioned the Patented Medicines Price Review Board’s acceptance of the correctness standard (Celgene Corp v Canada (Attorney General), 2011 SCC 1). Subsequently, in a different case, the Federal Court of Appeal accepted the board’s argument that the reasonableness standard applied (Canada (Attorney General) v Sandoz Canada Inc, 2015 FCA 249).

In the high-stakes world of pharmaceutical disputes, a reasonableness standard of review can have profound consequences for drug manufacturers. In the appeals discussed above, two innovative drug companies lost the opportunity to resist generic market entry under the regulations as a result of the application of the standard of review of reasonableness. This occurred despite the Federal Court’s finding that the minister’s decision was incorrect. The Federal Court of Appeal’s comment that those manufacturers retain the ability to sue for patent infringement may provide little comfort given the significant, and often immediate, impact of generic market entry and the well-known obstacles to obtaining interlocutory injunctions. Similar concerns apply in other regulatory niches, such as in the data protection context, where the minister decides whether an innovative drug manufacturer ought to be granted eight years of data exclusivity for an innovative drug. The minister may now be able to simply elect between various reasonable outcomes, leaving aside the previous, necessary rigour of achieving the correct outcome.