Court restrains Apotex from releasing new generic drug

Posted by Nicholas Liau ● Partner: Paul Kallenbach

Image courtesy of Grumpy-Puddin

Court cases often take months to go to trial. In the meantime, parties sometimes need guidance from the courts as to what they can and can't do before the trial.

Apotex (a pharmaceutical company) has been trying to release a generic version of the drug rosuvastatin, which (it is alleged) may infringe existing patent rights belonging to AstraZeneca. In a recent series of cases, the Federal Court has restrained Apotex, as well as other companies, from marketing this product until the outcome of the final trial. Based on the these decisions, it appears that in pharmaceutical cases, the courts will usually be reluctant to let a new entrant into the market while questions of patent infringement are still muddying the waters.

Balance of convenience

To obtain an injunction restraining Apotex from selling its product, one of the issues AstraZeneca had to show was that 'the balance of convenience' favoured the issuing of such an injunction. In deciding this, the Court had to consider the possible harms to both parties, both with and without the order.

In Apotex v AstraZeneca [2011] FCA 1520 and Apotex v AstraZeneca (No 2) [2011] FCA 213 the Federal Court considered that allowing Apotex to sell its generic version of rosuvastatin would do irreversible damage to AstraZeneca's business, even if AstraZeneca were to eventually win the final trial. An injunction was granted to prevent such damage to AstraZeneca's business. There are a number of reasons particular to the pharmaceutical industry which means that this is a likely outcome.

Firstly, the Court found that the benefit payable by the government under the Pharmaceutical Benefits Scheme (PBS) for sales of rosuvastatin would drop significantly. Under the rules of the PBS, the amount payable is based on the market price of a particular drug. The price of Apotex's drug would be about 75% cheaper than AstraZeneca's if it were allowed to go on sale in Australia. Allowing Apotex's drug to be released on the market would depress the market price for rosuvastatin, meaning that AstraZeneca would receive less money under the PBS. This process is irreversible; even if AstraZeneca were to win the final trial, the workings of the PBS mean that the new (lower) payment would still apply to its drug. This would deprive AstraZeneca of its right to charge higher prices under its patents, effectively denying it the very rights which are meant to be protected by patent.

Bad behaviour

Secondly, the Court found that the 'first mover advantage' is particularly strong in the generic pharmaceutical market. The first generic manufacturer to get its drug to market will always be able to offer a substantial discount on the original drug, allowing it to capture a large market share. Pharmacies are often involved in long term supply contracts, and typically only stock one generic brand of each drug; this limits the possibility of new entrants gaining significant market share. This would usually be something which leans towards allowing a new entrant (such as Apotex) to release its product (after all, it had gone to the trouble of trying to develop and market its generic product quickly to become the first mover).

Nonetheless, the Court took account of the way in which Apotex had approached the litigation, and lambasted it for its conduct.

The Court found that 'Apotex engaged in a carefully orchestrated marketing exercise designed to catch AstraZeneca by surprise'. Apotex had begun to market the drug in Australia in anticipation of its release, but had been evasive about its intentions when questioned by AstraZeneca. It was only days before the drug was due to be released that Apotex finally sued AstraZeneca, claiming that its patents were invalid. In other words, Apotex's first mover advantage was mainly gained because of its poor conduct as a litigant. Apotex knew that AstraZeneca would seek to enforce its patents if Apotex tried to release a generic product, but it continued to make preparations for the drug's sale. The Court found that Apotex was not then able to complain that these preparations would be wasted if an injunction were granted to AstraZeneca. The Court commented that Apotex could have challenged the validity of AstraZeneca's patents much earlier.

A few days ago in Watson Pharma v AstraZeneca [2012] FCA 200, AstraZeneca sought similar orders in relation to two other companies that were trying to release a generic version of the drug in a similar fashion to Apotex (Watson Pharma and Ascent Pharma). The Court was supportive of the approach to the 'balance of convenience' used in the Apotex case, and granted injunctions in AstraZeneca's favour.

The trial is expected to begin in October. In the meantime, it appears that AstraZeneca's patent rights are safe.