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Australian Government’s compensation claim against pharma patentees rumbles on…

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Commonwealth of Australia v Sanofi [2017] FCA 382 is the latest development in the Australian Government’s bid to recover substantial compensation against Sanofi pursuant to cross-undertakings in damages given by Sanofi in interim injunction proceedings against Apotex.

Why is the wider case of interest?

The case began in 2007 when, in exchange for obtaining interlocutory relief which prevented Apotex from marketing its generic clopidogrel products, Sanofi provided the requisite cross-undertaking in damages to submit to any order the court may make to compensate any person (whether or not a party) affected by the interim injunction order.  The patent fight made its way through the courts until, having exhausted all avenues for appeal in 2010, Sanofi’s patent was invalidated and Apotex commenced its compensation claim pursuant to the cross-undertakings.

Apotex’s claim was fairly advanced, with multiple affidavits and expert evidence having been filed, before the Government decided in 2013 to commence its own claim for compensation of financial losses suffered as a result of Apotex being prevented from launching its generic product.  Most of the Government’s loss is said to flow from statutory price reductions that would have occurred in respect of the clopidogrel drug had Apotex not been restrained.

In Australia, the usual cross-undertaking wording extends to “…any person, whether or not a party…”, whereas in the UK, the court has a discretion to require that the cross-undertaking extend to a person other than the respondent, although it has been said that the court needs to know, in some way at least, who the relevant persons are.  The UK Department of Health have in recent cases come to court in pharmaceutical interim injunction cases and sought the benefit of a cross-undertaking since the National Health Service will be paying the putative higher price for the drug in question while the interim injunction is in place.  That being said, and to date, there has been no inquiry on such a cross-undertaking.

This Australian case is, so far as I am aware, the first such case where the Government is seeking compensation pursuant to a cross-undertaking (or at least the first that will reach judicial determination – the final hearing has been fixed for six weeks beginning the end of August 2017).  This case has major implications for the pharmaceutical industry, particularly in those jurisdictions where cross-undertakings in damages are de rigueur when seeking interlocutory relief to prevent the launch and sale of generic pharmaceutical products.  It is one thing to be found liable to compensate the generic pharmaceutical company where the patent is finally found to be invalid, but it is quite another thing to also be faced with the real possibility of compensating the Government!  Indeed, until this case, it was all merely a theoretical possibility.

What is the latest interlocutory decision about?

The recent decision is confined to a narrow point, namely the enforceability of a clause in a settlement agreement between Sanofi and Apotex which prevented Apotex from assisting the Government in its claim against Sanofi (otherwise than by compulsion of law) by way of waiving any claim for legal professional privilege that Apotex may have, or releasing any third person (such as Apotex witnesses, including employees, past employees and consultants) from any obligation of confidence in respect of information relevant to the Government’s claim.

The Court accepted that if the relevant clause was enforced, it would hinder the Government’s preparation for the final hearing by effectively preventing the Government’s legal representatives from interviewing Apotex’s witnesses or other potential witnesses who the Government may wish to call (Apotex’s own compensation claim against Sanofi having been settled).  The Court held that the clause would interfere adversely with the administration of justice and, accordingly, declared that the clause is unenforceable.  It nonetheless remains a matter for each of Apotex’s witnesses to decide whether they would wish to participate in any interview with the Government’s solicitors.

In the meantime, we will be keeping an eye on the wider case (and any further developments) with interest.

This post was originally co-authored by Jin Ooi.