In Proving Foresight May Be Vain: Federal Court Vacates Bifurcation Order Just a Few Months After Granting It

Originating back in 2006, the litigation between Pfizer and Apotex over Pfizer’s blockbuster drug, Lipitor, has been long and arduous. With many twists and turns in these proceedings, Pfizer’s most recent motion to amend its statement of defence and counterclaim led to yet another surprising result. The motion brought by Pfizer is part of the proceedings commenced by Apotex for damages pursuant to Section 8 of the Patent Medicines (Notice of Compliance) (“PM(NOC)”) Regulations. In ordinary circumstances, given that discoveries have not yet commenced, the impact of these amendments would be minimal. However, just six months earlier the Court granted a new type of bifurcation order, separating the start date issue from the rest of the proceedings. Having determined that the proposed amendments would vary the order, the Court vacated it, dashing the hopes of many onlookers to see if yet another  novel trend would develop  in the emerging  arena of Section 8 litigation.

 

PM(NOC) proceedings

The litigation over atorvastatin, the active pharmaceutical ingredient in Lipitor, first began when Apotex served two Notices of Allegation (NOA) with respect to Pfizer’s patents relating to various polymorphic forms of atorvastatin.  Apotex’s submission for its first atorvastatin product was placed on patent hold by the Minister of Health on May 15, 2007. Apotex’s submission in relation to its second atorvastatin product was placed on patent hold by the Minister of Health on February 22, 2010.  Apotex was allowed market entry for both its atorvastatin products on May 19, 2010. As a result, Apotex claimed for damages pursuant to Section 8 of the PM(NOC) Regulations. In response, Pfizer counterclaimed against Apotex for infringement.

 

Section 8 Damages

In the event that a generic pharmaceutical company is successful in PM(NOC) proceedings, Section 8 of the Regulations allows them to claim damages that result from the delay in market entry while the proceedings were pending. When Section 8 Damages are at issue, a “but for” world must be created. In this instance, Apotex has to show what would have happened in terms of market penetration for its atorvastatin product had there been no prohibition application by Pfizer. The period for which damages are awarded is defined by “(a) beginning on the date, as certified by the Minister, on which a notice of compliance would have been issued … and (b) ending on the date of the withdrawal, the discontinuance, the dismissal or reversal.”

 

Bifurcation Order

While both parties agree that the end date of the damages period should be May 19, 2010, the start date became contentious.  Pfizer alleges that Section 8 Damages should be limited to a three-month period, when the second patent hold letter was obtained on February 22, 2010. Pfizer’s argument rests on the fact that Apotex only came to the market with the second atorvastatin product and not the first. On the other hand,  Apotex seeks Section 8 Damages for a three-year period that is marked by the start date of the first patent hold letter it received on May 15, 2007.  Apotex alleges that in the “but for” world, had it been allowed to enter the market as of the date of the first patent hold letter, it would have marketed the first atorvastatin product. Apotex further alleges that the second atorvastatin product was just an improved version of the first product. The difference between the two start dates would have a tremendous effect on the quanta of damages since Lipitor’s yearly sales averaged at approximately $1.2 billion. As a result, Pfizer brought a bifurcation motion seeking to separate the issue in relation to the start date from the rest of the proceedings. This bifurcation order was considered to be novel and “engag[ed] not only factual issues but statutory interpretation of the Regulations“. Ordinarily, bifurcation motions seek to separate liability and damage issues.   Ultimately, the Federal Court granted Pfizer’s motion (“Bifurcation Order”) holding that the bifurcation would save judicial resources, costs, and time.

 

Amendments to Statement of Defence and Counterclaim

Just a few months after the Bifurcation Order was granted, the Court heard a motion brought by Pfizer to amend various paragraphs of its statement of defence and counterclaim.  In considering whether to exercise its discretion, the Court held that the proposed amendments should be granted. However, since these amendments would significantly expand on the issue of the start date, the Bifurcation Order would be varied.  Moreover, the Court outlined its concerns with the number of motions that were brought by both parties, as well as the lack of agreement on productions and scheduling dates. Ultimately the case management judge concluded that the combination of these factors could “jeopardize the actual trial dates”. Consequently, the Bifurcation Order was vacated and a new trial date on all issues was scheduled. The case management judge also set a schedule for all steps in the proceeding and prohibited refusals on discovery.

 

This decision may have been disappointing to some observers, as the start date issue has been contentious in several recent Section 8 cases (See Apotex Inc  v Merck & Co Inc and Teva Canada Limited v Pfizer Canada Inc).  In fact, a start date bifurcation order could have set a new precedent. From a strategic point of view, this type of order can be quite beneficial to a party. In the instance of Pfizer, their liability has already been established; at issue is the time period. If the damage period is determined to be for the three months, then in Pfizer’s view the case would be “relatively simple and there is a significant prospect that [it] would settl[e]”. Moreover,  if the three-month period is established early on this would mean that settlement discussions would become more one sided. Keeping in mind that Pfizer is also counterclaiming for infringement, there would be quite the risk reallocation for Apotex.  In light of recent decisions of the Federal Court of Appeal in Apotex Inc v Sanofi-Aventis et al, and Teva Canada Limited v Sanofi-Aventis Canada Inc et al, PM(NOC) litigation, particularly in the context of Section 8 Damages, is still developing. As new proceedings arise, parties bring novel issues to the table. It would thus be interesting to see if this strategy will be implemented in the future or if other types of bifurcation orders will be sought.

 

Anastassia Trifonova is an IPilogue Editor and a JD candidate at Osgoode Hall Law School

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