Thursday, December 19, 2013

Double Ramp-up Revisited

Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
            PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
Underling NOC decision Solvay Pharma Inc v Apotex Inc / pantoprazole (NOC), 2008 FC 308 Gauthier J

The problem of double ramp-up was explained by Phelan J as follows:

[122] Ramp up is the initial period during which the generic drug has to be made or acquired, orders received from customers and the drugs shipped to those customers. It covers the period before Apo-pantoprazole achieves steady state sales.

[123] In the real world, Apotex experienced ramp up after it was successful in resisting Takeda’s attempt to obtain a prohibition order which lasted until it reached steady state.

[124] In the hypothetical world, the calculation of Apotex’s loss reflected this ramp up incurred or experienced in the Relevant Period.

[125] The effect of the calculation is that Apotex experiences the effect of ramp up in the hypothetical world resulting in a deduction from what would be steady state revenue and then in the real world it experiences the same ramp up consequences. This is double counting for the same circumstance; a disadvantage to Apotex and an advantage to Takeda.

In Apo-ramipril 2012 FC 553 [265-270] Snider J refused to allow Apotex to deduct the ramp-up loss that occurred in the real world, holding that this was precluded by the FCA Alendronate 2009 FCA 187, which held that losses incurred after the statutory period are not compensable as a matter of law. In his subsequent Alendronate 2012 FC 1235 decision assessing s 8 damages, Hughes J disagreed with Snider J, saying “I am not satisfied, particularly given the common view of the accounting experts that, normally, compensation would be made to prevent a double ramp-up loss, that the Court of Appeal had this situation in mind” [86]. He nonetheless followed Snider J, citing “the interests of comity and in the expectation of an inevitable appeal.” In my post on Hughes J’s decision, I remarked that “I am not sure that the principle of comity required him to follow Snider J” and “a novel point of law should not be considered settled by a single decision.” 

In Pantoprazole, Phelan J declined to follow Hughes J and Snider J on this point, saying, rightly in my view, that

[131] With the greatest respect, I do not view the determination of “double ramp up” in the present case as resolvable under judicial comity nor a matter on which one can presume to be eventually resolved on appeal.

Phelan J then undertook a purposive analysis of s 8, noting that the NOC Regulations “are not tools to penalize generic drug manufacturers where they have been successful against a brand company,” and “[t]he intent under the Regulations as under injunction law is to return the enjoined party to the position it would be in if the injunction/stay had not been granted (assuming the enjoined party is ultimately successful)” [134], [135]. He pointed out that in Alendronate the FCA had been dealing with springboard damages, not double ramp-up [136], and springboard damages are more clearly suffered outside the compensible period [137]. He therefore held that Apotex’s losses during the ramp-up period should not be included in the but for world, where such losses were experienced in the actual world [148].

I can see both sides of this argument. Phelan J’s purposive analysis is compelling, but the thrust of the FCA’s Alendronate was that the NOC Regulations aim at statutorily defined compensation, rather than full compensation in fact, so the question is as to exactly how far the FCA intended this principle to extend. But however this point is eventually resolved, I do feel that it is best to fully explore a contentious legal issue such as this at the FC level, rather than having all subsequent decisions simply follow whichever opinion happens to be first. As Phelan J pointed out, there is no particular legal basis for presuming there will be an appeal [131], and if there is an appeal and the FCA were to reverse, it seems wrong that the intervening parties should be burdened with launching an appeal to reverse the trial decision on a point on which the trial judge him or herself felt was wrongly decided.

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