Exception to payment clause applies in settlement agreement for valacyclovir

The case surrounds an agreement made following a 2009 dispute over GSK’s product Valtrex (valacyclovir hydrochloride). In 2008, Health Canada approved Pharmascience and Apotex to sell valacyclovir hydrochloride products. From 2009 to 2014, the parties were involved in patent litigation which was ultimately settled. The settlement agreement required Pharmascience and Apotex to stop selling their valacyclovir products in Canada.

The settlement agreement’s payment clause required Pharmascience to pay GSK if Teva, Sandoz or Sorres were marketing and offering a valacyclovir product for sale in Canada prior to October 13, 2015:

Section 12 of the Settlement Agreement provided that if “Teva, Sandoz or Sorres enter[ed] the Canadian market and offer[ed] a valacyclovir product for sale prior to the expiry of the Patent on October 13, 2015, then … [Pharmascience] shall pay to GSK the amounts set out in Schedule ‘A’”

Justice Papageorgiou found that the payment clause was triggered since Teva made sales on June 1, 2014.

The payment clause did not apply if Teva, Sandoz or Sorres stayed in the market for no more than a 60 day period, determined by the dates of the first and last sale of its valacyclovir product in the Canadian market

The Court had to determine what was meant by the first and last sale of its valacyclovir product.  The Court decided that it was a reference to Teva’s ex-factory sales as opposed to sales from pharmacists to patients.  In reaching the decision, the Court considered the consistency with the purpose, and that the exception would be meaningless if “sales” is interpreted as downstream sales.

Since Teva’s ex-factory sales ended within the exception’s time limit of 60 days, payment was not required.

A copy of Justice Papageorgiou’s Reasons for Order may be found here.