In a significant decision for the pharmaceutical industry, Justice Nicholas dismissed the Commonwealth of Australia’s compensation claim from Sanofi pursuant to undertakings given as the price of granting an interlocutory injunction restraining infringement of a patent relating to clopidogrel (Plavix®) – which was ultimately found to be invalid.
The judgment in Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543 had been reserved for more than two and a half years and comes as a relief to many in the industry. Despite the likelihood of an appeal, the decision hopefully provides guidance surrounding the applicable issues. The judgment is 698 paragraphs long and requires close consideration, however we have provided the following overview and initial insights for those seeking to understand the key factors.
Context
By way of background, until recently pharmaceutical patentees have had an enviable record of succeeding in contested applications for interlocutory (preliminary or interim) injunctions to restrain the launch of generic and biosimilar medicines in Australia. Much of that success can be attributed (at least in part), to Australia’s Pharmaceutical Benefits Scheme (PBS).
Through the PBS, the Commonwealth Government subsidises the cost of certain pharmaceutical products to eligible patients in Australia. The PBS Schedule is a list of the pharmaceutical products available to be dispensed to patients through the PBS at a Commonwealth-subsidised price.
A mandatory price reduction is applied to existing PBS-listed products when the first generic or biosimilar is listed on the PBS Schedule, provided certain circumstances are met and any exceptions do not apply. The initial price reduction was 16%, but was later increased to 25% from1 October 2018. The listing of additional generics/biosimilars triggers price disclosure obligations which can result in further decreases in the amount the Commonwealth will reimburse pharmacists for products they dispense.
The case at hand
This litigation started on 16 August 2007 when Apotex Australia commenced a proceeding seeking revocation of Sanofi’s Australian Patent No 597784 for clopidogrel (the Patent). Sanofi filed a cross-claim and on 25 September 2007 Sanofi obtained from Gyles J an interlocutory injunction against Apotex Australia restraining it from infringing the Patent (including) by importation or sale of pharmaceutical products which had clopidogrel as their active ingredient. Sanofi gave the usual undertaking as to damages to the Court in support of the interlocutory injunction. The ‘usual undertaking’ contemplates that other parties may be adversely affected by the interlocutory injunction and provides such persons with an entitlement to claim compensation.
Apotex Australia also gave to the Court an undertaking (the first Apotex undertaking) that it would not apply to list its clopidogrel products on the PBS until the determination of the proceeding or further order. Sanofi did not give any undertaking as to damages in return for the first Apotex undertaking.
On 13 October 2009 the Full Court of the Federal Court made orders allowing Apotex Australia’s appeal and ordered that the Patent be revoked. A subsequent application made by Sanofi for special leave to appeal to the High Court was unsuccessful.
Show me the money
In this proceeding, which was commenced on 11 April 2013, the Commonwealth sought compensation for the loss said to have been suffered by the Commonwealth because of Apotex Australia’s inability to supply its generic clopidogrel products in Australia and obtaining a PBS listing of such products on 1 April 2008. Among many other issues in dispute, were two critical questions relating to whether Apotex Australia’s clopidogrel products would have been listed on the PBS on 1 April 2008 but for the interlocutory injunction granted by Gyles J (at [26]):
- The first question, is whether the evidence establishes that Apotex Australia would have applied for a PBS listing of its clopidogrel products by 1 December 2007 to ensure listing on the PBS from 1 April 2008.
- The second question is whether the Minister, or a Delegate, would have accepted such an application and listed those products on the PBS with effect from 1 April 2008.
The outcome
Justice Nicholas effectively determined the answers to these questions as both ‘no’ and ‘yes’. With the first question’s answer in the negative, the Commonwealth’s claim for compensation was dismissed. That finding turned on the specific facts in this case. Of note, the Commonwealth’s decision not to call Dr Bernard (Barry) Sherman, co founder of Apotex Canada, and then its CEO and Chairman (and the ultimate controller of the Apotex group, including Apotex Australia), appears to have been significant.
Reflecting the extent of the evidence, submissions and the possibility of an appeal, Justice Nicholas nonetheless made findings in relation to other key issues.
Notably, in considering the question of whether the connection between the interlocutory injunction and the Commonwealth’s alleged loss was sufficiently “direct”, Justice Nicholas made the following findings (at [443] and [451]):
“In my view, the interlocutory injunction did not directly affect the legal rights, obligations or interests of the Commonwealth. It did not prevent the Commonwealth from receiving and accepting an application for PBS listing by Apotex Australia of any one or more of its clopidogrel products or the clopidogrel products of any other generic supplier. At most it prevented Apotex Australia from entering the market for clopidogrel in Australia which in turn had the practical effect of denying the Commonwealth the financial benefits it would have obtained were it to have received and accepted an application by Apotex Australia to list its clopidogrel products on the PBS from 1 April 2008.
[…]
In my view, any financial loss suffered by the Commonwealth as a result of Apotex Australia’s clopidogrel products not having been listed on the PBS from 1 April 2008 was not a loss that flowed directly from the existence of the interlocutory injunction but was the direct and immediate consequence of the first Apotex undertaking. This was an undertaking given by Apotex Australia to the Court that was not supported by any cross-undertaking as to damages. The Commonwealth’s loss is therefore not recoverable pursuant to the undertaking as to damages given in support of the interlocutory injunction.”
Where to from here?
While these findings rely on the specific form of undertakings in this case, subject to appeal, the decision presents significant difficulties to the Commonwealth in commencing similar actions in the future. For further information relevant to this case, please speak with your existing Griffith Hack relationship contact.
