Eli Lilly Canada Inc. v. Teva Canada Limited

Eli Lilly Canada Inc. v. Teva Canada Limited
Court (s) Database
Federal Court Decisions
Date
2017-01-30
Neutral citation
2017 FC 88
File numbers
T-1048-07
Decision Content
Date: 20170404
Docket: T-1048-07
Citation: 2017 FC 88
Ottawa, Ontario, April 4, 2017
PRESENT: The Honourable Mr. Justice O'Reilly
BETWEEN:
ELI LILLY CANADA INC., ELI LILLY AND COMPANY, ELI LILLY AND COMPANY LIMITED, AND ELI LILLY SA
Plaintiffs
(Defendants by Counterclaim)
and
TEVA CANADA LIMITED
Defendant
(Plaintiff by Counterclaim)
AMENDED PUBLIC JUDGMENT AND REASONS
(Redacted from Confidential Judgment and Reasons issued January 30, 2017)
I. Overview [1] Teva Canada Ltd (formerly Novopharm Ltd) seeks damages from Eli Lilly Canada, Inc as compensation for having been prevented from coming to market in 2006-2007 with a generic version of a medicine called olanzapine. Olanzapine is useful primarily in the treatment of schizophrenia. Teva alleges that it suffered losses for having been kept out of the olanzapine market as a result of Lilly’s application for an order prohibiting Teva from obtaining a Notice of Compliance (NOC) from the Minister of Health, and from the corresponding regulatory stay, pursuant to the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133. Teva was kept out of the olanzapine market until the proceedings under the Regulations were completed on June 5, 2007, when Justice Roger Hughes ruled against Lilly (Eli Lilly Canada Inc v Novopharm Ltd, 2007 FC 596).
[2] Subsequently, Lilly commenced an action against Teva for infringement of its patent for olanzapine. I found that Lilly’s patent for olanzapine was invalid (Eli Lilly Canada Inc v Novopharm Ltd, 2009 FC 1018). I also concluded that Teva was entitled to damages under s 8 of the Regulations in an amount which would be determined in a separate proceeding (see Annex II for all provisions cited). An appeal from my decision was allowed in part (Eli Lilly Canada Inc v Novopharm Ltd, 2010 FCA 197). In a later decision, I again concluded that Lilly’s patent was invalid (Eli Lilly Canada Inc v Novopharm Ltd, 2011 FC 1288). The latter decision was upheld by the Federal Court of Appeal; the Supreme Court of Canada denied leave to appeal.
[3] In effect, the dispute has come to me for a third time to decide a new question: What is the amount of the damages, if any, to which Teva is entitled under the Regulations for the time it was kept off the market? To answer that question, one must create a hypothetical world in which Lilly would not have brought an application whose effect was to deny Teva access to the olanzapine market. In that hypothetical world, Teva might have come to market on the strength of an NOC for generic olanzapine as early as March 3, 2006, when the Minister would have granted an NOC to Teva but for the proceedings initiated by Lilly. Lilly disputes that start date on the basis that Teva had earlier abandoned its claim for damages, and that Teva was not actually in a position to bring its product to market until the spring of 2007, at the earliest.
[4] Lilly also raises a number of grounds on which Teva’s damages should be discounted, including: Teva has included losses that are not attributable to the operation of the Regulations; Teva has failed to take account of the likely presence of another generic manufacturer, Apotex Inc, in the market at the same time; Teva has overstated the actual profits it would have realized in the various provinces; and Teva’s claim fails to include the full amounts that Teva would have given to pharmacies to promote its product (so-called “trade-spend”). Each of these factors requires separate analysis.
[5] Accordingly, the main issue, the amount of damages owed to Teva, raises five distinct questions:
1. What is the period of liability?
2. What was the size of the olanzapine market?
3. What was the generics’ share of the olanzapine market?
4. What was Teva’s share of the generic olanzapine market?
5. What is the real amount of Teva’s losses?
[6] The parties do not ask me to make any calculations. They ask me simply to make the factual findings necessary for those calculations to be made.
II. The Legal Framework [7] Under the Regulations, a drug company holding a patent on a particular drug (the “first person”) can commence proceedings to prohibit another company wishing to market a generic version of that drug (the “second person”) from obtaining an NOC until the latter has addressed the former’s patent or until the patent has expired. The second person can address the patent by alleging that its product will not infringe the patent or that the patent is invalid. Until the Court has ruled on those allegations, the second person cannot enter the market. The Regulations impose an automatic stay for 24 months or until the first person’s prohibition application has been dismissed.
[8] If the first person fails to persuade the Court that the second person’s allegations are unjustified, the first person will not obtain its prohibition order and the second person will be free to obtain its NOC. However, the Regulations recognize that the automatic stay will keep the second person off the market for the duration of the proceedings even where the second person’s allegations are ultimately found to be justified. Accordingly, the Regulations state that where the Court dismisses a first person’s application for a prohibition order, the first person is liable to the second person for any losses suffered during the relevant period. The relevant period begins on the date certified by the Minister as being the date the second person would have obtained its NOC but for the proceedings initiated by the first person, unless the Court finds that another date is more appropriate. The relevant period ends on the date the first person’s application was dismissed.
[9] Teva shoulders the legal burden of establishing all of the elements of its claim for damages: this includes showing that its alleged losses were a product of the operation of the Regulations (Pfizer Canada Inc v Teva Canada Limited, 2016 FCA 161 at para 64). To be recoverable, there must be a causal connection between the damages Teva seeks and the proceedings initiated by Lilly. The essential question is: What would have happened if Lilly had not applied for an order of prohibition against Teva?
[10] Lilly has an evidentiary burden to respond to Teva’s evidence, and bears the legal burden in respect of its defences. For example, in its defence, Lilly maintains that Teva had earlier abandoned its claim for damages and that the start date for the period of liability is much later than the date certified by the Minister. Lilly bears the burden of proof on those issues (Pfizer Canada Inc v Teva Canada Limited, above, at para 65).
III. Evidentiary Issues [11] The parties disputed two major evidentiary issues. The first was whether fact witnesses could testify about what they thought would or would not have happened in the but-for world. For the most part, this involved Lilly objecting to testimony proffered by Teva’s fact witnesses on the basis that asking those witnesses hypothetical questions invited them to provide opinion evidence, an area that should be left to qualified experts. Teva argued repeatedly that it had no choice but to ask fact witnesses about the but-for world given its burden of proving what would have happened if Lilly had not initiated proceedings under the Regulations. Teva pointed me to previous cases where this kind of evidence had been allowed. During the trial, I allowed some hypothetical questions to be put to fact witnesses, reserving on Lilly’s objection until I had an opportunity to consider the objection further and review the authorities.
[12] The second evidentiary issue related to alleged hearsay evidence. Lilly objected to the admission of certain documents for the truth of their contents. Again, for the most part, I reserved on Lilly’s objections until I had an opportunity to consider the admissibility of the documents in question, considering their necessity and reliability in the context of the case as a whole.
[13] With respect to the first issue, I agree with Lilly that the opinions of fact witnesses are not admissible. During the trial, I suggested to counsel that the best way to provide the relevant evidence to the Court would be to explore with fact witnesses what they did in the real world. The witnesses could then be asked whether they knew of any reason why they would have acted differently in the but-for world. This would confine fact witnesses to their own knowledge and experience, as opposed to asking them, in an open-ended fashion, what they would have done or what they thought would have happened in the but-for world. The latter involved inadmissible opinion evidence; the former related to admissible facts within the witness’ knowledge.
[14] I note that the Federal Court of Appeal has ruled that fact witnesses can, in a limited way, give evidence about a company’s “general intentions in the hypothetical world” and “the general steps it took to prepare itself for entry into the market” (Pfizer Canada Inc v Teva Canada Limited, above, at para 106). However, the evidence Teva sought from its fact witnesses went beyond general intentions or preparatory steps: the witnesses were sometimes asked what they actually would have done or what would have actually happened in the but-for world. The witnesses were being improperly invited to provide opinion evidence.
[15] However, the approach I suggested was not possible for some witnesses. For example, Teva’s witness Dr Brian Des Islet, Executive Director of Scientific Affairs at Teva, was invited to imagine a scenario in which Teva had obtained its NOC on March 3, 2006, and was asked whether Teva would have launched with material produced by a particular process (Process 1) or by another (Process 2). Counsel for Lilly objected to the question on the basis that it invited Dr Des Islet, a fact witness, to provide an opinion. Since only Process 2 material was used in the real world, asking Dr Des Islet whether Teva would have relied on Process 1 material in the but-for world would have invited him to offer a speculative opinion. The question of whether Teva could have and would have launched with Process 1 material can be answered only after considering all the relevant evidence; it is my responsibility to answer it based on the evidence before me. The fact that the burden falls on Teva to prove that it could have and would have launched in March 2006 with Process 1 API does not mean that it is entitled to ask a fact witness to answer that question.
[16] Accordingly, I have not considered the testimony of fact witnesses in which they offered opinions about what would or would not have happened in the but-for world. I rely solely on the opinions of experts and my own inferences drawn from the evidence.
[17] With respect to Lilly’s hearsay objections, I again agree with Lilly that hearsay evidence cannot be admitted unless it falls within a recognized exception (eg, business records) or it meets the criteria of necessity and reliability. This basic proposition has been firmly underscored by the Federal Court of Appeal (Pfizer Canada Inc v Teva Canada Limited, above, at paras 95-103). Lilly’s principal objection relates to a report prepared by Deloitte that, among other things, contains information about Teva’s trade-spend rate on its venlafaxine product. The author of the report was not called as a witness.
[18] In my view, the Deloitte report does not meet the test for the business records exception. That exception requires that the author of the record have a duty to create it, and did so contemporaneously and based on personal knowledge (Ares v Venner, [1970] SCR 608 at p 626; see also Canada Evidence Act, RSC 1985, c C-5, s 30). Since the author of the Deloitte report is unknown and the details surrounding the report’s preparation were not in evidence, the report cannot meet these criteria.
[19] Lilly also challenges on hearsay grounds documents purporting to contain information about the rebates and other incentives (“trade-spend”) that Teva would have paid to pharmacies and other retailers of another one of its products, venlafaxine. The documents in question were not prepared contemporaneously with the financial transactions they allegedly record. Those who authored the documents were not called as witnesses. These, too, amount to inadmissible hearsay not falling within the business records exception.
[20] Even though there are some indications that these impugned documents are reliable, they are not admissible under the principled exception to the hearsay rule because the criterion of necessity is not met. Evidence relating to trade-spend was provided by way of direct evidence from Teva’s fact witnesses – Ms Oksana Tressel, Mr Doug Sommerville, and Mr Barry Fishman. It is not necessary to look to the Deloitte report or the other impugned documents to determine what Teva’s trade-spend rate was for venlafaxine.
[21] Therefore, I have confined myself to the evidence that is properly before me. I have not considered opinions offered by fact witnesses or inadmissible hearsay.
A. Issue One – What is the period of liability? [22] Teva maintains that the period of Lilly’s liability commences on the date certified by the Minister as being the day on which Teva would have obtained its NOC if Lilly had not initiated proceedings under the Regulations: March 3, 2006. The parties agree that the period ends on the date on which Justice Hughes rendered his decision dismissing Lilly’s application: June 5, 2007.
[23] Lilly’s main position is that, because Teva abandoned its claim to damages, there is no period of liability. Alternatively, Lilly disputes Teva’s reliance on the Minister’s certified date of March 3, 2006, and suggests that the appropriate start date is March 22, 2007 because Teva could not actually have put its product on the market any sooner. In effect, Lilly would reduce the period of liability from the approximately 15 months asserted by Teva, to either zero or a maximum of 3.5 months.
[24] I am not persuaded by Lilly’s arguments relating to abandonment or an alternate start date. Read in context, the evidence does not show that Teva abandoned its claim to damages in this proceeding. Further, the evidence demonstrates that but for the prohibition proceedings, Teva would have been able to put its product on the market upon receiving its NOC on March 3, 2006. Therefore, the period of liability is from March 3, 2006 to June 5, 2007.
(1) Abandonment [25] Lilly relies on the sequence of events relating to Teva’s first Notice of Allegation (NOA) in which Teva alleged that Lilly’s olanzapine patent, Canadian Patent No 2,041,113 (the ‘113 patent), was invalid. Teva served that NOA on August 5, 2004. Lilly responded to the NOA by invoking the Regulations and applying for a prohibition order against Teva (T-1734-04). Lilly filed its evidence, but Teva later withdrew its NOA and served a new one. Lilly sought its costs in the first proceeding; in response to Lilly, 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 damages”.
[26] Lilly points to Teva’s submissions on costs filed in that earlier proceeding and contends that Teva made an unequivocal undertaking, both to the Court and to Lilly, that it had unequivocally abandoned any claim to s 8 damages. According to Lilly, Teva’s claim is blocked by the doctrines of abandonment and estoppel. Further, Lilly says, the Court should take account of Teva’s submission in the earlier proceeding when assessing damages under s 8(5) of the Regulations here. Lilly also notes that the proceeding relating to Teva’s second NOA had already been initiated at the time Teva made its submissions on costs. Therefore, says Lilly, Teva’s earlier position on abandonment should carry over from the earlier proceeding and apply here, and should prevent Teva from advancing any damages claim against Lilly.
[27] I disagree with Lilly on this point. Reading Teva’s submission on abandonment in context, I find that it related solely to the first proceeding. Teva’s submission responded to Lilly’s request for costs. As I read it, Teva was simply pointing out that one of the consequences of the withdrawal of its first NOA was a relinquishment of a claim to damages within that proceeding. Teva did not agree that it would not to seek s 8 damages in the second proceeding or, indeed, in this action.
[28] Further, in my first decision in this action, I concluded that Teva’s claim to s 8 damages would be decided in a separate proceeding. While that decision was appealed successfully in part, the Federal Court of Appeal made clear that its ruling did not affect the issue of s 8 damages (2010 FCA 219 at para 13). It left the issue to be decided in a subsequent proceeding.
[29] I disagree with Teva’s position, though, that my earlier decision in this case and the subsequent response of the Federal Court of Appeal renders the issue of abandonment res judicata. I specifically stated that the start and end date of the period of liability could be decided in the separate proceeding on damages, apart from the trial on liability and infringement (see my Order of December 16, 2009). As I read the bifurcation order, I was free, but not bound, to address all the issues relating to liability for damages in the first phase. The bifurcation order relieved the parties from adducing evidence on the quantum of damages during that phase, but it did not specify what would be decided in the second phase. I preferred to leave the issue of liability for damages to the second phase as I believed it was closely connected to the question of quantum. While I disagree with Lilly on the issue of abandonment, I do not fault it for raising the issue here. The issue of abandonment is not res judicata.
(2) The Start Date [30] Lilly contends that the start date of the period of liability should be March 22, 2007. Lilly’s position is based on the following:
1. Teva had to seek and obtain a notifiable change for the process it planned to use for its product before it entered the market. Its notifiable change was approved by Health Canada on March 22, 2007.
2. The bulk Active Pharmaceutical Ingredient (API) Teva received during the relevant period was provided by its supplier, Dr Reddy’s Laboratory, |||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||.
3. Dr Reddy’s supply of API was unreliable until late 2006.
4. Teva had not completed its validation tests until March 22, 2007.
[31] I disagree with Lilly. The evidence does not support its claim that Teva would have had difficulty entering the market once it obtained its NOC on March 3, 2006.
[32] Regarding the notifiable change, the evidence shows that Teva used one process (Process 1) for manufacturing API for regulatory purposes. |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. Dr Reddy’s then created Process 2 and Teva sought a notifiable change for the new process. Teva submitted its request on September 14, 2006. Health Canada agreed to review the request on November 9, 2006, and completed its review on March 22, 2007. From that date, Teva was able to sell its product with Process 2 API.
[33] Lilly’s expert, Dr Gordon Munro, concludes from this evidence that Teva could not have implemented the change from Process 1 to Process 2 until March 22, 2007, and that no Process 2 product could have been marketed until after that date (see Annex I for a summary of experts’ qualifications).
[34] Based on this evidence, Lilly submits that Teva’s product could not have been marketed commercially until March 22, 2007.
[35] I disagree with Lilly’s position. While the evidence shows that Teva could not have marketed its product with Process 2 API prior to March 22, 2007, it equally demonstrates that Teva could have sold olanzapine tablets containing Process 1 API as of March 3, 2006. Dr Reddy’s was in a position to supply it. Mr Rajesh Sadanandan, an employee of Dr Reddy’s who was responsible for European sales of Dr Reddy’s API products at the relevant time, explained that Process 1 was developed ||||||||||||||. During the 2005 to 2007 period, Dr Reddy’s was capable of producing about 1800 kg a year. In 2007, Dr Reddy’s started selling Process 2 material, in addition to Process 1 API.
[36] Dr Brian Des Islet, Executive Director of Scientific Affairs at Teva, testified that Dr Reddy’s had supplied Teva with Process 1 material for the batches that were submitted to Health Canada for regulatory purposes and, in fact, has continuously supplied Teva with API for its olanzapine product. He explained that Teva asked Dr Reddy’s to develop a different process for producing the API, which resulted in Teva’s seeking a notifiable change to switch from Process 1 to Process 2. |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||.
[37] Dr Des Islet was invited to imagine a scenario in which Teva had obtained its NOC on March 3, 2006, and was asked whether it would have launched with Process 1 or Process 2 API. I have discussed the inadmissibility of this evidence above. However, Dr Des Islet was able to state that the only material with which Teva had regulatory approval to launch on March 3, 2006 was Process 1 API. Further, he was aware that Dr Reddy’s was able to supply the US market with Process 1 material, suggesting that Dr Reddy’s could likely have met Teva’s needs, as well.
[38] Lilly argues that Teva could not have come to market with Process 1 API |||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. However, there is little or no evidence that ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. Lilly’s expert, Dr Munro, stated in a supplemental report that he “would consider” |||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||. However, on cross-examination, Dr Munro stated that he was merely making an observation, one which did not affect his overall opinion about when Teva might have been in a position to launch its product. He conceded that it was not a matter within his main area of expertise and that he could not render an opinion on infringement. Therefore, I cannot conclude that Teva would have been legally prevented from entering the market with tablets containing Process 1 API on March 3, 2006. |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||.
[39] Regarding the US injunction, Lilly points to packing slips and invoices showing that Teva received bulk API from Dr Reddy’s Laboratories in the US prior to June 2007. Any such shipments, says Lilly, would have violated a US court order. However, it is unclear whether the evidence on which Lilly relies shows the actual provenance of shipments of API to Teva in Canada, or whether they simply show where the documents originated or where the billing occurred. On this evidence, I cannot conclude that the shipments of API were illegal.
[40] Regarding supply of API, Lilly relies on Dr Munro’s opinion that shipments from Dr Reddy’s from India were slow and unpredictable, at least until June 2007. Dr Munro noted that early orders from Teva to Dr Reddy’s took approximately six months to arrive. Prior to June 5, 2007, Teva had received only 61 kg of API. Delays thereafter were reduced to about six weeks. Still, Dr Munro concludes that Teva’s access to API did not stabilize until June 2007. These problems related to Process 2 material. Dr Munro was asked whether Teva, given that it had successfully launched to a sole source market in June 2007, could have done the same in March 2006. Dr Munro characterized the question as hypothetical and refused to answer it. He based his opinion solely on the documents he had reviewed, which related to the events in the real world in 2006-2007: he was unwilling to consider what might have happened in the but-for world.
[41] Dr Munro also points out that Teva’s validation batches, essential for regulatory approval, were not completed until March 2007. Based on that information, he concluded that Teva would not have been in a position to launch its product in March 2006. He was asked whether Teva would have carried out its validation process earlier if it knew it could come to market in March 2006, but Dr Munro dismissed that as a hypothetical scenario for which he had no evidence on which to base an expert opinion.
[42] The data for these batches showed that the yields varied from 86% to 97%, a range that Dr Munro considered unusually low. Dr Munro also noted that the lot numbers appeared to be out of sequence, suggesting that Teva might not have tested its batches consecutively, as required. Again, Dr Munro expressed concern that the documentation revealed variability in the manufacture of Teva’s product that would have impaired its commercial launch. However, he could not say that this variability would have actually affected the reliability of Teva’s validations or interfered with its entry into the market.
(3) Conclusion on the Liability Period [43] The liability period begins on March 3, 2006 and ends on June 5, 2007, the date on which Justice Hughes rendered his decision dismissing Lilly’s application for an order prohibiting the Minister from issuing an NOC to Teva.
B. Issue Two – What was the size of the olanzapine market? [44] The parties agree that the size of the olanzapine market in the but-for world would have been the same as it was in the real world. Entry of a generic manufacturer into the market would not have affected the overall olanzapine market. Since Teva launched its product only in certain dosage forms (2.5, 5, 7.5, 10 and 15 mg), it is the overall market for those particular products that should be considered.
C. Issue Three – What was the generics’ share of the olanzapine market? [45] The parties agree generally on the methodology for determining the generic portion of the olanzapine market. However, they dispute the speed with which a generic company could have entered the olanzapine market in each province. This depends on the date the generic could have obtained approval and listing on the provincial formularies. In each jurisdiction, one must consider what happened in the real world – the delay between Teva’s obtaining its NOC and its entry on the market in each province – and then assess whether something different would have occurred in the but-for world.
[46] The parties’ principal disputes relate to the provinces of British Columbia, Alberta, Saskatchewan, and Manitoba. However, the circumstances in those provinces can be understood only after considering the situation in Ontario in 2007. Therefore, even though the parties largely agree on the appropriate listing date in Ontario, I will review the Ontario scenario first.
(1) Ontario [47] Assuming that Teva obtained its NOC on March 3, 2006, the parties agree that Teva’s generic olanzapine would have been listed on the Ontario formulary on May 19, 2006. The more challenging question is the price at which it would have been listed, and what effect certain events in Ontario would have on the prices in other provinces.
[48] Generally speaking, Teva would have sought to list its product in all provinces, including Ontario, at 70% of Lilly’s brand price. For Ontario, however, in the real world, the situation was complicated by the introduction of new legislation, known as Bill 102, in October 2006. Teva’s expert on this subject, Mr Ian Hilley, explained that under Bill 102, generic prices were generally set at 50% of brand prices. However, some exceptions were permitted. The Executive Officer of the Ontario formulary commonly allowed exceptions for sole-source generic products in which the manufacturers had invested heavily. For example, Teva achieved an exception for its sole-source venlafaxine product, which was listed at 70% of brand price instead of 50%.
[49] However, Teva sought, but was denied, an exception for its olanzapine product. Teva was unable to justify a listing at |||||||||||||||||||||||||||||||||| of the brand price. |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| Teva obtained a published listing at 75% of brand price, ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. Accordingly, the |||||||||||||||| under the agreement was |||||||| of Lilly’s price.
[50] |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||| Once Bill 102 came into effect, Teva would have sought, but would likely not have received, an exception to the rule. Therefore, as of January 1, 2007, Teva would have had to |||||||||||||||||||||||||||||| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||. In the but-for world, as in the real world, Teva would have had to set its effective price in Ontario at no more than |||||||| of Lilly’s price.
[51] On the strength of its published 75% listing price in Ontario, Teva looked to increase its pricing in other provinces to an equivalent level. As will be seen below, this was a confounding factor in Teva’s efforts to obtain listings in those provinces. Since the Ontario |||||||||| agreement would not have been in place in the but-for world, one must consider what would have transpired in its absence. In addition, the landscape was changing in 2007, largely as a result of developments in Ontario. One must be mindful, therefore, in reconstructing the but-for world of 2006-2007, that certain real world events had not yet transpired.
[52] In my view, some real-world events in 2007 and thereafter – the impact of Bill 102, Lilly’s competitive offer to Ontario, Teva’s corresponding |||||||||| agreement, and the ongoing litigation between the parties – do not reflect the situation in the 2006-2007 but-for world.
(2) British Columbia [53] In the real world, Teva’s product was not listed in British Columbia until May 2011, almost four years after Teva obtained its NOC. Lilly argues that Teva would have experienced the same difficulties getting its BC listing even if it had obtained its NOC in 2006 instead of 2007. Accordingly, says Lilly, Teva did not experience lost sales in BC during the relevant time frame.
[54] I disagree. There were particular circumstances in 2007 that delayed Teva’s listing on the BC formulary. I am satisfied that those circumstances would not have prevailed in 2006 and, therefore, that Teva would have obtained its listing on the BC formulary fairly promptly had it obtained its NOC on March 3, 2006.
[55] Teva’s expert, Ms Jane Costaris, estimated that Teva would likely have obtained its BC listing for generic olanzapine on March 17, 2006. By contrast, Lilly’s expert, Mr Ghislain Gauthier, concluded that Teva would not have obtained its listing in BC until sometime after the liability period. On many points relating to formulary listings, I prefer the evidence of Ms Costaris who has substantial real-world experience making submissions to provincial formularies.
[56] In Ms Costaris’ opinion, in 2006, BC officials would have been keen to list Teva’s generic olanzapine quickly because doing so would have saved the province over $8 million each year given that Teva’s generic product would have been listed at 70% of the cost of Lilly’s product. In reality, as pointed out above, it actually took nearly four years to list Teva’s product. However, as Ms Costaris explained, that delay was the result of a series of special circumstances in 2007 that would not have existed in 2006.
[57] In August 2007, after Teva had obtained its NOC and while Lilly’s appeal of Justice Hughes’ decision was pending, Lilly entered into an agreement with BC to provide olanzapine at a price lower than Teva’s in order to preserve its listing. After Lilly’s appeal was dismissed, BC issued a request for proposal (RFP) in respect of olanzapine. It was the first time BC had invoked this type of procedure. Lilly succeeded on the RFP and entered into further agreements with BC. Teva did not participate in the RFP; rather, it chose to challenge the process. It did not succeed. However, on May 5, 2011, Teva’s product was ultimately listed in BC, just 16 days after it resubmitted its application.
[58] In the but-for world, Lilly would not have initiated its application to prevent Teva from obtaining its NOC. It follows that Lilly would have had no right to appeal Justice Hughes’ decision in respect of that application. Therefore, to the extent that BC officials’ concerns about the ongoing litigation between the parties under the Regulations impaired Teva’s ability to get its product listed, I must disregard them. In fact, numerous documents in evidence cited Lilly’s appeal as a significant factor standing in the way of Teva’s listing. While he had not mentioned that factor in his report, Mr Gauthier conceded its significance on cross-examination.
[59] Lilly suggests that even in the absence of proceedings under the Regulations, its infringement action, commenced immediately after Justice Hughes’ decision, would also have stood in the way of Teva’s obtaining its listing in BC. However, I see no evidence of concern on the part of BC officials about patent infringement; rather, their concerns, as expressed in correspondence with Teva, related solely to the proceedings under the Regulations – that is, whether Teva’s NOC was valid.
[60] In relation to the August 2007 agreement between BC and Lilly, Mr Gauthier stated that a similar agreement would likely have been entered into had Teva obtained its NOC in 2006. However, Mr Gauthier’s opinion was based on the precedent of a 2005 product-listing agreement (PLA) between BC and Lilly in respect of a drug called “Actos”. On cross-examination, Mr Gauthier conceded that the 2005 PLA was not an exclusive listing agreement and was therefore unlike the 2007 agreement between BC and Lilly. He also failed to consider a 2006 BC report that stated that the province had historically “not actively negotiated drug prices with manufacturers”, but would begin to do so in 2007.
[61] With respect to the RFP process, the evidence shows that this was likely a result of the introduction of Bill 102 in Ontario, which came into force on January 1, 2007. Dr Aidan Hollis, Teva’s economics expert, described the BC tender process as an unprecedented event that responded to contemporaneous developments in Ontario. BC did not invoke a RFP process in 2006 in respect of risperidone, a drug with similar uses to olanzapine, and did not rely on that type of process again until 2015. In 2007, the Competition Bureau published a report recommending alternative drug plan approaches that would save costs, and BC’s Deputy Minister of Health established a Pharmaceutical Task Force to explore various drug procurement and delivery options. These actions, according to Dr Hollis, were responsive to circumstances particular to the 2007 environment.
[62] In contrast, Dr Iain Cockburn, for Lilly, believed that the only reason Teva’s product was not listed in BC in 2007 was because of the listing agreement between Lilly and the BC government entered into in August 2007. Given that a similar agreement would likely have been achieved in the but-for world, Dr Cockburn concluded that Teva’s product would not have been listed in BC during the liability period. However, Dr Cockburn conceded that BC’s concern about the outstanding litigation between the parties was another possible, perhaps even more dominant, reason why Teva’s product was not listed promptly in that province.
[63] Looking at this evidence as a whole, I am satisfied that the real-world events that unfolded in BC in late 2007 cannot be relied on to determine what would have happened in the liability period of March 2006 to June 2007. During the relevant time-frame, BC would probably not have entered into a PLA with Lilly, had a stay placed on Teva’s listing pending the outcome of litigation, or established an RFP process for supplying olanzapine. In my view, in March 2006, BC would likely have listed Teva’s product promptly. I agree with Ms Costaris that BC would likely have listed Teva’s product on or about March 17, 2006. Mr Gauthier conceded that Ms Costaris’ estimated date was reasonable, assuming that BC and Lilly had not entered into a PLA.
(3) Alberta [64] In the real world, Teva’s generic olanzapine product was listed in Alberta on September 1, 2007, nearly three months after Teva obtained its NOC.
[65] Mr Gauthier concluded that Teva would likely have received its listing on July 1, 2006, had it obtained its NOC on March 3, 2006, a delay of about four months.
[66] According to Ms Costaris, if Teva had obtained its NOC on March 3, 2006, it would have obtained its Alberta listing about two months later, on May 1, 2006. In her opinion, generic olanzapine would have received a fast-track listing given the quantity of annual savings that the province would realize, about $5.5 million. Ms Costaris stated that generic olanzapine’s listing in the real world was probably delayed somewhat because of issues about price. However, she notes, those issues arose out of the regulatory environment in Ontario in 2007 in which