The Court of Appeal has upheld a damages award made to Consilient and Krka arising from an interim injunction wrongfully obtained by AstraZenea pending trial of an allegation of patent infringement. In doing so, the Court considered various approaches to determining the damage caused by the lost opportunity to enter a pharmaceutical market.

Background

Back in 2010, AstraZeneca (“AZ”) was marketing esomeprazole, a protein pump inhibitor for the treatment of heartburn, under the name ‘Nexium’. Nexium was in tablet form, and was a blockbuster drug. Global sales at that time exceeded $3bn. Following the expiry of various patents relating to omeprazole (the racemic mix from which esomeprazole, the S- enantiomer, had been resolved) and the revocation by the EPO of another AZ patent covering the S- enantiomer and its salts, the only relevant patent remaining in the UK was European patent (UK) 1 020 461 (the “Patent”). Claim 1 was in Swiss form, directed to the use of magnesium esomeprazole with an optical purity of 99.8% enantiomer excess for the manufacture of a medicament for the inhibition of gastric acid secretion.

Consilient, a pharmaceutical sales and marketing company with experience in the generic sector was planning to launch in September 2010 in the UK a generic version of esomeprazole in capsule form supplied by Krka (a major generic manufacturer based in Slovenia) under the brand Emozul (a so-called “branded generic”). At that point, it would have been the first generic esomeprazole on the market.

AZ brought a claim for patent infringement and sought an interim injunction to prevent Consilient/Krka launching Emozul pending trial. The injunction was granted in October 2010 on the basis that AZ gave the usual cross-undertaking in damages in respect of the injunction.

At the same time that AZ obtained the interim injunction against Consilient/Krka, it was also facing the launch by Ranbaxy of its generic esomeprazole product in tablet form. Ranbaxy, expecting to receive marketing authorisation in July 2011, decided to clear the path. It brought separate proceedings against AZ to revoke the Patent and for a declaration of non-infringement in October 2010, and obtained an order for a speedy trial. On 15 July 2011, judgment was delivered (see Ranbaxy (UK) Limited v AstraZeneca AB [2011] EWHC 1831 (Pat)). The Court held that Ranbaxy’s generic esomeprazole product was non-infringing.

In light of this judgment, AZ took the approach that it could not succeed in its claim for infringement of the Patent against Consilient/Krka either, and so could not maintain the interim injunction. The injunction was discharged on 29 July 2011.

Consilient/Krka was eventually able to launch Emozul in September 2011. However, by that time, Ranbaxy had launched its generic esomeprazole in tablet form (on 5 September 2011) and AZ itself had teamed up with Arrow Generics to sell Nexium in Arrow packaging as an equivalent to a branded generic. Arrow launched this product on 17 July 2011 (just two days after the Ranbaxy judgment was handed down). Subsequently, Mylan launched a generic esomeprazole capsule in November 2011 and Teva launched a generic esomeprazole tablet in December 2011.

The first instance decision

Krka soon afterwards brought a claim under the cross-undertaking provided by AZ, for damages of more than £32 million in respect of its losses during the period of the injunction and interim injunction had allowed a number of other companies to market generic esomeprazole products, thus depriving it of the “first mover advantage” and having a negative impact on the success of Emozul. In contrast, AZ estimated Krka’s loss to be £6 million.

In January 2014, in a rare example of an inquiry as to damages proceeding all the way to trial, the High Court awarded Consilient/Krka a sum of more than £27 million.

In assessing the counterfactual scenario (i.e. what would have happened had the interim injunction not been granted), the legal principles to be applied were largely agreed between the parties. In applying these legal principles, the Court looked in detail at the structure and operation of the UK market for pharmaceuticals and their reimbursement. It had to consider various factors such as: the extent to which AZ would have reduced the price of Nexium in response to the launch of Emozul; whether Consilient would have aimed to maximize the impact of its launch, or conversely would have carried out a ‘soft launch’ because of fear of the Patent and the potential damages payable if it lost at trial; the extent to which Medicine Managers from NHS Primary Care Trusts (“PCTs”) (at that time, prior to the Health and Social Care Act 2012, the parts of the NHS primarily responsible for funding prescription medicines in primary care) would have encouraged switching away from Nexium; the extent to which clinicians would have followed such encouragement; the suspicion within the NHS of branded generics; and the pharmaceutical form of Emozul being a capsule rather than a tablet.

The parties took widely differing views as to what would have happened on each of these issues. In resolving these questions of fact, the Court heard both expert evidence from accountants and experts in the operation of the UK market for pharmaceuticals, and also factual evidence from ‘Medicine Managers’ from various NHS PCTs as to the extent they would have recommended that their clinicians switch to generic prescribing, or prescribing Emozul by brand name.

The decision on appeal

AZ appealed against the amount awarded by the judge at first instance. Since the legal principles to be applied had been largely agreed, AZ targeted the findings of fact made by the judge at first instance, claiming that the judge had made three fundamental errors of principle:

  • The judge had no proper basis for drawing the conclusions he did from the evidence of the limited number of Medicine Managers who appeared at the trial and fell into error in failing to attach any or any significant weight to the actual behaviour of the market when Emozul became available in 2011 or to the behaviour of the market in relation to other comparable products.
  • The uncertainty discount of 20% was arbitrary, wholly inadequate and the judge had failed to take into account a series of obviously relevant matters.
  • The judge assumed that PCTs would have begun to implement switching immediately after the launch of Emozul, rather than waiting for the launch of other generics which would have been confidently expected, and this had no basis in the evidence put forward.

The Court of Appeal unanimously dismissed AZ’s appeal, upholding the £27 million award.

The Court reviewed the evidence before the first instance judge in detail. It rejected AZ’s criticism of the High Court judge’s treatment of the evidence given by the Medicine Managers and its argument that damages should be calculated on the basis of sales of Emozul after the lifting of the injunction. Kitchin LJ stated that the judge had taken the relevant issues into account and had made findings which were properly founded upon the evidence before him when concluding that Krka’s product Emozul would have achieved a market share of 80% one year after launch (subject to the uncertainty discount of 20%). He had also properly taken into account both the time it would have taken PCTs to decide to promote switching and the time it would have taken to secure compliance with those decisions.

Comment

The English courts have been generally willing to give preliminary relief to originator pharmaceutical companies against would-be generic entrants to the UK market who fail to clear the path.

Conversely, this case illustrates that the cross-undertakings in damages, which is the price to be paid for the interim injunction in England, has real teeth and can provide substantial recompense to a would-be generic entrant who is wrongly enjoined.

The appeal decision is also a useful reminder that the English Court of Appeal is unwilling to overturn findings of fact made at first instance in the absence of an error of principle or a decision which is plainly incorrect. The assessment of damages due under a cross-undertaking is heavily fact dependent, depending crucially on the view that the judge takes of the counterfactual scenario (i.e. what would have happened if the interim injunction had not been granted). Any appeal against such an assessment will therefore often be an uphill struggle, as AstraZeneca found here.

AstraZeneca AB and AstraZeneca UK Ltd v KRKA dd Novo Mesto and Consilient Health Ltd [2015] EWCA Civ 484