What registrants and data holders need to know about Canada’s new data compensation regime

It has been over a year since Health Canada’s Pesticides Regulatory Directorate (PRD) released its final guidance and Section 66 Agreements under the Pest Control Products Act (“PCPA”) for registrants seeking to rely on, and data holders seeking compensation for, data submitted in the course of a re-evaluation or special review (post-market reviews).

These guidance documents and Section 66 Agreements were intended to provide greater clarity on the data compensation process for registrations that were or are subject to post-market reviews under the Pest Control Products Regulations (PCPR).

While these new documents provide important guidance, several aspects of the new regime require greater diligence. These issues may give rise to more conflict between data holders and registrants in the data compensation process, resulting in a higher likelihood that matters will proceed to arbitration.

New deadlines require close attention

Registrants and data holders should take note of the new deadlines for commenting on the PRD’s initial list of compensable data, and for commencing the negotiation and arbitration process.   

With respect to the initial data lists issued by the PRD, the deadlines to provide comment vary:

• For post-market review decisions made prior to December 4, 2023, data holders and registrants have a 45-day period to review and provide written comments on the initial list issued by the PRD.
• For post-market review decisions after December 4, 2023, data holders and registrants have a 30-day period to review and provide written comments on the initial list.  

Industry should also be aware that the deadlines for the commencement of the negotiation and arbitration process differ depending on whether the post-market review decision is published before or after December 4, 2023:

• For decisions made prior to December 4, 2023, once the PRD issues the final list of compensable test data, either party may deliver the Section 66 Agreement to the other party. There is no stated deadline for delivering the Section 66 Agreement.
• For decisions made after December 4, 2023, once the PRD issues the final list of compensable test data, parties have 60 days to deliver the Section 66 Agreement to the other party.

In both instances, once the Section 66 Agreement is delivered, the negotiation period is set at 120 days unless the parties agree to an extension by written agreement. If negotiations fail, either party may, by delivering written notice to the other party within 30 days of the negotiation period expiry date, submit the determination of the compensation payable to binding arbitration.

Data holders and registrants may have different incentives

The incentive for commencing the negotiation and arbitration process will differ depending on whether you are a data holder (typically an innovator company) or a registrant (typically a generic company).

Despite concerns expressed by innovator companies in the PRD consultation process that generic companies get a “free ride” for being able to maintain a registration while the innovator is subject to an often lengthy and costly re-evaluation and special review process, generic companies that obtained a registration prior to a post-market review decision are not required to provide the PRD with a letter of access (LOA) from the innovator data holder, or proof that the parties are still in negotiation or arbitration, until such time as its registration is up for renewal.

This disincentivizes generic registrants from pursuing early resolution of data compensation for post-market review data and puts the burden on data holders to move forward with the negotiation and arbitration process.  

Higher-value data may increase the potential for arbitration

The value of the data sets for post-market reviews may be higher than the value of the data sets for other existing pesticide registrations where the compensability period for data has long expired. In other words, there may be more to fight about in post-market reviews when compared to the data compensation process for new generic registrations.

Although few, if any, arbitrations have proceeded under Canada’s data compensation regime since it introduced “final offer” arbitration (also known as “baseball arbitration”) in 2010, industry should be prepared for more contentious and drawn-out arbitration proceedings. This will require data holders and registrants alike to sharpen their pencils in preparing the most reasonable and reasoned final offers.

Practical considerations for data holders and registrants

In summary, data holders and registrants in the post-market data compensation process should approach the new regime proactively and with a clear strategy. In particular, data holders and registrants should:

• Closely diarize and comply with all applicable deadlines under the PCPA, the PCPR and the applicable Section 66 Agreement.
• Carefully review PRD data lists and raise any concerns within the prescribed comment periods.
• Assess early whether the data at issue is compensable and how it should be valued.
• Prepare a principled and well-supported negotiating position in anticipation of final offer arbitration.
• Consider consulting with legal counsel early in the process to help interpret any ambiguities and formulate final offers.

Given the potential value of post-market review data and the procedural requirements under the regime, early planning can be critical. Our team can assist registrants and data holders in assessing compensability, developing valuation positions, navigating negotiations and preparing for arbitration where required.