Patented Medicines and the Patent Bargain


Patented Medicines and the Patent Bargain

While all Canadians understand that certain ideas can be owned, the complex statutory regimes that govern such ownership aren’t widely understood. Whether patent, copyright, or trademark, there is always a balancing of benefits to creators and society more broadly.

Some of the most important — and frequently litigated — balancing is done through the Patented Medicines (Notice of Compliance) Regulations (“PM(NOC)”). This regime governs the entry of generic drugs into the market — the end of the innovator’s ownership, and the balance between the temporary monopoly granted to an inventor and the benefit of more widespread access to medicines.

The PM(NOC) process requires that prior to selling a generic drug a manufacturer must address patents listed on Health Canada’s Patent Register. Only having done so will it receive a Notice of Compliance, allowing it to market and sell that drug.

Two courses exist for any generic manufacturer: simply await expiry of any patents, or attack the patents by alleging invalidity or alleging that a new product would not infringe. If the generic manufacturer succeeds in either attack, the benefit can be significant: earlier market access and the profits from that access.

The generic drug company will first serve a Notice of Allegation on the patent owner. The patent owner can either consent, or more likely commence an action in the Federal Court to prohibit generic market entry.

By statute, commencing a PM(NOC) action stays the regulatory approval process while the litigation proceeds, up to a maximum of 24 months.

If the generic drug company succeeds fully invalidating the listed patents after a PM(NOC) trial, those patents are invalidated in rem, allowing any generic drug company to obtain a Notice of Compliance.

However, given that PM(NOC) litigation is expensive, there is a further balancing: a successful challenger is given a “first mover advantage,” allowing it to begin marketing prior to other generic manufacturer. This can result in substantial growth, given that many provincial formularies will push consumers toward available generic manufacturers by only reimbursing the lower cost of a generic drug. 

While complex, the PM(NOC) regime reflects the fundamental “patent bargain” in the context of medicines. The Government of Canada’s Regulatory Impact Analysis Statement confirms Canada’s policy objective to “balance the effective patent enforcement over new and innovative drugs with the timely entry of their lower priced generic competitors”; in other words, balancing the benefit to creators with the benefit of widely available drugs for the public.

That bargain arises from the intersection of the PM(NOC) and the Patent Act. For an innovator, s. 42 of the Patent Act provides a 20-year monopoly over the invention. In exchange, the inventor must fully disclose the invention for the benefit of society.

The balance depends on sufficient disclosure, which lies at the very heart of the patent system. In the event a patent’s disclosure is insufficient, it may be invalidated pursuant to section 27(3) of the Patent Act.

The monopoly also isn’t absolute. Another facet of the balance is reflected in s. 55.2(1), which provides the “early working exception,” allowing a generic manufacturer to use a patented invention so long as the use is solely for the purpose of seeking regulatory approval. Without this exception the PM(NOC) process could be stymied, as those seeking approval would have difficulty undertaking appropriate preparation.

As with each of Canada’s IP regimes, the balancing necessary to grant ownership of an idea is challenging. Ultimately, however, the benefit to Canadians is immense: access to lifesaving medicines and the knowledge necessary for those medicines to be made widely available.