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Unjust Enrichment – Medication and Monopolies

16 Mar 2016

In the case of Apotex Inc. v. Eli Lily and Company, 2015 ONCA 305, Eli Lilly and Company and Eli Lilly Canada Inc. ("Lilly") had used the process available under the regulatory scheme of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, in order to keep Apotex’s generic counterpart to Strattera (a drug used in the treatment of Attention Deficit Hyperactivity Disorder) off the market. Lilly thus ensured a virtual monopoly on sales of the drug.

Apotex’s generic counterpart to Strattera was approved on October 10, 2008. Lilly had immediately launched prohibition proceedings to protect its patent rights and prevent the issuance of a Notice of Compliance (NOC), which would enable Apotex to bring its counterpart to Strattera to the market. In the meantime, Lilly was facing allegations regarding the invalidity of their patent. The allegations resulted in a court action and on September 14, 2010, the Federal Court revoked Lilly’s patent to the formula underlying Strattera.

At this point "Apotex…became entitled to recover from Lilly, under s. 8(1) of the PMNOC regulations, the loss it suffered as a result of its exclusion from the market" (para 10). As such, Apotex commenced an action against Lilly to recover its losses as owed under the Statute of Monopolies, R.S.O. 1897, c. 323, s. 8 of the PMNOC regulations, and Trade-marks Act, R.S.C. 1985, c. T-13. However, Apotex decided to also claim unjust enrichment with regards to the seventy million dollars ($70,000,000.00) that Lilly earned during the two years in which Apotex was effectively excluded from the market.

The Ontario Court of Appeal Decision

The Ontario Court of Appeal ("OCA"), with reference to Kerr v Baranow, 2011 SCC 10 (CanLII), [2011] 1 S.C.R. 269, explained that in order to succeed in a claim for unjust enrichment "a plaintiff must prove three components: (1) an enrichment of or benefit to the defendant; (2) a corresponding deprivation of the plaintiff; and (3) the absence of a juristic reason for the enrichment".

The OCA, however, explained that Apotex’s claim for unjust enrichment would fail independently of whether it is even available. "Apotex was never deprived of the portion of Lilly’s revenues represented by its monopolistic profits because Apotex would never have earned those profits." The OCA goes on to explain that Apotex failed to indicate their deprivation in their statement of claim, instead asserting that their exclusion deprived the public. Furthermore, the OCA relied on the Supreme Court of Canada (SCC) Decision in Professional Institute of the Public Service of Canada v. Canada (Attorney General)2012 SCC 71 (CanLII), [2012] 3 S.C.R. 660 to characterize unjust enrichment as a reversal of "unjust transfers of wealth." The SCC emphasized a strong association between the gain and the deprivation – "they are ‘the same thing from two different perspectives’ or ‘two sides of the same coin.’" The OCA followed this rationale to the family law case of Pettkus v. Becker1980 CanLII 22 (SCC), [1980] 2 S.C.R. 834, where it was explained that a casual connection needs to exist between the gain and the associated deprivation or loss. 

As such, the OCA determined that "Apotex cannot show that Lilly’s monopolistic profits should have accrued to it as a result of a legal entitlement or a contribution it made" (Para 46). In response Apotex referenced cases where unjust enrichment arose not from a corresponding loss but from an unconscionable gain. The OCA took the opportunity to differentiate between the two varieties of unjust enrichment.

The first kind relies on a transfer of wealth, which the OCA showed is inapplicable to Apotex’s case as they had no claim or entitlement to any of the profits initially. The second kind relies on a party profiting from an unconscionable wrong. The OCA explained that such a remedy is exceptional and is only awarded in a restitutionary sense, usually in cases where there was a breach of fiduciary duty, as it still contemplates an injury or a wrong accruing to the other side. The OCA made clear that in the case at hand Apotex cannot successfully claim for unjust enrichment due to wrongdoing as it would effectively designate itself as the only victim. However, that is not the case, in accordance with Apotex’s own statement of claim the victims of this two-year monopoly were the consumers who were effectively robbed of their opportunity to purchase the drug at a lower price. Furthermore, the OCA noted that such a remedy was provided only in situations where other remedies were insufficient, and as such is to be deployed only in exceptional circumstances.

Apotex pleaded that the current regulatory mechanisms in place did not deter pharmaceutical companies from engaging in practices similar to Lilly because the amount they made whilst under false monopolies would far outweigh any monetary consequences accruing thereafter. The OCA seemingly brushed those concerns aside stating that the law may still provide for a disgorgement of those profits to the parties actually affected, namely the public. As such, the OCA held in favour of Lilly dismissing the claim for unjust enrichment.

Our Thoughts

Despite the determination against Apotex’s claims for unjust enrichment, it would appear that there is some precedent established for the benefit of the consumers when it comes to unjust enrichment in the context of pharmaceutical monopolies like the one enjoyed by Lilly in the case above. As such, the additional deterrence factor that Apotex was seeking can be achieved via a class-action suit, or some other form of legal mechanism that would disgorge the profits of such improper monopolies to their rightful beneficiaries – the public consumer. 

The law draws its legitimacy from various sources. Whether it is precedent set by previous cases, the wording of statutes, or the very intent of the government enacting those statutes. To be informed is to be prepared. Zeilikman Law offers legal services with the experience and depth of knowledge that is necessary for effective legal strategies. We combine passion with precision to get you the outcome you deserve. Whether you’re from Vaughan, Richmond Hill, Mississauga, Toronto, Woodbridge, Markham, Stouffville, Oak Ridges, Aurora, or Newmarket, Zeilikman Law has the right lawyers for you.

The above article is for general information purposes only and does not constitute legal advice. If you have concerns with regard to the foregoing issues, please make an appointment with one of our lawyers or a qualified legal practitioner elsewhere.