Canada Closes Door to Consumer Class Actions Based on Invalidated Pharma Patents

Following a landmark decision from the Supreme Court of Canada in 2012, the Federal Court of Appeal invalidated the Pfizer patent to the active ingredient in Viagra.¹ Subsequently, a class action was initiated in the Supreme Court of British Columbia alleging that Pfizer had injured consumers who had purchased Viagra at inflated prices, because the invalid patent had kept generic competitors off the market.  

The parties agreed to bifurcate the certification process, with the result that the Supreme Court of British Columbia was asked initially to determine whether the cause of action requirement for certification was met. The Court held in first instance that the claim disclosed a cause of action. Pfizer appealed the decision. 

What You Need To Know

• The Court of Appeal for British Columbia has ruled that the claim did not disclose a cause of action, and hence that this requirement for certification was not met because:²
  • the Patent Act is a complete code which precludes any civil claims by consumers rooted in a breach of the statute.
  • A breach of the Patent Act by Pfizer cannot constitute the "unlawful act" on which a claim for unlawful interference with economic relations can be based.
  • The plaintiff could not seek recovery based on principles of unjust enrichment since there was a juristic reason for Pfizer’s alleged enrichment (namely, the contracts of purchase and sale between Pfizer and direct purchasers of Viagra).
• There are at least three additional class actions in Canada with similar causes of action in early stages. None have been certified. If the Court of Appeal's ruling stands, these actions may not proceed any further.

Novel Targeting of Innovative Drug Manufacturers

Recent claims, including class actions brought by consumers, have targeted the profits earned by innovative drug manufacturers on the basis of allegations that the innovator has availed itself of its rights under the Patent Act and PM(NOC) Regulations in such a way as to wrongfully extend the period of patent protection and market exclusivity.

One proposed consumer class action, Low v Pfizer Canada Inc., had initially been partially certified by the Supreme Court of British Columbia, which held that the claim disclosed valid causes of action for intentional interference with economic relations, or unjust enrichment.³ Similar class actions have been filed in Manitoba and Saskatchewan.^{4 5}

These class actions stem from a 2012 decision of the Supreme Court of Canada rendered in the context of Canada’s PM(NOC) Regulations,⁶ as well as a subsequent 2012 Federal Court of Appeal decision. The combined effect of these decisions was to invalidate a key Pfizer patent to sildenafil, the active ingredient in Viagra. The main thrust of the plaintiff’s claim in Low was that Pfizer had manipulated the Canadian patent system in order to wrongfully extend Viagra’s patent protection, and hence its market exclusivity in Canada.

The Supreme Court of British Columbia held in first instance that the claim disclosed a cause of action, and therefore met the requirements of the Class Proceedings Act in this regard.

The Court of Appeal has overturned this decision, and has ruled that the Patent Act and PM(NOC) Regulations form a complete code which precludes the possibility of a parallel civil claim by a consumer. The Court held that it would not make sense to allow consumers to claim disgorgement of profits earned by the innovative brand manufacturer when generic manufacturers have no such recourse.

The Court of Appeal also held that the plaintiff was improperly seeking to use the common law to expand the scope of the Patent Act, and that such an expansion was impermissible under Canadian law, which does not allow an independent cause of action for "breach of statute." 

Further, the Court of Appeal held that the alleged breach of the Patent Act by Pfizer could not ground a claim for unlawful interference with economic relations, because that alleged breach is not an "actionable civil wrong," since a generic manufacturer cannot claim unjust enrichment or disgorgement of profits. Rather, under the PM(NOC) Regulations, the generic manufacturer’s claim is limited to its own losses. Therefore, an innovative manufacturer could not face greater liability to a consumer than to a generic manufacturer for the same conduct, namely an alleged breach of the Patent Act.

With respect to the claim for unjust enrichment, the Supreme Court of British Columbia noted that Pfizer had entered into contracts of purchase and sale with direct purchasers of Viagra, such as distributors and pharmacies. Those contracts provided a "juristic reason" for Pfizer’s enrichment from sales of Viagra. Accordingly, the Court of Appeal found that there was no valid claim to unjust enrichment, as the existence of any "juristic reason" for enrichment precludes a claim for unjust enrichment.

The Court of Appeal's ruling, if it stands, would appear to foreclose the possibility of innovative drug manufacturers facing enhanced liability if their patents are ultimately found to be invalid. While innovators remain liable to generic drug manufacturers under the PM(NOC) Regulations, those Regulations, together with the Patent Act, form a "complete code" which precludes the possibility of parallel civil actions by consumers.

Either party may seek leave to appeal from the Supreme Court of Canada until February 8, 2016.

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¹ Apotex Inc. v Pfizer Ireland Pharmaceuticals, 2012 FC 1339, aff’d 2014 FCA 13.

² Low v Pfizer Canada Inc., 2015 BCCA 506.

³ Low v Pfizer Canada Inc, 2014 BCSC 1469.

⁴ Thompson v Pfizer Canada Inc., Court file no. CJ14-01-88141;  Andres v Pfizer Canada Inc., Court file no. QBG 122 of 2014.

⁵ An additional B.C. class action against Pfizer was also commenced but did not proceed:  Sewell v Pfizer Canada Inc., Court file no. VLC-S-S-128762.

⁶ The PM(NOC) Regulations allow innovative drug manufacturers to seek to prohibit a prohibition order preventing a generic drug product from being approved until the patents for the drug product listed on "Canada’s Orange Book" have expired. Under the Regulations, if a generic drug manufacturer is improperly delayed in getting its drug product approved, the generic manufacturer may claim against the innovative manufacturer for damages, but not disgorgement of profits, resulting from the delay. However, there is nothing in the legislation that allows consumers or patients to make any claims in such a scenario. This regime is similar to the U.S. system under the Hatch-Waxman Act.