For life sciences companies in Canada, these may be the best of times: the end of the "promise doctrine", supplementary patent protection to compensate for regulatory delays, revamped linkage laws, and robust data protection. However, this newfound optimism and confidence in a robust patent and data exclusivity regime that promotes innovation has been dampened by proposed changes to how patented drugs are priced. Will 2019 therefore see the best and the worst of times for life sciences companies in Canada?
The End of the "Promise Doctrine"
On June 30, 2017, the Supreme Court of Canada in AstraZeneca Canada v Apotex, 2017 SCC 36, abolished the "promise doctrine", under which patentees were required to show that the claimed invention fulfilled the "promised" uses found in the specification. The decision was hailed as a major victory for patentees, as the highly contentious promise doctrine had invalidated numerous patents over the course of fifteen years. The unanimous decision clarified that patentees need only demonstrate a "scintilla" of utility relating to the subject-matter of the invention, and found the claims directed to esomeprazole magnesium, marketed in Canada as NEXIUM, to be valid.
Following the AstraZeneca decision, a number of attempts to invalidate patents based on inutility or a recast "promise doctrine" have been unsuccessful. These include patents protecting dasatinib, marketed in Canada as SPRYCEL (Bristol-Myers Squibb v Apotex, 2017 FCA 190); a polymorphic form of desvenlafaxine succinate, PRISTIQ (Pfizer v Apotex, 2017 FC 774 and Pfizer v Teva, 2017 FC 777); and a new use of infliximab, REMICADE (Hospira v The Kennedy Trust, 2018 FC 259).
The striking down of the promise doctrine has removed a significant uncertainty surrounding the validity of patents in Canada.
Supplementary Protection Arrives – Finally!
Although Canada established a linkage regime in 1993 similar in many respects to the U.S. Hatch-Waxman linkage regime, unlike under Hatch-Waxman, Canada did not provide for patent term restoration.
However, on September 21, 2017, patent term restoration (finally) arrived. Canada's certificate of supplementary protection (CSP) regime was introduced as a consequence of the Canada-European Union (EU) Comprehensive Economic and Trade Agreement (CETA). Similar to European Supplementary Protection Certificates, CSPs provide an additional patent-like protection term to partly compensate patentees of human or veterinary drugs for the time required for research and obtaining regulatory approval in Canada.
The CSP takes effect at the end of the term of the relevant patent, and is calculated in the same manner as in Europe; namely, by subtracting five years from the period beginning on the filing date of the application for the patent and ending on the day on which the marketing authorization is issued. However, unlike in Europe, the maximum term is two years, without the possibility of a pediatric extension.
A CSP is only available where no other CSP has been issued with respect to the medicinal ingredient or the combination of medicinal ingredients, and the medicinal ingredient or combination has not been previously approved (including before September 21, 2017). Only patents claiming the medicinal ingredient or combination, or uses thereof, can be extended. Furthermore, a CSP can be granted only for drugs approved based on a new drug submission filed with Health Canada within 12 months of the first filing for a marketing authorization in the EU (or any member country thereof), the U.S., Switzerland, Japan and Australia. This 12-month period is extended to 24 months if a CSP application is filed on or before September 21, 2018.
Applications for CSPs are filed with Health Canada, and it is Health Canada that maintains the public register of pending applications and granted CSPs.
Once a CSP is granted, the CSP grants the same rights as the relevant patent, but only with respect to the "making, constructing, using and selling of any drug that contains the medicinal ingredient, or combination of medicinal ingredients, set out in the certificate, by itself or in addition to any other medicinal ingredient". The CSP will also be added to the Patent Register, and thus may be asserted in linkage litigation.
A New Look for Linkage
On September 21, 2017, Canada's new linkage regulations came into force, fundamentally changing the Patented Medicines (Notice of Compliance) Regulations (PMNOC Regulations) that have been in place for the past 25 years. These amendments, flowing from CETA, were designed to address many of the criticisms that had developed over the years. The amendments changed the nature of the proceedings from a summary application to a full right of action; introduced a full right of appeal for both parties; and eliminated "dual litigation" by replacing summary prohibition proceedings with full actions to determine patent infringement and validity issues. The PMNOC Regulations will also now permit a parallel infringement proceeding to be commenced for unlisted patents, or patents listed after the subsequent entrant files its submission for marketing authorization with Health Canada. While these patents would not contribute to the stay, patents claiming processes, intermediates, metabolites or other subject matter that would not result in a listable patent can now be asserted prior to launch of a subsequent entry product.
Notably, the same linkage regime continues to apply equally to small molecule pharmaceuticals and biologics.
Data Protection – Still Standing After All of These Years
Data protection for innovative drugs was enacted in 2006. Initial challenges were made to the regime, but none were successful. Data protection has thus become a robust form of protection.
A drug may be entitled to data protection if the medicinal ingredient was not previously approved, or if it is not a salt, ester, enantiomer, solvate or polymorph variation of a previously approved medicinal ingredient. If data protection applies, there is a six-year "no file" period from the first NOC for the innovative drug and an eight-year market exclusivity period. This eight-year period may be extended to 8.5 years, if the pediatric extension applies.
The number of drugs granted data protection per year has remained roughly steady over the past five years; however, there is an upward trend in the proportion of biologics among drugs granted protection. Canada provides the same term for small molecule pharmaceuticals and biologics, and does not provide any additional form of protection for new formulations or uses, or for orphan drugs.
The Price of Patented Drugs
Despite the many advances made and greater certainty provided to pharmaceutical patentees, changes have been proposed to the pricing of patented drugs, which may undermine the value of a patent and impact on access to new medicines in Canada. On December 2, 2017, proposed Regulations Amending the Patented Medicines Regulations (the proposed Regulations) were published, to revise the approach of the Patented Medicine Prices Review Board (PMPRB) to controlling against excessive pricing of patented drugs.
The Patent Act and the Patented Medicines Regulations provide the framework and authority by which the PMPRB regulates the prices of patented medicines. These regulations currently include benchmarking the price of a patented drug based on the price of the drug in seven other countries (the PMPRB7): France, Germany, Italy, Sweden, Switzerland, the United Kingdom and the United States.
The proposed Regulations would drop the U.S. and Switzerland from the current basket of countries, and add seven new countries to create a PMPRB12: Australia, Belgium, France, Germany, Italy, Japan, the Netherlands, Norway, the Republic of Korea, Spain, Sweden and the United Kingdom. In addition, the proposed Regulations introduce new price regulatory factors, such as market size and the pharmacoeconomic value of the drug, which would require the reporting of every published cost-utility analysis prepared by a publicly funded Canadian organization where the outcomes are expressed as the cost per quality-adjusted life year (QALY) for each indication that is the subject of the analysis.
Further clarity on the proposals will be provided when the PMPRB issues its draft Guidelines, which are expected this fall. The new price regulatory factors may only apply to certain products (e.g., first in class drugs), while the price of other drugs may be limited by the median price of that same drug in the PMPRB12.
The proposed changes would also fix the ceiling price of a new drug at introduction, rather than allowing incremental increases matching inflation, while at the same time providing criteria to re-bench the maximum price based on specific market conditions.
The law has not yet changed, and while the stated goal is implementation by January 1, 2019, it is not yet clear when or if the amendments will ultimately come into effect, and if so, whether they will be amended from the original proposal.
Optimism over the state of pharmaceutical patent law is at an all-time high. The strength of the patent right has been clarified with the death of the promise doctrine, CSPs and data protection provide further recognition of innovation in the pharmaceutical arts, and changes to patent linkage should provide greater certainty for innovators and subsequent entrants alike.
The only clouds on the horizon are the proposed changes to the pricing of patented medicines, which may ultimately be reconsidered, including as part of the North American Free Trade Agreement renegotiations. However, it would be prudent for pharmaceutical patentees to consult with their Canadian business to better understand the potential impact of these changes.