Federal Court dismisses claim by Commonwealth for compensation for additional PBS costs

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This article was written by Matt SwinnKim O'ConnellSuzy Madar, Bridie Egan, Sarah-Jane Frydman, Sarah Huang.

Commonwealth denied compensation for additional PBS costs following injunction restraining generic clopidogrel launch despite patent being invalid

In a long-awaited judgment that will affect applications 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 has dismissed a claim made by the Commonwealth for compensation from Sanofi.  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 paid to subsidise cost of the drug to patients during the period when Apotex was restrained from entering the market with its generic versions of the Plavix products.  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. 

The decision follows a landmark decision of Justice Jagot in 2018 in which several parties who suffered damage following interlocutory injunctions restraining the launch of generic venlafaxine products were found to be entitled to compensation from Wyeth.  KWM acted for two of the successful claimants in those proceedings.

The claims on the undertaking in this case were made after the Full Court's finding that Sanofi's patent was invalid and therefore the interlocutory injunction restraining Apotex from launching its products was wrongly granted.

The Commonwealth's claim failed here 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 Pharmaceutical Benefits Scheme (PBS), despite the potential exposure to significant damages if Sanofi succeeded in enforcing its patent; and
  • the Commonwealth's loss flowed directly from the interlocutory injunction granted against Apotex.

Snapshot summary

In 2007, Sanofi obtained an interlocutory injunction restraining Apotex from entering the market with a generic version of Sanofi's Plavix, a platelet inhibitor frequently prescribed to lower the risk of heart disease or stroke.  The purpose of an interlocutory injunction is to preserve the status quo in the market, pending the Court's determination – in this case in relation to whether Sanofi's patent was valid and infringed by Apotex's product.  In order to obtain an interlocutory injunction, the Court requires the patentee to provide an undertaking to compensate any person who is adversely affected by the interlocutory injunction.

Following the Full Court's decision that Sanofi's patent for clopidogrel was found to be invalid, Apotex and the Commonwealth filed compensation claims based on the undertaking given by Sanofi:

  • Apotex claimed lost profits it would have made had it not been restrained from launching its generic clopidogrel products; and
  • the Commonwealth claimed the considerable cost savings that would have flowed from Apotex listing a generic clopidogrel product on the Pharmaceutical Benefits Scheme (PBS), triggering both an initial statutory price reduction of 12.5% (at the time of listing) and subsequent price reductions resulting from ongoing price disclosure obligations.  At that time, clopidogrel was the third most costly medicine on the PBS, costing the Commonwealth $170 million per year in respect of Plavix alone.

In November 2014, Apotex settled its claim with Sanofi, leaving the Commonwealth as the only claimant in this aspect of the proceeding.

The Commonwealth had to establish that:

  • 'but for' the interlocutory injunction, Apotex would have launched at risk (i.e., applied for PBS listing of its clopidogrel products on 1 April 2008 and commenced supply), despite the significant damages for which it would have been liable if Sanofi's patent were to be found valid and infringed (the key factual finding upon which the Commonwealth's entire claim hinged);
  • the Department of Health would have accepted the PBS application and listed the products from 1 April 2008;
  • the Commonwealth was a person adversely affected by the interlocutory injunction restraining generic launch and suffered loss which flowed directly from the interlocutory injunction; and
  • Sanofi's defences (premised on the basis that the grant of compensation to the Commonwealth would be inequitable) should be rejected.

The Commonwealth claim failed because it was unable to establish that Apotex would have launched at risk (which was fatal to the Commonwealth's case) and that the Commonwealth's loss flowed directly from the injunction (even though the Commonwealth was a person adversely affected).  This is despite the Commonwealth being successful in respect of the second and fourth points. 

The Court made the following findings.

  • 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 he would have authorised an at-risk launch.  The Court drew a negative inference from this absence of evidence that the evidence would not have assisted the Commonwealth's case. 
  • The Department of Health would have accepted a PBS application by Apotex, if it had decided to launch at risk.  The Court relied on evidence from Sanofi's own employees that, at the time of the interlocutory proceedings, they expected that it was almost certain that Apotex would have been successful in obtaining a PBS listing had Sanofi not sought an injunction.
  • The Commonwealth was a person adversely affected but that its loss did not flow directly from the order granting the interlocutory injunction.  The order only restrained Apotex from acts constituting an exploitation of the Patent (including importation, manufacture and supply of the clopidogrel products) but did not restrain Apotex from applying for PBS listing for the clopidogrel products.  Although the Court accepted that the practical effect of the order prevented Apotex from applying for PBS listing, it did not directly affect the legal rights and obligations of the Commonwealth.    
  • The Court rejected Sanofi's equitable defences based on the Commonwealth's delay in making its claim for compensation and Sanofi's hypothetical claim that Apotex's product information would have amounted to an infringement of Sanofi's copyright in the of the Plavix product information in the counterfactual scenario.  The Court found that it was not open to the Commonwealth to have made a compensation claim prior to knowing the final outcome of the proceedings on 12 March 2010 when the High Court refused Sanofi special leave to appeal, and the almost three year delay between the High Court's decision and the filing of the Commonwealth's claim in 2013 was justified by factors including the need to seek legal advice.  The Court found that it would not be just or equitable to reduce compensation on account of hypothetical copyright infringement by Apotex in the counterfactual scenario, when Sanofi accepted it would never have brought those claims against Apotex.  

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 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. 

Both this case, and the venlafaxine case reinforce the difficulty and complexity of claiming on an undertaking as to damages in a case concerning pharmaceuticals.  There is no doubt that the interplay of the NHA and the steps required for a successful patent challenge will come under considerable scrutiny and we may see policy and legislative changes in this space.

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