The protracted litigation history between Sanofi and Apotex

The litigation began in 2007, when Apotex applied to revoke Sanofi's patent covering clopidogrel, a blockbuster product sold by Sanofi as Plavix®. Sanofi obtained an interlocutory injunction preventing Apotex's launch of its proposed generic clopidogrel, supported by the usual undertaking as to damages. While the interlocutory injunction did not expressly prevent Apotex from applying for PBS listing, Apotex had also undertaken to the Court not to apply for PBS listing until determination of the proceedings. Sanofi did not give any undertaking as to damages in return for this separate undertaking.

In 2008, the trial judge found one claim of Sanofi's patent valid and infringed (although other claims were invalid), and granted a final injunction that would prevent Apotex from supplying its generic clopidogrel product. The parties appealed to the Full Court, and pending the determination of that appeal, agreed various consent orders that would stay the revocation of the invalid claims, restrain Apotex from infringing those claims, and prevent Apotex from seeking PBS listing of any clopidogrel product, supported by an undertaking as to damages given by Sanofi.

In 2009, Apotex's appeal succeeded with the Full Court finding Sanofi's patent wholly invalid. A few months later, the High Court refused Sanofi's application for special leave to appeal. As a result, the injunction was lifted and Apotex obtained PBS listing. In 2010, Apotex filed a claim for compensation from Sanofi under the undertaking as to damages, which was settled in 2014.

In 2013, the Commonwealth claimed compensation from Sanofi under the undertaking as to damages for the Commonwealth's loss resulting from Apotex being prevented from supplying its generic clopidogrel and not having obtained PBS listing five years earlier. The Commonwealth claimed that the interlocutory injunction delayed significant reductions in PBS reimbursements for the supply of Plavix® (including the mandatory 12.5% price reduction on the listing of the first generic brand, and subsequent "price disclosure" related reductions). While this was the first such claim made by the Commonwealth, it has subsequently made similar claims against Wyeth for venlafaxine (settled), AstraZeneca for rosuvastatin (settled), and Otsuka for aripiprazole (ongoing).

Commonwealth did not establish that Apotex would have applied for PBS listing

The threshold issues that resulted in Nicholas J dismissing the Commonwealth's claim was that the evidence did not establish that Apotex would have applied for PBS listing of its generic clopidogrel products by 1 December 2007 (so as to obtain PBS listing on 1 April 2008), if the interlocutory injunction had not been granted. Given this conclusion, the Judge's comments on the other issues in the case are obiter, but nonetheless significant, as the only authority on such claims by the Commonwealth.

Among other factors, Justice Nicholas considered that the Commonwealth’s case suffered from an "evidentiary deficiency", in that it had not called evidence from Dr Bernard Sherman, the founder, chairman, CEO and ultimate controller of the Apotex group. The Commonwealth relied on evidence from Apotex employees lower down the decision-making chain, who ultimately accepted that Apotex would not have launched clopidogrel in Australia without Dr Sherman's approval. Justice Nicholas inferred that the Commonwealth did not call him as a witness because his evidence would not have been favourable to the Commonwealth's case on this point. In the absence of evidence from Dr Sherman, Nicholas J was not persuaded that Apotex would have applied for PBS listing in late 2007 "at risk", had the interlocutory injunction not been granted.

This highlights a significant challenge the Commonwealth will face in pursuing any such claim for damages from a patentee. Establishing that, on the balance of probabilities, a generic supplier would have proceeded with a PBS listing application "at risk" of exposure to a substantial damages claim should it later be found to have infringed, is likely to require direct evidence from the ultimate decision maker (or a good explanation as to why that person cannot be called to give evidence), and disclosure of contemporaneous documents supporting that position (many of which may be privileged). This will be particularly difficult if the generic supplier has already settled its damages claim against the patentee (as Apotex had here) and therefore has no further financial interest in the proceedings, and if the ultimate decision maker has a very senior role in an overseas parent company (as was the case here) or no longer works for the generic supplier.

The Judge did find in the Commonwealth's favour on the second limb of this threshold issue. Although the Commonwealth did not call evidence from the Delegate of the Minister of Health who would have determined Apotex's application at the relevant time, Nicholas J was satisfied that Apotex's PBS listing application would most likely have been approved. Relevantly, the Judge accepted that the Minister's Delegate would not have taken into account patent issues, or the possibility that Apotex might have later not been able to supply the generic clopidogrel product, when considering the PBS listing application.

Patentee's cross-undertaking did not cover Apotex's undertaking not to apply for PBS listing

A further "critical point" that the Judge held would also defeat the Commonwealth's claim was that the interlocutory injunction obtained by Sanofi did not expressly prevent Apotex from applying for PBS listing. Rather, Apotex offered during the injunction application hearing to undertake not to do so, and this undertaking was not supported by any undertaking as to damages from Sanofi.

Therefore, the interlocutory injunction did not directly cause the Commonwealth's losses suffered due to Apotex not applying for PBS listing and the mandatory price reduction (at the time, 12.5%) not being implemented in 2008. This loss was an indirect consequence of the interlocutory injunction, and so was not compensable by Sanofi under the undertaking (even though it was a reasonably foreseeable loss).

On the basis of Justice Nicholas' approach to causation, similar difficulties may arise for the Commonwealth if an interlocutory injunction does not expressly prevent a generic supplier from applying for PBS listing, even if there is no separate undertaking given by the generic (given that applying for PBS listing is not an infringing act, see Warner-Lambert v Apotex [2017] FCAFC 58).

Commonwealth's PBS losses are in principle compensable

Nicholas J went on to reject the numerous factors upon which Sanofi relied to argue that the Commonwealth's claim was not compensable or should be refused on discretionary grounds, even if the threshold requirements referred to above had been satisfied. These findings provide important confirmation that the Commonwealth is in principle able to obtain compensation from patentees in future claims, where the evidence supports the threshold requirements of the claim.

This follows on from the Full Court's decision in 2015 in this proceeding (and the Wyeth venlafaxine proceeding) rejecting Sanofi's argument that the "patent certification" regime in the Therapeutic Goods Act 1989 (Cth) precluded the Commonwealth from even making a claim pursuant to the usual undertaking as to damages (Commonwealth v Sanofi [2015] FCAFC 172).

Justice Nicholas held that the Commonwealth's claim was not affected by factors such as:

• whether or not other generic suppliers could have listed on the PBS before 1 April 2010;
• the fact that the Commonwealth may have offset expenditure or balanced budgets following the interlocutory injunction;
• that the Commonwealth was the architect of the PBS regime and its loss was caused by the operation of the National Health Act 1953 (Cth);
• the Commonwealth first notifying Sanofi of its claim three years after the High Court's refusal to grant special leave (which Nicholas J considered the Commonwealth had explained and which had not prejudiced Sanofi);
• a claim by Sanofi that, absent the interlocutory injunction, it could have relied on a copyright claim relating to the Product Information for Apotex's generic clopidogrel to prevent it launching; and
• the public interest that Sanofi said arose because of "unusual" features of its undertaking as to damages.

Two possible "counterfactuals" for assessing the Commonwealth’s damages

Finally, his Honour considered the two different time periods for which the Commonwealth’s damages would have been assessed. On Sanofi’s case, the relevant “counterfactual” period would be from PBS listing on 1 April 2008 until around 19 August 2008, when the trial Judge handed down his decision, at which stage the generic clopidogrel product would have been withdrawn from sale pending the appeal. Nicholas J held that, in that scenario, there was a high likelihood that the 12.5% price reduction would in fact have been reversed by the Minister.

The Commonwealth’s case sought damages for a longer period, until Apotex was in fact free to launch generic clopidogrel after the High Court special leave application was dismissed in 2010, in which subsequent “price disclosure” price reductions would have taken effect and been relevant to quantifying the Commonwealth’s loss.

Had the Commonwealth succeeded in establishing that it was entitled to compensation, it would have been awarded either approximately $15.5 million, based on Sanofi’s counterfactual period, or in excess of $230 million if the Commonwealth’s counterfactual period had been adopted.