[Guestpost] Australian government fails to recoup clopidogrel costs from Sanofi

The AusKat won't be restrained from
launching to attack that wrinkle on the
sheets.....

In a long-awaited judgment that will affect applications in Australia for interlocutory injunctions to restrain launch of pharmaceutical products, as well as claims for compensation following wrongful exclusion of generic or biosimilar pharmaceuticals from the market, the Federal Court of Australia dismissed a claim made by the Commonwealth government for compensation from Sanofi (Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543, available here).

The AmeriKat has turned to trusty Kat friend, Matt Swinn (King & Wood Mallesons) for a dive into this much-awaited decision and what this means for patent owners in Australia.  Over to Matt: 

"The Commonwealth sought to recover part of its expenditure on Sanofi’s drug Plavix (clopidogrel) under the Pharmaceutical Benefits Scheme (PBS), being the additional amount it said it paid to subsidise the cost of the drug to patients during the period when Apotex was restrained from entering the market with its generic version of clopidogrel. As is usual, in return for an interlocutory restraint by the Court and pending a decision about the validity and infringement of its patent, Sanofi was required to provide an undertaking that it would compensate any person adversely affected by the interlocutory injunction (interlocutory injunction decision here). The relevant patent was upheld in part in the first instance judgment but revoked on appeal. Special leave to appeal to the High Court of Australia was refused.

This paved the way for claims for compensation by any person adversely affected by operation of the interlocutory order. Apotex made a claim, which was ultimately settled. The terms of the settlement have not been made public save that a provision preventing Apotex from assisting any other party in a claim was held to be unenforceable because it had a tendency to interfere with the administration of justice.

The Commonwealth also made a claim for compensation. A threshold question of whether certain statutory provisions in the Therapeutic Goods Act 1989 (Cth) established an exhaustive statutory code limiting the Commonwealth’s right to recover under the undertaking given by Sanofi was referred as a stated case directly to Full Court of the Federal Court of Australia, which held that it did not.

In this latest decision, the Commonwealth’s claim failed because it did not establish that:

• had Apotex not been restrained, Apotex would have supplied its generic clopidogrel products ‘at risk’ and applied to list the products on the PBS; and

• the Commonwealth’s loss flowed directly from the interlocutory injunction granted against Apotex.

On the first point, there was insufficient evidence to establish that Apotex would have decided to launch at risk based on the contemporaneous records and evidence of the Australian Managing Director of Apotex. A key factor in the Court’s assessment was that the Commonwealth did not lead any evidence from Dr Sherman, the global CEO and Chairman of Apotex at the time and the ultimate decision maker about whether to proceed with an at-risk launch. As a result of this absence, the Court drew a negative inference that Dr Sherman’s evidence would not have assisted the Commonwealth’s case. This deficiency was not capable of being overcome by reliance on certain email correspondence from Dr Sherman in the lead up to the hearing of the interlocutory application. In view of the very considerable damages exposure that an at-risk launch would create, the Court was not prepared to infer that Dr Sherman would have authorised a PBS listing.

On the second point, the Commonwealth was a person adversely affected but its loss did not flow directly from the order granting the interlocutory injunction. The order only restrained Apotex from acts constituting an exploitation of Sanofi’s patent (including importation, manufacture and supply of the clopidogrel products) but did not in terms restrain Apotex from applying for PBS listing for the clopidogrel products. It is the PBS listing of the first generic that usually triggers a statutory reduction in the government subsidised price for prescription medicines so the Commonwealth’s claim hinged on this causative link. Although the Court accepted that the practical effect of the interlocutory order prevented Apotex from applying for PBS listing, the order did not directly affect the legal rights and obligations of the Commonwealth.

The decision is the latest, and most significant, chapter in a long line of Federal Court judgments since the introduction of the mandatory price reduction scheme applicable when the first generic lists, under the National Health Act (NHA) in 2007. It will impact the decision-making of innovator and generic/biosimilar pharmaceutical companies in relation to the launch of a generic or biosimilar product, and the decision-making of courts in future applications for interlocutory injunctions.

The outcome of this case and the length of time (and no doubt the amount of money) it has taken the parties to get to this point, raises some stark questions about whether the present system for resolving pharmaceutical patent disputes achieves the Government’s policy objectives of enabling patents to be tested or encouraging generic market entry at the earliest opportunity. Both this case, and the recent venlafaxine case, reinforce the difficulty and complexity of claiming on an undertaking as to damages in a case concerning pharmaceuticals.

Given that interlocutory injunctions may now be harder for patent owners to obtain and the fact there is substantial damages exposure for a generic company wishing to enter the market, it is clear that an expedited pathway to resolve these disputes is called for. One step down this path is to make patent owners aware of applications for marketing authorisation of a generic or biosimilar product much earlier, so that the inevitable litigation can get underway. That seems the likely outcome of a current legislative consultation, intended to become law early next year."