A hard lesson learnt: Commonwealth v Sanofi

The Australian government has made numerous claims for damages against patentees for savings forgone when an interlocutory/preliminary injunction delays a generic's launch but the patent is invalidated or there is a finding of non-infringement.

In June this year, the first Full Federal Court decision on this issue was handed down following a ten-year damages battle between the Commonwealth and Sanofi relating to Apotex’s ‘delayed’ launch of generic clopidogrel following PI.

In Commonwealth of Australia v Sanofi FCAFC 97 (June 26, 2023), the court denied the Commonwealth’s application for AUS $355 million ($229.6 million) damages from Sanofi (supplier of Plavix), and made a costs order against the Commonwealth, which is expected to be in the order of tens of millions of dollars.

In order to obtain PI, the patentee must provide an ‘undertaking as to damages’ which applies to the world at large. It applies to the Commonwealth’s savings foregone, even when the Commonwealth is not a party to the patent proceedings. As the Commonwealth has learned the hard way, the devil’s in the detail.

The court rejected the Commonwealth’s claim relating to ‘delayed’ sales of generic clopidogrel, finding that it had not established that Apotex would have listed and launched in the absence of PI.

"THE COMMONWEALTH ULTIMATELY FAILED BECAUSE IT HAD NOT ESTABLISHED THAT, BUT FOR THE INJUNCTION, APOTEX WOULD HAVE SUCCESSFULLY LISTED AND LAUNCHED ITS CLOPIDOGREL PRODUCTS IN 2008."

This is the only such claim to be determined by the full court to date, the Commonwealth having settled its claims regarding venlafaxine (Effexor, Wyeth) and rosuvastatin (Crestor, AstraZeneca), while its claim regarding aripiprazole (Abilify, Otsuka/BMS) is ongoing. The latter case was heard in May 2023 (judgment pending), almost eight years after the initial patent proceedings were commenced in 2015.

Australia’s Pharmaceutical Benefits Scheme (PBS)

Australia’s PBS subsidises certain approved pharmaceutical products, at the same time fixing the maximum price that a supplier may charge a dispensing pharmacist (‘reimbursement price’). The key feature of the PBS relevant to an Australian court’s consideration in granting PI is the mandatory reduction of the reimbursement price which occurs on the date of listing of the first generic/biosimilar product (currently 25%).

PIs are almost routinely granted against the first-to-market generic/biosimilar because it is generally perceived that damages will be an inadequate remedy for the patentee because of substantial loss of market share fuelled by this mandatory price drop.

The Sanofi decision

The Sanofi proceedings originated with Apotex filing revocation proceedings in the court in 2007 on Sanofi’s patent for clopidogrel. Sanofi filed a cross-claim for infringement, and an application for PI. The court granted PI following Sanofi’s undertaking in the usual form.

Importantly, the injunction did not prohibit Apotex from applying for PBS listing of its generic clopidogrel product, but in this case, Apotex separately provided the court with an undertaking not to do so.

Sanofi’s patent was ultimately held invalid (including on appeal), and in 2013 the Commonwealth filed its compensation claim. The Commonwealth’s claim amounted to over $325 million with interest, based on delays to the triggering of various PBS price reductions.

Unsuccessful at first instance, the Commonwealth appealed to the full court.

The full court upheld the first instance decision dismissing the Commonwealth’s claim on the facts.

It considered two key issues:

• Directness: The court held that the Commonwealth had established that its claimed loss flowed directly from the PI, overturning the trial judge’s finding that it flowed from Apotex’s intervening undertaking not to seek PBS listing.
Interestingly, the undertaking to supply, a condition of PBS-listing, was a factor, the court acknowledging Apotex’s ‘significant legal and commercial peril’ if the undertaking was not met with commercial supply.

• Evidence: The Commonwealth ultimately failed because it had not established that, but for the injunction, Apotex would have successfully listed and launched its clopidogrel products in 2008. The trial judge and full court
took the same view on this point, following a detailed consideration of extensive internal Apotex correspondence as to its launch plans should Sanofi’s interlocutory injunction application
be dismissed.

While the Commonwealth was ultimately unsuccessful, the court’s finding on directness removes one barrier to future claims.

It is likely the Commonwealth will seek to overcome evidentiary deficiencies identified in these proceedings as it pursues pending and future damages claims, including its claim against Otsuka.

Naomi Pearce is the founder of Pearce IP and is an Australian lawyer, patent and trademark attorney. She can be contacted at: naomi.pearce@pearceip.law

Kate Legge is an Australian lawyer. She can be contacted at: kate.legge@pearceip.law