This bulletin provides an update on the most recent decision of the Federal Court in the ongoing saga concerning Galderma's dermatology medicine, Differin. Galderma has been locked in a legal saga with the Patented Medicine Pricing Review Board ("PMPRB") regarding its order to provide sales and pricing information for Differin.
The case is relevant to Canadian patentees since it speaks to both the scope of the PMPRB's jurisdiction and the PMPRB's willingness to implement guidance from the Federal Court of Appeal. Even though the case had been remanded to the PMPRB with comments that its jurisdictional analysis was tainted by error, the Board reached the same conclusion a second time, following similar reasoning.
Background
Galderma has marketed two different adapalene products in Canada: Differin containing 0.1% adapalene and Differin XP containing 0.3% adapalene. Differin was the subject of two patents, the last of which expired in December 2009. Galderma provided sales and price information to the PMPRB for Differin until December 2009. Galderma also had a patent that covered DIFFERIN XP ("237 Patent"), which expired in March 2016. All claims of the 237 Patent include a 0.3% adapalene limitation. Critically, this meant that Differin could not fall within the claims of the 237 Patent.
In a decision dated December 19, 2016, seven years following the expiry of the Differin patents, the PMPRB brought an application alleging that Galderma had failed to furnish information regarding the medicines Differein 0.1 and Differin XP, on the basis that the 237 Patent pertains to those two medicines. The Board determined that the 237 Patent was capable of being "used for" Differin, within the meaning of s 79(2) of the Patent Act, and ordered Galderma to provide pricing information for Differin. This information-reporting order was likely to be merely a prelude to later excessive pricing prosecution by the Board.
Galderma sought judicial review of this decision. On November 9, 2017, the Federal Court quashed the Board's decision, holding that "it was unreasonable (and irrelevant) to conclude that, on the face of the 237 Patent, it pertained to Differin because the patent is capable of being used for Differin. The Board does not explain how the 237 Patent for 0.3% adapalene can be used for a medicine with 0.1% adapalene."1
On June 28, 2019, the Federal Court of Appeal granted the appeal of the PMPRB, and remitted the matter to the Board to determine whether the invention of the 237 Patent pertained to Differin.2 In doing so, the Federal Court of Appeal emphasized that the name of the test used for the Board's jurisdiction, the so-called "slender thread" test, was merely a colourful metaphor, and that the Board should assess whether the invention of the 237 Patent is intended or capable of being used for Differin.
In May 2020, the Board concluded that the "collective effect of [the] clinical similarities between Differin and the invention of the 237 Patent as reflected in Differin XP establish that the invention of the 237 Patent is intended or capable of being used for Differin." In its second decision, the PMPRB claimed that patentees should not evade the PMPRB's regulatory oversight by marketing a core drug product through various line extensions. It rejected the argument that an invention must "encompass" a medicine that a patentee sells in Canada.
Most Recently
Galderma once again sought judicial review of the PMPRB's decision at the Federal Court. On January 11, 2024, the Federal Court wrote that the Board reasonably found that the invention of the 237 Patent pertained to, or could be used for, Differin.3
The PMRPB Staff argued that the invention of the 237 Patent and Differin use the same molecule and same mechanism of action to treat the same condition, with similar clinical efficacy and side effects. The 237 Patent was therefore capable of being used for Differin.
Galderma argued that "pertains to" in s 79(2) of the Patent Act meant encompassing the off-patent medicine, such that one must be capable of being used for the other. In other words, for an invention to pertain to a medicine under the Patent Act, it must broadly "encompass" the medicine that a patentee is selling. Galderma goes on to argue that the differences in concentrations of adapalene produced differences in effectiveness, tolerance, and side effects. The 237 Patent, the product monograph, and prescribing clinicians all treated the two medicines differently. Galderma also argued that the PMPRB's failure to assess whether the 237 Patent conferred an ongoing market benefit in relation to Differin renders its decision unreasonable.
The Federal Court gleaned the following principles from the jurisprudence:
- While the relationship between a patented invention and an off-patent medicine may be tenuous, the fundamental question is whether the invention is intended or capable of being used for the medicine, not whether there is the merest slender thread of a connection.
- Where it appears that a patent confers exclusivity with respect to a portion of the market relating to the medicine being sold in Canada, there is a presumption that its mere existence confers market power by distorting the competitive process and competitors are dissuaded from entering the marketplace. There is no need for Board Staff to demonstrate actual market distortion, and no opportunity for a patentee to prove the contrary.
- The Board has neither the mandate, nor the necessary experience and expertise, to go beyond the face of a patent to construe the use claims before determining whether they correspond to the uses stipulated in the NOC for an off-patent medicine. A finding that, on its face, the patent is intended or capable of being used for the off-patent medicine is sufficient to establish the Board's jurisdiction.
Based on these principles, the Federal Court upheld the PMPRB's decision as reasonable. Even though there was no proof of market power or monopoly from the 237 Patent, this was not required, and its mere existence raised an irrebuttable presumption of a potential for abuse of monopoly.
Federal Court quoted from the Quebec Court of Appeal's 2022 Merck Canada inc. c. Procureur général du Canada decision, which struck down portions of the PMPRB's new regulations and limited it to regulating patent monopolies, but did not ultimately apply that ruling, preferring instead the broad approach to PMPRB jurisdiction set out by the Federal Court of Appeal.
It is questionable whether that is the correct legal approach. If the PMPRB's jurisdiction is limited by constitutional considerations (something on which all courts agree), then it seems improper to allow the existence of a commercially-irrelevant patent to bootstrap federal jurisdiction over a medicine that is neither covered by that patent, nor whose market is affected by that patent. The Supreme Court recently struck down the federal environmental impact assessment legislation on the basis that it attempted to regulate projects with only trivial links to federal jurisdiction.4 It is reasonable to conclude that a patent with no market power or connection to a medicine is similarly trivial in its pricing effects, and thus insufficient to authorize federal price regulation. Or at the very least, evidence should be required to show a non-trivial pricing effect, failing which the PMPRB would lack jurisdiction to act.
The appeal period is currently open. Only time will tell if Galderma appeals for the second time to the Federal Court of Appeal, and if so, how the case will fare on its second round of appeals. Until then, it remains to be seen whether the "slender thread test" is merely a metaphor for the legal analysis under s 79(2) of the Patent Act, or whether this is a distinction without a difference, since the PMPRB will be allowed to regulate medicines with only trivial connections to the federal patent power.
Footnotes
1. Galderma Canada Inc. v. Canada (Attorney General), 2017 FC 1023.
2. Canada (Attorney General) v. Galderma Canada Inc., 2019 FCA 196.
3. Galderma Canada Inc. v. Canada (Attorney General), 2024 FC 46.
4. Reference re Impact Assessment Act, 2023 SCC 23.
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