SummaryA recent Court of Appeal case has upheld a previous High Court order for payment of damages of £27 million arising from the grant of an interim injunction in favour of AstraZeneca. The award
Summary
A recent Court of Appeal case has upheld a previous High Court order for payment of damages of £27 million arising from the grant of an interim injunction in favour of AstraZeneca. The award granted in AstraZeneca AB & Anor v KRKA dd Novo Mesto & Consilient Health Ltd [2015] EWCA Civ 484 is said to be the largest award ever made by the Patents Court upon an inquiry of this kind.
Background
In 2010 AstraZeneca had a monopoly in the United Kingdom in respect of a gastric treatment drug, esomeprazole, which was marketed as 'Nexium'. Sales of Nexium in the UK amounted to around £65 million. In September 2010, Consilient, a UK pharmaceutical sales and marketing company sought to bring to the UK an esomeprazole capsule called Emozul, which had been manufactured by Krka, a leading generic pharmaceutical company, based in Slovenia. This was a generic version of esomeprazole and would allow Consilient to launch it at a price 25% lower than that of Nexium.
As a result, AstraZeneca issued proceedings for infringement of its patent and applied for an injunction to restrain both Consilient and Krka, ("the defendants"), from marketing Emozul pending the trial. The defendants submitted to AstraZeneca's application on the basis that AstraZeneca would give the usual cross-undertaking in damages.
At the same time, another generic esomeprazole company, Ranbaxy, began proceedings in respect of the same patent, challenging its validity and seeking a declaration of non-infringement in respect of its own generic esomeprazole tablet. It was held that Ranbaxy's product did not infringe (the "Ranbaxy decision"). This led AstraZeneca to lift the injunction against the defendants and an order for its discharge was made.
The Ranbaxy decision opened the door to the marketing of generic esomeprazole products which drove the price down and significantly impacted the launch of Emozul, the defendants' drug. The defendants lost the opportunity to enjoy almost a year as the only generic esomeprazole on the market, a loss known as the "first mover" advantage.
The claim for damages
The defendants originally claimed for damages in excess of £32 million in respect of their losses, for the period of the injunction and following the launch of Emozul. The claimants estimated the defendants' losses at only £3 million to £6 million.
The claimants argued that it would have been hard for the defendants to penetrate the market to the extent claimed because they would have to persuade the Primary Care Trusts ("PCTs") and health boards to switch to Emozul. These bodies would then have had to persuade their GPs to change their prescribing practices and prescribe Emozul.
Sales J (as he was then) found that, but for the injunction, the defendants would have entered the market with full force and effect. He then went on to assess the degree of success and discounted it by 20% to account for various uncertainties.
The calculation of damages
The general principles to be applied in assessing the damages payable under a cross-undertaking given in respect of the grant of the injunction was explained in Les Laboratoires Servier v Apotex Inc [2008] EWC 2347. The approach was not to punish the party which had been granted the injunction but to compensate the party which had been the subject of the injunction.
In this case, damages were assessed for the loss of opportunity to exploit entry into the generic esomeprazole market. The conventional method is to assess damages on a particular hypothesis and then to adjust the award by reference to the percentage chance of the hypothesis occurring.
Sales J, at first instance, relied upon the evidence from the PCTs and the decisions they would make when considering whether to recommend changing from one drug to another version of the drug. He recognised that the Medicine Managers (those within the PCTs making the decisions) might have had a tendency to exaggerate the simplicity behind persuading the GPs to make a change. As such, Sales J applied a 20% discount to the amount of damages awarded.
Comment
The Court of Appeal stated that it understood the case was fact-sensitive, but it upheld the approach and decision made by Sales J at first instance; the award of £27 million in damages was to stand. The case highlights a possible change in approach by the courts. Historically, pharmaceutical patent owners have been protected by interim injunctions. However this case demonstrates the possible dangers and significance of giving cross-undertakings in damages in patent cases, particularly when it comes to the amount. The case also serves to demonstrate the methods used by the courts to calculate damages, and endorses the process used in Les Laboratoires Servier v Apotex Inc.
A recent Court of Appeal case has upheld a previous High Court order for payment of damages of £27 million arising from the grant of an interim injunction in favour of AstraZeneca. The award granted in AstraZeneca AB & Anor v KRKA dd Novo Mesto & Consilient Health Ltd [2015] EWCA Civ 484 is said to be the largest award ever made by the Patents Court upon an inquiry of this kind.
Background
In 2010 AstraZeneca had a monopoly in the United Kingdom in respect of a gastric treatment drug, esomeprazole, which was marketed as 'Nexium'. Sales of Nexium in the UK amounted to around £65 million. In September 2010, Consilient, a UK pharmaceutical sales and marketing company sought to bring to the UK an esomeprazole capsule called Emozul, which had been manufactured by Krka, a leading generic pharmaceutical company, based in Slovenia. This was a generic version of esomeprazole and would allow Consilient to launch it at a price 25% lower than that of Nexium.
As a result, AstraZeneca issued proceedings for infringement of its patent and applied for an injunction to restrain both Consilient and Krka, ("the defendants"), from marketing Emozul pending the trial. The defendants submitted to AstraZeneca's application on the basis that AstraZeneca would give the usual cross-undertaking in damages.
At the same time, another generic esomeprazole company, Ranbaxy, began proceedings in respect of the same patent, challenging its validity and seeking a declaration of non-infringement in respect of its own generic esomeprazole tablet. It was held that Ranbaxy's product did not infringe (the "Ranbaxy decision"). This led AstraZeneca to lift the injunction against the defendants and an order for its discharge was made.
The Ranbaxy decision opened the door to the marketing of generic esomeprazole products which drove the price down and significantly impacted the launch of Emozul, the defendants' drug. The defendants lost the opportunity to enjoy almost a year as the only generic esomeprazole on the market, a loss known as the "first mover" advantage.
The claim for damages
The defendants originally claimed for damages in excess of £32 million in respect of their losses, for the period of the injunction and following the launch of Emozul. The claimants estimated the defendants' losses at only £3 million to £6 million.
The claimants argued that it would have been hard for the defendants to penetrate the market to the extent claimed because they would have to persuade the Primary Care Trusts ("PCTs") and health boards to switch to Emozul. These bodies would then have had to persuade their GPs to change their prescribing practices and prescribe Emozul.
Sales J (as he was then) found that, but for the injunction, the defendants would have entered the market with full force and effect. He then went on to assess the degree of success and discounted it by 20% to account for various uncertainties.
The calculation of damages
The general principles to be applied in assessing the damages payable under a cross-undertaking given in respect of the grant of the injunction was explained in Les Laboratoires Servier v Apotex Inc [2008] EWC 2347. The approach was not to punish the party which had been granted the injunction but to compensate the party which had been the subject of the injunction.
In this case, damages were assessed for the loss of opportunity to exploit entry into the generic esomeprazole market. The conventional method is to assess damages on a particular hypothesis and then to adjust the award by reference to the percentage chance of the hypothesis occurring.
Sales J, at first instance, relied upon the evidence from the PCTs and the decisions they would make when considering whether to recommend changing from one drug to another version of the drug. He recognised that the Medicine Managers (those within the PCTs making the decisions) might have had a tendency to exaggerate the simplicity behind persuading the GPs to make a change. As such, Sales J applied a 20% discount to the amount of damages awarded.
Comment
The Court of Appeal stated that it understood the case was fact-sensitive, but it upheld the approach and decision made by Sales J at first instance; the award of £27 million in damages was to stand. The case highlights a possible change in approach by the courts. Historically, pharmaceutical patent owners have been protected by interim injunctions. However this case demonstrates the possible dangers and significance of giving cross-undertakings in damages in patent cases, particularly when it comes to the amount. The case also serves to demonstrate the methods used by the courts to calculate damages, and endorses the process used in Les Laboratoires Servier v Apotex Inc.