Market exclusivity for innovative new drugs found to be constitutional by Federal Court

by Angela Furlanetto and Geoff Mowatt

A version of this article was published by LexisNexis in The Lawyers Weekly, 4 September 2009

In a recent decision, the Federal Court confirmed the constitutionality of the Data Protection Provisions of the Food and Drug Regulations¹ and the eight years of market exclusivity for innovative new drugs in Canada. Under the Data Protection Provisions, approval will not be granted for a generic version of a previously approved drug for a period of eight years, regardless of whether the drug in question is protected by patent.

In his decision rendered on July 17, 2009, Mr. Justice Mandamin addressed the primary issue of whether Parliament had the constitutional power to enact subsection 30(3) of the Food and Drugs Act² and the Data Protection Provisions. Subsection 30(3) of the Food and Drugs Act authorizes the Governor in Council to make regulations in relation to drugs for the purpose of implementing Canada's obligations to protect data as provided under the North American Free Trade Agreement (NAFTA) and the Trade-Related Aspects of International Property Rights Agreement (TRIPS). The court also considered whether the Governor in Council could enact the Data Protection Provisions in their present form.

The decision was in respect of two judicial review proceedings. The first proceeding (T-1976-06) was brought by the Canadian Generic Pharmaceutical Association and the second proceeding (T-2047-06) was brought by Apotex Inc., Canada's largest generic pharmaceutical company. Canada's Research-Based Pharmaceutical Companies intervened in the first proceeding, while Eli Lilly Canada, Inc. intervened in the second.

The Federal Government had amended the Data Protection Provisions on October 18, 2006 to extend the exclusivity period of data protection for innovative new drugs from the term of five years (as it was at the time) to eight years. This period applies from the date the innovative new drug (a drug that contains medicinal ingredients that have not been previously approved in Canada) receives a notice of compliance (NOC), unless the drug owner consents to a generic manufacturer's filing of an abbreviated new drug submission (ANDS).

Under the Data Protection Provisions, the first six years are considered to be a no-filing period, within which a generic is prohibited from filing an ANDS in which it compares its generic version of a drug to the innovator's version. During the final two years, the generic may file an ANDS and directly or indirectly compare its generic version with the innovator's version based on the safety and efficacy data previously filed for the innovator's product; however, the Minister of Health will not issue a NOC until the expiry of the full eight years of data exclusivity. An additional six-month extension may be applied if an innovator includes, in its new drug submission (NDS), or any supplemental NDS filed within the first five years, results of clinical trials designed and conducted to increase knowledge about the use of the drug in pediatric populations and leading to a health benefit for children. The data protection period applies only to drugs that continue to be marketed in Canada.

The amendments to the Data Protection Provisions also clarified and implemented Canada's obligations under NAFTA and TRIPS to protect research data submitted to regulatory authorities by innovative companies. NAFTA and TRIPS provide for member countries to protect data that has been assembled with considerable effort where the data is filed "for approving the marketing of pharmaceutical or agricultural chemical products that utilize new chemical entities".³  The amendments were intended to provide clarity, predictability and balance to laws affecting the pharmaceutical and biopharmaceutical industries in Canada.

In the decision, Mr. Justice Mandamin held that subsection 30(3) of the Food and Drugs Act and the Data Protection Provisions are intra vires federal legislative powers. He found that the Data Protection Provisions are not intended to serve a "criminal law" objective or safeguard the public and therefore do not fall under the exercise of federal criminal law powers. Rather, the pith and substance of the Data Protection Provisions is directed at balancing the commercial considerations between the investment of innovators in innovative new drugs and the eventual approval of lower cost generic versions of those drugs. On this basis, Mr. Justice Mandamin held that the Data Protection Provisions are a valid exercise of the federal constitutional power under the regulation of trade and commerce under subsection 91(2) of the Constitution Act, 1867. He also concluded that the Data Protection Provisions are rationally connected with subsection 30(3) of the Food and Drugs Act, and therefore come within the regulatory authority Parliament has given to the Governor in Council.

Mr. Justice Mandamin also held that the data contained in an innovator drug manufacturer's NDS meets the purpose set out in NAFTA and TRIPS. While the information filed with Health Canada in an innovator's NDS may not be secret in all respects, the data satisfies the meaning of a trade secret and confidential information given that it has value and its compilation makes it unique to the innovator. The Data Protection Provisions establish a market exclusivity period as an alternative to protection against disclosure of such data, in a manner contemplated in NAFTA and TRIPS. This means that the market exclusivity period is fixed for all eligible drugs, regardless of the value of the data submitted to Health Canada by the innovator, the maintenance of confidence in the regulatory scheme, or whether the data was developed in another country.

The ruling of the Federal Court is a significant win for "big pharma". The decision confirms that innovator drug manufacturers are entitled to market exclusivity for eight years on their innovative new drug products, even when they have no patent protection. No generic is allowed to compare its product to the innovative product to obtain approval during the exclusivity period. Further, other pharmaceutical companies are prohibited from relying on clinical trials and other data submitted by the innovator in its original NDS.

The Canadian Generic Pharmaceutical Association estimates that this ruling will cause Canadians to pay an additional $100 million per year in drug prices to "big pharma" in additional drug monopoly prices. The Canadian Generic Pharmaceutical Association filed an appeal of this decision on September 14, 2009 (A-360-09).

¹ C.R.C., C. 870, section C.08.004.1.

² R.S.C. 1985, c. F-27.

³ NAFTA, Article 1711, paragraph 5; TRIPS, Article 39, paragraph 3.