Over the course of at least a decade, patentees in pharmaceutical patent cases have had a very strong track record of obtaining interlocutory injunctions to prevent the launch of generic products in Australia. The Federal Court’s recent experience in assessing claims for compensation, when restrained generic pharmaceutical companies have ultimately succeeded (because the patent was revoked or not infringed), has resulted in a fundamental shift in its approach.
Patentees can no longer safely assume that the Federal Court (Court) will readily come to their aid to prevent a generic or biosimilar launch on the basis that the launch will result in a significant price reduction and irreparable harm to the patentee. Rather, patentees will need to work harder to persuade the Court of the strength of their infringement case and the complexities involved in assessing damages having regard to the particular market in question.
Those seeking to launch generic and biosimilar products with strong revocation or non-infringement positions may well be able to defend an interlocutory injunction, including by highlighting the complexities that would be involved in a compensation claim if it ultimately succeeds. They are likely to find themselves ‘preaching to the converted’.
A strong track record in favour of patentees
Prior to 2018, the Court had demonstrated a strong tendency to grant interlocutory injunctions to restrain the launch of a generic or biosimilar in pharmaceutical patent cases. In assessing whether to grant an interlocutory injunction, the Court considers:
- the strength of the infringement case (including any cross-claim for revocation of the patent); and
- the balance of convenience including whether damages will be an adequate remedy.
Importantly, the two limbs of the test are interrelated, so that the weaker the infringement case, the more the balance will need to weigh in the patentee’s favour and vice versa.
An unavoidable condition of obtaining an interlocutory injunction is that the patentee must give the ‘usual undertaking as to damages’ to compensate parties adversely affected by the injunction if, as it transpires, that injunction ought not to have been granted.
In Australia, many medicines are subsidised by the Federal (Commonwealth) Government under the Pharmaceutical Benefits Scheme (PBS). The launch of a first generic or biosimilar product will cause an automatic price drop (now 25%) in the price at which the reference product (and any generic) will be subsidised. A patentee will also generally be forced to implement ‘voluntary’ price reductions to effectively compete with a generic entrant.
Interlocutory injunctions were granted to restrain the launch of a range of generic and biosimilar products. Patentees argued, and the Court accepted, that the balance of convenience weighed in their favour because generic launch would trigger a price drop with the consequence that they would suffer irreparable harm as their loss would be unquantifiable. For example, in MSD v Apotex Justice Jagot found:
“… it is likely that Apotex’s entry into the market (being the market of intra-nasal corticosteroid sprays) will cause significant structural change in terms of pricing and market shares which will not be readily changed should Merck obtain final relief and which exposes Merck to unquantifiable loss not only in terms of pricing changes but also loss of staff, the need to re-train staff if Apotex is ultimately restrained, as well as loss of goodwill.”
The earliest sign that the tide was turning may have been Justice Burley’s acknowledgment in Roche v Sandoz that Sandoz “will face significant complexities in establishing its claim on the undertaking as to damages”. His Honour was influenced by the fact that at that time there were three proceedings before the Court involving complex compensation claims by parties who were ultimately found to have been wrongly prevented from launching generic products – these included claims relating to venlafaxine, clopidogrel and rosuvastatin. His Honour, nevertheless, granted the interlocutory injunction.
The turning point
The landscape changed as a consequence of two cases heard by Justice Jagot in which decisions were handed down in late 2018.
The first case was a claim made by a number of generic pharmaceutical companies who were wrongly restrained from launching venlafaxine products in 2009 in circumstances were the patent was ultimately found to be invalid. In the judgment in Sigma v Wyeth, her Honour identified:
“It is difficult to imagine that when Sundberg J and then I granted the interlocutory injunctions in 2009 we anticipated that if those injunctions turned out to be wrongly granted, the resulting exercise would bear any resemblance to this one. Hindsight makes one thing certain. Knowing what has occurred, it could never have been concluded, for example, that insofar as relevant to the balance of convenience it would be easier for the generics to prove their loss if the interlocutory injunctions were wrongly granted than for Wyeth to prove its loss if the interlocutory injunctions were withheld and the method patent was valid.”
The second case was a damages claim by Lundbeck for losses suffered by reason of the sale of generic companies selling products which infringed its patent for its blockbuster anti-depressant LEXAPRO. In Lundbeck v Sandoz, Justice Jagot found:
“…instead of requiring econometric modelling to ascertain prices and market shares Lundbeck could rely on the prices and market shares actually involved in generic entry into the market.
It may be apparent from this that it was far easier for Lundbeck to prove the value of its loss on the basis of the generics having entered the market than it was for the generics in Sigma to prove the value of their loss on the basis that they were wrongfully held out of the market.”
The Court’s new approach
It did not take long for Justice Jagot’s position to find favour with other members of the Court.
In December 2018, Justice Burley refused an application by Sanofi-Aventis seeking an interlocutory injunction to restrain Alphapharm from launching its Semglee pen for delivering insulin in Sanofi v Alphapharm. Justice Burley found that “there was a real and substantial prospect” that the patent lacked novelty and that the balance of convenience favoured refusal of the injunction. While Sanofi argued that its products would be subject to a 25% price drop, Burley J considered that:
“…having regard to the relative complexities between the two, I consider that the calculation of loss likely to be suffered by Alphapharm having regard to a hypothetical launch is likely to be more difficult as a vehicle for recompense than the calculation of loss for Sanofi, even taking into account the consequential effects of price drops that arise because Semglee is listed on the PBS Schedule and the uncertainties associated with future market conditions.”
In his reasons for refusing the injunction (at ), Burley J quoted the paragraph above from Justice Jagot in Sigma v Wyeth. Sanofi’s appeal against Burley J’s decision was unanimously dismissed by the Full Court.
The last chapter in this story took place in April this year when Mylan sought to restrain Sun Pharma and Cipla from launching generic versions of its fenofibrate product LIPIDIL. Mylan’s applications for injunctions restraining Sun Pharma and Cipla were heard together by Justice Yates who refused to the applications. Mylan faced added difficulty because its patents had been found invalid by the Court at first instance and it sought interlocutory injunctions in aid of its appeal. However, the Court has previously granted an injunction in such circumstances.
While Justice Yates acknowledged that Mylan’s grounds of appeal were “arguable”, his Honour held that the balance of convenience weighed in favour of Sun Pharma and Cipla (consistent with the views expressed by Justice Jagot in Sigma v Wyeth and Lundbeck v Sandoz, and by Justice Burley in Sanofi v Alphapharm):
“The most compelling reason for the conclusion to which I have come is the difficulty, complexity and uncertainty involved in assessing compensation under an undertaking as to damages given in patent infringement proceedings involving the supply of pharmaceutical products in the Australian market. I accept that the recent experience of the Court has demonstrated that, whatever general views might have been held in the past about the difficulty of that task compared with the task of assessing damages for infringement, the calculation of compensation under an undertaking as to damages can impose burdens and raise uncertainties that are far greater than the burdens and uncertainties involved in assessing damages for infringement. The differential nature of these burdens and uncertainties is captured by Jagot J’s observations in Sigma and Lundbeck, which I have quoted above…Her Honour’s observations in Sigma reflect my own view as to the likely difficulty, complexity and uncertainty that would be involved in assessing compensation under an undertaking as to damages in the present case.”
Pharmaceutical companies seeking to launch or prevent the launch of generic or biosimilar products in Australia cannot afford to ignore the fundamental shift in the Court’s position when it comes to assessing the balance of convenience.
Innovators will, of course, continue to pursue interlocutory injunctions. However, they will need to carefully consider how to persuade the Court of:
- the strength of the infringement case; and
- difficulties in quantifying their loss because of, for example, changes to the market affected by generic launch (resulting in uncertainty that every generic sale would have been made by the patentee) or difficulties assessing the contribution of multiple generic companies to price reductions.
Despite the Court’s shift, those seeking to launch generic or biosimilar products are still best placed to avoid an infringement claim (and an interlocutory injunction) by seeking to ‘clear the way’ early. Importantly, this avoids the risk of liability for the price reduction. If this is too late and the generic is confident of defeating any infringement claim (including by reason of strong invalidity position), generics should take advantage of the Court’s new approach by resisting applications for interlocutory injunctions by demonstrating the complexity of quantifying its loss if is wrongly prevented from launching and ultimately succeeds.
Disclosure: Corrs acted for Lundbeck in H. Lundbeck A/S v Sandoz Pty Ltd  FCA 1797, two of the claimants in Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth  FCA 1556 and Cipla in Mylan Health Pty Ltd v Cipla Australia Pty Ltd  FCA 506.