Canadian pharmaceutical company alleges denial of justice in claim against the United States

By Damon Vis-Dunbar
15 January 2009

A Canadian pharmaceutical company delivered a notice of arbitration to the United States government in December 2008 under NAFTA’s Chapter 11 on investment. The US$8 million claim is rooted in the complicated legislation that governs how generic medications can be introduced to the U.S. market.

Apotex Inc., which claims to be the largest Canadian owned pharmaceutical company, alleges that a series of legal blunders by U.S. courts have frustrated its efforts to sell a generic antidepressant medication.

The dispute relates to Apotex’s generic version of the antidepressant medication commonly known as Zoloft, or sertraline hydrochloride by its generic name. Although the pharmaceutical giant Pfizer held several patents for the drug, Apotex sought to gain approval from the US Food and Drug Administration to bring its generic version of the drug to market before one of these patents expired in 2006. To do so, Apotex triggered an ‘artificial’ act of patent infringement, in an effort to draw Pfizer into a dispute that would provide a judgment, one way or the other, on the legality of Apotex’s aspiration to sell the antidepressant.

When Pfizer declined to take the bait, Apotex filed for a declaratory judgment—a common legal tactic in patent litigation. However, U.S. Federal Courts refused to rule on the matter, citing lack of subject matter jurisdiction. In particular, the courts concluded that they lacked a “reasonable apprehension” that Pfizer would launch a suit for patent infringement. Apotex’s efforts to convince the Supreme Court to overturn the Federal Court decisions have also failed.

In its notice of arbitration, Apotex argues that the U.S. courts “misapplied” statutory and constitutional law in multiple decisions, in what amounts to a violation of NAFTA commitments on National Treatment, Minimum Standard of Treatment, and Expropriation and Compensation.

This marks the first notice of arbitration under NAFTA Chapter 11 to be served to the United States in over two years.

Apotex has elected to arbitrate under the UNCITRAL Arbitration Rules.

The Notice of Abitration in Apotex Inc. v. the Government of the United States of America is available from the website of the U.S. Department of State: http://www.state.gov/s/l/c27196.htm