On January 18, 2013, the Federal Court of Appeal, in a 2:1 decision, released its Reasons for Judgment holding that Takeda’s dexlansoprazole product, DEXILANT, was not an innovative drugs and thus not elgible for the protections afforded by Canada’s data protection scheme for pharmaceuticals.
Where a new drug is an “innovative drug”, subsequent manufacturers may not submit a drug submission that makes a direct or indirect comparison to the innovative drug until 6 years after the innovative drug was first approved. Further, the Minster of Health may not approve a new drug that makes a direct or indirect comparison to an innovative drug until eight years after the innovative drug was first approved. C.08.004.1(1) Food and Drug Regulations defines innovative drug as follows:
“innovative drug” means drug that contains a medicinal ingredient not previously approved in a drug by the Minister and that is not a variation of a previously approved medicinal ingredient such as a salt, ester, enantiomer, solvate or polymorph.
Takeda’s DEXILANT product was a first approved by Health Canada on July 22, 2010. Shortly thereafter, the Minister of Health refused to add DEXILANT to the Register of Innovative Drugs on the basis that dexlansoprazole is a specifically excluded variant, namely an enantiomer of lansoprazole, previously approved by the Minister as PREVACID. Takeda sought judicial review of the Minister’s refusal to add DEXILANT the Register of Innovative Drugs, and that application was dismissed by Justice Near, who held that the Minister had adopted the correct interpretation of “innovative drug”.
Justices Dawson and Justice Pelltier dismissed the appeal, holding that both the Minster and the Federal Court has properly interpreted the definition of “innovative drug:
 In my view, the definition is sufficiently precise that its ordinary meaning should play the dominant role in its interpretation. However, notwithstanding my view as to the clarity of the language used, it is necessary to consider the context and purpose of the definition
 These obligations required the Governor in Council to consider what constitutes “new chemical entities” when crafting the data protection regulations. It was open to the Governor in Council to decide, as a matter of policy, that salts, esters, enantiomers, solvates and polymorphs were not sufficiently different to be “new chemical entities.” If, as the appellant argues, the data protection regulations are under inclusive, this is a matter for the Governor in Council to remedy. This Court ought not to thwart the decision of the Governor in Council as expressed in the definition of “innovative drug” and in its rejection of the request by the innovative drug industry that data protection be extended to salts, esters, enantiomers, solvates and polymorphs.
Justice Stratas, focusing on “the context of the overall scheme” and the “overall purpose of the statutory scheme” would have allowed the appeal, and remitted the matter to the Minister for redetermination. Justice Stratas held that even where the words of a Regulation may not appear ambiguous in first glance, the context and purpose of the regulations may reveal latent ambiguities. Justice Stratas characterized the proper interpretation of “innovative drugs” as follows:
 A drug that contains an enantiomer of a previously approved medicinal ingredient is not automatically excluded from data protection under subsection C.08.004.1(1) of the Regulations. The listed substances in the definition of “innovative drug” – salts, esters, enantiomers, solvates or polymorphs – are examples of substances that may be “variations,” depending on the circumstances, and invite special scrutiny.
 Whether an enantiomer is a “variation” of a previously approved medicinal ingredient depends on the circumstances surrounding the data that had to be submitted to get regulatory approval. In particular, if regulatory approval for the drug required the submission of confidential data generated by considerable effort – e.g., new and significant evidence bearing upon the safety and efficacy of the drug – and the medicinal ingredient in the drug is “new” in the sense that it has qualities of safety and efficacy materially different from a previously approved medicinal ingredient, then it is not a “variation” of that previously approved medicinal ingredient.
Justice Stratas concluded that this interpretation was consistent with both NAFTA and TRIPS which require protection for undisclosed data whose origination requires considerable effort. Further, this interpretation was consistent with providing an incentive to drug manufacturers to develop new medicines:
 Given the purpose of the international obligations that Canada is implementing in its data protection regulations and given the absence of definitive text in the data protection regulations to the contrary, why shouldn’t data protection be given in such a circumstance? Research and development into such drugs should be encouraged not discouraged. That is the primary aim of the international obligations Canada is supposed to be implementing in its data protection regulations.
 Needless to say, the Minister’s interpretation would create incentives against the development of beneficial new drugs. For example, if enantiomers are automatically excluded, then the innovators of the arguably new, safe and efficacious thalidomide drug (discussed at paragraph 66, above) and the innovators of other drugs whose medical ingredients are enantiomers that give rise to greater safety and efficacy (discussed at paragraph 65, above), would not receive data protection.
A copy of the Court of Appeal’s Reasons for Judgment may be found here.
On March 19, 2013, Takeda filed an application for leave to appeal to the Supreme Court of Canada.