The Court's decision
In comments whilst handing down his decision, Justice Nicholas stated that the determinative conclusions were that:
- the Commonwealth did not establish on the evidence that Apotex would have applied for and obtained PBS listing for its generic clopidogrel product from 1 April 2008 as claimed; and
- it was not established that the loss claimed by the Commonwealth was a direct consequence of the interlocutory injunction granted by the Federal Court as opposed to an undertaking voluntarily given to the Court by Apotex not to list its products on the PBS.
These conclusions relate to matters of evidence and the form of order granting the interlocutory injunction and do not amount to a principle of general application that would bar future claims by the Commonwealth against originators in similar circumstances. Nonetheless, the Court’s findings on these matters will be instructive for both sides in any future Commonwealth compensation claim and provide guidance for originators that ought to be considered in the pre-commencement phase of pharmaceutical patent litigation in Australia.
Evidence concerning whether Apotex’s would have applied for and obtained PBS listing
Based on the evidence before it, the Court found or inferred that Apotex Australia had no real interest in launching and marketing its clopidogrel products unless it could obtain a PBS listing for them… there would have been no significant market for the Apotex Australia clopidogrel products in Australia unless they could be supplied to pharmacists at prices that were subsidised under the PBS and that there would have been no commercial benefit to Apotex Australia if it were to market its clopidogrel products in Australia in the absence of a PBS listing. Further, Apotex CEO’s was not expecting that Apotex Australia would be successful in resisting an application for an interlocutory injunction by Sanofi.
The Commonwealth called on evidence from a number of the witnesses employed by the Apotex group (many of whose affidavits had been prepared and filed before Apotex discontinued its damages claim after reaching settlement with Sanofi). Importantly, however, the Commonwealth did not call on the evidence of relevant decision makers within the Apotex group and instead sought to rely on internal Apotex emails to seek to establish by inference that Apotex would have applied for PBS listing in 2008 but for the interlocutory injunction.
The Court was not, however, prepared to infer based on internal emails that PBS listing would have been applied for and procured with effect from 1 April 2008, explaining at :
In my opinion, the Commonwealth’s case suffers from an evidentiary deficiency which cannot be made good by drawing inferences from [internal] correspondence… in the lead up to the hearing of the interlocutory application.
To the contrary, in fact, the Court noted that the Apotex emails appeared to reveal an intention to use the undertaking as to damages as a means of having Sanofi underwrite the decision not to launch.
More broadly in relation to the Commonwealth’s decision to not lead evidence from relevant decision makers both from Apotex and the Commonwealth, the Court cited the rule in Jones v Dunkel (1959) 101 CLR 298. This rule operates where there is an unexplained failure by a party to call witnesses and may, in appropriate circumstances, lead to an inference that the uncalled evidence would not have assisted the party. The Court appeared to make such an inference on on a separate, counterfactual, question assuming that Apotex had supplied the market for a period before withdrawing. Here, the Court thought it more likely than not that the statutory price reduction would have been reversed and came to this decision (at ) “due at least in part to the absence of any evidence from any relevant decision-maker.”
Why did the “usual undertaking” not apply?
Sanofi gave the usual undertaking in return for orders granting an interlocutory injunction enjoining Apotex from making, selling or supplying, offering to make, sell or supply, using or importing, and keeping its generic clopidogrel products. The terms of the injunction did not prevent Apotex from applying to list its generic clopidogrel products on the PBS. As the Court stated at -:
At most it prevented Apotex Australia 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 Australia to list its clopidogrel products on the PBS from 1 April 2008.
… The terms of the interlocutory injunction did not prevent Apotex Australia from applying for a PBS listing of its clopidogrel products or from taking any other steps to obtain such a listing. Doing so would not have involved a breach of the interlocutory injunction.
Importantly, the trigger for statutory price reductions under Australia’s PBS is the first listing of a generic product on the PBS not the failure to supply that drug to the market. This meant that although the “Commonwealth’s loss was a natural and direct consequence of Apotex not being able to apply to list its clopidogrel products on the PBS…” this was “not something the interlocutory injunction expressly or implicitly prohibited. This strongly suggests… that the loss alleged by the Commonwealth in this case was an indirect consequence of the interlocutory injunction.”
Given that Sanofi only gave the usual undertaking in support of the interlocutory injunction, the Court concluded at  that:
any financial loss suffered by the Commonwealth as a result of Apotex Australia’s clopidogrel products not having been listed on the PBS from 1 April 2008 was not a loss that flowed directly from the existence of the interlocutory injunction but was the direct and immediate consequence of the first Apotex undertaking. This was an undertaking given by Apotex Australia to the Court that was not supported by any cross-undertaking as to damages. The Commonwealth’s loss is therefore not recoverable pursuant to the undertaking as to damages given in support of the interlocutory injunction.
Why was PBS listing the subject of a voluntary undertaking instead of the interlocutory injunction order?
During the original 2007 hearing on Sanofi’s interlocutory injunction application, the Court indicated that it did not see any proper basis to prevent Apotex from taking steps to list its clopidogrel products on the PBS based on Apotex’s stated position that, should the Court grant the injunction, “the question of needing to restrain us from doing anything with the PBS or restraining the PBS doesn’t arise”. As Apotex’s Senior Counsel explained:
MR CATTERNS: Because, in short your Honour, it’s pointless for us, the question of needing to restrain us from doing anything with the PBS or restraining the PBS doesn’t arise. If your Honour were against us…
HIS HONOUR: Why would that be, why would that be, because - - -
MR CATTERNS: It’s of no value to us, your Honour. We don’t want to get listed, to be candid, we don’t want to be listed on the PBS if we can’t sell. It would damage our friends by bringing their price down twelve and a half per cent.
HIS HONOUR: Yes, that’s a risky thing anyway.
MR CATTERNS: Yes, it will only damage our friends, it’s of no benefit to us, and we will make enemies in the industry.