Trade Secrets, Transparency, and Temporality

Trade Secrets, Transparency, and Temporality

Access to information is generally important in a free and democratic society. It’s particularly important in the context of regulating drugs, medical devices, and other products. In Merck Frosst Canada Ltd. v. Canada (Health), the Supreme Court of Canada affirmed Health Canada’s decision to disclose certain information about Merck’s asthma medication Singulair®. The Court rejected Merck’s claims that the information in dispute qualified as “trade secrets,” “confidential business information,” or could otherwise harm the company’s competitive interests. Even so, the decision was far from a victory for transparency; it undervalued timely access to safety and efficacy information beyond the confines of Health Canada.

Let’s start with a little background about the regulation of medical products: Following the thalidomide disaster in the 1950s, countries around the world implemented regulatory systems for vetting the safety and efficacy of drugs before they were available for sale on the market. For a long time, information about the safety and efficacy of drugs was held in confidence between the regulator and the manufacturer of the product. However, a number of highly publicized cases in the early 2000s involving drugs like Paxil® and Vioxx® revealed that this confidential relationship between regulators and manufactures might not serve the public interest, or worse, result in actual harm to patients. Take the example of Paxil, a drug belonging to a class of drugs called “SSRIs.” In an analysis recently published by the Canadian Medical Association Journal, one of us (MH) explained how Health Canada’s decision to delay disclosure of safety and efficacy information precipitated misinformed off label prescribing by physicians:

Health Canada did not authorize SSRIs for sale to people younger than 19 years because of data from clinical trials showing risks of harm, including self-harm, associated with use of SSRIs in that age group. But Health Canada also did not publicly disclose that evidence, and by 2004 SSRIs were being widely prescribed for teenagers. Physicians had no idea they were invoking their discretion to prescribe “off label” on the basis of incomplete information — the balance of which Health Canada had in hand.

It is difficult to know how frequently such misinformed off label prescribing occurs. But it only takes one blockbuster drug to become a public health issue: tens of millions of Americans were estimated to be using Vioxx for pain relief when knowledge of increased risks of heart attack and stroke began to surface. The selective publication behaviours of researchers and manufacturers combined with the publication bias toward statistically significant results amongst journals suggests that regulators are in possession of relevant safety and efficacy data that is not in the public domain for every drug they review.

In the wake of the Paxil and Vioxx scandals, several jurisdictions implemented changes to make safety and efficacy information as well as regulatory decision-making more transparent.  The United States’ Food and Drug Administration (FDA) and the European Medicines Agency (EMA) are leading the way.  Health Canada, in sharp contrast, has been slow to change.  An initiative known as the “Summary Basis of Decision” project has, by Health Canada’s own account, been an abject failure given the limited value add it provided to information that is already in the public domain. Instead, Health Canada’s approach to transparency remains largely reactive, in response to requests for information made under the Access to Information Act.

Merck was an appeal from the Federal Court of Appeal concerning the disclosure of Merck’s New Drug Submission (NDS) of Singulair and Supplementary New Drug Submission (SNDS) under the ATI Act. Under the s. 4 of the Act, the government is obligated to release any record under the control of a government institution subject to certain exemptions such as personal privacy. Here, the set of exemptions at issue were the “third party” (in this case, Merck) information exemptions, which encompass information that is owned by (i.e. trade secrets or confidential business information) or could harm the competitive or financial interests of a third party.

When Health Canada received an access to information request for documents pertaining to Singulair, it undertook a review of the NDS documents and found 550 relevant pages. Of those pages, it found 30 pages contained confidential information and found that 15 pages did not contain any confidential information and released them without notice to Merck. It requested submissions from Merck for the balance. For the SNDS request, it found 300 pages, refused to disclose 60 pages and released 8 pages without notice. Merck objected to the disclosure of pages that Health Canada sought submissions on. After two rounds of correspondence, Health Canada redacted an additional 55 pages and decided the release the balance of the document subject to Merck’s right to seek judicial review, which Merck invoked, leading to extensive proceedings at the Federal Court and the Federal Court of Appeal.

Justice Cromwell, writing on behalf of a majority of six, characterized the ATI Act as a balance between “openness and commercial confidentiality.” He stated that balance was achieved in the form of two kinds of protection, which he framed as the “procedural protection” afforded to third parties in terms of notice of disclosure and so forth, and the “substantive protection” of information that falls within the scope of the third party exemptions. In the end, Cromwell J. supported Health Canada’s decision to disclose information on the facts of this case. But the ways in which he interpreted the substantive and procedural protections available to third parties seem likely to further undermine access to information under the legislation in the future.

Consider first the “procedural protections” conferred under the ATI Act. The Court focused on two issues embedded in the legislation’s s. 27(1) notice requirement: What is the threshold for notice and what type of efforts must be expended by the agency prior to disclosure or notice? While the Cromwell J. rejected Merck’s assertion that notice should be automatic, he held that the threshold for notice is nevertheless very low: the institutional head must have “no reason to believe that the information might fall within the exemptions under s. 20(1).” In almost the same breath, Justice Cromwell emphasized that the third party will generally be “better position[ed] than the head of the institution to identify information that falls within one of the s. 20(1) exemptions.” Practically speaking, then, Health Canada has to be absolutely certain that the information is not exempt under s. 20(1) without checking in with the third party. The Court also held that it is incorrect to place a burden on the third party to prove that the documents they object to being disclosed falls under s. 20(1), at least until judicial review.

In terms of what efforts must be made by the regulator before deciding whether to give notice and/or disclose, Cromwell J. held that governmental agencies such as Health Canada must conduct a “sufficient review.” He stressed that the duty to disclose and the duty not to disclose are “equally important” and should be taken “equally seriously.” In principle, each of these moves by Justice Cromwell follows from the language of the statute. However, they also have the potential to further delay transparency.

So too with the principles articulated by Justice Cromwell with respect to the “substantive protections” from disclosure contemplated under the ATI Act.  To begin, the majority noted that the Federal Court of Appeal erred by holding Merck to a “heavy burden” to establish that the pages in question contained trade secrets. Rather, the appropriate burden on the third party attacking Health Canada’s decision to disclose is the civil balance of probabilities standard. What’s more, characterizing trade secrets as narrow or broad in scope was deemed unhelpful. Whether something qualifies as a trade secret instead turns on the evidence: Is it secret in an absolute or relative sense? Did the alleged owner of the information treat it as secret? Was it capable of industrial application? Does the owner have an economic interest in the information? While these questions derive from the jurisprudence (not to mention Health Canada’s own internal operational guidelines), the fact-driven nature of the test further exposes Health Canada’s decision-making to negotiation, uncertainty, and challenge by the third party meanwhile delaying access to information by others.

Justice Cromwell’s remarks around the scope of “confidential business information” (CBI) under s. 20(1)(b) of the ATI Act are illustrative of the same. Provided the information in question is of a financial, commercial, scientific or technical nature and not simply administrative details (e.g. page numbers), it may amount to CBI.  Cromwell J. noted that the fact of relying upon studies that are publicly available (provided the reliance isn’t known through, for example, the FDA’s website or stated in the Product Monograph), and the manufacturer’s evaluation of a published study could all be shown to be within the sphere of CBI. Observations and analysis by regulators is not likely CBI, but correspondence that reveals information supplied by the manufacturer could be. Each is a question of evidence to be determined on the facts of each case.

Form the perspective of enhancing transparency, the most helpful passages from the Court surround s. 20(1)(c), which exempts information that could result in financial or competitive harm to the third party.  Cromwell J. found that Health Canada applied too high of a standard under s. 20(1)(c).  The third party must show that harm is more than merely possible or speculative, but need not demonstrate that harm is more likely than not to ensure. Justice Cromwell accepted that any release of information that could give competitors a head start in product development might fall under the definition of harm under s. 20(1)(c). Yet, at the same time, he held that there must be a “direct link between the disclosure and the apprehended harm and that the harm could reasonably be expected to ensue from disclosure.” And he dismissed Merck’s argument that the prospect of public misunderstanding the information should be equated with harm under s. 20(1)(c), quipping: “The point is to give the public access to information so that they can evaluate it for themselves, not to protect them from having it.”

In this concluding statement and at the outset of the judgment where he quoted Brandeis’ famous statement about “sunlight” being the “best of disinfectants,” Justice Cromwell gestured at the broader importance of transparency. Yet it seems to do little work in the main analysis. We think the parameters that Justice Cromwell (the minority dissented on other grounds) placed upon the substantive and procedural protections under the ATI Act ignore the temporal dimension of transparency, that is, the importance of timely access to information. The Court referenced the time requirements codified in the legislation, but showed no awareness of Health Canada’s woeful track record in meeting those timeframes. In fairness, that is an issue for the executive branch or Parliament, not the judiciary. The Court also didn’t have the benefit of hearing why timely access to information beyond Health Canada’s doors is critical. BIOTECanada, a trade association aligned with Merck’s position, was the only intervenor in the case. Where was the Canadian Medical Association? Where were consumer protection groups? The Court made a passing reference to the importance of access to information given pharmaceutical industry practices. But regulatory failures like Paxil and Vioxx did not inform the analysis. At worst, the decision in Merck will exacerbate problems under the access to information legislation by lowering the threshold for notice and endorsing a case-by-case, fact-intensive approach to disputes over the scope of trade secrets and confidential business information protection. At best, it confirms what many already suspected: the ATI Act is no answer to the need for timely transparency within and without Health Canada.


William Wong is a JD Candidate at Dalhousie's Schulich School of Law and a Judicial Clerk at the Supreme Court of Nova Scotia.

Matthew Herder is an Assistant Professor in Dalhousie's Faculty of Medicine who has been cross-appointed to the Schulich School of Law.