Federal Court Finds Health Canada Liable To Apotex In Tort But Apotex Required To Mitigate

On November 18, 2014, Justice Hughes of the Federal Court (Court) issued his ruling in Apotex Inc v Canada, 2014 FC 1087, finding Health Canada (HC) liable for damages to Apotex in tort (namely, for misfeasance in public office and negligence) due to the facts surrounding a 7-year delay in issuing a Notice of Compliance (NOC) to Apotex in respect of Apo-Trazad (trazodone). However, Justice Hughes also found that Apotex was required to mitigate its damages. HC was also held liable for breach of a settlement agreement, but this cause of action failed for being time-barred.

In 1998, Apotex commenced this action for damages, including punitive damages, on the grounds of negligence, breach of a settlement agreement, misfeasance in public office and misrepresentation (negligent, fraudulent or innocent). HC defended, asserting that Apotex's claims were time-barred, that Apotex had repudiated the settlement, that there was no duty of care owed, and that Apotex failed to mitigate its damages.

The issue at trial was whether Apotex was entitled to damages for HC's failure to issue a NOC to Apotex in respect of its Apo-Trazad for seven years, a delay which allegedly caused two competitors to beat Apotex to market with their own generic trazodone products.

Background

On January 25, 1988, Apotex filed a regulatory submission for Apo-Trazad to the Health Protection Branch (HPB) within HC. Apotex's submission relied on a US reference product. At that time, HC did not have a clear policy or guidelines on the ability to use a foreign reference product to obtain generic drug approval. It did not accept Apotex's submission and required Apotex to use a Canadian reference product unless the US reference product could be "conclusively proven to be identical" to the Canadian product.

In August 1990, Apotex brought a judicial review application to compel the Minister to review its submission without requiring the use of a Canadian reference product and issue an NOC. The parties reached a settlement agreement on November 26, 1990 and the application was discontinued. According to the settlement agreement, the HPB was prepared to consider evidence to establish equivalency between Canadian and US reference standards for the purposes of a comparative bioavailability study.

Apotex submitted further bioavailability data to establish equivalency pursuant to the settlement agreement; however, HPB continued to insist on identicality.

In July 1991, Apotex brought a second...