The Commonwealth of Australia is one step closer in its efforts to seek to recover over A$60 million in compensation from originators, Sanofi and Wyeth (now Pfizer).

In Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2015] FCAFC 172, the Full Federal Court has unanimously held that the Commonwealth is not precluded from recovering compensation pursuant to undertakings as to damages provided by Sanofi and Wyeth in the context of the grant of interim injunctions in patent proceedings. 

This decision has significant implications for pharmaceutical patent litigation in Australia. 

In separate patent proceedings conducted between 2007 and 2012, Sanofi and Wyeth obtained interlocutory injunctions preventing generic clopidogrel and extended release venlafaxine drugs from entering the market and listing on the PBS.

As a condition of the grant of interlocutory relief, Sanofi and Wyeth each provided the "usual undertakings as to damages" to the court, agreeing to pay compensation to any person, whether or not a party to the proceedings, adversely affected by the operation of the interlocutory injunction in circumstances where a permanent injunction was not ultimately granted.

Listing of generic drugs on the PBS generates significant savings for the Commonwealth as a result of mandatory statutory price reductions. Conversely, preventing generic drugs from listing on the PBS means the Commonwealth will fund originator drugs for a longer period of time.

Sanofi's and Wyeth's patents were subsequently invalidated and the interlocutory injunctions dissolved.  The Commonwealth subsequently filed applications in the Federal Court seeking to recover compensation for the period in which the interlocutory injunctions were in force and it was therefore required to fund more expensive drugs on the PBS.  The Commonwealth specifically claimed a sum which is asserted to amount to the difference between what the Commonwealth paid for the originators' drugs and the amount it would have paid had generic versions of these drugs been PBS listed during the relevant period. 

Sanofi and Wyeth argued that the Commonwealth is precluded from claiming compensation by reason of the statutory regime in the Therapeutic Goods Act 1989 (Cth) ("Act")  which they asserted provides a "complete statement" of the Commonwealth's rights to seek compensation in circumstances where interlocutory injunctions are granted in patent proceedings.  Sanofi and Wyeth submitted that the statutory regime "impliedly" excludes the general law remedy available pursuant to their undertakings as to damages.

The Full Court disagreed.  There is no express restriction in the Act limiting the Commonwealth's rights as would be expected if that was Parliament's intention; the Full Court was also satisfied that there was no implied intention.  To the contrary, the Full Court considered that it was likely that Parliament intended by the statutory regime to enhance the rights of the Commonwealth and generic companies to recover compensation, rather than restrict them.

Interestingly, Justice Dowsett in a separate judgment noted that it was too late for Sanofi and Wyeth to place any limitations on their undertakings, which should have been sought at the time the undertakings were given.  If the Commonwealth is ultimately successful in its claim against Sanofi and Wyeth, it will be worthwhile considering whether such a claim may be excluded or limited by patentees by seeking to provide expressly limited undertakings in the context of the grant of an interlocutory injunction.

The Commonwealth's substantive claim will be heard by the Federal Court in 2016.