IN THE MATTER OF the Patent Act, R.S.C. 1985, c. P-4, as amended AND IN THE MATTER OF Apotex Inc., (the “Respondent”) and the medicine “Apo-Salvent CFC Free”

STATEMENT OF ALLEGATIONS OF BOARD STAFF

INTRODUCTION

1. This Statement of Allegations results from an investigation by Board Staff into the price of Apo-Salvent CFC Free (“Apo-Salvent”) (DIN 02245669), a patented medicine sold in Canada by Apotex Inc. (“Apotex”).

THE MEDICINE

2. Apo-Salvent is a new DIN of an existing dosage form of an existing bronchodilator medicine (salbutamol sulphate) which relieves chest tightness and wheezing caused by spasms or narrowing in the small air passages of the lungs. (Attachment 1)

3. Health Canada issued a Notice of Compliance for Apo-Salvent on March 21, 2002. (Attachment 2) Apo-Salvent is considered an “authorized generic” as it is a drug product which was originally manufactured, marketed and sold by 3M Canada Company (“3M Canada”) under the brand name Airomir. THE PATENT

4. Canadian Patent No. 2,004,598 (“the ‘598 patent”) pertains to Apo-Salvent. (Attachment 3) This patent was issued to Riker Laboratories, Inc., US on November 7, 2000 and will expire on December 5, 2009.

5. In 2002, Apotex and 3M Canada entered into a licensing agreement permitting Apotex to sell Apo-Salvent under the Apotex label. As a result, Apotex is, for the purposes of the Patented Medicine Prices Review Board (“PMPRB”), considered a Canadian patentee.

REGULATORY FILINGS

6. Apotex failed to report its price and sales information, for Apo-Salvent, for the period October 1, 2002 to June 30, 2006, within the specified time set out in the Patented Medicines Regulations, 1994 (the “Regulations”). However, on October 4, 2006, Apotex filed its price and sales information for Apo-Salvent for all periods, and has since continued to file its price and sales information, in accordance with the Regulations.

APPLICABLE GUIDELINES

Category

7. Section 3 of Chapter 3- Scientific Review Procedures (“Scientific Review Procedures”) provides the following guidance with respect to determining categorization for a new drug product:

3.1 A Category 1 drug product is a new DIN of an existing dosage form of an existing medicine, or a new DIN of another dosage form of the medicine that is comparable to the existing dosage form as per Schedule 7.

3.2 A Category 2 drug product is one that provides a breakthrough or substantial improvement. It is a new DIN of a non-comparable dosage form of an existing medicine or the first DIN of a new chemical entity.

3.3 A Category 3 drug product is a new DIN of a non-comparable dosage form of an existing medicine or the first DIN of a new chemical entity. These DINs provide moderate, little or no therapeutic advantage over comparable medicines. This group includes those new drug products that are not included in Category 2 above.

8. Based on the above Scientific Review Procedures, Board Staff categorized Apo-Salvent as a Category 1 new drug product as it represents a new DIN of an existing dosage form of an existing medicine that is comparable to the existing dosage form.

The Maximum Non-Excessive Price for Ratio-Salbutamol at Introduction

9. Chapter 1 – Excessive Price Guidelines (“the Guidelines”) sets out the tests applicable to the introductory price of Category 1 new drug products as follows:

8.3 Category 1 New Drug Products

In addition to the Guideline applicable to all patented drug products detailed in Section 7, the introductory price of a Category 1 new drug product will be presumed to be excessive if it does not bear a reasonable relationship (“RR”) to the average price of other DINs of the same medicine in the same or comparable dosage forms (Schedule 1).

When the above methodology is not considered adequate or appropriate, Board Staff may conduct a Therapeutic Class Comparison Test (Schedule 2) to determine if the introductory price of the new DIN is excessive. This could be relevant if, for example, the new DIN has a therapeutic use or dosage regimen that differs materially from the other DINs of the same or comparable dosage forms of the medicine.

While the introductory price of a Category 1 DIN will normally be compared against DINs of the same patentee, Board Staff may consider it appropriate in some instances to include DINs of other patentees. (For example, another voluntary licensee of the same patent as that pertaining to the new drug product, or a patentee marketing a drug product containing the same active ingredient as the new drug product but for which a different patent pertains.)

10. As per subsection 8.3 of the Guidelines, Board Staff conducted an RR Test comparing the price of Apo-Salvent to other salbutamol sulphate products being sold in Canada during its introductory period. The results of the RR test indicated that the introductory price of Apo-Salvent per 0.1 mg/dose (“per dose”) was within the Guidelines for the introductory period October 2002 to December 2002 and established the drug's benchmark price for review in subsequent reporting periods. (Attachment 4)

11. The Guidelines also set out the International Price Comparison (IPC) Test for new and existing drug products as follows:

7.1 The price of a new or existing patented drug product will be presumed to be excessive if it exceeds the prices of the same medicine sold in all countries listed in the Regulations. These prices will be determined using the International Price Comparison Test described in Schedule 3.

12. Since Apo-Salvent is an authorized generic, Board Staff reviewed the publicly available international prices of Airomir when applying the IPC Test. The results indicated that during the introductory period, Apo-Salvent did not exceed the highest available ex-factory price of Airomir sold in the foreign countries listed in the Regulations. (Attachment 5)

The Maximum Non-Excessive Price of an Existing Drug Product

13. The Guidelines also set out the appropriate price tests for an existing drug product as follows:

9.1 In addition to the Guideline applicable to all patented drug products detailed in Section 7, the price of an existing DIN will be presumed to be excessive if it exceeds the benchmark price of the DIN adjusted for the cumulative change in the Consumer Price Index (CPI) from the benchmark period to the pricing period under review (CPI-adjusted price). Schedule 4 provides detailed definitions and examples of the PMPRB's CPI-adjustment methodology.

9.2 Regardless of the above, and in addition to the Guideline applicable to all patented drug products detailed in Section 7, one-year price increases in the current pricing period may not exceed 1.5 times the forecast change in the annual CPI. In periods of high inflation (over 10%), the limit will be five percentage points more than the forecast change in the CPI.

14. Commencing in 2003, Board Staff reviewed the price of Apo-Salvent by applying the PMPRB's CPI-adjustment methodology to revised data filed by Apotex, and the price of Apo-Salvent was found to be outside the Guidelines for the period commencing January 1, 2004 to December 31, 2004 and all subsequent periods:

15. Board Staff further reviewed the publicly available international prices of Airomir as part of the existing drug product IPC Test. The results indicated that Apo-Salvent did not have the highest publicly available ex-factory price when compared to the international prices of Airomir. (Attachment 5)

16. By letter dated August 22, 2007, Board Staff advised Apotex that for the period of January 1, 2004 to June 30, 2007 Apotex had accumulated excess revenues for Apo-Salvent, and that the price of Apo-Salvent was excessive since it exceeded the MNE price calculated using the PMPRB's CPI-adjustment methodology. (Attachment 6)

17. According to publicly available information, Apotex was selling Apo-Salvent at a price of $4.64 per inhaler ($0.0232 per dose) in 2003 and 2004; and at a price of $7.73 per inhaler ($0.0386 per dose) in 2005, 2006 and 2007. (Attachment 7)

EXCESSIVE PRICING

18. Subsections 83(1) and 83(2) of the Patent Act state that:

83. (1) Where the Board finds that a patentee of an invention pertaining to a medicine is selling the medicine in any market in Canada at a price that, in the Board's opinion, is excessive, the Board may, by order, direct the patentee to cause the maximum price at which the patentee sells the medicine in that market to be reduced to such level as the Board considers not to be excessive and as is specified in the order.

(2) Subject to subsection (4), where the Board finds that a patentee of an invention pertaining to a medicine has, while a patentee, sold the medicine in any market in Canada at a price that, in the Board's opinion, was excessive, the Board may, by order, direct the patentee to do any one or more of the following things as will, in the Board's opinion, offset the amount of the excess revenues estimated by it to have been derived by the patentee from the sale of the medicine at an excessive price:

(a) reduce the price at which the patentee sells the medicine in any market in Canada, to such extent and for such period as is specified in the order;

(b) reduce the price at which the patentee sells one other medicine to which a patented invention of the patentee pertains in any market in Canada, to such extent and for such period as is specified in the order; or

(c) pay to Her Majesty in right of Canada an amount specified in the order.

19. It is the position of Board Staff that Apotex has been selling Apo-Salvent in Canada since 2004 at a price per dose which exceeded the MNE price calculated in accordance with the PMPRB's CPI-Adjustment Methodology. To date, Apotex has failed and/or refused to lower the price of Apo-Salvent to comply with the PMPRB's Guidelines. 20. Therefore, it is respectfully submitted that there are grounds for the Board to conclude pursuant to section 83 of the Patent Act that Apotex is selling or has sold the medicine known as Apo-Salvent in any market in Canada at a price which is or was excessive.

OTHER

21. Board Staff reserves the right to make such other allegations and submissions and introduce other additional documents as Board Staff may advise and the Board may permit.

22. Pursuant to section 86 of the Patent Act, a hearing shall be held in public unless the Board orders otherwise. Board Staff submits that any hearing conducted by the Board into the price of Apo-Salvent should be held in public and, subject to the orders of the Board, all information and documents filed should form part of the public record.

ORDER REQUESTED

23. Board Staff seeks the issuance of an Order pursuant to section 83 of the Patent Act as against Apotex, the terms of which would be as follows:

a) The maximum non-excessive price of Apo-Salvent in Canada for the period January 1, 2004 to December 31, 2007 inclusive shall be as follows:

b) The maximum non-excessive price of Apo-Salvent in Canada in future periods shall be calculated in accordance with the Guidelines.

c) In accordance with subsection 83(1) of the Patent Act, Apotex shall cause the maximum price at which it sells Apo-Salvent in Canada to be reduced to the maximum non-excessive price effective on or before 30 days from the date of the Board's Order.

d) In accordance with subsection 83(2) of the Patent Act, Apotex shall offset the amount of excess revenues estimated to have been derived by Apotex from the sale of Apo-Salvent at an excessive price from January 1, 2004 until the date on which the price reduction referred to in paragraph c) above comes into effect:

i) With respect to the period from January 1, 2004 to December 31, 2007, Apotex shall pay to Her Majesty in Right of Canada, within 30 days of the date of the Board's Order, an amount equal to the amount set out in Attachment 8; and

ii) With respect to the period from January 1, 2008 to the date on which the price reduction referred to in paragraph c) comes into effect, Apotex shall pay to Her Majesty in right of Canada, a further amount equal to the amount of the excess revenues estimated by the Board to have been derived by Apotex from the sale of Apo-Salvent at an excessive price and make the payment within 30 days of receipt of a notification from the Board of its estimate of excess revenues based on the information filed in response to paragraph e) below;

e) Apotex shall, within 30 days of the date of the Board's Order:

i) Notify federal/provincial/territorial ministers of health or their representatives and all customers of the price decrease as required by the Board's Order (a copy of which shall be included in such notifications) and the effective date of such price decrease;

ii) Submit copies of the above-noted notifications and any other notice to the Board; and

iii) Provide to the Board information concerning the quantity of Apo-Salvent sold and either the average price per inhaler or the net revenue from sales of Apo-Salvent in Canada, in the same form as required by subsection 4(1) of the Regulations for the period January 1, 2008 to the date on which the price reduction referred to in paragraph c) comes into effect.

Dated at Ottawa this 17th day of June 2008.

Borden Ladner Gervais, LLP
The Chambers
Suite 1100, 100 Queen Street
Ottawa, Ontario K1P 1J9

Tel: (613) 787-3521
Fax: (613) 230-8842

Guy Pratte
E-mail: gpratte@blgcanada.com

Nadia Effendi
E-mail: neffendi@blgcanada.com

List of Attachments

• Attachment 1 Apo-Salvent Package Insert
• Attachment 2 Notice of Compliance for Apo-Salvent dated March 21, 2002
• Attachment 3 Canadian Patent No. 2,004,598 issued November 7, 2000
• Attachment 4 Letter dated March 9, 2007 from Board Staff to Apotex
• Attachment 5 Publicly Available International Prices of Airomir for the period 2002 - 2007
• Attachment 6 Letter dated August 22, 2007 from Board Staff to Apotex
• Attachment 7 Publicly Available Price Listings (2003 - 2007) for Apo-Salvent from Association Québécoise des Pharmaciens Propriétaires
• Attachment 8 Apo-Salvent - Calculation of Excess Revenues