Apotex Inc. v. Canada

Apotex Inc. v. Canada
Court (s) Database
Federal Court Decisions
Date
2014-11-18
Neutral citation
2014 FC 1087
File numbers
T-1930-98
Notes
A correction was made on April 21, 2015
Decision Content
Date: 20141118
Docket: T-1930-98
Citation: 2014 FC 1087
BETWEEN:
APOTEX INC.
Plaintiff
And
HER MAJESTY THE QUEEN
Defendant
REASONS FOR JUDGMENT
HUGHES J.
[1] Apotex filed a submission with Health Canada on January 25, 1988 for approval to sell a generic version of a trazodone (sometimes called trazadone) drug in Canada. Seven years later, after much correspondence, telephone conversations, meetings, the institution of two lawsuits – including one resulting in a decision by this Court – and a settlement agreement, Apotex received that approval in February 28, 1995. By that time, two generic competitors had already received approval to sell their versions of that drug in Canada.
[2] In October 1998, Apotex commenced this action for damages, including punitive damages, based upon multiple causes of action, including negligence, breach of a settlement agreement, misfeasance in public office, and misrepresentation, whether negligent, fraudulent or innocent. The Defendant, Her Majesty the Queen, has vigorously defended this action, including asserting that the claims are barred by limitation periods and statute; that Apotex has repudiated the settlement; that there was no duty of care owed and that Apotex did not mitigate its damages.
[3] For the reasons that follow, I find that Apotex is entitled in tort to damages but was required to mitigate those damages. The extent of those damages will be assessed at a later trial.
[4] The following is an index, by paragraph number, to these Reasons:
TOPIC
PARAGRAPH NUMBER
The Parties
5 and 6
The Evidence
7 to 13
Obtaining Drug Approval in Canada – 1988 to 1995
14 to 20
Usual Practices of Health Canada – 1988 to 1995
21 to 23
Innovator Filings
24 and 25
Generic Filings
26 to 33
Apotex’s Submission for an NOC – If A = B, and B = C, it follows that A = C
34 to 37
Apotex Files its Submission – Battle Lines are Drawn
38 to 48
Judicial Review #1: T-2276-90
49 and 50
Settlement Agreement
51 and 52
Ensuing Matters – Not All is Well
53 to 60
Judicial Review #2: T-1877-91
61 to 63
Apotex Mitigates on Apo-Zidovudine
64 to 66
Back to Judicial Review #2: T-1877-91
67 to 69
Justice MacKay’s Findings
70 and 71
After Justice MacKay’s Decision
72 to 89
What Does this Court Make of the Activity of Apotex and HPB Post the Decision of Justice MacKay?
90 to 97
After Apotex Got Its NOC
98 to 101
My Overall View of the Matter
102 to 108
Issues
109 to 111
Misfeasance in Public Office
112 to 119
Negligence
120 to 131
Misrepresentation
132
Breach of Contract – the Settlement Agreement
133 to 135
Limitation Period
136 to 143
Repudiation
144 to 146
When Do Apotex’s Damages Begin to Accrue
147 to 149
Mitigation
150 to 163
Punitive Damages
164 to 167
Conclusion and Costs
168 to 170
SCHEDULE A
The Parties [5] The Plaintiff Apotex Inc. is an Ontario corporation, having its head office in the City of Toronto. Apotex carries on business principally as a manufacturer of generic prescription pharmaceutical products for sale in Canada and elsewhere.
[6] The Defendant Her Majesty the Queen represents the Minister of Health and officials of the Ministry within the Health Protection Branch (HPB), responsible for examining pharmaceutical products before they are permitted to be sold or distributed in Canada for the purposes of determining safety and efficacy of those products, all as more particularly provided for in the Food and Drugs Act, RSC 1985, c. F-27 (FDA) and Food and Drug Regulations, CRC, c. 870, under that Act. Throughout the period of time relevant to this action, essentially 1988 to 1995, the HPB was organized and re-organized within a Drug Directorate (DD) and various Divisions and Bureaus of that Directorate.
The Evidence [7] I commend Counsel for each of the parties for their co-operation in organizing the evidence and presenting it in an efficient manner. They agreed upon a large number of documents, which were produced in evidence without requiring formal proof of each and every one. Exhibit 1, which comprised four large volumes of documents – each identified with a numbered tab – were admitted into evidence by agreement, the full extent of which agreement is set out in Exhibit 4, but essentially provides that these documents will be received in evidence as being sent or authorized by the persons indicated on their face and received by persons so indicated on or about the date apparent from the document. The truth of the contents was not admitted. A further single document, Exhibit 8, was admitted in evidence under the same terms.
[8] Also provided were books containing certain documents filed with the court in Judicial Review proceedings instituted by Apotex in this Court, T-2276-90 (Exhibit 2) and T-1877-91 (Exhibit 3).
[9] Certain facts admitted by the parties for purposes of this action were set out in Exhibit 5.
[10] The parties each submitted a booklet containing excerpts from the examination for discovery of the opposite party, which were deemed to have been read into evidence. The excerpts of the examination of the Defendant are found in Exhibits 14 and 21; and that of the Plaintiff in Exhibit 16.
[11] The Plaintiff Apotex called one fact witness and one expert witness in chief both of whom were examined and cross-examined. No witness was called in reply. Called were:
• Dr. Bernard Sherman, Toronto, Ontario, as a fact witness. He founded Apotex in 1977 and has been the controlling mind of that corporation ever since whether as President or as Chairman. He was personally involved in most of the events pertinent to this case from the Apotex side of things.
• Dr. Arthur H. Kibbe, Clarks Summit, Pennsylvania, as an expert witness. His qualifications are set out in an agreed statement provided on behalf of Counsel for each of the parties and marked as Exhibit 11. It says:
Expert in pharmaceuticals (pharmaceutical dosage form design, development and manufacture), pharmacokinetics, pharmaceutical excipients, the evaluation of the physical and chemical composition and therapeutic equivalence of formulations.
[12] The Defendant, Her Majesty, called six fact witnesses and one expert witness. Called as fact witnesses, all of whom were examined and, except for Dr. Simon, cross-examined, were:
• Dr. Craig Simon, Ottawa, Ontario. Associate Director, Bureau of Pharmaceutical Studies. He did not join the organization until after 1995 and could only provide general information as to the period in question, 1988 to 1995. He was the person offered by the Defendant for discovery.
• Mike Ward, Ottawa, Ontario. Manager, International Programs, International Programs Division, Bureau of Policy, Science and International Programs Canada.
• Bruce Rowsell, Russell, Ontario. Retired, Former Director, Bureau of Pharmaceutical Surveillance.
• Dann Michols, Elgin, Ontario. Retired, Former Executive Director, Drugs Directorate and Former Assistant Deputy Minister, Health Canada.
• Mary Carman, Ottawa, Ontario. Retired, Former Director, Bureau of Nonprescription Drugs. During part of the relevant period, she was Mary Carman Kasparek.
• Dr. Wayne Nitchuk, Ottawa, Ontario. Retired, Former Acting Chief, Division of Biopharmaceuticals Evaluation, Bureau of Pharmaceutical Surveillance.
[13] Called as an expert witness for the Defendant was:
• Dr. Isadore Kanfer, Toronto, Ontario. Emeritus Dean and Professor, Faculty of Pharmacy, Rhodes University, South Africa. He was examined and cross-examined. His qualifications are set out in an agreed statement provided on behalf of Counsel for each of the parties and marked as Exhibit 17:
Dr. Kanfer is an expert in the bioavailability and bioequivalence of drug products, including the scientifically valid methods for demonstrating bioavailability and bioequivalence, and the design, methods, Use (or application) of comparative dissolution studies in demonstrating bioavailability and bioequivalence. He is also an expert in biopharmaceutics.
Obtaining Drug Approval in Canada - 1988 to 1995 [14] In the period from 1988 to 1995 and up to today, approval from the Minister of Health was and is required before a drug could be sold or distributed in Canada. That approval took the form of a Notice of Compliance (NOC) issued by the Minister. The Minister’s officials were required to abide by the terms of the Food and Drug Act and Regulations, supra. In addition, the Minister periodically published Guidelines and policy statements which did not have the force of law, but were intended to provide guidance to those seeking approval, and the Minister’s officials.
[15] In the present case, we are dealing with the period from 1988 to 1995. In late 1995, substantial amendments were introduced, which affect current practice, but not the practice during the relevant time period.
[16] The overriding concern of the Minister is that drugs provided to Canadians should be safe and effective for the intended purpose. A party seeking approval for a drug not previously sold in Canada - often called an innovator - is required to provide sufficient information, usually including extensive clinical studies, to satisfy the Minister as to safety and efficacy of that drug for the stated purpose. This is expensive and time consuming.
[17] A second party – often called a generic – who wished to sell or distribute that drug in Canada, could avoid the provision of clinical studies, provided that it could demonstrate to the Minister’s satisfaction that its drug was sufficiently similar (and I use those words advisedly, because words such as identical and equivalent are important in this case) pharmaceutically and by way of bioavailability, so as to be a satisfactory substitute for the innovator’s drug.
[18] I adopt and accept certain of the definitions given by the Defendant’s expert, Dr. Kanfer, in his Report, Exhibit 18, in this regard:
Bioavailability
Bioavailability refers to the rate and extent to which the API (active pharmaceutical ingredient)t, or its AM ( therapeutic active entity) (substance), is absorbed from a pharmaceutical produce (dosage form) and becomes available at the site of action or biological fluids (plasma, serum or blood), representing the site.
Bioequivalence
Two pharmaceutical (medicinal) products are bioequivalent if they are pharmaceutically equivalent and if their bioavailabilities in terms of the peak drug concentration in blood, serum or plasma (Cmax) and time to reach the peak (Tmax) and extent of absorption or total exposure expressed as the area under the drug concentration versus time profile (AUC) after administration of the same molar dose under the same conditions are similar to such a degree that their effects with respect to safety and efficacy can be expected to be essentially the same. The U.S.A’s definition is:
...the absence of a significant difference in the rate and extent to which the active ingredient becomes available at the site of action when administered at the same molar dose under similar conditions in an appropriately designed study.
Pharmaceutical equivalent
Pharmaceutical products are pharmaceutically equivalent if they contain the same amount of the same API (active pharmaceutical ingredient) in the same dosage form, if they meet the same or comparable standards, and if they are intended to be administered by the same route.
It is important to note that pharmaceutical equivalence does not necessarily imply bioequivalence as differences in the excipients (inactive ingredients Used as formulation adjuncts) and/or the manufacturing process can lead to changes in drug release and/or absorption.
The U.S.A FDA’s definition is:
...drug products that contain the identical amounts of the identical active drug ingredient in identical dosage forms, but not necessarily containing the same inactive ingredients, and that meet the identical compendia or other applicable standard of identity, strength, quality, and purity, including potency and where applicable, content uniformity, disintegration times and/or dissolution rates.
Therapeutic equivalence
Two pharmaceutical products are therapeutically equivalent if they are pharmaceutical equivalents and, if they can be expected to have the same clinical effect and safety profile when administered to patients under the conditions specified in the labelling. Pharmaceutically equivalent products that are bioequivalent can be substituted for each other with the full expectation that the substituted product will produce equivalent clinical effects and safety profile as the original product.
[19] The history of the use of bioequivalence by a generic as a substitute for clinical studies was discussed by Dr. Kanfer at paragraphs 15 and 16 of his Report:
15. Generic medicines contain the same active pharmaceutical ingredient(s) (API) as the innovator product, where previously the innovator has shown their prescribable product to be safe and efficacious based on clinical data from their initial clinical studies in humans. During the ‘70s the U.S. FDA decided that it was unnecessary for pharmaceutical companies seeking approval for generic products which contained identical active ingredients previously approved as safe and effective by the innovator companies to duplicate those initial clinical safety and efficacy studies. However, in lieu of those clinical studies in patients, a surrogate method known as comparative bioavailability (BA) or Bioequivalence (BE) studies comparing the genetic (TEST or “T”) product with the approved product of original research (REFERENCE or “R”) was introduced. This method focuses on the process by which the active ingredient is released from a dosage form and move(s) to the site of action.
16. Such surrogate measures are justified by the presumption that concentrations of drug in the blood stream reflect concentrations at site(s) of action and that a relationship between the resulting systemic drug concentrations and the safety and efficacy of the drug is implied. Such studies circumvent the need to re-do time-consuming and costly studies in patients and involve an indirect measure of safety and efficacy where the concentration of the API in the blood of healthy human volunteers is measured following administration of the T and R products, each on different occasions in the same healthy human subjects. In other words, each subject receives both the T and the R product on different occasions and blood samples are collected at various intervals of time and analysed for the API. The resulting data are then Used to generate drug concentration profiles where the concentrations of drug are plotted versus time and the profiles resulting from the T and R are compared and assessed for equivalence, i.e. BE. The figure below is an example of a typical profile and associated parameters which are used to assess BE.
[20] On occasion, a generic would offer evidence as to the dissolution rates of its drug as evidence of or in support of other evidence as to bioequivalence. A tablet would be dissolved in a liquid such as water, at different pH levels – and the dissolution over certain periods of time would be measured and often plotted on a graph. The drug at issue here was described as quick-dissolving, as it would be 95% dissolved within 15 minutes in water or 0.1 pH water solution. The acceptance of dissolution data in the circumstances of the present case was controversial.
Usual Practices of Health Canada – 1988 to 1995 [21] The Health Protection Branch (HPB) is the name generally used in these proceedings to indicate that branch of the Ministry of Health responsible for receiving and reviewing applications for a Notice of Compliance and issuing that Notice if the application were to be approved.
[22] Evidence was given by Dr. Simon and other witnesses for the Defendant as to the general practices followed by HPB in this process in the period from 1988 to 1995. An application would be received and given a brief review to ensure that the requisite documents, fees and so forth were provided. If that proved to be the case, a filing date would be assigned. Submissions would be examined in the order as received. There was a substantial backlog and significant delays in processing applications.
[23] If a file was examined and, if not found to be unsatisfactory, a letter would be sent to the applicant pointing out deficiencies, requesting further information, and so forth. The file would be put away and not looked at again until HPB received all the information requested and all deficiencies addressed. Only then would the file be looked at again and only in sequence having regard to other files requiring examination. It was a tedious practice. It appears that the quickest that a generic could expect approval and an NOC was one to two years from the date of original filing.
Innovator Filings [24] An innovator drug company, a name used to describe the company first to seek approval from HPB to sell a drug in Canada, was usually required to file data, including not only pharmaceutical information as to its drug; but in vitro (in glass – laboratory) testing, and in vivo (rats, etc) testing, and clinical testing on humans, of its drug. Where the drug was obtained from a manufacturer outside Canada who had already obtained approval from the country of manufacture, such as the United States, where there were rigorous drug approval studies conducted, HPB would accept data as submitted; for example, to the United States Food and Drug Administration, in respect of that drug.
[25] It was a policy of HPB not to look at the data submitted by the innovator for purposes of evaluating a submission by a generic who subsequently sought approval for the same drug. The generic could “reference” that data in the sense that approval had already been given by HPB, but HPB would not actually look at the data itself in the course of evaluating the generic’s application. This policy does not appear to have a basis in law, as there is no provision in the Food and Drug Act or Regulations dealing with this matter.
Generic Filings [26] It was a usual practice in the 1988 to 1995 period for a generic to test its product as against the innovator’s product as approved in Canada for bioavailability (i.e. blood sampling over intervals). However, this was not an invariable practice. As the Agreed Facts (Exhibit 5) state, and the evidence of Dr. Sherman and several of the fact witnesses of the Defendants shows, there were at least a few instances where a product that had been approved for sale and sold in another country, such as the United States, was accepted during the period at issue as a reference product instead of a Canadian product. No clear or consistent reason for accepting a foreign reference product is apparent.
[27] The “policy” of Health Canada in respect of the use of a Canadian or foreign drug product as the reference product has a murky history.
[28] Guidelines dated February, 1981 (Exhibit 1, Tab 2) published by the Health Protection Branch, state at page 4, only:
…the bioavailability of the new generic drug product is compared to that of an acceptable standard…
No definition of an “acceptable standard” was provided.
[29] It appears that in the 1980’s, there was some general understanding, at least within HPB, that a Canadian reference product was required. This understanding was not reduced to writing until a Memorandum was created by the Director General, Dr. Somers, on June 23, 1989 (Exhibit 1, Tab 28), which stated:
STANDARD FOR COMPARATIVE BIOAVAILABILITY AND COMPARATIVE PHARMACEUTICAL STUDIES
In conformity with past Directorate practices, I wish to reiterate that New Drug Submissions (NDS) for ‘generic’ or synonym drug products should contain appropriate, adequate and validated data on comparative bioavailability studies.
Such comparative studies should be performed by the use of the corresponding currently marketed Canadian drug formulation as the essential reference standard.
[30] It appears that this Memorandum was never released to the general public although Apotex was given a copy on November 30, 1988.
[31] Some time in 1992, HPB published a “Guidance for Industry” concerning the Conduct and Analysis of Bioavailability and Bioequivalence Studies (Exhibit 10). It is a 49 page document which provides, at page 15:
5.3 Selection of Reference Product
For a new drug substance (i.e., the first market entry), an oral solution should be used as the reference product when possible. The oral solution can be prepared from an intravenous solution, if available.
In bioequivalence studies, the reference product is:
A drug product that has been issued a notice of compliance pursuant to section C.08.004 of the Food and Drug Regulations, and is currently marketed in Canada by the innovator, or
a drug product acceptable to the Director.
[32] There is no guidance as to what might constitute “a drug product acceptable to the Director”.
[33] It must be made clear that neither the “policy” nor the “Guidance” respecting a suitable reference product is to be found in the Food and Drug Act or Regulations.
Apotex’s Submission for an NOC – If A = B, and B = C, it follows that A = C [34] On January 25, 1988, HPB received a submission from Apotex for a Notice of Compliance for a drug it called Apo-Trazad (later called Apo-Trazadone), in both 50 mg and 100 mg tablet form. It was a generic form of tablets containing the drug trazodone as the active ingredient.
[35] Apotex stated that its products would be manufactured in the United States by a company owned by it; Barr Laboratories. Apotex stated that Barr had obtained approval from the relevant United States authorities to sell its drug in the United States by providing data comparing the Barr drug to a drug called Desyrel, approved for sale and sold in the United States by an innovator company, Mead Johnson. Apotex provided a letter dated December 22, 1987, from Bristol the Canadian company who had received approval to sell the Desyrel product in Canada from Health Canada, Bristol, to a Canadian doctor, Dr. Rein. The letter said that the Canadian and United States Desyrel products were identical. In other words, in respect of a reference product, Apotex submitted that it would be selling the Barr product in Canada, that the United States authorities had approved the Barr product using the United States Desyrel product as a reference and, given that the Canadian and Untied States Desyrel products were identical, Apotex should be permitted to use the same bioavailability studies relied upon by Barr in its United States application in Apotex’s Canadian application.
[36] Some seven years later, after voluminous correspondence, many meetings and telephone calls, two judicial reviews having been instituted and one of them decided by this Court, and a purported settlement along the way, Apotex got its Notice of Compliance on February 28, 1995. The parties have admitted that two of Apotex’s competitors, Pharmascience and Novopharm, had received Notices of Compliance for their generic trazodone tablets before Apotex did.
[37] It is useful to tabulate some of the more relevant documents and events provided in evidence. I attach this as Schedule A.
Apotex Files its Submission – Battle Lines are Drawn [38] Apotex’s submission for a Notice of Compliance for its Apo-Trazad 50 mg and 100 mg tablets was received by HPB on January 25, 1988 and received a preliminary screen. By letter dated April 25, 1988, HPB advised Apotex that the material would be reviewed “as soon as possible”.
[39] The next substantive matter occurring within HPB was at a high level when the Director of the Bureau of Human Prescription Drugs, Dr. Johnson, sent a memorandum to the Director General of the Drugs Directorate, Dr. Somers, which clearly draws the lines that have been followed throughout the history of this matter: namely, on the basis of science alone, Apotex’s submission makes sense; the decision to be made is one of policy. It is worthwhile repeating this memorandum received January 30, 1989 (Exhibit 1, Tab 21):
NEW DRUG SUBMISSION FOR APO-TRAZAD – APOTEX INC.
Apotex filed a New Drug Submission for Apo-Trazad on January 25, 1988, for the purpose of obtaining clearance for marketing the first generic Trazodone product.
Trazodone is an antidepressant drug marketed for a number of years in this country by Bristol Labs.
As you are aware, generic manufacturers usually supply bioavailability data as evidence of the safety and efficacy off their product. In this particular situation, Apotex would be expected to provide in their submission evidence of the bioequivalence of their product as compared with that of the innovator’s brand marketed in Canada under the trade name of Desyrel. A preliminary review of the Apotex Submission, indicates that they have provided instead the results of a bioavailability study comparing the Trazodone product manufactured by Barr Laboratories in the U.S., with the standard innovator’s brand manufactured in the United States by Mead Johnson. The comparative bioavailability study was carried out in Canada by BioResearch (Montreal) under a Canadian cleared IND.
Since Barr Laboratories are owned by Apotex, they can presumably provide evidence that the Barr product and the proposed Apotex product are identical from a chemistry and manufacturing standpoint. Furthermore, they have obtained a letter from Mr. Leo P. Fleming, Manager, Technical Services, Bristol Laboratories of Canada to Dr. A. Rein in Toronto indicating that the product Desyrel sold by Mead Johnson in the United States is identical to the same product sold by Bristol in Canada. Therefore, it is not illogical to conclude that the bioavailability study done on the Barr and Mead Johnson products is applicable to the Apotex and Bristol products marketed in Canada.
This point is further strengthened by the fact that the Mead Johnson product, in addition to being identical to the Bristol product, was in fact the product mainly used in carrying out pivotal studies performed in the U.S., which were also submitted in support of the Canadian NDS for Desyrel.
Therefore, on the basis of science alone, I am inclined to accept the arguments advanced by Apotex. However, we should also examine the possibility that we may be establishing a precedent if we follow this course of action that could see us forced to accept similar arguments from around the world. What is to prevent, for example, Apotex from commissioning a bioavailability study comparing the French brand of a product as the standard? If we accept the arguments advanced in this particular case, we could have a difficult time not allowing this type of study. This could be the start of a process that would see us lose control over the generic submissions.
Before a decision is made in this particular case I suggest that you contact Mr. L.B. Rowsell. In the future, his Bureau will be responsible for generic submissions and I do not want to take an action that might compromise his ability to carry out the duties that have been assigned to him. Perhaps when you have considered this memo you might wish to discuss it with Mr. Rowsell and give me your views on the issue.
[40] Mr. Rowsell had, in 1988, assumed the role of Director of Bureau Pharmaceutical Surveillance within the Drug Directorate. His job was to oversee the people who did the actual evaluation of submissions for drug approval. He had an undergraduate degree in pharmacy. He did not do any of the actual reviewing or evaluating himself.
[41] The matter was apparently referred to Mr. Rowsell because on February 8, 1988, he wrote a memorandum to Dr. Somers (Exhibit 1, Tab 22) stating that he anticipated substantial difficulty in establishing that the United States reference product was identical to the Canadian product and that this “emphasizes the need for clear guidelines to express our requirements”.
[42] There followed the internal policy statement of Dr. Somers of June 23, 1989, previously referred to, as well as internal memoranda involving Ms. Mary Carman (Kasparek) and correspondence with Apotex (Dr. Sherman) as to the propriety in using a non-Canadian drug as the reference standard. Dr. Johnson provided his view to Ms. Carman in a memorandum dated July 10, 1989 (Exhibit 1, Tab 30):
STANDARD FOR COMPARATIVE BIOAVAILABILITY AND COMPARATIVE PHARMACEUTICAL STUDIES
I am in receipt of your memo of June 30th on this topic together with the correspondence dated June 29th and April 3rd from Dr. Sherman. I would like to make the following comments:
1. I believe that we should accept data comparing the generic product against the innovator’s brand as sold in a major market of the world if we have evidence that the innovator does not have manufacturing capabilities in Canada and must import his product from the major market country.
2. I do not believe we should accept studies conducted outside Canada against the innovator’s brand as sold in a major market area if the innovator has manufacturing capabilities in Canada and formulates his product in our country. Although the innovator’s product may have the same master formulation throughout the world, differences in equipment and personnel may affect the overall performance of a product and we have no guarantee that the product manufactured by Merck, for example, in the United States is identical to a product bearing the same name and manufactured by the same company in Canada.
3. It is correct that in many cases the originator has obtained his Canadian Notice of Compliance on the basis of data generated on a product sold in a major market, however, in the subsequent years it is the Canadian formulated product that has been accepted as being safe and efficacious in Canada on the basis of its track record in large numbers of Canadian patients. It must, therefore, remain our “gold standard” against which imitators should make their comparisons.
[43] On June 29, 1989 (Exhibit 1, Tab 29) Dr. Sherman wrote to Dr. Somers, re-iterating his position that a United States reference product was appropriate. In response, Dr. Somers wrote to Dr. Sherman on August 24, 1989,(Exhibit 1, Tab 32) rejecting this proposal, saying:
In your letter of June 29th, you proposed that if a series of conditions were met in their entirety, the Health Protection Branch could forego its normal requirement for Canadian sourcing of the reference dosage form.
The requirement for Canadian sourcing allows a manufacturer to establish, in very exact terms, that their test product releases drug into the systemic circulation at the same rate and extent as does the reference dosage form. Where the safety and efficacy profile of the reference drug product is acceptable, this offers a scientific basis to assert that, apart from possible effects from impurities or excipients unique to the dosage form, the test product will also be acceptably safe and effective. The basis for the acceptability of the Canadian reference product stems from both premarket data on file with the Branch and the subsequent years of performance by the product in Canada. This aspect of performance is greatest for the first brand of that drug product to enter the Canadian market and therefore is the appropriate norm for comparison.
When the reference product cannot be conclusively proven to be identical to that marketed in Canada, parity of performance with a product known to the Branch can not be assumed.
The alternative is for the manufacturer of the test product to abandon comparative bioavailability studies with marketed products and conduct original clinical research to establish the safety and efficacy of the test product.
The conditions that you have proposed to forego Canadian sourcing of the reference product do not conclusively prove that a non-Canadian reference product is identical to the Canadian version. Additionally two of the conditions bear special note.
With respect to your condition 4., the Branch is not at liberty to consult the file of another manufacturer to determine the extent to which their data was generated using a product formulation that was sold in a different country. As well, subsequent Branch experience will have been with the formulation marketed in Canada and the Branch need not have been apprised of ensuing formulation changes made to the product in another country.
Secondly, stipulation to intend to sell the product in other countries, as noted in your condition 6., does not temper the mandate of the Food and Drugs Act for Canada.
I trust that the preceding explanations clarify the Branch position on Canadian sourcing of the reference dosage form for comparative bioavailability studies.
[44] It was clear by this time that the battle lines had been drawn. Apotex wanted to use a United States reference standard; HPB insisted on a Canadian standard, unless the United States reference product could be “conclusively proven to be identical” to the Canadian product. The evidence before me is that it is almost impossible to demonstrate that any drug product is “identical” to another, even tablets taken from the same batch (e.g. Dr. Kibbe’s Report, Exhibit 12, para 38). Some measure of difference must be tolerated.
[45] Apotex continued to press; HPB “reanalyzed” the data it had received from Apotex. A Mr. Michalko, Chief, Division of Biopharmaceutics Evaluation, came into the picture. On November 30, 1989 (Exhibit 1, Tab 38) he wrote to Apotex a peculiar letter attempting to bootstrap HPB’s insistence on a Canadian reference product by reliance upon HPB’s unpublished policy that had been reduced to writing after Apotex had filed its submission. On December 18, 1989, Michalko wrote to a Mr. Jeffs, Assistant Director-Operations, Bureau of Human Prescription Drugs (Exhibit 1, Tab 39) asking whether the “policy” that HPB had respecting its refusal to look at third party information to gain information in order to verify if the submission – in this case, of Apotex – was correct. On February 1, 1990, Michalko wrote to Apotex stating that HPB would not look at another party’s submission.
[46] Here I pause to repeat what Apotex’s Counsel stated in argument before me. HPB already knew that the United States reference product relied upon by Apotex was identical to the Canadian drug sold by the innovator. They knew this because, in approving the innovator’s drug for sale in Canada, the innovator had provided the data from its United States product. If HPB had referred to the innovator’s file, it would know that the United States product was identical to the innovator’s Canadian product. By refusing to look at this file, HPB was requiring Apotex to prove to HPB that which HPB already knew to be true. The only reason for refusing to look at the other file was “policy”.
[47] In late 1989, and until August 1990, when Apotex filed its first Originating Motion for Judicial Review, there was an exchange of correspondence between Apotex and HPB. I will not recite all of this; suffice it to say that each party stuck to its position as to whether a Canadian reference product was required and whether a United States reference product could be used.
[48] Apotex filed an application for judicial review with this Court in August, 1990.
Judicial Review # 1: T-2276-90 [49] On or about August 13, 1990, Apotex filed an originating Notice of Motion (as was the practice then) with the Court seeking an Order directing that the Minister review Apotex’s Apo-Trazad applications without requiring that the reference product be purchased in Canada, and to issue a Notice of Compliance to Apotex. Court file number T-2276-90 was assigned to the matter. The pertinent requests were for an Order:
(a) Directing the Respondent Minister of National Health and Welfare (the “Minister”) to review the Applicant’s New Drug submission in respect of its drug product, Apo-Trazad, to determine whether same, and more particularly, the comparative bioavailability study, literature review and other data contained therein, adequately establish the safety and effectiveness of Apo-Trazad for use as a drug in Canada without regard to a condition precedent to such review that the reference product tested in the comparative bioavailability study be purchased in Canada;
(b) Directing the Respondent Minister, upon completion of the review of the Apo-Trazad New Drug submission, if such review is satisfactory, to issue a Notice of. Compliance in respect thereof;
[50] Apotex discontinued that proceeding upon a settlement having been reached with the Minister.
Settlement Agreement [51] On November 5, 1990, Apotex, represented by Dr Sherman, and its lawyer Harry Radomski, met with Bruce Rowsell, representing the Minister and Marlene Thomas, a Department of Justice lawyer representing the Minister in order to settle the litigation in T-2276-90. The result was a letter from Ms. Thomas to Mr. Radomski dated November 26, 1990. This letter is referred to as the Settlement Agreement and said:
This letter confirms the agreement reached between the parties and counsel as to the settlement of this action, culminating in its withdrawal without costs before Jerome, A.C.J. in Motions Court of the Federal Court, Trial Division in Toronto on November 19, 1990.
The Respondents hereby provide the following statement with respect to the subject matter of the litigation:
Further to recent discussions, this confirms that the review of your Apo-trazad new drug submission is continuing and has not been completed for the purposes of section C.08.004 of the Food and Drug Regulations. If there are any deficiencies, they will be identified upon completion of the examination.
Any existing and further data provided by Apotex to establish that Apo-trazad is chemically and therapeutically equivalent to a drug product sold in Canada will be considered. For the purposes of a comparative bioavailability study, the Health Protection Branch is prepared to consider evidence to establish equivalency between Canadian and non-Canadian reference standards.
I believe this concludes the matter.
[52] Ensuing matters did not proceed well.
Ensuing Matters-Not All is Well [53] Things did not go well after the Settlement Agreement letter was signed by Ms. Thomas and given to Apotex. In his reasons given in the second judicial review, which I will discuss in some detail shortly, Justice MacKay set out at considerable length what went on within HPB and between HPB and Apotex. I refer in particular to paragraphs 17 to 30 and 38 to 87 of his reasons, reported at 59 FTR 85. Having heard the witnesses, and having reviewed the documents in evidence in the case before me, I endorse and confirm his findings.
[54] I accept Dr. Sherman’s evidence as to the discussions leading up to the Settlement Agreement, and I reject Mr. Rowsell’s evidence in that respect. It is clearly evident from the discussions between Apotex and HPB that the only outstanding issue was that of bioavailability. The parties were apart in that respect, in that Apotex believed that it could demonstrate bioavailability by equivalency, whereas HPB was looking at identicality. The Settlement Agreement clearly states that HPB will look at the matters from the point of view of equivalency. To say that the Agreement was ambiguous or that HPB didn’t know what the parameters were for equivalency is disingenuous. Sherman and Rowsell were at the settlement meeting; if HPB had any concerns respecting equivalency, they could have been raised then, and clarified then. HPB’s lawyer wrote the Settlement Agreement letter; if she or her client had any doubts about what she was writing, they should have expressed them at the time. HPB knew what the letter meant.
[55] However, HPB did not follow the terms of the Settlement Agreement. It stayed on a path whereby th