In brief

In the latest instalment of the clopidogrel (Plavix^®) patent saga, the Commonwealth has been unsuccessful in its claim for compensation pursuant to an undertaking as to damages given by Sanofi in relation to an interlocutory injunction restraining Apotex from launching its generic clopidogrel products: Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5) [2020] FCA 543.

On the facts, the Court found that the evidence fell short of establishing that Apotex would have sought and obtained PBS listing of its clopidogrel products on 1 April 2008 if the interlocutory injunction had not been granted.

The Court has, however, confirmed there is no reason why the Commonwealth should not be entitled to compensation in appropriate cases.

Background

On 16 August 2007, Apotex commenced proceedings for revocation of Sanofi’s Australian patent number 597784 (the Patent), which claimed the compound clopidogrel and various salts thereof (including, in claim 3, the hydrogen sulfate salt). Sanofi filed a cross-claim seeking injunctive and other relief for threatened infringement of the patent.

Apotex obtained registration on the Australian Register of Therapeutic Goods of its own clopidogrel (hydrogen sulfate salt) products on 21 August 2007 and applied for listing under the Pharmaceutical Benefits Scheme (the PBS) in September 2007, with a view to listing on 1 December 2007. However, Apotex’s application was out of time and so it could only obtain PBS listing on 1 April 2008 (provided the application for PBS listing was made by 1 December 2007).

On 25 September 2007, Sanofi obtained an interlocutory injunction restraining Apotex from infringing the Patent, for which it gave the usual undertaking as to damages. Apotex undertook not to apply for PBS listing of its clopidogrel products until determination of the proceeding or further order.

On 19 August 2008, the trial judge granted a final injunction restraining Apotex from infringing claim 3 of the Patent and ordered that certain other claims of the Patent be revoked.

Apotex appealed to the Full Court and the parties again provided undertakings. The Full Court allowed the appeal, set aside the final injunction and ordered that the Patent be revoked.

Sanofi applied for special leave to appeal to the High Court, which was heard and refused on 12 March 2010.

Apotex’s clopidogrel products were PBS listed on 1 May 2010.

The compensation claims

On 4 May 2010, Apotex sought compensation pursuant to the various undertakings given by Sanofi in the proceedings. In late 2014, Apotex discontinued its claim pursuant to a settlement deed with Sanofi and Bristol-Myers Squibb Investco LLC (BMS), which also sold clopidogrel products in Australia and was party to the proceedings.

Before Apotex’s claim was discontinued, on 11 April 2013, the Commonwealth sought compensation from Sanofi for the loss said to have been suffered as a result of Apotex being prevented from supplying its generic clopidogrel products on 1 April 2008.

The Commonwealth contended that the interlocutory injunction had the effect of delaying significant reductions in the payments it was obliged to make to pharmacists under the PBS for the supply of Sanofi’s and BMS’ clopidogrel products. More specifically, the Commonwealth claimed approximately $325 million in compensation, excluding interest and costs, comprising:

• approximately $51 million in respect of mandatory statutory price reductions that would have occurred on 1 April 2008 (then a 12.5% reduction) and 1 August 2009 (a further 2% reduction)
• approximately $216 million in respect of price disclosure price reductions that would have occurred between 1 April 2010 and 31 December 2014
• approximately $58 million in respect of payments made by the Commonwealth for clopidogrel with aspirin combination products in the period 1 December 2009 to 31 March 2016.

The issues

The principal issue in the proceeding was whether the Commonwealth’s loss would have been sustained but for the grant of the interlocutory injunction. In other words, but for the interlocutory injunction, would Apotex’s clopidogrel products have been listed on the PBS on 1 April 2008? The settlement of Apotex’s claim meant that the evidentiary burden on this issue fell to the Commonwealth.

There was substantial evidence of Apotex’s internal communications from 2006 regarding the potential launch of its clopidogrel products, including based on the possible outcome of any interlocutory injunction application and related proceedings. It became apparent during cross-examination of Apotex employees called by the Commonwealth that Dr Bernard Sherman, the co‑founder, CEO and Chairman of Apotex Canada and the ultimate controller of the Apotex group, was the key decision-maker who would have had to give his approval before there could be any launch at risk of Apotex’s clopidogrel products in Australia. Because Dr Sherman was not called to give evidence, the Court drew the inference that his evidence would not have assisted the Commonwealth’s case.

As a result, the Court was not persuaded that Apotex would have sought and obtained PBS listing of its clopidogrel products even if the interlocutory injunction had not been granted and, accordingly, dismissed the Commonwealth’s claim for compensation.

Although not necessary to do so, the Court considered a number of other issues raised in the proceedings, including whether the Commonwealth’s losses were a direct and reasonably foreseeable consequence of the interlocutory injunction.

The Court found that the interlocutory injunction did not directly affect the legal rights, obligations or interests of the Commonwealth. It did not prevent the Commonwealth from receiving and accepting an application for PBS listing by Apotex of any one or more of its clopidogrel products. At most, it prevented Apotex from entering the market for clopidogrel in Australia, which in turn had the practical effect of denying the Commonwealth the financial benefits it would have obtained were it to have received and accepted an application by Apotex to list its clopidogrel products (or those of another generic company) on the PBS from 1 April 2008. The loss did not, therefore, flow directly from the interlocutory injunction. This finding turned on the particular form of the orders made when the interlocutory injunction was granted. Apotex undertook not to apply for PBS listing, but that undertaking was not supported by any cross-undertaking by Sanofi.

Importantly, however, the Court did find that it was reasonably foreseeable at the time Sanofi applied for the interlocutory injunction that, if prevented from supplying its clopidogrel products, Apotex would not make any application to list those products on the PBS for so long as the interlocutory injunction remained in force. The losses relating to the combination products, which were PBS listed on 1 December 2009 at a price reflecting the price of clopidogrel at the time, were also foreseeable because a reasonable person in Sanofi’s position would have understood that the listing of Apotex’s clopidogrel products on 1 April 2008 may well influence later price negotiations relating to clopidogrel products, including new combination products.

The Court also rejected a number of other arguments by Sanofi as to why the Commonwealth should not be entitled to recover compensation, including that:

• it ought not be regarded as a person 'adversely affected' by an injunction
• it was the author of the statutory scheme whose operation caused its loss
• compensation to the Commonwealth should be refused on discretionary grounds, or would be contrary to the public interest.

By rejecting all these arguments the Court has made clear that the Commonwealth will generally be regarded as a party adversely affected by the operation of an interlocutory injunction to restrain a generic entrant on the usual undertaking as to damages, and that it remains open to the Commonwealth to recover PBS payments made to originators during the period of such injunctions.

As expected, both parties are contesting the judgment, with the Commonwealth filing a notice of appeal on 26 May 2020 and Sanofi filing a notice of contention on 16 June 2020. A hearing date has not been set at the time of writing this article.

Key lessons

A party (including a generic company) seeking compensation pursuant to an undertaking as to damages bears the burden of establishing on the evidence what the restrained party would have done if there was no interlocutory injunction.

More broadly, pending any appeal, the Court has confirmed that originator companies will be liable in appropriate cases to compensate the Commonwealth for higher PBS subsidies paid during the period of an interlocutory injunction restraining generic entrants, if the patent is ultimately held invalid or not infringed.

This article was published in Edition 2 of The Prescription.