Merck Frosst Canada Ltd. v. Minister of Health – Part II

Can innovator pharmaceutical companies rely on exemptions in the Access to Information Act (the “Act”) to block the disclosure of documents that might contain information that could hurt its business? The Supreme Court of Canada (“SCC”) handed down its long-awaited decision on the treatment of sensitive commercial information under the Act in Merck Frosst v. Canada, 2012 SCC 3. Last week, examined the Court’s decision on the notice requirement under the Act, where the majority of the SCC held that disclosing information without giving notice could only occur in the clearest circumstances. This week, focuses on how and when the Minister of Health can refuse to disclose the public record under s. 20(1) of the Act, as well as how some parts of an exempted record may nevertheless be severed and disclosed under s. 25 of the Act.

Substantive Protection

Under s. 20(1) of the Act, (a) trade secrets, (b) “financial, commercial, scientific or technical information that is confidential information supplied to a government institution by a third party and is treated consistently in a confidential manner by the third party”, or (c) information “which could reasonably be expected to result in material financial loss or gain to, or could reasonably be expected to prejudice the competitive position of, a third party” might be exempted from disclosure.

Once the government institution has determined that some of its records are exempt, the head of the institution is required to consider whether any part of the material requested “can reasonably be severed” under s. 25 of the Act.

At issue is how to interpret these provisions in order to strike the balance between access to information and commercial confidentiality.

What are the Applicable Burden and Standard of Proof on a Third Party Claiming a s. 20(1) Exemption?

Section 20(1) of the Act specifies that certain categories of third party information are exempt from disclosure. Trade secrets (s. 20(1)(a)) and confidential information (s. 20(1)(b)) exemptions are class-based: once information corresponds to the statutory provision, that information is exempted from disclosure. The s. 20(1)(c) exemption is harm-based and applies only if disclosure could reasonably be expected to result in “harm” to the third party.

Section 20(1)(a): Definition of Trade Secrets

In the absence of a definition of “trade secrets” under the Act, the SCC surveys case law, Quebec civil law, the use of “secrets industriels” in the French version of the Act, scheme of the Act, and various academic opinions to search for an applicable definition. The SCC holds that “trade secrets” in s. 20(1)(a) is a narrower concept than the broader category of confidential commercial information set out in s. 20(1)(b). A “trade secret” should be understood as being a plan or process, tool, mechanism or compound which possesses the four characteristics set out in Health Canada’s Access to Information Act — Third Party Information — Operational Guidelines: (1) the information must be secret in an absolute or relative sense (only one or a small number of persons know about it); (2) the possessor of the information must demonstrate an intention to treat the information as secret; (3) the information must be capable of industrial or commercial application; (4) the possessor must have an interest (such as an economic interest) worthy of legal protection.

It is important to highlight Merck’s argument here.  Merck takes the definition in the Security of Information Act and NAFTA (article 1711). Yet, the SCC holds that, because the purposes of the Act and the Security of Information Act (“SOIA”) are different, the definition of “trade secrets” under SOIA could not be assigned to the Act. Furthermore, while the extent of domestic law should be interpreted so that it is consistent with Canada’s international obligations, it is not necessary to adopt the treaty definition of “trade secrets” into the Act in order to fulfil its treaty obligations.

While the SCC disagrees with Merck’s argument here, a closer look at the meaning of “trade secret” purported by Merck is quite similar to the one asserted by the SCC. Moreover, if the information does not fall within the definition of “trade secrets”, it could nonetheless be captured by s. 20 (1)(b), which casts a broader net that goes beyond the protection of trade secrets.

The next question is whether the party claiming the exemption has established that the record falls within the definition. The SCC asserts that the standard of proof is the balance of probabilities. However, even with this lower threshold (as compared to the heavy burden established by the FCA), Merck does not explain how the remaining records constitute trade secrets and why they should be redacted. Furthermore, the reviewing judge failed to explain why the documents fall within the exemptions and, importantly, he seemed to have misconceived the evidence that affected his conclusion. (For example, the reviewing judge ruled that a blank page is a trade secret.) Thus, the SCC upholds the FCA decision that these documents do not fall within the s. 20(1)(a) exemption.

Section 20(1)(b): Confidential Information Exemption

It is obvious on the face of s. 20(1)(b) that the substantive contents of the record that fall into this exemption should be confidential in nature. Instead of taking on this point, Merck contends that the formatting and structure of the information (such as the compilation of information) could also be “confidential” within the meaning of s. 20(1)(b). In other words, while the content of published studies may not be confidential, the fact that Merck actually relied on and used certain published studies in the NDS has not been made publicly available and is thus also confidential.

The SCC finds that information in the public domain is not confidential. For the information to be confidential, it must be supplied to the government institution by the third party. It follows that referencing a publicly available study generally is not confidential information because the public can, with some effort, obtain the study and its contents independently. Moreover, information collected by the government officials based on their own observations generally cannot be said to be information supplied by a third party.

By using the word “generally” in its decision, the SCC does not completely exclude this possibility. Ultimately, whether or not a record is confidential is primarily a question of fact rather than one of legal principle.

Here, the decision turns on Merck’s factum, which addresses these issues in “three short paragraphs.” As the SCC put it, “the submissions do not explain how what is left on the often heavily redacted pages is confidential in the face of Health Canada’s evidence that the unredacted material is in the public domain and therefore not confidential.” Therefore, the SCC rejects Merck’s claims for s. 20(1)(b) exemptions.

I agree that such records should be disclosed. However, the Court could have reached this conclusion under s. 20(6) rather than holding such records as non-confidential. It is clear that the list of studies, in itself, is information that is only known to Merck. Given that numerous studies pertaining to the drug have been published over the years, there is no way of knowing which studies are used in the NDS without Merck’s information. Unless one expends significant research, time and money to identify the list of studies, neither the government nor the public could have known such information. Thus, the list of studies could not be said to be public knowledge. In my opinion, this information should have fallen under the confidential information exemption in s. 20(1)(b). However, the exemption could be overridden by s. 20(6), which allows disclosure of some otherwise confidential information if “the disclosure would be in the public interest as it relates to public health, public safety…” Here, considering that this drug might be provided to many patients with asthma attacks, and that this drug might cause serious side effects, the public interest to disclose the relevant studies clearly outweighs any financial loss to Merck or any prejudice to its competitive position. Such information must be disclosed to allow public scrutiny, which is in accordance with the spirit of the Act. Therefore, in my opinion, the Court should have exercised the discretion to disclose the records pursuant to s. 20(6), but not s. 20(1)(b).

Section 20(1)(c): Disclosure of Information that Could Reasonably Be Expected to Harm the Third Party

Section 20(1)(c) is a harm-based exemption in which disclosure is exempted if the third party can show that disclosure would result in “a reasonable expectation of probable harm.” The SCC holds that the standard here is considerably higher than a mere possibility of harm, but somewhat lower than harm that is “more likely than not” to occur. There is no need to establish on the balance of probabilities that the harm will in fact occur, but there must be proof of a “clear and direct connection between the disclosure and the injury that is alleged.”

Merck crafts the argument that the compilation of publicly available studies is a separate work that has been created by Merck through investment of time and resources. Specifically, Merck raises the following harms: facilitating a competitor’s drug development and preparation of an NDS or SNDS, and giving an incorrect impression concerning Singulair®’s safety. In essence, Merck’s concern is that disclosing such information could expedite a competitor’s entry into the drug market, and thus cause prejudice to Merck’s competitive position.

The SCC holds that it is possible for a compilation of public available information to be viewed as not publicly known. The question becomes whether disclosing it could give rise to the risk of harm required under s. 20(1)(c). After concluding that disclosure of such information could give competitors a head start in developing competing products, the SCC examines the submissions made by both Health Canada and Merck. While Health Canada gave extensive and precise references as to where the information could be obtained in the public domain, Merck did not provide evidence demonstrating how the disclosure of the redacted information could reasonably be expected to give rise to the harm and prejudice it claimed. Furthermore, the SCC agrees with Health Canada’s submission that, because the information related to the adverse reactions of the drugs must be made publicly available, as required by the Food and Drug Regulations and Health Canada, “it is difficult to see how” releasing such reports could result in harm to the third party. Therefore, Merck has not established the grounds for a s. 20(1)(c) exemption.

On this point, the legal principles established by the SCC favours the innovator’s pharmaceutical company: first, there is no need to prove harm on the balance of probabilities, and second, a compilation of publicly available information is held to be a separate work and could be exempted from disclosure under s. 20(1)(c). Because Merck did not put forward comprehensive submission here, the SCC is unable to examine its position.

Ultimately, the SCC finds that Merck has not shown that any of the redacted pages contain any information exempted under s. 20(1)(a), (b) or (c).

How Should Section 25 of the Act Be Applied?

By virtue of s. 25 of the Act, any part of the record that does not contain exempted information and which “can reasonably be severed” from other exempted information must be disclosed. This provision aims to facilitate access to as much information as is reasonably possible, while simultaneously giving effect to the exemptions in the Act.

The SCC states that, because s. 25 uses the mandatory “shall” with respect to disclosure of the severable portion, the institutional head is required to enter into the severance exercise that is prescribed. To determine whether the material “can reasonably be severed” from exempted material, both semantic and cost-benefit analyses must be performed. Under the semantic analysis, severance is not reasonable if the institutional head finds that what is left after excising exempted material has no meaning. The cost-benefit analysis considers whether the redaction is justified by the benefits of severing and disclosing the remaining information. It is important to note that the s. 25 analysis must follow the s. 20(1) analysis because the severable portion must come from the records that are exempted under s. 20(1).

Here, Merck does not provide any submissions as to why the non-exempt material could not reasonably be severed. Furthermore, the reviewing judge (whose decision is reversed by the FCA) also did not provide any explanation as to why the non-exempt material could not reasonably be severed. Thus, the SCC upholds the FCA decision to isolate the non-exempt material and disclose them.

Based on the facts of this case, the SCC dismisses Merck’s appeal in this 6-3 decision. The decision as a whole is favourable to innovators – the Minister of Health cannot disclose third party information without notice unless there is “no reason to believe” that the record might contain exempted material, and the standard of proof on the innovator company claiming the s. 20(1) exemption is the civil standard of the balance of probabilities. In Part 3 of this series, will discuss the strong dissent provided by Deschamps J., as well as the impact of this decision on the pharmaceutical industry going forward.


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