The long-running and keenly observed damages dispute between the Commonwealth and Sanofi will come to a head before the High Court in Melbourne on 4 and 5 September 2024.

The High Court appeal follows the Full Federal Court dismissing the Commonwealth's claim for compensation under Sanofi's damages undertaking. The Commonwealth is seeking to recover losses resulting from the two-year restraint on Apotex supplying its generic clopidogrel product, which Apotex intended to have listed on the Pharmaceutical Benefits Scheme (PBS) from 1 April 2008.

The Commonwealth claims that the wrongly granted interlocutory injunction (or 'preliminary injunction') obtained by Sanofi delayed PBS listing of those products until May 2010. As a result, the Commonwealth paid higher PBS subsidies for clopidogrel prescriptions dispensed between 1 April 2008 and 1 May 2010. We have previously written about the Full Federal Court's decision in 2023, and Justice Nicholas' trial decision in 2020.

In short, the Full Court upheld the primary judge's conclusion that the Commonwealth could not establish on the evidence that Apotex would have applied for PBS listing if the interlocutory injunction had not been granted.

However, the Full Court agreed with the Commonwealth that, if it had made out that part of its case, its claimed losses did 'flow directly' from the interlocutory injunction (contrary to the primary judge's conclusion).

In addition to those two central issues, several other issues not substantively addressed in the Full Court's judgment will be raised before the High Court. This article explores those issues.

Additional Directness Issue: Claimed losses in relation to price disclosure price reductions (PDPRs) and combination products

Sanofi wants the High Court to rule that the Commonwealth cannot recover the following losses:

• the consequence of the "price disclosure" regime taking effect for clopidogrel two years later than would otherwise have been the case; and
• the higher PBS price paid by the Commonwealth for combination clopidogrel / aspirin products, which were first listed on the PBS in December 2009, because the PBS price was negotiated by reference to the price of Sanofi's clopidogrel.

Sanofi argues that neither category 'flows directly' from the interlocutory injunction, and the High Court should dismiss that part of the claim. The Commonwealth wants these questions to be referred back to the Full Court after the High Court determines the meaning of 'flows directly'.

Delay to PDPRs

The PBS price disclosure regime under the National Health Act 1953 (Cth) (NH Act) requires a drug manufacturer to disclose to the Department of Health sales revenue and volume for each of its drugs every six months. A weighted average disclosed price for each drug is calculated based on that data, and a price reduction (PDPR) may occur if the difference between the current price and the weighted average price meets a certain threshold.

Sanofi argues that PBS listing of clopidogrel on 1 April 2008 would not necessarily have resulted in a PDPR. It submits that PDPRs depend on the actual prices at which clopidogrel products were sold by all suppliers. Therefore, any PDPR would have depended on the actual prices for Apotex and Sanofi's clopidogrel, the market share each achieved and maintained, and whether any other generics entered the market.

Sanofi also argues that any claimed PDPR losses depend on legislative amendments and regulatory decisions made by the Commonwealth in the period from September 2007 onwards, including substantial changes to the rules by which PDPRs are determined. The fact that such changes affected the calculation of the Commonwealth's claimed loss undermines the argument that the loss flowed directly from the interlocutory injunction.

Combination products

The price for clopidogrel combination products was agreed between the Commonwealth and Sanofi based on the price of Sanofi's clopidogrel monotherapy product at December 2009. The Commonwealth argues that, if the price of clopidogrel had been lower at that time (as it would have been without the interlocutory injunction in place), the Commonwealth would have been able to impose a lower subsidised price for the combination product.
Sanofi relies on the fact that, at the time of the injunction, no combination products were approved by the TGA (let alone PBS listed). The Commonwealth's claimed losses for combination products depend on a series of events that Sanofi argues would not have transpired, including that the PBS listing of Apotex's generic clopidogrel would have triggered the PDPR regime, and Sanofi would have agreed with the Department of Health a lower reimbursement price (which was not in Sanofi's interests).

Is the Commonwealth a person 'adversely affected' by the operation of the interlocutory injunction?

The usual undertaking as to damages refers to "any person adversely affected by the grant of the injunction".

Sanofi argues that the Commonwealth's unique status and role as a 'polity' means that it could not, in this situation, be a person adversely affected by the interlocutory injunction. Specifically, the Commonwealth is not an 'ordinary litigant', and does not suffer loss in the ordinary sense when, in accordance with the laws it has made and policy objectives it has determined, it pays certain PBS subsidies under a regime that it itself controls.

The Commonwealth argues that it is clearly a legal 'person' for the purposes of the undertaking given by Sanofi. Further, the Court, comprising the judicial branch of government, can make orders that bind the Commonwealth in the same way as it can any other person. The order made by the Court in imposing the interlocutory injunction was 'adverse' to the Commonwealth, giving rise as it did to higher PBS subsidies (the primary beneficiary of which was Sanofi). The Commonwealth argues that Sanofi's original undertaking was a commitment to compensate any losses incurred by the maintenance of the status quo, and it does not have to identify any 'wrongdoing' on the part of Sanofi.

Is the Commonwealth precluded from claiming on Sanofi's undertaking as to damages by reason of the Therapeutic Goods Act?

The Therapeutic Goods Act 1989 (TG Act) requires a patentee commencing litigation alleging infringement of a patent relating to a medicine to certify that the proceedings are commenced in good faith, have reasonable prospects of success, and will be conducted without unreasonable delay.
If the patentee obtains an interlocutory injunction against the generic supplier, and a court later declares that the patentee's certificate was false or misleading, or that the patentee breached an undertaking given in the certificate, the Court has the power under section 26C(8) of the TG Act to order the patentee pays compensation to the Commonwealth.

Sanofi argues that this regime means that the Commonwealth is implicitly excluded from claiming compensation on the usual undertaking as to damages. Instead, the Commonwealth's right to recovery is limited to the circumstances contemplated by section 26C(8).

The Commonwealth argues that the High Court should not entertain this argument, because it was not raised by Sanofi before the Full Court. Rather, it has already been rejected by a differently constituted Full Court back in 2015 (Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) [2015] FCAFC 172), and a High Court special leave application on that issue was dismissed. In any event, the Commonwealth argues that the s 26C(8) regime leaves the general law (non-fault-based) undertaking as to damages untouched, but adds a fault-based remedy; thus expanding potential liability for a patentee, rather than limiting it.

The MinterEllison Intellectual Property team continues to monitor these developments, and we are available to discuss your questions about life sciences patent litigation and associated damages claims in Australia.