On September 23, 2014, the Competition Bureau (the “Bureau”) released a white paper regarding reverse-payment settlements in pharma litigation, Patent Litigation Settlement Agreements:  A Canadian Perspective. According to the Bureau, the goal of the white paper is to provide background on Canada’s regulatory system governing generic entry, its applicable competition legislation, and the Bureau’s preliminary views as to how Canadian competition law could apply to reverse-payment settlements.

Of significance, the white paper notes that the Bureau will consider using its criminal enforcement powers under section 45 of the Competition Act (the “Act”) to prosecute reverse-payment settlement in certain circumstances.  These circumstances include a settlement between competitors that includes conduct with respect to markets or products that are not the focus of the patent litigation or conduct beyond the scope of the patent (such as fixing a generic entry date beyond the term of the patent).  It also includes circumstances where direct or circumstantial evidence indicates that a settlement is a vehicle for a “naked restraint” on competition that is not implemented in furtherance of a legitimate collaboration or was motivated by factors beyond the issues associated with the litigation.

The white paper also notes that the Bureau will utilize its enforcement discretion to investigate and prosecute reverse-payment settlements under the civil (as opposed to criminal) provisions of the Act (i.e.  sections 90.1 and 79 of the Competition Act).

A clear enforcement priority for the Bureau is the prevention of anticompetitive conduct in the pharmaceutical industry.  The Bureau is particularly concerned with patent litigation settlement agreements between brand and generic drug manufacturers, and the possibility that they may delay generic entry.  According to the white paper, the Bureau will continue to consult with its stakeholders and experts to develop an effective enforcement approach to reverse-payment settlements.