Apotex Inc. v. Merck Canada Inc.

Apotex Inc. v. Merck Canada Inc.
Court (s) Database
Federal Court Decisions
Date
2012-10-24
Neutral citation
2012 FC 1235
File numbers
T-1144-05
Decision Content
Date: 20121024
Docket: T-1144-05
Citation: 2012 FC 1235
Toronto, Ontario, October 24, 2012
PRESENT: The Honourable Mr. Justice Hughes
BETWEEN:
APOTEX INC.
Plaintiff
and
MERCK CANADA INC. and MERCK FROSST CANADA & CO.
Defendants
PUBLIC REASONS FOR JUDGMENT AND JUDGMENT
[1] This is a continuation of an action commenced by the Plaintiff Apotex in 2005 for compensation for any loss suffered by it as against the Defendants, collectively Merck, under the provisions of section 8 of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, as amended (NOC Regulations). The purpose of this present part of that action is to seek to quantify that loss. For the reasons that follow I have made findings as to the matters in controversy and ask that the accounting experts for each of the parties, on the basis of these findings, and including the matters agreed upon, collaborate to produce a final calculation as to the amount of compensation. I have asked for submissions as to costs. Following receipt of the foregoing, final Judgment will be issued.
INDEXING
[2] For convenience, the matters considered in these Reasons can be found at the following paragraphs:
LITIGATION HISTORY
Paras 3 - 8
THE ISSUES
Paras 9 - 11
THE EVIDENCE
Paras 12 - 34
THE “BUT FOR” WORLD, WHO BEARS THE BURDEN
Paras 35 - 38
WHAT IS THE RELEVANT PERIOD
Paras 39
OVERALL SIZE OF THE ALENDRONATE MARKET
Paras 40 - 41
GENERIC SHARE OF THE OVERALL ALENDRONATE MARKET
Para 42
APOTEX’S SHARE OF THE GENERIC MARKET
Capacity Motivation Formlulary Listing
Ontario Saskatchewan
Paras 43 –
Paras 45 – 47
Paras 48 – 49
Paras 50 - 69
Paras 59 – 64
Paras 65 - 69
FORMULARY LISTINGS FOR THE NOVOPHARM AND COBALT ALENDRONATE PRODUCTS
Paras 70 - 73
AT WHAT PRICE WOULD APOTEX OF SOLD ITS PRODUCT
Paras 74 - 80
DOUBLE RAMP-UP
Paras 81 - 87
DEDUCTIONS
Agreed Deductions Rebates Free Goods
Paras 88 – 104
Paras 88 – 91
Paras 92 - 101
Paras 102 - 104
INTEREST
Paras 105 - 106
CONCLUSION AND COSTS
Paras 107 - 108
LITIGATION HISTORY
[3] I will repeat what I wrote in my earlier decision in this action cited as 2008 FC 1185 at paragraphs 3 to 7:
FACTUAL BACKGROUND
3 Counsel for the parties are to be commended for co-operating in providing an agreement as to facts and documents (Exhibit 1). The Plaintiff, Apotex Inc., is what is known colloquially as a generic drug company which manufactures and markets primarily generic versions of pharmaceuticals in Canada. In the PMNOC Regulations, Apotex is referred to as a "second party". The two Merck Canadian companies Merck Frosst Canada Ltd. and Merck Frosst Canada & Co. (collectively referred to in these reasons as Merck) are the Canadian branch of a multinational organization which manufactures and markets are what are commonly referred to as "brand name" or "originator" or "innovator" pharmaceuticals and are what is referred to as "first person" under the PMNOC Regulations. Merck & Co. Inc., a United States company, was named as a party defendant in this action but shortly before trial, an Order was issued, on consent, discontinuing this action against that entity.
4 The pharmaceutical of interest in this action is a drug commonly known as alendronate which is used primarily in the treatment of osteoporosis. Merck has an interest in a patent, Canadian Patent 2,294,595 ('595) which, among other things, includes claims directed to a particular dosage regimen for the use of that known drug, alendronate, in the treatment of osteoporosis, a known use. Merck listed the '595 patent with the Minister of Health under the provisions of the PMNOC Regulations which meant that any generic seeking approval to sell a generic version of alendronate in Canada for the patented dosage regimen for the treatment of osteoporosis and wanting to take advantage of simply referencing approvals already given to Merck for that drug could file an Abbreviated New Drug Submission (ANDS). In so doing a generic is required to send a notice to Merck alleging, among other things, that the '595 patent would not be infringed or was invalid, thereby permitting Merck to commence an application in this Court to prohibit the generic from marketing its generic version of alendronate in Canada in the dosage regimen claimed in the '595 patent.
5 Merck received an NOC approving for sale its version of alendronate in Canada on February 4, 2002. Apotex filed an ANDS for alendronate on February 7, 2003 and sent a Notice of Allegation to Merck on April 14, 2003 alleging that the '595 patent was invalid for a number of reasons. On May 29, 2003, Merck & Co. Inc. and Merck Frosst Canada & Co. commenced proceedings in this Court, T-884-03, to prohibit the Minister of Health from issuing a Notice of Compliance to Apotex which otherwise would permit Apotex to sell a generic version of the alendronate drug in Canada. On February 3, 2004 the Minister send a letter to Apotex advising it that its application was approved but would be held in abeyance subject to the Court proceedings. On May 26, 2005, Mosley J. of this Court gave Reasons and an Order in T-884-03, dismissing Merck's application, finding that Apotex's allegations as to invalidity, on some but not all grounds, were justified. These Reasons are cited as 2005 FC 755. No appeal was taken. On May 27, 2005, the Minister issued a Notice of Compliance to Apotex permitting it to sell its generic version of alendronate, Apo-alendronate, in Canada.
6 On July 5, 2005, Apotex instituted this action T-1144-05 claiming recovery against Merck under the provisions of section 8 of PMNOC Regulations for the period from February 3, 2004 to May 27, 2005.
7 By Orders of this Court dated January 24, 2006 and August 14, 2008, the quantification of any amounts found to be properly recoverable in this action is a matter to be determined at a subsequent trial. The two preliminary issues previously referred to are the subject of the present trial.
[4] I delivered the following Judgment after that trial:
JUDGMENT
For the Reasons provided herein:
THE COURT ADJUDGES that:
1. Section 8 of the Patented Medicines (Notice of Compliance) Regulations SOR/93-133 as amended (SOR/98-166) effective until 2006 is:
a. within the competence of the Federal Court to hear and determine an action brought thereunder;
b. enabled by the Patent Act, R.S.C. 1985, c. P-4 as amended S.C. 1993, c. 2, s. 4; and
c. intra vires the constitutional authority of the federal Parliament of Canada
2. In this action brought under the provisions of said section 8:
a. Apotex Inc. is not entitled to elect an account or the disgorgement of the profits of the Respondent, Merck Frosst Canada Ltd. or Merck Frosst Canada & Co.;
b. Apotex Inc. is entitled to claim damages or its lost profits for the period from February 3, 2004 to May 26, 2005; and
c. Apotex Inc. is entitled to claim damages for lost sales and lost permanent market share as claimed in paragraphs 1 (a)(ii) of its Further Amended Statement of Claim dated October 6, 2008 for a period beyond May 26, 2005 provided it is shown in evidence that such loss was not rectified and could not have been rectified before that date;
3. The quantification of the damages or lost profits referred to in paragraph 2 above shall be the subject of the further trial as set out in the Order of this Court dated August 14, 2008.
Any party is entitled to seek case management by the Prothonotary assigned to this action for directions as to the procedure to be followed in respect of said trial;
4. No party is entitled to costs of this present portion of the trial of this action.
[5] Merck appealed from my Judgment and the matter was heard by the Federal Court of Appeal; which Court delivered Reasons for Judgment, cited as 2009 FCA 187. Judgment was delivered by that Court as follows on June 4, 2009:
JUDGMENT
[1] The appeal is allowed in part, paragraph 2 (c) of the judgment rendered by the Federal Court Judge is set aside, and giving the judgment which ought to have been given, it is held that Apotex’s claim for damages for lost sales and lost permanent market share must be confined to such losses which can be shown to have been incurred during the section 8 period. Costs computed at the mid-level of Column I of Tariff B are awarded in favour of the appellant.
[2] Apotex’s cross-appeal is dismissed with costs computed at the mid-level of Column III of Tariff B.
[6] Thus, the present trial came before me commencing on September 17, 2012. The parameters of the task before me are contained in paragraphs 2(b) and 2(c) of my Judgment as modified by the Federal Court of Appeal and may be restated as follows:
2(b) Apotex Inc. is entitled to claim damages or lost profits for the period from February 3, 2004 to May 26, 2005 (the section 8 period); and
2(c) Apotex Inc.’s claim for damages for lost sales and lost permanent market share must be confined to such losses which can be shown to have incurred during the section 8 period.
[7] As to liability, the parties have entered into an Undertaking whereby each of the Defendants Merck Frosst Canada & Co. and Merck Frosst Canada Ltd. have agreed that any order or judgment for monetary relief against either of them in this action may be enforced by Apotex against either of them, subject to their right to appeal or seek a stay.
[8] It must also be noted that during trial I was advised that about a year and a half ago the Defendant previously called Merck Frosst Canada Ltd. changed its name to Merck Canada Inc. I made an Order changing the style of cause to reflect this change.
THE ISSUES
[9] Having regard to my Judgment, as modified by the Court of Appeal as set out above, my task is to arrive at a calculation of the “loss suffered by Apotex” during the period from February 3, 2004 to May 26, 2005, based on a hypothetical situation that Apotex had not been impeded from entering the Canadian marketplace with its 70 mg Apo-alendronate tablets by any NOC proceedings taken by Merck.
[10] I am obliged to my colleague Justice Snider, who, in two recent decisions, Apotex Inc v Sanofi-Aventis, 2012 FC 553, and Sanofi-Aventis Canada Inc v Teva Canada Limited, 2012 FC 552, has provided a clear and useful roadmap as to how to approach such a calculation. I propose to follow, by and large, that roadmap by addressing the following issues:
a. The “But For” World, who bears the burden
b. What is the relevant period?
c. What is the overall size of the alendronate market in that period?
d. What would have been the size of the generic share of the overall alendronate market in that period?
e. What would have been Apotex’s share of that generic share in that period?
o When would Apotex have been alone in that market?
o When, if at all, would Cobalt have entered that market?
o When, if at all, would Novopharm have entered that market?
f. At what price would Apotex have sold in that market in that period?
o When the sole generic?
o When in competition with other generic(s)?
o Compensation for double ramp-up
g. What deductions, if any, should be made from the selling price?
o agreed deductions
o rebates
o free goods
§ How is pre-judgment interest to be calculated?
[11] I will first review the evidence.
THE EVIDENCE
[12] At the trial before me in September 2012, the Plaintiff Apotex provided evidence from two expert witnesses and five witnesses as to fact. Portions of the transcript and exhibits from Apotex’s discovery of Merck were entered into evidence, as well.
[13] Apotex called as expert witnesses the following two persons. Merck agreed that they could be called as experts and the parties jointly tendered in evidence their agreement as to their expert qualifications, which I repeat as follows:
a. Mr. Howard Rosen: A Senior Managing Director of FTI Consulting Inc. having offices in several places around the world. He is located in Toronto, Ontario. The parties have agreed as to his qualifications as follows:
A Chartered Accountant, Chartered Business Valuator and Certified Fraud Examiner with expertise in investigative and forensic accounting, business valuation and loss quantification in commercial and intellectual property disputes.
b. Ms. Rosemary Bacovsky: President, Integra Consulting Ltd. of Calgary, Alberta. The parties have agreed as to her qualifications as follows:
A pharmaceutical industry consultant and pharmacist with expertise in formulary listings, market access, reimbursement policies and pricing regimes of the Canadian pharmaceutical marketplace.
[14] The Plaintiff Apotex called the following five persons as factual witnesses:
a. Ms. Marlie Yoshiki: Client services, Global Operations of IMS Brogan, an organization that collects and distributes to members of the pharmaceutical community, data; including data as to the sale of pharmaceutical products in Canada.
b. Mr. Darren Hall: Vice President, Supply Operations of Apotex Pharmaceuticals, a company related to the Plaintiff. He testified as to the manufacture and capacity to manufacture alendronate tablets by his company for Apotex.
c. Dr. Bernard Sherman: Chairman of the Board of the Plaintiff Apotex. He is responsible for the overall operations of Apotex and gave evidence as to those operations, including the manufacture and sale of the alendronate product at issue.
d. Mr. David Kohler: Vice President, National Sales of the Plaintiff Apotex. He gave evidence as to the sales of Apotex products in Canada, including the alendronate product at issue.
e. Mr. Gordon Fahner: Vice President of Business Operations and Finance of the Plaintiff Apotex. He gave evidence as to the manufacture and sales of Apotex products, including the Apotex product at issue. He testified as to rebates given to Apotex’s customers.
[15] The Defendant Merck provided evidence from two expert witnesses and seven witnesses as to fact. Portions of the transcript and exhibits of Merck’s discovery of Apotex were entered into evidence, as well.
[16] Merck called as expert witnesses the following two persons. Apotex agreed that they could be called as experts, and the parties tendered into evidence their expert qualifications, which I repeat below:
a. Mr. W. Neil Palmer: President and Principal Consultant of PDCI Market Access Inc. of Ottawa, Ontario. The parties have agreed to his qualifications as follows:
Neil Palmer is a pharmaceutical industry consultant with expertise in formulary listing, market access, reimbursement policies and pricing regimes related to the Canadian pharmaceutical marketplace.
b. Mr. W. Ross Hamilton: A partner in the firm of Cohen Hamilton Steger of Toronto, Ontario. The parties have agreed to his qualifications as follows:
Chartered Accountant with a specialist designation in investigative and forensic accounting and expertise in business valuation and damages quantification in commercial and intellectual property disputes.
[17] The Defendants Merck called the following seven persons as factual witnesses:
a. Mr. Gordon Fahner This is the Apotex executive who was a witness for Apotex. He was recalled by Merck under subpoena.
b. Mr. Jeff Spencer: Vice President, Women’s Health and Diversified Brands of Merck Canada Inc. He testified as to Merck’s marketing and litigation strategy.
c. Mr. David Boughner Director, Strategic Initiatives of Teva Canada Limited (formerly Novopharm). He testified as to Novopharm’s marketing strategies.
d. Mr. Chris Ichiyen Director, Financial Management of Cobalt Pharmaceuticals Company. He testified as to Cobalt’s marketing strategy.
e. Mr. Brent Fraser: Director, Drug Processing Services, Ontario Public Drug Program. He testified as to how drugs were put on to the Ontario drug formulary.
f. Ms. Kimberley Van Wart: Consultant, Mississauga, Ontario. She was previously the President of Cobalt Canada. She testified as to Cobalt marketing and legal strategies in the 2004-2005 period.
g. Ms. Virginia Cirocco: Consultant, Mississauga, Ontario. She was an Executive Vice President of Shoppers Drug. She testified as to the purchasing practices of that organization in the 2004-2005 period.
[18] In reply, the Plaintiff Apotex recalled:
a. Mr. Gordon Fahner: He testified as to the percentage of Apotex sales to Shoppers Drug in the 2004-2005 period.
[19] I have found all of the expert witnesses to be credible. Where they differed, they did so in respect of methodology and assumptions made. Where I have preferred the evidence of one of them over the other, I have not done so on the basis of credibility, or in any sense on the basis of superior credentials. I will endeavour to state, in respect of certain of their conclusions or opinions that I prefer, to say why I have done so.
[20] With respect to the factual witnesses, I find that all but one of them is credible. I have comments as to that person and two others.
[21] Two factual witnesses who I find to be credible nonetheless cause me concern. Ms.Yoshiki and Ms. Van Wart. Some background is necessary to explain my concern. This matter was case managed. In May of this year I issued a direction that Counsel were to exchange lists of witnesses including will-says for the factual witnesses. There was to be no surprise at trial. The trial of this matter was originally scheduled to be heard in June of this year. A few days before the trial was to begin, Counsel for Merck notified Counsel for Apotex that Merck was changing its position with respect to an important factual issue; namely, the date that Merck would be alleging that a second generic, Cobalt, entered the Canadian marketplace. After a pre-trial hearing with Counsel, I adjourned the trial, on terms, to permit Apotex to explore the factual basis that Merck had for the change of position and to provide new instructions to its expert witnesses (and the same would apply to Merck). With respect to Cobalt, Merck’s Counsel provided certain information to Apotex’s Counsel as to the factual basis for Merck’s assertions as to the entry date of Cobalt into the Canadian market. That basis was the evidence to be given by Mr. Ichiyen, and certain documents were provided. Apotex conducted a discovery of Merck a few days before this trial began in September, and Merck’s Counsel gave assurances that this was all there was in respect of this matter.
[22] Mr. Ichiyen appeared as a witness for Merck at the trial before me. He was examined and cross-examined. Suffice it to say that his evidence did not turn out as Merck might have expected. He said that Cobalt would not enter the marketplace as long as there was a patent around. He was Cobalt’s auditor, but not a Cobalt executive or employee at the relevant time. I do not find anything in his evidence that would be sufficient to support Merck’s assertion as to an early entry date by Cobalt into the Canadian market.
[23] As the evidence shows, one of Merck’s Counsel, minutes after Mr. Ichiyen had given his evidence at the trial; obtained Ms. Van Wart’s email address from Ms. Cirocco, another of Merck’s witnesses who had not yet been called and contacted Ms. Van Wart to set up a meeting with her. It must be made very clear that Ms. Van Wart’s name was not on Merck’s witness list; nor was it disclosed at any time to Apotex, whether on discovery or otherwise, before the evening prior to the morning of trial when Ms. Van Wart gave her evidence. Apotex strongly objected to her appearing as a witness. I allowed her to appear, indicating that I would reserve as to admissibility of her evidence and, in any event, review the evidence with a very large measure of salt.
[24] As it turned out, Ms. Van Wart’s testimony was largely directed to an attempt to contradict Mr. Ichiyen’s evidence and to provide a picture much more favourable to Merck. Ms. Van Wart’s evidence was based on her recollection as to what might have happened some eight years ago assisted by discussions that she had a few hours previous with persons not called as witnesses and a review of documents not tendered in evidence. It became clear during cross-examination that the Canadian Cobalt company’s decisions such as whether and when to enter the Canadian marketplace, particularly when a patent might be involved, were made by those higher up the corporate ladder. The Canadian Cobalt company was a subsidiary of a European corporate structure. Ms. Van Wart had limited input into these decisions. I will admit her evidence, but will prefer that of Mr. Ichiyen. Ms. Van Wart’s evidence is insufficient to persuade me as to Merck’s position that Cobalt would have entered the Canadian market in or about November 2004, or at any time prior to the entry of Novopharm.
[25] I rebuked Merck’s Counsel at trial. The direction as to disclosure of witness names and will says was ignored. A delay of several months in the date set for the hearing of the trial was provided but seemingly did not assist in the preparation of the case. Days before this trial began Merck’s Counsel, on discovery, gave assurances that there would be nothing more presented at trial.
[26] I must add that my remarks in no way should be taken to reflect upon the character of Ms. Van Wart. She retired from Cobalt some time ago, and has a consulting business. She was contacted the night before she appeared. Her memory was refreshed by speaking to persons who did not appear as witnesses, and in reviewing documents not produced at trial. A contact was arranged through Ms. Cirocco, but nonetheless came out of the blue as far as Ms. Van Wart was concerned. She seemed to be perplexed and uncertain as well she might be, as to what was going on.
[27] I also have concerns about the evidence of Ms Yoshiki. Her name was not on Apotex’s witness list, nor was a will-say provided. In this case however Merck did not object to her being called as a witness. She did not contradict the evidence of another witness. She provided information as to data was collected by an organization known as IMS Brogan, in particular Canadian Drug Store Hospital Audit known as CDH. The accounting experts for each of the parties referred to this data. Unlike Ms. Van Wart her evidence was not an endeavour to impeach a party’s own witness. I accept her evidence and find it credible.
[28] The third factual witness, about whom I have concerns, is Ms. Cirocco. She graduated from university as a pharmacist. She joined Shoppers Drug Mart in 1995 and retired from a position as Senior Vice President of Pharmacy and Corporate Affairs in 2009 to do what she described as volunteer community work and consulting. Although she was apparently subpoenaed, she was in fact retained by Merck’s solicitors as a consultant. For instance, she was the person who quickly obtained Ms. Van Wart’s email address.
[29] Ms. Cirocco testified principally as to the rebate programme instituted by Shoppers Drug Mart, whereby Shoppers would more or less insist wherever possible that generic drug suppliers such as Apotex provide by way of a rebate, a percentage of the money paid by Shoppers to purchase drugs from the drug supplier. Her evidence in this regard went well beyond her will say as provided by Merck’s Counsel to Apotex’s Counsel, particularly in a critical area as to the size of the rebate. Her evidence in this regard was unsupported by any document or other evidence.
[30] The evidence shows that Apotex’s Counsel, when her name was disclosed to them by Merck’s Counsel in June, attempted to contact Ms. Cirocco with a view to discussing her possible evidence in the case. This is quite proper; there is no property in a witness. Ms. Cirocco played a game of cat and mouse, through emails, with Apotex’s Counsel. She insisted that they disclose a list of questions they might ask. They did so, by email. She did not communicate with them any further and never met with them. That is her prerogative; however, it indicates a lack of candour and a willingness to play games.
[31] Further, it appears that Ms. Cirocco was disciplined for professional misconduct in 2004 by the Ontario College of Pharmacists. She frankly admitted to this when asked in cross-examination. Merck’s Counsel went through an extremely lengthy examination in chief as to Ms. Cirocco’s background and activities in the pharmaceutical field, and never touched on this aspect. He did so in reply but only because the matter had been raised in cross-examination.
[32] It appears that, according to Ms. Cirocco, Shoppers was accepting rebates as high as sixty percent (60%) in about the relevant period. The Ontario government had passed legislation in 2006/7 intended to curb rebates at twenty percent (20%). It appears from Ms. Cirocco’s evidence that her company had what she described as “private business” in “various places” that apparently continued to receive those larger rebates.
[33] In all, I am quite sceptical as to Ms. Cirocco’s evidence. It deals with the rather murky business of rebates. She provided no candid illumination in this area. She offered that Shoppers was getting rebates of up to sixty percent (60%) This statement, if true, is important. It was not disclosed by Merck in a pre-trial will say or otherwise. It is unsupported by any other evidence. This number was never put by Merck’s Counsel in cross-examination of any Apotex witness, including Mr. Fahner, who appeared again as a witness in reply after Ms. Cirroco had given her evidence.
[34] I will not accept Ms. Cirocco’s evidence on any point unless it is clearly supported by other credible evidence.
THE “BUT FOR” WORLD, WHO BEARS THE BURDEN
[35] The Court is required to consider what would likely have been the case had Apotex not been prevented from entering the Canadian marketplace with its generic 70 mg Apo-alendronate tablets. It was prevented from doing so because Merck had instituted and prosecuted through to a judgment unfavourable to it, proceedings under the NOC Regulations. Therefore, the Court is to determine, as best it can, a hypothetical question: What would have been the case “but for” those proceedings?
[36] In entering the “but for” world, the Court is to be mindful as to who bears what burden. Both parties have cited and relied on what I wrote at paragraph 35 of my decision in Apotex Inc v AstraZeneca Canada Inc, 2012 FC 559; therefore, I repeat it:
35 In brief, it may be said that the party who has led sufficient evidence to put an issue "in play", must, to succeed on that issue, put in sufficient evidence so that on the balance of probabilities, the relevant facts are accepted by the Court as having been proved. Thus Apotex must put in play and subseqtently prove on the balance of probabilities the facts that it needs to establish its case for compensation. AstraZeneca must put in play and subsequently prove those facts that it asserts disqualifies Apotex or reduces or negates Apotex's claim for compensation.
[37] Also, both parties have cited and relied upon the decision of the Supreme Court of Canada in Athey v Leonati, [1996] 3 SCR 458, at paragraphs 26 and 27, which I repeat:
26 The respondents argued that the trial judge's assessment of probabilities in causation was similar to the assessment of probabilities routinely undertaken by courts in adjusting damages to reflect contingencies. This argument overlooks the fundamental distinction between the way in which courts deal with alleged past events and the way in which courts deal with potential future or hypothetical events.
27 Hypothetical events (such as how the plaintiff's life would have proceeded without the tortious injury) or future events need not be proven on a balance of probabilities. Instead, they are simply given weight according to their relative likelihood: Mallett v. McMonagle, [1970] A.C. 166 (H.L.); Malec v. J. C. Hutton Proprietary Ltd. (1990), 169 C.L.R. 638 (Aust. H.C.); Janiak v. Ippolito, [1985] 1 S.C.R. 146. For example, if there is a 30 percent chance that the plaintiff's injuries will worsen, then the damage award may be increased by 30 percent of the anticipated extra damages to reflect that risk. A future or hypothetical possibility will be taken into consideration as long as it is a real and substantial possibility and not mere speculation: Schrump v. Koot (1977), 18 O.R. (2d) 337 (C.A.); Graham v. Rourke (1990), 74 D.L.R. (4th) 1 (Ont. C.A.).
[38] I emphasize the last sentence of that decision; the hypothetical possibility must be real and substantial not mere speculation. Put another way, the possibility must be realistic and not simply hopeful.
WHAT IS THE RELEVANT PERIOD
[39] This period has already been determined by this Court and affirmed by the Federal Court of Appeal. It is from February 3, 2004 to May 26, 2005. The parties have agreed that the accountants should pro-rate the compensation over precisely those dates.
OVERALL SIZE OF THE ALENDRONATE MARKET
[40] The parties are agreed that the size of the total market for 70 mg alendronate tablets during the relevant period is to be the quantity as sold by Merck, the only authorized person in the real world who sold that product in that period.
[41] I should add that others, including Apotex, Novopharm and Cobalt, were selling alendronate tablets in other strengths, 5 mg and 10 mg tablets, during at least a portion of that period. To some extent, the experts have used sales of these tablets as models or proxies for their opinions. The difference between these tablets and the 70 mg tablets appears to be that the 70mg tablets are intended for “once a week” administration.
GENERIC SHARE OF THE OVERALL ALENDRONATE MARKET
[42] The parties have agreed that the share of the alendronate market that would have been occupied by the generics in the period in question; that is, the share in the “but for” world, is the same as the share occupied by the generics in the subsequent “real world” period.
APOTEX’S SHARE OF THE GENERIC MARKET
[43] To answer this question, two matters must be addressed. First, when would Apotex have entered the market in the “but for” world. Second, when would one or other of the two generics, Cobalt and Novopharm, have entered that market in the relevant period, if at all.
[44] The question as to when a generic would have entered the marketplace must be answered in several parts. First one has to establish when the generic would have received its Notice of Compliance (NOC). Another part is whether the generic had the capacity to manufacture or acquire the product in the relevant time. Another part is whether the generic was motivated or dissuaded from entering the marketplace during the relevant period. The final part is when, if at all, the product would have been accepted by the relevant branch of the provincial or territorial governments for listing in a formulary; which listing would permit the product to be sold in that province in significant quantities.
1. Capacity
[45] I find on the evidence, particularly of Mr. Hall, that Apotex had the ability to manufacture 70 mg alendronate tablets in a quantity sufficient to fill the market in the relevant time period. This is supported by the fact that as soon as Apotex did receive its NOC in the “real world”, sufficient quantities appeared on the market very quickly. This matter was not seriously contested by Merck.
[46] I find in considering the evidence of Mr. Ichiyen and Ms. Van Wart, that I do not have enough evidence to persuade me that Cobalt had sufficient resources available to it in the “but for’ period to make or obtain the product. Neither of them had first-hand knowledge that would support such a conclusion.
[47] As to Novopharm, I find on the evidence of Mr. Boughner that he did have first-hand knowledge of the relevant facts. He testified that Novopharm had the ability to acquire from a related company abroad, sufficient quantities of alendronate product to supply the market in the relevant time period.
2. Motivation
[48] I find that both Apotex and Novopharm would have entered the market during the “but for” time period had each of them received an NOC. Both Dr. Sherman and Mr. Boughner testified as to this. No serious challenge was raised in respect of this testimony.
[49] The matter is different with respect to Cobalt. Mr. Ichiyen testified that Cobalt would not have launched a product while a patent was in place. Ms. Van Wart’s testimony related only to a situation where no patent was in place. I find that, in the relevant period, since Merck still had a patent in place, Cobalt would not likely have been motivated to launch a product.
3. Formulary Listing
[50] It is common ground that a pharmaceutical product such as tablets containing an active ingredient such as alendronate cannot be sold commercially in Canada until the distributor has received from the federal Minister of Health a Notice of Compliance (NOC). It is also common ground that, even though a distributor has received an NOC, the product generally cannot be sold in any reasonable commercial quantities in any province of Canada until it has been listed on what is called a formulary, by the relevant provincial Ministry. Thus, when considering when a product could have been sold in Canada, an important date is the date that the product would have been listed on the relevant provincial formulary.
[51] It is common ground that, in general, the first generic version of a drug listed on a provincial formulary during the period in question here, 2004 and 2005, would have been sold at a price established at seventy percent (70%) of the price established for the previously listed branded product. In argument Apotex’s Counsel urged that the price would have been greater. I will address this matter later. It is further agreed that when one or more generics subsequently enter the marketplace, the price of all generics will drop to sixty-three percent (63%) of the brand listed price. Therefore, it is important in this case to determine the period for which Apotex’s 70 mg alendronate product would have been the exclusive generic, and the period for which it was no longer the exclusive generic.
[52] In discussing price in this context, I am not considering the issue of rebates which I will discuss elsewhere.
[53] Each of the parties provided expert evidence as to the dates, in the relevant period, when Apotex would, in their opinion, have been listed on the provincial formularies and when the products of competitor generics, Novopharm and Cobalt, would have been so listed.
[54] These experts, Ms. Bacovsky for Apotex, and Mr. Palmer for Merck; are agreed as to twenty-three of those dates, and disagree as to seven. I set out Table 1 of Mr. Palmer’s Supplementary Report of September 10, 2012 at paragraph 33, which lists all of the dates and highlights those in disagreement.
[55] Ms. Bacovsky set out the dates which were in disagreement at Table 1 of her Responding Expert Report dated September 16, 2012, paragraph 3, as follows:
[56] The accounting experts, Mr. Rosen for Apotex, and Mr. Hamilton for Merck, have used these listing dates in their calculations. Thus, it is necessary to resolve the disagreements.
[57] Fortunately, the parties have agreed that while several of these dates are in disagreement, the disagreement makes no material difference to the final calculation of a quantum. Further, the parties have agreed that “but for” sales in Canada’s territories may be added in to the quantum.
[58] In the result, the “but for’ entry date for Apotex’s product remains in dispute in respect of two provinces only; Ontario and Saskatchewan.
a. Ontario
[59] Ms. Bacovsky’s opinion is that Apotex’s product would have been listed on the Ontario formulary on April 6, 2004. Mr. Palmer’s opinion is that it would be listed on July 20, 2004. Much of the bases for the differences in these opinions lies in their respective views as to the Ontario “fast track” programme in place at about the relevant period and whether the Apotex product, had it received its NOC in early February 2004, would have been placed on that fast track.
[60] Merck called the evidence of Mr. Fraser, who was a senior official with the relevant Ontario ministry at the time. I accept his evidence as credible and authoritative as to what transpired in the Ontario Drug Benefit Program (ODB), the relevant department at the time.
[61] Mr. Fraser stated that, in general, the ODB had a continuous programme for the review of drugs sought to be listed on the formulary. Those that had received an NOC as approved generic equivalents of drugs already approved on the formulary received faster treatment. Once approved by ODB, the matter was passed up for approval by cabinet. Delays could occur if cabinet was not meeting within the next while or if the matter could not be reached on the cabinet agenda. His department established internal cut-off dates, not generally known to the public, as to when material respecting various drugs would be bundled together to be forwarded for cabinet approval. In the period in question a cut-off date of December 31, 2003 was established so that any new drugs submitted for approval as of that date would be bundled and forwarded for cabinet approval in April 2004. He testified that any submission received after December 31, 2003, such as February 2004, would not have been eligible for inclusion in the April 2004 bundle previously sent to cabinet.
[62] Ms. Bacovsky’s opinion leading to an approval date of April 6, 2004 was based on her reading of a recital of evidence given in Reasons for Judgment in a decision given by Justice O’Driscoll of the Ontario Superior Court of Justice in Apotex Inc v Minister of Health, Court File 157/04, et al, April 27, 2004, involving the drug citalopram. In that case, a submission for listing on the formulary made by another generic in December 2003 was included in the April 2004 bundle, but Apotex’s submission made in January 2004 was not. This is consistent with Mr. Fraser’s evidence that a submission filed after the end of December 2003, namely in February 2004, would not have been included in the bundle sent to cabinet for approval in April. It would have been put in a later bundle.
[63] When asked in cross-examination whether Mr. Fraser’s evidence (which had not yet been given) that December 31, 2003 was a hard cut-off date would have changed her opinion, Ms. Backovsky paused and said only that Mr. Fraser was not senior enough in the decision making process. I find that he was senior enough and that his factual evidence is to be preferred to Ms. Bacovsky’s opinion evidence.
[64] Mr. Palmer’s opinion is based on the assumption, borne out by Mr. Fraser’s evidence, was that July 20, 2004 was the more likely date for listing of the Apotex product on the Ontario formulary. I agree with that opinion and so find that the relevant date for the listing of the Apotex 70 mg. tablets on the Ontario formulary in the but-for world is July 20, 2004.
b. Saskatchewan
[65] It is Ms. Bacovsky’s opinion that Apotex’s product would have been listed on the Saskatchewan formulary on March 1, 2004. Mr. Palmer’s opinion if that the listing would have taken place April 1, 2004. Apparently, there is no middle ground; it is one date or the other.
[66] Ms. Bacovsky used ciprofloxacin as the criterion for the speed of listing a product in Saskatchewan. Here, her opinion was that listing could be achieved in less than a month.
[67] Mr. Palmer’s opinion was that a drug submitted for listing in February 2004 would more likely be processed and listed in the month of April, not March. He stated that ciprofloxacin was a special case where listings were expedited because of a perceived fear of an anthrax outbreak. The time period for listing, in his opinion, is consistent with listings of other drugs such as ramapril.
[68] I accept Mr. Palmer’s approach. It is more consistent with a realistic estimate as to a listing date than with the more hopeful approach of Ms. Bacovsky.
[69] The list