Pharmascience Inc. v. Meda AB et al - Nov 15, 2021 - Part 1
1:56PM Nov 15, 2021
MR. de SOUSA
The sitting of the federal court by videoconference is now open. Presiding, the Honorable Mr. Justice Zinn. Before the court, file T-815-17 between Pharmascience Inc. and Meda AB, Meda Pharmaceuticals Ltd., Valeant Canada LP and Valeant Canada SEC.
Markus Klee, Jonathan Stainsby, Jonathan Giraldi, Aleem Abdulla and Yaseen Manan represent the Plaintiff. Melanie Baird, Andrew Skodyn, Cole Meagher, Rebecca Torrance and Sanjit Rajayer represent the Defendants.
Good morning, counsel.
Good morning, Justice Zinn.
Just a couple of small housekeeping matters. I did receive your compendium, Mr. Klee, for your opening statements this morning, just so you know. Obviously I haven't turned the pages of it, but I do have it in front of me. I have three screens going now. I have the transcript over here on my left, I have you folks directly in front of me and I have the eTrial Toolkit over on the side. If at any time you wish to use screen sharing to show a document either to the witness or to me, please just tell me that's what you're doing. You don't need to seek my permission time. You just got your blanket permission to do that. And because there is no confidentiality order in place, as documents are entered as exhibits any x and the confidential file on the E-trial toolkit, I've instructed the registrar to remove that. So it will be a public document. And with that, unless there's any issue that either of you feel we need to address before we get started, you can start with opening statements.
I have a -- thank you, Justice Zinn. And I have a couple of housekeeping matters as well that I'll just raise with the court. The first is the trial schedule. You should have a copy of that. That was sent in. That's the obviously the current list of witnesses and the order in which we believe they will appear there is an update to that that's currently being circulated among counsel and that will be provided to the court as soon as it's ready. Okay, thank you. We also have some documents that we'd like to begin by marking as exhibits. The first one is FC293. And that's the agreed facts between the parties.
It'll be and by the way, my practice I'm not sure it's always been my practice, but it is now is simply to mark exhibits sequentially, so that will be Exhibit 1.
Okay. The next exhibit would be the statement of issues, which is FC292. Exhibit 2, and then the next exhibit are Pharmascience's read-ins. That's FC308.
And just as in we had an exchange with my friends about this last night and this morning, and there are still some small test data, get into a fight about readings, but there are a few related readings that we had proposed and we had understood we're in discussion among the parties and read ends on the trial schedule we got yesterday the day before were due on Friday. So we haven't we haven't even looked at what they've uploaded to the trialkit. We wanted to continue having a discussion with them about these. There's like three or four related readings that are left and so we asked my friends this morning if they would mind putting this off for a day or two given it was supposed to be Friday. Anyways and see if we can resolve this amongst ourselves. I don't want readings to become an issue, but this was a surprise to us, obviously, given it had been on the Friday list of things to do since since the tribal shedule was exchanged, you know, a month month and a half ago.
So let's let's let's leave that one aside then for now, Mr. Clean until you folks have an opportunity to see if you can reach agreement on that. And obviously I'm not going to be reading mediums at this point.
No, I understand just as in but the time for the the exchanges done on Regents, the time for bringing a rope a motion for additional regions the three or four that my friends wish to add in that we said we will not put in has passed. So I don't want my friends intend to accomplish that whether it goes in today or Friday it doesn't change the fact that their time for moving has passed.
So I with all due respect, I don't agree with that the the readings aren't fixed until they're actually proposed to be read in at trial. So normally parties are able to agree on this and I think I can describe to you very briefly the nature of the dispute which is like you know, there are questions in between the questions, questions that are redacted out in between the readings my friends want to make that we think should the whole section should be in we're not talking about the witness saying something three days later or whatever. But to my friend's point, I respectfully disagree that readings and related readings are a pretrial matter. I don't think a party is fixed to what they want to read in until they actually present it at trial. And so at that point, if they're still disputed, then then they're subject to resolution but they could have added something later or taking something out and in fact they did both at various points. So anyways, I if my friend thinks that that was a pre trial motion, we respectfully disagree and as I say I think we thought we were discussing this but as you noted in one of your orders last week, there are a number of squabbles, and we're just hoping that this won't be a squabble that you need to adjudicate. And if we can discuss it with my friends over the next day or two, that's all we're asking.
This is this is what I propose. To do. We will mark your regions is exhibit three. You folks continue talking if you can't reach agreement on the half dozen or so, issues that the defendants have, I will hear their emotion at the end of the plaintiffs case. As to whether or not these additional questions or answers ought to be accepted as part of the readings. If it is, then you'll file a new document without the redactions. As I understand it, that are the subject of the discussion. But you're not prohibited Mr. Scogan from bringing emotion if need be, like you I hope it's not necessary, but you know, that's why I get paid the big bucks. It's to make those tough decisions.
I read it and they're the toughest of all
and I mean, the alternative is I and I was going to start by saying this. I could do what my mentor John D. Rashard used to do and actually insist that parties read them into the record.
Well, in that you'll, you'll, you'll, you might be interested to know that in the last trial, we had. Justice Phelan said that if he after I believe what was two readings, maybe three said if he heard another read and he was gonna throw himself out the window, so he may be diverging from justice for sure. Anyways, enough about readings for now. Thank you.
Okay, so that'll be exhibit to me UFC 308 is exhibit three.
And then the next item just as in our pharma sciences request to admit and the defendants response and that's FC 299.
That will be exhibit four.
You also you mentioned that you had our Compendium that we will screen share a very select number of documents, but it's there just for your convenience. If at a later date you wish to review the documents that are all set out in order of the presentation. So with that out of the way, obviously, I'll begin farmer science is seeking its damages under Section Eight of the NOC regulations for being prevented. from selling its zolpidem product from January 2 2015 until December 6 2016 January 2 2015. Is the patent hole date. December 6 2016. is the date that Justice Manson held that farm usciences zolpidem products, also known as PMS, zolpidem did not infringe the patent issue in the NOC application. And this is a fairly straightforward section eight action as far as Section Eight actions go. Valiant now Bosch and that's what I'll be referring to them throughout did not sue farmer science for patent infringement following its its loss in the NOC case, and it does not raise patent infringement as a defense in this action. So the purpose of this trial is simply the quantified farmer sciences damages. Farmer science seeks damages of approximately $2.9 million, not including interest. And that's behind tab one. And valiant now Bosh seeks to limit pharma sciences damages to 1.4 million, not including interest. Why one of the main reasons the parties are not close in terms of their assessment of damages is that Bosch is expert Paul Bruton. Dorst offers a model of the but for world in which pharma science does not enter first and alone, but enters at the same time as Apotex. Now the scenario is contrary to the evidence you will hear and is contrary to the factual assumptions Dr. Norris was asked to make. And that is behind tab three. A second reason for the distance between the parties is that Dr. Bruton doors took a methodology from a paper entitled Newton's first law as applied to pharmacies, while market order entry matters for generics that showed the significant benefit of a generic entering the market first and alone and inverted the analysis to tease out a different effect applied to a generic which entered the market after the first generic. You'll not hear Dr. Gluten floors provide any compelling explanation as to why this approach accords with his own publication, but more significantly, you will hear from pharma science witnesses about how his conclusion is contrary to pharma science, his experience, real world experience when it was first to market at Apotex was second and so will screen share our first document which is tab five.
And this is a graph from IMS data which has been produced in this action and will be tendered at trial as evidence.
So just as soon I received mine, I hesitate to to object to my friend's opening. But we saw this in the Compendium and based on my friends very strong position in the motion you heard two weeks ago and your decision released on Friday. It's my respectful submission that the plaintiff is not going to be allowed to lead evidence of its experience with other drugs at other times. This is Bell cycle of year from May 2008 to May 2010, which the plaintiff specifically told you two weeks ago in no uncertain terms this case had nothing to do with other drugs that other times I also note that it was in this seven inch is referred to in portions of the Hollis reply that that you did not permit but for a fact witness to from fact pharmacies to testify about its experience with other drugs other times in my respectful submission is breast judicata. And that ought not to be in the opening because it's not going to be able to be led at trial. So I make that objection. Now, we are you've rendered your decision on this issue with all due respect to my friends it is a it was a great surprise when we saw this that whenever we got at nine o'clock this morning and saw that they had this in it, it's not going to be admissible. It ought not to be in the opening period.
Well, it's not evidence yet. So I know your objection to it. It's not evidence. It's an opening statement when it is proposed to be tendered as evidence as Mr. Cleves says it will be I'll consider your objection at that point. This is just opening.
Thank you. Justin said I must observe I've I've very rarely been interrupted in open, let alone as frequently as this one. This document was sent to my friend as a demonstrative pursuant to the schedule. So I think that was quite a while ago, but in any event I will I will continue to explain what is shown in this and that is the orange line is pharma science. The blue line is APA text and for valacyclovir. We have a one month delay. So Apotex is delayed by one month and you see pharma science taping 60% of the market share. When you're hearing the cross examination of experts both Dr. Hollis and Dr. Bruton doors, it'd be worthwhile Keeping this in mind that will occur after this has been tendered through the fact witnesses a farmer science because Dr. Bruton Doris has the complete opposite effect with them entering the market with pharmacists entering the market first. The next slide is for Gabapentin you'll hear evidence from Dr. Goodman. On the launch of Gabapentin among other pharmaceutical witnesses and you'll see an example of pharma science entering the market about nine months before Apotex and dominating the market throughout the entire period.
Similarly, slide missing
and I'm going to ask just to sit I'm going to ask that you allow me to do my opening without these persistent objections from Mr. Scogan.
Let's just go on here your objection when these are trying to win they are proposed to be entered as evidence in the trial right now. It's counsel talking to me.
Okay, I understood just didn't want to didn't want to hear from my friends later that we only objected to one. So as long as they understand our position, then I'm fine. I'll go back. Whether they do or not I certainly do.
Thank you, just as in so that's got a patent in the next example is tetrabenazine. And again, there's a shorter delay between pharma science and Apotex. But you see in the real world pharma science, dominating the market against Apotex for much of the time period in question. So that is the factual referent by which to assess in part the evidence of Dr. Bruce Norris than the evidence of Dr. Hollis that you'll be hearing and that's just by way of a preview really of what I think is is one of the main issues if not the main issue, which is is the market share generic market share. And with that, I'll sort of go back to the beginning, and I feel I don't need to tell you too much about this, but I will as you know, Section Eight proceedings involve constructing this hypothetical but four world as to what would have happened had pharma sciences entry into the generic market not being impeded by the NOC regulations. And then the venlafaxine section eight decision you apply the analytical framework for assessing section eight damages set out in the RAM of parole decisions. That framework has also been applied by Justice failing in the pen top results section eight decision the Teva pregabalin section eight decision by Justice O'Reilly in the Teva, olanzapine section eight decisions and extracts of those cases are behind tab six to nine of the Compendium we've provided to you. As you know, the framework consists of basically five steps, you determine the duration of the liability period, determine the overall size of the zolpidem market during that period. Determine the generic portion of that market, determined farmer sciences share of that market, which is the last volumes and then the damages are quantified based on those last volumes to arrive at a loss net profits. And I don't believe that there's a dispute between the parties that the round pro framework is appropriate for this case. In fact, experts for both parties have applied this framework. What I would like to do now then is outline what I believe to be the areas of dispute between the parties that you will be called upon to decide. The first appears to be the liability period for pharma sciences damages.
So we know from Section Eight of the NOC regulations that Bosch is liable for damages sustained by pharma science, beginning on the date as certified by the Minister on which a notice of compliance would have been issued in the absence of these regulations, unless the court concludes that a date other than the certified date is more appropriate. And in the venlafaxine section a case you found that another date was more appropriate because ratio farm had said it would await the expiry of a patent. And the expiry of that patent occurred after its patent holiday and the Court of Appeals said that that was the correct approach. And the certified date also known as the patent hold date is behind tab three pardon me tab three. And behind tab, pardon tab 12 and behind tab 13. You'll have bosses admission that that was on January 2 2015. So we have section eight of the NOC regulation saying it's the patent hold date unless there's a more appropriate date. We know what the patent hold date is. And then we have the Court of Appeal in ramaa Prill. And that's behind tab 14. And we have the Court of Appeal in venlafaxine. And that's a tab 15 both saying that the usual normal or default start date is when the NOC would have been issued to the generic manufacturer had it not been for the operation of the NOC regulations. So they're basically reaffirming what section eight says but emphasizing that unless there is good reason to depart from the patent hold date the court should not depart from that date. Now, the issue I have is that in the pleading that Bosch has has filed it accepts the patent hold date of February 2 2015 as the start for bosses liability, sorry, I should have said January 2 2015. But Alternatively, it pleads that it would have been some other date depending on the facts. Now the only factor that could possibly affect the start date is the real world delay between the NOC being issued to Farmer science and the first sale. In the real world farmer science received its NOC on December 7 2016. And that's an admitted fact. It's also an admitted fact that in the real world pharma science began selling zolpidem to customers on December 15 2016. Again, that's an agreed fact that's behind tab 18 And so this court will hear evidence that the reason for the short delay of one week in the real world between receipt of the NOC and the first shipment of zolpidem was a result of the need for our narcotics license for the product. So you'll hear the testimony of Debbie ship, the Senior Director of portfolio one product management from 2010 to December 2016. That a controlled substance like zolpidem cannot be sold until a narcotics license is received. You'll hear that a narcotics license cannot be received until an NOC is issued. And then it usually takes five days after the NOC is received to receive a narcotics license. Sara net Chang, the Senior Project Manager for global r&d Scientific Affairs at pharma science, will testify that pharmacy science received a narcotics license resulting them a few days after its noc. So while the start date is the patent hold date, all experts have calculated pharma sciences losses starting a week after its patent hold date. And you can see that behind tabs 19 and tabs 20 And the point of bringing this all to your attention now is that the fact that there was a one week delay as a result of receiving a narcotics license does not change the start date. So the start date would still be the patent hold date. It's just that there would be no lost sales. For the first week of the damages period. Okay, so the the end date is the next item and that's not usually a contentious issue. Section Eight specifies that the end date of the liability period is the date of the withdrawal, the discontinuance the dismissal or the reversal of the application for prohibition. And we know that bosses application for prohibition was dismissed by way of confidential reasons issued on December 6 2016. With a public version of those reasons issued on December 9 2016.
And I bring this to your attention because Bosh pleads on November 30 2016 date as an end date. I believe that was the date that a draft of the reasons was circulated to the party. But December 6, is the date pursuant to the regulations when the damages period ends.
I'll then turn to the next issue. And that is willingness to enter the market. So this is part of the requirement that farmer science both would have and could have entered.
Farmer science bears the burden on this issue. And the defendants have not pleaded that farmer science would have been unwilling to enter the market in the bud for world they simply deny that pharma science would have launched its product during the relevant period. So you'll hear evidence from Dr. David Goodman, the current CEO of pharma science and the CEO of pharma science in 2016. And he'll testify that in the real world pharma science launched PMF zolpidem when it received its NOC in December 6 2016, and did still at risk of a patent infringement suit by Bosch. And that was because that case was decided under the old regulations, which allowed a brand come to you to then sue for patent infringement. From this it can be inferred as a fact that PMS would have done the same thing and the but for world. But Dr. Goodman will also testify that pharma science would have launched PMS open em when it received its NOC in the bud for world. Doctor Dr. Goodman will testify that that decision was his to make and he will test about testify about pharma sciences launch of other products at risk of a patent infringement suit, including gabbeh patent in 2001, a product for which pharma science was the first generic in the market and alone nine months and for which there were pending patent applications, which issued after PMS was on the market. You will hear the testimony of Dr. David Goodman, that pharma science launched many other products at risk and has in fact been sued for patent infringement following launch, including for such drugs as clopidogrel to dalla Phil, olanzapine and valacyclovir. So the evidence you will hear will fully support the conclusion or the finding that pharma science would have entered this open end market in the bud for world when it received its NOC just as it did in the real world when it received its noc. So that that will be the evidence that discharges from usciences burden on what have we now turn to could have and what's also known as the ability to supply or ability to enter the market. And and so the question is whether pharma science could have entered the market and supplied its share of the generic market for zolpidem when it received its NOC in the bud for world. First point and this could be done almost in any order, but I'll just start with API or the active pharmaceutical ingredient. You'll hear evidence that pharma sciences API supplier was Glenmark Pharmaceuticals limited. You will hear evidence that in March 2013, so well before the relevant date pharma science, ordered six kilograms of API and received it in June 2013. Now those might seem like small quantities, just as in I will tell you now just so you can put it in perspective, this is a low dose drug. So there's a small amount of active in each pill and it's a fairly small market drug. In other words, it's it's a relatively small and so six kilograms is represents a lot of unit dosage forms. You'll also hear evidence that in December 30 2013, Farmer science ordered another six kilograms of API and received it in May of 2014. You'll hear the evidence of Debbie ship that in February 2014 When farmer science was expecting to receive its NOC in March 2015. So in other words, not anticipating issues with the regulations. It plan to order 42.2 kilograms of API, which was the quantity that farmer science believed was necessary to launch and supply the market. You'll hear testimony that the order was to be placed when farmer sciences bioequivalence studies were successful. And you can see the gates report discussing that behind tab 24. And Debbie shimp will testify that the bioequivalence studies were in fact successful. And pharma science did in fact, place a purchase order for 42.2 kilograms with the delivery requested for May 2014. Debbie chef will also testify that the delivery date was rescheduled several times as a result of the ongoing NOC litigation commenced by Bosch. You'll hear testimony that this order was ultimately delivered in May 2015. To prepare for launch following the hearing of the NOC case.
You will also hear about numerous other orders of API that were delivered by Glenmark to PMS or pharma science from April 2016 to April 2021. So there is a long history of supplying API, this particular API for this particular product. And all of this will provide the factual basis upon which to infer as a fact that Glenmark would have in could have supplied pharma science with sufficient API to meet pharma sciences requirements for the entire section eight damages period. You will also hear testimony that from August 2014 until March 2015, Farmer science had nine kilograms of API in stock. So in their factory in Montreal, and in the real world, Farmer science maintained the stock of between 24 and 36 kilograms from the date it received its NOC until December 2018. You'll also hear evidence from a representative of Glenmark that Glenmark could have and would have supplied sufficient quantities of zolpidem API to produce the validation batches required to produce large quantities and to supply from a science to share of the zolpidem generic market from January 2015 to December 6 2016. In fact, you'll hear that had the delivery date of that one order of 42.2 kilograms had not been rescheduled by pharma science. As a result of the ongoing NOC case commenced by Bosch pharma science would have had enough a piece API to supply its share of the entire zolpidem market for the entire damages period. And you can see that behind tab 25 is worthwhile opening up.
And there you see the quantities required. So if you see on the first page, it's done by year, it says quantity of API required to produce the required volumes in kilograms. And then over in the total there you'll see 10.31 So it was 10 kilograms for the period setup there. And then the next page, you have a requirement of 17 kilograms and for the third page, you have a requirement of 12 kilograms added together that is less than the 42.2 kilogram order that was rescheduled as a result of the NOC regulation proceedings. And if that were not enough, you will also hear evidence from brutal we both the business finance partner at pharma science that in the calendar year 2014. Farmer science had in stock 186,000 tablets of the five milligram dose and 225 tablets 225,000 tablets of the 10 milligram dose, those had all been manufactured. And just to give you the context, Dr. Aidan Hollis calculated that for the first months of sales in the bud for world starting in January 2015, exclusive of Pikeville pharma science would require approximately 130,000 of the five milligram tablets and 179,000 of the 10 milligram tablets. So you have an API order that was that was postponed as a result of the regulations which would have supplied the entire market and then you have installed in pharmacy sciences warehouses in Montreal, enough finished goods. So tablets already manufactured to supply the first four months of the market. And you'll hear evidence to that effect. So that takes care of the API and a little bit of the finished products with respect to the availability of excipients. To the extent that that is a real issue. You will hear the testimony of Rudolph we both that there was no issue with the availability of excipients there was nothing unusual about any of them. They were kept in stock and he is the one who does the SAP stock inventory tracking. That then moves us along to the next issue which is validation. And in order to sell a pharmaceutical product in Canada, the process to manufacture it must be validated. And that requirement is independent of receiving regulatory approval for the product by way of an NOC so Health Canada does not require pharmaceutical manufacturers to submit their validation results. It just requires that pharmaceutical manufacturers have a plan and carried out for validation. And you'll hear the testimony of Debbie ship that farmer science had a structured process in place to prepare for launch when it files a drug submission with Health Canada that pharma science typically prepares its first validation batch a year or so in advance of its expected noc. And then farmer science typically prepares its final Validation batches and three are required to validate each dose and it does that the final ones five to six months prior to its expected noc. You'll also hear the testimony of any boy a the technical service director at pharma science, who manage the real world validation of PMS, zolpidem, and from Sarah net Chang, a Senior Project Manager at pharma science and the project manager for PMS open em, but in the real world from a science plan to and did validate and then manufacture launch quantities for an anticipated NOC based on the timing of the hearing of its own NOC proceeding. You'll hear testimony from Debbie ship that when farmer science knew that it did not have to engage the NOC regulations. It timed its validation so that it was ready to launch on the date when pharma science expected AMDs to be approved by Health Canada and an LLC issue. And you'll also hear that given pharma sciences knowledge of Health Canada's timing, also known as a target review. And you'll hear that that was disclosed to generic companies that farmer science would have taken steps to be ready to launch on January 2 2015. So the evidence will fully support the finding that farmer science would have and could have been ready to supply its share of the entire generic market as of January 2 2015.
That then brings us to capacity to manufacture. Again, this is a low volume product. But with respect to manufacturing capacity, you'll hear the testimony of Andre Bodia, the head of supply chain management that pharma science had capacity at both its royal mount plant, and its Abrams plant to produce validation batches of PMS, zolpidem, and to produce sufficient quantities of packaged PMS is open them to supply pharma sciences entire share of the generic market in the bucks for a world. So that concludes my opening with respect to abilities to apply. You'll hear plenty of evidence and see the supporting documents on every aspect of that question. Which again is the is the burden to find the science to prove. Then following the ramaa pill outline will turn to the overall size of the zolpidem market. And Dr. Aden, Hollis is model the size of that market in the relevant period and will give his opinion that the total sales of zolpidem during the liability period would have been generally the same as the actual zolpidem sales that were made during that time period. So in other words, what was sold in the real world is the same as what would have been sold in the but for world and this does not appear to be an area of any material dispute. As bosses economist Dr. Bruce doors agrees with Dr. Hollis and you'll find that behind tab 27. We then turn to the generic share of the zolpidem market. And you'll hear the evidence of Dr. Hollis who's modeled the growth of the generic share the total zolpidem market, also known as the erosion of the branded product or generic erosion, and he has determined the portion of the total zolpidem market that would have been captured by generic zolpidem. You'll hear Dr. Hollis explain how he used real world generic market rate and extent of growth for zolpidem fallen genericized ation and shifted it back to January 2015. You'll hear Dr. Hollis explain how he brought his expertise and judgment to bear the task at hand and how these real world events informed his construction and behind tabs 28 to 30. There are a series of cases which all stand for the proposition that the real world plays a significant role in the construction of the but for world. And one can use history as a basis for assessing the assumptions advanced in the bud for world scenarios. And then that really applies to to all elements of the case. So when I was taking you through the evidence that you'll hear for example, on willingness to launch, you know, the would have issue and Dr. Goodman's testimony, and that's why he's talking about past experiences launching at risk, because it's it's history being used as a basis for assessing the assumptions advanced the the approach used by Dr. Hollis which is grounded in real world events is has been accepted in numerous section eight cases, including the venlafaxine section eight case and we have a few of those behind tab 32 and 33. And we expect the dog that Pashas expert Dr. Bruton Norris will present a dramatically different opinion in court. We say it's based on a flawed methodology, which is counterfactual and not based on real world events. And Dr. Hollis will explain the many reasons why Dr. Root endorsed opinion defies logic and is inconsistent with real world experience and with history. You'll hear Dr. Hollis address and debunk Dr. Gluten doors theory and you'll hear factual evidence from Lin Raman. RAMAN pardon me who is presently a national sales director and has been in pharmaceutical sales for nearly 30 years, who will present real world facts which completely contradict Dr. Doris conclusions based on this flawed methodology. We then turn to pharma sciences share of the generic market
and pharma sides the share of the generic market depends on whether and when another generic would have entered the zolpidem market. The parties have agreed that there would have been no authorized generic that was originally pleaded and that agreement is behind tab 34. So the only possible generic competitor put forward by Bosch is Apotex. And Bosh bears the burden to establish when Apotex as a second entrant in the but for world could have and would have entered the zolpidem market. So they bear the same burden with the same evidentiary standard that that that we do so it's but not on that issue. Obviously, they do. We then turn to the quantification of pharma sciences losses. You'll hear evidence from Joanne salvo, the finance manager Canada for pharma science as to the amount that pharma science paid in customer investment, and that's what it's called at pharma science. It's known colloquially as trade spent, but she will testify as to how much was paid in the real world. In the context of farmer science, having entered almost two years after Apotex, you'll hear evidence from Lynn Raman as to the amount that farmer science would have paid in customer investment if it entered first and alone in the bud for world and it will be up for the court to decide what which rate is the more reasonable as between pharma sciences experts and and Bosch as experts, both of them have used assumption as to the rate and the court will need to make a determination as to what a reasonable rate is. With respect to the price the generic price of the product. Valiant has admitted that a farmer science had received its NOC on January 2 and launched that pharma science would have sold the product at the prices specified in the agreement. Those are behind tab 35. So there's no need for the court to make an independent finding a fact in that regard and those are the values that have been used by the experts in their calculations. There are other expenses that the court will need to consider. The parties have agreed that to Farmer science productions, PMS 17 and PMS 131 which will be tendered in evidence contain the standard costs set by farmer science during the fiscal years indicated. And by standard costs, those are those are effectively estimated costs that are then adjusted based on actuals but they're what companies use to determine costs. And those cover the cost of the API excipients packaging material, direct labor, manufacturing direct, direct labor, packaging, manufacturing machine and packaging machine costs as well as overhead costs included in the standard costs. And the parties have agreed on several other expenses. They've agreed on the value of the cash discount. So that's effectively a prompt, prompt pay discount that's given and which is fairly frequently paid. And that's behind tab 37. The value of that it's about 2.3% the insurance expenses which have been allocated and those are behind tab 38 freight expenses which again had been allocated. So there's no not specific trade expenses for the product that's behind 39. And then you have the fee for service that the parties have agreed on. And that's behind tab 40 Furthermore, I've been advised that pharma sciences accounting expert arrow Siriano has taken us an assumption that Miss Frederick's approach. She's the accounting expert for Bosch to the costs associated with quality assurance and quality control. Those are two minor elements but they are a cost that you are encouraging your manufacturer pro product is appropriate.
Mr. Seriola will also testify that he accepts a minor correction pointed out by Miss Frederic and then so apart from their differing assumptions on volumes, customer investments and prejudgment interest, there are also three minor issues, the costs associated with destroyed product whether there are any incremental costs associated with bonuses and commissions. And you'll hear testimony from farmer science fact witnesses as to how bonuses are handled. And then the last minor issue is the costs associated with manufacturing and packaging machines.
Pikeville is sometimes referred to as inventory adjustment and that's the reflects the fact that when the market opens, you supply wholesalers sales are made to them. And then that is that is captured as part of your section eight damages. And so farmer sciences expert economist Dr. Hollis has included pipe fill in his modeling. There's I think a slight disagreement but ultimately his pipe fill calculation basis of his calculation is accepted. The only difference really in the amount of Pikeville depends on which expert the court prefers as to the volume of lost sales. So is it Dr gluten doors counterfactual low volumes or is it Dr. Hollis its volumes. And so I don't think there's any real debate with respect to pipe just its application
and then that just is in brings me to interest and the applicable interest rate as a point of dispute. between the parties and significant financial consequence. Bosch says that it's either 0.8% Based on the Courts of Justice Act interest rate in q2 2017. Which is the date that the Statement of Claim I believe was filed or the bank rate which ranges from zero or near 0.5 to 2%. And find the science says that it is either 6% or in the alternative 5%. And the dispute revolves around section 36 of the federal courts act and whether or not farmer science his cause of action arose in Quebec, or whether it arose other than in a province. And if it arose other than a province how this Court should exercise its discretion.
We know from Section eight that the suffering of the loss is the trigger for a cause of action under that provision under Section eight and the regulations are behind tab 43. The Federal Court of Appeal has held in the corporate context of deciding and appeal of an award of a prejudgment interest in the venlafaxine section eight action that the cause of action arises on the date that the damages that are the basis for the claim actually begins to be suffered. And just as in you may recall, there were competing debates. And the argument on the other side was that the cause of action does not arise until the application for prohibition is dismissed. So you were contending with that argument. You said no the cause of action arises on the date that the damages are suffered. And that was upheld by the Court of Appeal. And the decision or that portion of that decision is behind tab 44. And paragraph 261 of that decision. The court said that the disposition of a prohibition application does not ground liability it simply confirms that liability exists. And it concluded that for that reason prejudgment interest must be tied to when the loss actually begins to be suffered. And what we say is that prejudgment interest must be tied to where the loss was actually suffered as well. And the damages at issue in this case were suffered in Quebec. PMS zolpidem was made at pharma sciences factory in Montreal. Pharma science is located in Quebec, and it's suffered his loss in Quebec. We also know although not dispositive, although it may be if you get to exercising your discretion that boss was and is located in Quebec. The defendant in this action is also based in Quebec. And therefore, we submit the prejudgment interest should be determined pursuant to articles in 18 and 1619 of the Quebec Civil Code, which provides for interest at the legal rate. Those provisions are behind tab 45. The legal rate is 5%. That's pursuant to the interest act, and that's behind tab 46. And additional indemnity as it's called, is awarded as part of interest under the Quebec rules, and is the difference between the legal rate and the Quebec interest rate on debt and works out to be about 1% over the period and behind tab 47 to 49. You'll find the authority for that. And in the alternative, if you find that the cause of action arose in more than one province, then section 36 sub two gives this court the discretion to set any rate that the court considers reasonable in the circumstances. Now, Justice Hughes in a section eight damages case, and that's behind tab 51 exercised his discretion and apply the Ontario post judgment interest rate. And again, it was post judgment, but I'd say that the considerations are the same, because the parties were based there and much of the relevant activity occurred there and I say the same factors that I say, bring this under the Quebec rules and acts are the same factors that would support the exercise of discretion to apply the interest rate provided for in Quebec, which is the 6% and 5% in the alternative. And I would propose to address post judgment interest in closing arguments, but I would suggest it would be governed by much the same principles. So subject any questions that the court may have, those are the opening submissions of pharmacists,
ie decision of justice use is that in the Compendium
that is behind tab 5151
Thank you was my only question rather than since we don't seem to have a super long day today. Let's take let's take our morning break early and take 15 minutes so we'll come back at what is that? Not 22
The stands adjourned until 1040
Thank you recording stopped