Australia: Government loses appeal in landmark AUD 325m compensation claim for delayed generic drugs

28 Jun 2023    2 minute read
Sectors Healthcare & Life Sciences

In brief

In a unanimous decision, over two years in the making, the Full Court of the Federal Court of Australia has confirmed that the Australian Government is not entitled to compensation for the delayed entry of generic clopidogrel into the Australian market. In doing so, the Full Court dismissed the Government's appeal from an earlier decision of Justice Nicholas.

Contents

Key takeaways

  • It remains open to the Government to bring a claim for compensation under an undertaking as to damages where an interlocutory injunction to restrain the launch of a generic (or biosimilar) drug has been wrongly granted, due to a patent later being invalidated.
  • Successfully claiming on the undertaking is complex: the Government must adduce sufficient evidence (contemporaneous documents, testimony of relevant decision-makers from the Government and generic) to establish that the interlocutory injunction caused the delayed reduction of reimbursement prices. The facts in the present case illustrate the difficulties the Government faces in obtaining this kind of evidence given it requires the co-operation of the generic manufacturer and its key decision-makers. This is particularly challenging where the generic has already resolved its claim with the patentee.
  • In its judgment delivered on 26 June 2023, the Full Court affirmed the finding of Justice Nicholas that, on the evidence presented at trial, Apotex would not have sought to list its generic clopidogrel products on the Australian Pharmaceutical Benefits Scheme (PBS) on 1 April 2008 even if there had been no interlocutory injunction obtained by Sanofi. This finding was fatal to the Government's compensation claim.
  • Directness is essential - where a claimed loss is proven, it must "flow directly" from the interlocutory injunction. The Full Court has now indicated that it is not necessarily the case that an "interposed causal step" between an interlocutory injunction and the loss said to result from it will prevent that requirement being satisfied. In the present case, the Full Court disagreed with the trial Judge's opinion that an undertaking given by Apotex not to seek PBS listing was an "interposed causal step" which prevented a finding that the Government's claimed loss (had it been proven) flowed directly from Sanofi's interlocutory injunction.
  • The implications of the Full Court’s findings are likely to be felt in future interlocutory injunction applications concerning patents covering PBS-listed pharmaceuticals. Whilst the threat of a Government claim on an undertaking as to damages remains, the substantial evidentiary challenges and time involved in establishing such a claim should be factored into both patentee and generic/biosimilar patent litigation strategies.

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Contact Information
Colette Downie
Senior Associate at BakerMcKenzie
Melbourne
colette.downie@bakermckenzie.com

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