Federal Court Considers PMPRB Jurisdiction Over Generic Manufacturers

On May 27, 2014, the Federal Court released two related decisions, Sandoz Canada Inc. v. Canada (Sandoz) and Ratiopharm Inc. (now Teva Canada Limited) v. Canada (Ratiopharm) dealing with the jurisdiction of the Patented Medicine Prices Review Board (PMPRB) over generic drugs and, arguably, any genericized drug.

Under section 2 of the Patent Act (Act), a patentee is a person entitled to the benefit of a patent. Similarly, a "patentee" under section 79(1), in respect of an invention pertaining to a medicine, "includes, where any other person is entitled to exercise any rights in relation to that patent . . . that other person in respect of those rights." The PMPRB decided in each of the two decisions that its jurisdiction extended to generic manufacturers. Each of Sandoz and Ratiopharm appealed the Board’s decision to the Federal Court.

The decisions of the Federal Court overruled the PMPRB’s finding that Sandoz and Ratiopharm each fell within the scope of a patentee, and were therefore subject to the PMPRB’s pricing control regime. The Court also held that the definition of patentee, were it to extend to generic companies, would exceed the limits of federal jurisdiction over pricing of medicines and expose the legislation to a constitutional attack. In the decision in Sandoz, this concept was explained as follows:

In my view, the mere fact that a subsidiary generic company sells a version of a patented medicine is insufficient to bring it within the definition of a patentee. Usually, a generic company is not entitled to the principal benefit of a patent—an exclusive monopoly to make, use, or sell the patented product. Nor can a generic company typically exercise rights in relation to a patent held by another company. Before the patent expires, a generic company can enter the market with a license from the patent holder, or with the patent holder’s permission, or by successfully challenging the patent. In none of these scenarios does the generic company receive the exclusive benefits and rights that inure to patent holders.

On the definition of patentee, Justice O’Reilly appears to have distinguished entities who are able to assert a monopoly due to the patent and those who are able to benefit from the patent. On a broad reading, this finding indicates that once an innovative “brand” drug has been genericized, the brand manufacturer would no longer be under PMPRB jurisdiction as there is no longer a monopoly on the drug.

On June 25, 2014, the Attorney General of Canada (on behalf of the PMPRB) filed notices of appeal from the decisions of Justice O’Reilly. We will keep you apprised of developments as these cases move forward.

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