08 March 2012

Preliminary Injunction for CRESTOR—Not All ‘Tablets’ are Equal

Apotex Pty Ltd v AstraZeneca AB [2011] FCA 1520 (14 December 2011)

Interlocutory injunctionsprima facie case – balance of convenience – relevance of delay by patentee, complexity of proceedings, and parties’ conduct and obligations

CRESTOR In the first Federal Court decision to follow the ruling of the Full Court in Samsung v Apple (see Samsung v Apple – A Closer Look at the Appeal Decision) Justice Rares has granted a preliminary injunction to pharmaceutical company AstraZeneca, barring  Apotex from supplying a generic version of cholesterol drug CRESTOR (rosuvastatin) in Australia pending a final decision regarding the validity and infringement of three patents owned by AstraZeneca.

In reaching this decision, Justice Rares was bound by the ruling of the Full Court overturning the injunction originally granted to Apple against Samsung’s Galaxy Tab 10.1 tablet, which had been issued only two weeks earlier.  The Apple case confirmed that the correct approach to determining whether or not to grant a preliminary injunction is:
  1. firstly, to assess whether the patentee has a sufficiently strong prima facie case upon which it may succeed at trial; and
  2. if so, to weigh up the balance of convenience to the parties in the event that an injunction is, or is not, granted, to determine whether it is appropriate to do so in the circumstances.
Apple failed to defend its injunction because, while the merits and the question of convenience between itself and Samsung were fairly evenly balanced, this meant that Apple needed to demonstrate good prospects of success to justify imposing substantial prejudice on Samsung.  As Apple found to its detriment, it may be very difficult to establish ‘good’ prospects of success in a complex patent case, which might depend heavily on expert evidence to interpret patent claims, assess infringement issues, and evaluate inventiveness.

Not so AstraZeneca, however, which has been awarded an interlocutory injunction which will be effective until such time as the court orders otherwise – normally this will be after a final judgement on the merits of the case.

PRIMA FACIE CASE

AstraZeneca relied on three patents for its infringement case, which are identified in the decision only in abbreviated form:
  1. the ‘051 patent’, or ‘dosage patent’, which relates to the treatment of hypercholesterolemia using a daily oral dosage of 5-10 mg of rosuvastatin;
  2. the ‘842 patent’ or ‘composition patent’, which relates to a formulation (e.g. a tablet) in which rosuvastatin is present in combination with a specified inorganic salt (which serves to stabilise the active ingredient); and
  3. the ‘165 patent’, or ‘generic patent’, relating to the use of rosuvastatin for treatment of heterozygous familial hypercholesterolemia.
Notably, rosuvastatin itself is a known compound, therefore AstraZeneca cannot claim any exclusive right in this compound, except when used in the manners, or compositions, defined in the three patents.

The proceedings had commenced with Apotex applying to the court for revocation of the dosage patent, on 18 May 2011.  By 17 November 2011, Apotex had obtained regulatory approval to market a generic version of CRESTOR for treatment of hypercholesterolemia other than heterozygous familial hypercholesterolemia, i.e. the subject matter of the generic patent.  It informed AstraZeneca of its intention to do so, and immediately launched a major marketing campaign. 

AstraZeneca subsequently filed a cross-claim for infringement of patents, including the 051, 842 and 165 patents.  Apotex’s own disclosure of the composition and indications of its generic product established that it would infringe the 051 (dosage) patent, which it was seeking to revoke.

While there appears to be some room for possible dispute, AstraZeneca led expert testimony indicating that, as a practical matter, and on a reasonable interpretation of the claims, all three patents would be infringed by Apotex’s generic product.

Apotex, oddly, led no actual evidence to support its original invalidity claim in relation to the 051 patent, nor its claims not to infringe either the 842 or the 165 patent.  Its solicitor testified to having obtained an expert opinion regarding the validity of the 842 patent, but the expert in question was not produced as a witness in the proceedings.  The court noted (at [18]) that Apotex had previously challenged both the 051 and the 165 patents before the Patent Office, without success.  And Apotex offered no explanation for its exclusion of treatment of heterozygous familial hypercholesterolemia in its Therapeutic goods registration, which the court appeared to take as further undermining its invalidity argument (at [32]).

Considering the state of the evidence, the court had no difficulty concluding that AstraZeneca had established a sufficent prima facie case (at [48]).

BALANCE OF CONVENIENCE

The balance of convenience in cases involving pharmaceuticals can be quite different – and far less finely-balanced – than in cases relating to other patented subject matter. 

The reason for this has to do with the operation of Australia’s regulatory system, and the Pharmaceutical Benefits Scheme (PBS) under which the government subsidises many drugs in order to ensure that they are affordable to ordinary citizens.

In particular, once a competitive (e.g. generic) drug has entered the market against an incumbent (e.g. patented) drug, the original manufacturer will obviously be forced to compete on price.  This necessarily results in price drops, and in this case the aggressive marketing by Apotex had included discounts of up to 75% on the price of CRESTOR for its generic replacement.

As the court explained (at [24]-[25]):

If Apotex is able to bring its generic to market and AstraZeneca’s infringement claims are found to be justified at a final hearing, the latter will have suffered significant and irreversible damage to its market position. … [The competition] has the effect of reducing the pharmaceutical benefit payable for all forms of the drug, including CRESTOR, because once prices drop, the PBS will only pay a benefit based on actual market prices. If CRESTOR had to compete in the market on price against Apotex’s generic, and the generic were later found to have infringed one or more of AstraZeneca’s patents, the benefit payable by the scheme would be permanently reduced to the competitive price. That would have the consequence of denying the patentee the ability to exploit its statutory monopoly by returning to a higher price in circumstances where its patent has been wrongly infringed.
That change in its market pricing will be irreversible in circumstances where AstraZeneca’s patents have over eight years to run, if they are valid. [AstraZeneca’s witness] considered that AstraZeneca would never be capable of being restored to its current position because the market would become accustomed to the lower prices of the generic caused by the intense competition on its entry into the market and the irreversible nature of the PBS price reductions.

These circumstances also tend to be a public relations nightmare for the originating manufacturer, since many members of the public (and some members of parliament) are inclined to accuse patent-holding pharmaceutical companies of abusing their monopolies.  For their part, companies such as AstraZeneca, which conduct original research and drug discovery, argue that without a reasonable monopoly period they would be unable to fund their ongoing R&D into new drugs.

Whatever one’s views on this issue, there is no question, as the court accepted (at [22]) that the temporary entry of a generic competitor is liable to result in a market ‘backlash’ against the patentee.

Considering these – and other – factors, the court concluded that ‘[t]he long term damage that AstraZeneca will suffer strongly outweighs the damage which Apotex might suffer’ (at [53]).

THE CONDUCT OF THE PARTIES

Another issue weighed up by the court was the conduct of the parties in the proceedings to date, and whether that should have any bearing on the decision of whether or not to grant an injunction.

Apotex argued that AstraZeneca had delayed its application for an interlocutory injunction significantly, after it was made aware of Apotex’s intentions on 17 November 2011.  Essentially, Apotex hoped to be able to continue its marketing campaign, and obtain a ‘first mover advantage’ over other generic manufacturers, until at least 31 January 2012, when the application had been set down for a full hearing.

However, Apotex’s decision to mount a defence at the initial interlocutory hearing, rather than waiting until 31 January 2012, was apparently raised at the last minute, which was a cause of some inconvenience to the court.  Furthermore, it seems that Apotex wanted to have its cake and eat it too – arguing against the grant of an injunction at the initial hearing but, if unsuccessful, being able to return for a second attempt with additional evidence and submissions on 31 January 2012.  Apotex therefore argued that if a preliminary injunction were granted, it should be for this limited term only, pending a decision in the further hearing.

Overall, Justice Rares was more unimpressed with Apotex’s conduct than with AstraZeneca’s.  He considered that Apotex had mounted a sufficiently substantial opposition, and was well aware that by doing so it risked losing the further opportunity to do so, and the possibility of an indefinite injunction pending a full trial and final determination.  He therefore granted a preliminary injunction until further order (at [63]).

CONCLUSION

Interlocutory injunctions are an extraordinary form of relief – barring a competitor from the market before a full trial has been conducted, at which the court has an opportunity to consider the full evidence and submissions of the parties.

In the Apple/Samsung case, the Full Federal Court ultimately determined that Apple’s preliminary case for infringement by Samsung of any valid patent claims was not sufficiently strong, when considered in light of a relatively even balance of convenience, to justify the grant of such relief.

AstraZeneca was able to achieve a different outcome largely on the basis of insufficient evidence at the hearing to support Apotex's claims of invalidity and non-infringement of the AstraZeneca patents, in combination with the significant impact of Australia’s therapeutic goods regulatory and subsidisation regimes on the balance of convenience.  The policy objective is to ensure that once generic products enter the market, prices fall rapidly and remain at the reduced level.  However, this means that as a matter of regulation, rather than market forces, the entry of a generic competitor is an irreversible event which causes losses to the patentee that would not be easily calculated, or compensated through an award of damages.

We expect that, following the Apple/Samsung decision, it will remain difficult for any patentee to obtain an interlocutory injunction against any comparable competitor in a free market, because the balance of convenience is likely to be relatively even in such cases.  As this case demonstrates, however, the situation can be quite different in a regulated market.

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