The Patented Medicine Prices Review Board (PMPRB) held that Sandoz Canada, Inc. must file documents with the PMPRB relating to several generic drugs it sells because of its subsidiary relationship with Novartis AG, concluding that Sandoz is a ‘patentee’ with reporting obligations pursuant to Section 80, 81 and 88 of the Patent Act.

The Board’s order and reasons, dated last week, are now available from the PMPRB website under file PMPRB-10-D2-SANDOZ.

At paragraph 22 of the decision, the Board defined the issues to be determined as:

1. Is Sandoz a patentee within the meaning of subsection 79 of the Act, such that it has reporting obligations with respect to its sales of patented medicines?
2. Are the sections of the Act that established the Board constitutional insofar as they are sought to be applied to (as Sandoz describes itself) “a reseller of therapeutically equivalent generic medicines as a second or subsequent market entrant in a provincially price-regulated, competitive market”?

Sandoz had argued that it was not a “patentee…being entitled to the benefit of the patent for that invention” under Section 79(1) of the Patent Act:

[33] Sandoz further argued that its status as an ultimately wholly-owned subsidiary of Novartis AG could not, on its own, give rise to “patentee” status in relation to patents held directly or indirectly by Novartis AG. Sandoz argued that it is incorrect to imply a grant of “rights in relation to” a patent from the patent holder to a subsidiary in the absence of an agreement to that effect or conduct that implies such a grant. Sandoz notes (and Board Staff does not allege otherwise) that there are no agreements between Sandoz and any Novartis company regarding any patents.

The Board concluded that Sandoz was a ‘patentee’:

[48] However, as discussed below, the evidence in this proceeding established that the very reason that Novartis AG operates Sandoz in Canada is to sell generic medicines, including (indeed, wherever possible), medicines regarding which Novartis AG holds pertaining patents. In these circumstances, the Panel concludes that Sandoz is indeed entitled to the benefit of, and to exercise rights in relation to, that patent: it is entitled to sell the medicine without being sued for infringement.
…
[57] For these reasons, the Panel concludes that Sandoz is a patentee, within the meaning of subsection 79(1) of the Act, of any patent owned directly or indirectly by Novartis AG, where that patent is for an invention pertaining to a medicine that Sandoz is authorized by its parents to sell in Canada.

The Board rejected arguments that “no monopoly was created by the patent, that the patent was not used, or not used for the medicine, [and] that the medicine did not infringe the patent.” [at para 83]

The Board also concluded that there was no basis to distinguish between patentees that are “brand name” pharmaceutical companies and patentees that are “generic” pharmaceutical companies and so application of the Patent Act to generics was not unconstitutional. [para 88]

Note: the first version of this post was published on August 7, 2012 based on the decision as published by the PMPRB but was removed on August 9, 2012 at the request of a party due to confidentiality concerns. The decision was republished by the PMPRB on October 3, 2012.