(Apotex Pty Ltd v Warner-Lambert Company LLC (No 3) [2017] FCA 94)

The recent decision of Apotex Pty Ltd v Warner-Lambert Company LLC (No 3) [2017] FCA 94 (Apotex No 3) highlights the importance of the timing of an application to list a generic pharmaceutical product pursuant to the Australian Pharmaceutical Benefits Scheme (PBS).

Apotex No 3 arises from a substantive hearing as to the validity and infringement of Australian Patent 714980 (Pfizer’s Patent) that was reported as Apotex Pty Ltd v Warner-Lambert Company LLC (No 2) [2016] FCA 1238 (Apotex No 2). Apotex No 3 concerned an application for court orders, following Apotex No 2, that variously related to: • the issuance of a permanent injunction; • the timing of Apotex’s PBS application for its of its generic pregabalin product; and • costs associated with the proceeding.

Ordinarily, orders of this nature do not attract much attention (beyond that which attaches to the parties to the proceeding), however in Apotex No 3 the terms of the permanent injunction imposed on Apotex surprisingly did not prevent Apotex from taking steps to list its generic product on the PBS. On one reading, his Honour appears to have allowed Apotex to apply for PBS listing of its generic product during the term of a valid patent. However, as we discuss below, his Honour’s decision is more nuanced and must be read in context.

A. Background

Apotex No 2 concerned an application for revocation of claims 1 to 32 of Pfizer’s Patent. The claims were method of treatment claims and Swiss-style claims directed to Pfizer’s pregabalin product, marketed under the brand name Lyrica®.

In Apotex No 2, Pfizer sought quia timet injunctive relief against Apotex from the threat of infringement of Pfizer’s Patent. This threat arose from Apotex: • obtaining a TGA application for its generic form of pregabalin; and • refusing to provide undertakings not to apply for PBS listing for its generic pregabalin product.

Apotex No 2 was handed down at the end of 2016, with the court finding that Pfizer’s Patent was valid and would be infringed by the proposed exploitation of Apotex’s product. Pfizer was entitled to quia timet injunctive relief against Apotex for this threatened infringement. Apotex No 3 considers the appropriate orders to be made in light of that decision.

Before turning to the findings made in relation to the PBS in Apotex No 3, we briefly note that Pfizer’s Patent expires on 16 July 2017. As we discuss below, the timing of the expiry of Pfizer’s Patent and the timing of Apotex’s PBS application is pivotal to understanding the rational for Nicholas J’s orders and observations made regarding PBS listing.

B. Orders Concerning Apotex’s PBS Application

The orders made in Apotex No 2 dismissed Apotex’s application for revocation of Pfizer’s Patent. Apotex was unable to show that claims of Pfizer’s Patent were invalid. Accordingly, the Court ordered Apotex to be permanently restrained from exploiting, and granted an injunction against the exploitation of, claims 1 to 31 during the term of Pfizer’s Patent.

In granting a permanent injunction, Nicholas J however observed the following.

“For the avoidance of doubt, the terms of the injunction imposed by order 5 do not prevent the Applicant/Cross-Respondent from taking any steps required to obtain listing of the Apotex Generic Pregabalin Products under the pharmaceutical benefits scheme (“PBS”) maintained by the Australian Government Department of Health under the National Health Act 1953 (Cth).”

Thus, although Apotex was permanently restrained from exploiting Pfizer’s Patent, it could proceed with taking any steps required to list its pregabalin product on the PBS. At first glance these two positions may appear incongruous, however Nicholas J’s finding must be read in the context of the facts.

The Court did not hold that obtaining PBS registration does not infringe a patent, or is not a matter that would weigh heavily in favour of granting an interlocutory injunction. To the contrary, the Court very carefully distinguished (a) filing a PBS application and obtaining listing during the patent term from (b) filing a PBS application during the patent term and obtaining listing after the patent expires.

a. Timing of a PBS Application

In Apotex No 3, Nicholas J was asked to consider whether Pfizer was entitled to an injunction preventing Apotex from applying for PBS listing in circumstances where expiry of Pfizer’s Patent was imminent. Apotex contended that Pfizer was not entitled to such relief.

Nicholas J began addressing this issue by noting that Pfizer’s monopoly is defined by the terms of section 13 of the Patents Act 1990 (Cth) and confers the exclusive right to exploit the invention during the term of the patent. He then noted that this right includes the right to offer an invention for sale. In particular, he held that “[w]hen a person offers a patented product for sale during the term of the patent without the patentee’s consent that person infringes the patent even if no actual sale or delivery of the product occurs before patent expiry.”

After characterising the patentee’s rights, Nicholas J considered whether filing Apotex’s PBS application would infringe Pfizer’s Patent. After some deliberation, Nicholas J held:

“Apotex proposes to seek a PBS listing of the products so that it may commence to offer them for sale at subsidised prices to wholesalers or approved pharmacists once the Patent has expired. I will assume that, in the course of applying for a PBS listing, Apotex will represent to the Minister or his or her delegate (either expressly or by implication) that it intends to make the products available to wholesalers or approved pharmacists during the guaranteed period once a determination is made in respect of the products pursuant to s 85(6) of the NHA.

In my view, this would fall short of offering to sell or otherwise dispose of the products. All that Apotex proposes to do by applying for a PBS listing is to engage with the statutory scheme that may enable it to offer the products for sale at subsidised prices once the Patent has expired. (Emphasis added)

Thus, Nicholas J found that Apotex is not exploiting Pfizer’s Patent by applying for PBS listing of it products. The mere act of filing a PBS application is a preparatory step to obtaining PBS listing, and nothing more. Consequently, filing a PBS application is not of itself an act of infringement, though the grant of a PBS application can constitute an infringement.

In effect, the Court recognised that, while PBS listing triggers a price drop of a pharmaceutical on the PBS, listing is dependent on the PBS applicant guaranteeing supply of the relevant pharmaceutical product. Typically, such a guarantee is only provided if a PBS application is successful, and is usually only provided near completion of the PBS application process. It is at the point when the guarantee of supply is given that exploitation of patent rights occurs. Even if the application is filed during the patent term, if the guarantee takes effect after the patent has expired, there is no patent infringement.

Nicholas J did not however leave the question of PBS listing at this point. His Honour went on to consider exploitation of a claimed invention that arises where, during a patent term, a PBS applicant guarantees an offering to supply products at subsidised prices.

C. Interlocutory Injunction

In distinguishing the facts of the present case from those cases where a PBS application is made and listing will occur during the term of a patent, Nicholas J noted that the latter circumstance still justifies the grant of quia timet relief restraining threatened acts of infringement (e.g. making, importing or keeping the product for sale in the patent area).

It is this latter set of circumstances that relate more specifically to interlocutory injunctions. In particular, Nicholas J noted that there have been numerous interlocutory judgments in which the Court has held or accepted that it is reasonably arguable that the act of applying for PBS listing may constitute an act of patent infringement: see, for example, • Otsuka Pharmaceutical Co Ltd v Generic Health Pty Ltd [2012] FCA 239 (Yates J) and • Eli Lilly and Company v Generic Health Pty Ltd [2013] FCA 1254 (Nicholas J).

In each of these cases, the balance of convenience weighed heavily in favour of granting an interlocutory injunction restraining the making of any such application until the determination of the proceeding because of the risk that PBS listing would trigger statutory price reductions and price review mechanisms would cause irreparable harm to the patentee’s or exclusive licensee’s business.

D. Conclusion

In Apotex No 3, the Court has very carefully recognised that Apotex can apply for PBS listing of its pregabalin product during the term of Pfizer’s Patent, but makes clear that Apotex is permanently restrained from exploiting its product during the patent term. The decision establishes that the mere filing of a PBS application is not of itself an act of patent infringement, but PBS listing during the term of a patent, flowing from a PBS application, can constitute patent infringement.

Clearly, following this decision Apotex cannot represent to the Minister of Health (either expressly or by implication) that it intends to make its pregabalin products available to wholesalers or approved pharmacists during the term of Pfizer’s Patent. The permanent injunction prohibits Apotex from (inter alia) importing or supplying or offering to supply the products during the patent term.

This decision appropriately recognises that the guarantees and arrangements that Apotex may wish to reach with the Minister of Health, following the expiry of Pfizer’s Patent, is a matter for Apotex. However, a PBS application that is likely to be granted during the term of a patent, and trigger statutory price reductions and price review mechanisms, may cause irreparable harm to a patentee’s or exclusive licensee’s business and is still a significant matter weighing heavily on the balance of convenience associated with the grant of an interlocutory injunction.