A series of events has led to the Commonwealth of Australia attempting to recover damages from the bio pharma company, Sanofi-Aventis, to the tune of $60 million. Depending on the final outcome this could be of significance to both drug originator companies seeking to enforce or defend their pharmaceutical patents and to generic companies seeking to challenge a patent or otherwise to gain entry of their generic product to the market prior to expiry of a relevant patent.

Background

Sanofi was the registered owner of Australian Patent no. 597784 (the clopidogrel patent) which included claims having within their scope the anti-clotting agent, clopidogrel (sold to the market as PLAVIX). PLAVIX was a true blockbuster drug product for Sanofi. A competitor, Apotex Pty Ltd (previously known as GenRx Pty Ltd), wanted to introduce a generic equivalent of clopidogrel into the Australian market and, as part of this process, commenced proceedings seeking revocation of the clopidogrel patent. Sanofi, in response, cross claimed that Apotex’s proposed actions would constitute an infringement. Sanofi, in trying to protect their market position, additionally sought an interlocutory injunction preventing Apotex from entering the market and obtained this along with certain undertakings provided by Apotex. In return Sanofi provided typical undertakings that it would submit to any cost order the court may direct to compensate any parties ultimately shown to have been adversely affected by the injunction.

The real significance of this ‘dance’ between the drug originator (Sanofi) and the generic manufacturer (Apotex) relates to an aspect of the Australian healthcare system. The Australian government subsidises access to approved medications via a system known as the Pharmaceutical Benefits Scheme (PBS) whereby a portion of the drug’s cost is borne by the government, and the patient pays the remainder to improve patient access. To ensure a level of price competitiveness within the system, the PBS has a policy whereby when a cheaper equivalent, such as a generic version of a brand name drug, is available then the government immediately reduces the subsidy it will pay by 16%. Importantly, this price drop is irreversible even if the generic entry is subsequently removed from the market due to, for example, patent infringement. Thus this issue forms the core of many interlocutory injunction and patent dispute cases in the pharmaceutical sector.

Relating this to the facts of the current case, Sanofi’s prevention of Apotex’s entry to the market with their generic PLAVIX meant that the Australian government continued to pay a premium price for the drug. Had the courts not granted the interlocutory injunction, the Apotex generic equivalent would have been introduced to the market and would have reduced the government’s costs by 16%.

In the revocation court case Sanofi won at trial, but an appeal subsequently ruled in favour of Apotex, and an application for special leave to the appeal to the High Court was refused. Ultimately, the clopidogrel patent was therefore revoked on inventive step grounds. Apotex then sought compensation from Sanofi for their loss of profits for the duration of the interlocutory injunction. This matter was settled outside of court with the settlement sum not being publicly disclosed.

However, the Australian government then took the highly unusual step of seeking compensation from Sanofi for the loss of savings it was entitled to during the interlocutory injunction period. Effectively the government asked to be reimbursed the savings it calculated it would have made had Apotex not been blocked from entering the market and thereby triggering the 16% price reduction. The government has stated that it “alleges it has suffered financial loss in excess of $60 million as a result of Apotex being prevented by the various interlocutory orders and undertakings from achieving a listing for its clopidogrel products under the PBS. Most of the Commonwealth’s loss is said to flow from statutory price reductions and price disclosure reductions that would have occurred had Apotex not been the subject of the relevant interlocutory restraints.”

Sanofi is fighting the government’s damages claim and in a recent decision raised an interesting ground in its defence. Sanofi will argue that even if Apotex had been allowed to list its generic clopidogrel on the PBS, Apotex would not have been able complete this task without infringing on the copyright of the PLAVIX product information and consumer medicine information documents. Sanofi’s argument is that it is unreasonable for the government to claim damages resulting from an action which would have been an infringement of Sanofi’s intellectual property.

Implications

While it will be interesting to see how Sanofi’s copyright infringement defence plays out in court, the Australian government’s unusual damages claim has potentially wider reaching effects in the pharmaceutical space. The possibility of a damages claim by the government should make the patentee of a patent covering a PBS reimbursed drug think twice about seeking an interlocutory injunction if early evidence on any wider revocation action indicates a real likelihood of revocation. If the patent is ultimately shown to be invalid, and it could be argued the patentee should have reasonably known this at the outset, then the patentee may be asked to pay compensation to the government. Clearly this becomes more likely for highly prescribed or high cost medicines where the quantum of damages is enough to interest the government.

Finally, for generic drug companies seeking to enter the market in light of an existing patent, then this scenario may provide them with a further means to apply pressure during settlement negotiations with the patentee, especially if the relevant patent is approaching its expiry and reasonable questions can be raised regarding its likely validity.