Teva Successful In Pregabalin Section 8 Damages Case Against Pfizer

On March 30, 2017 Justice Phelan issued his Public Reasons for Judgment awarding Teva damages under section 8 of the PM(NOC) Regulations after Pfizer prevented Teva from selling its pregabalin product. Pregabalin is used for the management of neuropathic pain and is sold by Pfizer under the trade name Lyrica.

Justice Phelan applied what is now the well-established framework for assessing section 8 damages:

[8] The five steps can effectively be described as follows in respect of the relevant drug:

  • determine the duration of the period of liability [the Liability Period];
  • determine the overall size of the Pregabalin market during the Liability Period;
  • determine the portion of the Pregabalin market that would have been held by Teva and any other generic manufacturers during the Liability Period – the generic market;
  • determine the portion of the generic market that would have been held by Teva – its lost volumes; and
  • quantify the damages that would have been suffered by Teva in respect of its lost volumes (net lost profits).

In accordance with the Court of Appeals guidance in Venlafaxine FCA, Justice Phelan noted that while the fundamental question is what would have happened if Pfizer had not commenced prohibition proceedings, the Court must examine both what could have and what would have happened.

Justice Phelan found that the liability period commenced on August 26, 2010, Teva’s patent hold date, and ended on February 14, 2013 when the proceedings were discontinued. To determine the overall size of the pregabalin market and how that market is shared in the but-for world Justice Phelan held that the economic models of Teva’s expert, Dr. Aidan Hollis, should be used. Justice Phelan preferred Dr. Hollis’ evidence to that of Pfizer’s expert, as it was clear, balanced and fair. Justice Phelan also found that Teva would have and could have launched its pregabalin product on August 26, 2010 and supplied the entire generic market. In making this finding Justice Phelan rejected Pfizer’s arguments that Teva would have encountered numerous obstacles and not been able to launch noting that it was Pfizer’s burden to establish the impediments:

[184]   It was Pfizer’s contention that Ratiopharm/Teva had problems which prevented its launch. It was for Pfizer to establish these impediments. The evidence established that Ratiopharm had the ability to supply ratio-pregabalin, particularly at Ratiopharm’s Mirabel facility.

Pfizer also argued that once Teva entered the market it would have ceased opposing market entry by other generic manufacturers, launched its own generic version of pregabalin and authorized at least one generic manufacturer to enter the market. Justice Phelan rejected Pfizer’s “open season” argument noting that the Court of Appeal has expressly rejected this argument in other section 8 cases and that in the but-for world all potential market entrants, except the section 8 claimant, are bound to navigate the PM(NOC) Regulations:

[202] Pfizer contends that once one generic (in this case Teva) enters the marketplace, Pfizer would cease all opposition to market entry by other generics. The Federal Court of Appeal describes it as an “open season” methodology.

[203] This “open season” methodology was rejected by the Federal Court of Appeal in Apotex v Sanofi-Aventis, 2014 FCA 68 at paras. 156-159… in which the Federal Court of Appeal agreed with the trial judge’s reason for rejecting the open season methodology. …

[204] The Court of Appeal went on to explain that the BFW [but-for-world] is one in which all potential market entrants (other than the s 8 claimant) are bound to navigate the PMNOC Regulations and, from the third party generics’ perspective, the prohibition proceedings remain alive.

Justice Phelan also held that there was insufficient evidence to support Pfizer’s arguments that it would have launched its own generic pregabalin product and authorized other generics to enter the market.

While much of the legal framework for assessing section 8 damages is now well established, one issue that remains unsettled is whether an award should account for pipefill. Pipefill consists of sales made by generic manufacturers to distributors in order to provide them with initial inventory. While several section 8 decisions have allowed for a pipefill adjustment, in one decision the Court held (see our previous blog post here) that pipefill adjustments are inappropriate. Teva argued that since the IMS sales data used to assess its damages only captures retail sales an adjustment needs to be made to reflect the pipefill sales that are made during the liability period but are not included in the IMS data. In allowing an adjustment to reflect pipefill Justice Phelan noted that Teva is entitled to recover losses suffered in the liability period and that pipefill sales are not a disguise for recovering double-ramp up:

[311] To the extent that pipefill or inventory adjustments represent sales lost in the BFW, they are appropriate. To the extent that they are a disguised method of compensating for double ramp-up, they are not.

A copy of Justice Phelan’s Public Judgment and Reasons can be found here.

Pfizer has appealed.

Teva was represented by David Aitken, Jonathan Stainsby and  Bryan Norrie  of Aitken Klee LLP.