In a decision much-anticipated by pharmaceutical companies, the High Court in Commonwealth of Australia v Sanofi [2024] HCA 47 dismissed the Commonwealth’s attempt to overturn the Full Court’s finding that it was not entitled to compensation pursuant to its claim against Sanofi for damages under the “usual undertaking” given in exchange for a preliminary injunction (PI) granted in 2007.
As a result, Sanofi is not liable to pay the Australian Government any compensation for the delay in listing of a generic clopidogrel on the Pharmaceutical Benefits Scheme (PBS), caused by the granting of the PI. The Australian Government had originally claimed damages in excess of AU$325 million.
Background
Essentially, Sanofi was successful in obtaining a PI after Apotex brought revocation proceedings in 2007 against Sanofi’s clopidogrel (PLAVIX) patent and Sanofi filed a cross-claim. The PI prevented Apotex from exploiting its generic clopidogrel products in Australia. In exchange for the PI, Sanofi had given the usual undertaking to compensate any person adversely affected by the PI. Apotex also undertook not to seek listing of its generic clopidogrel products on the PBS (the Australian Government subsidy scheme for pharmaceutical products).
In Australia, the listing on the PBS of a first generic product triggers an automatic price reduction in the subsidy paid by the Australian Government for the pharmaceutical product. Apotex was unsuccessful at first instance and a final injunction was granted, preventing Apotex from launching its generic clopidogrel products in Australia.
While Apotex was ultimately successful in revoking the PLAVIX patent on appeal, it did not seek PBS listing until 2010 when the High Court refused leave for Sanofi to appeal the invalidity finding by the Full Court. Both Apotex and the Commonwealth sought compensation from Sanofi pursuant to the usual undertaking as to damages. Sanofi settled with Apotex but not the Commonwealth.
In the proceedings commenced by the Commonwealth, the judge at first instance found that, when considering the counterfactual scenario where a PI was not granted, the evidence did not establish that Apotex would have launched at risk. Therefore, the counterfactual scenario was not one in which the Commonwealth would have paid a reduced amount for clopidogrel products (previously reported here).
The Commonwealth was unsuccessful in overturning the primary decision in the Full Federal Court (previously reported here).
The High Court decision
The grounds of appeal asserted by the Commonwealth were essentially two-fold, being that:
- The Full Court erred in finding that the evidentiary burden on the Commonwealth was to establish a prima facie case that its loss flowed directly from the PI and that, once established, the evidentiary burden shifted to Sanofi to establish that Apotex would not have sought PBS listing but for the PI (Ground 1).[1]
- The Full Court had failed to find on the evidence that, in the absence of the PI, Apotex would have sought PBS listing (Ground 2).[2]
In relation to Ground 1, the majority (Gordon A-CJ, Edelman and Steward JJ) found that the Commonwealth had “all but abandoned” this ground at the hearing, acknowledging that it was not determinative,[3] and that the case law nonetheless did not support a shifting of the evidentiary burden to Sanofi in the circumstances.[4] Rather, the Commonwealth bore – and had not discharged – the legal and evidentiary burden that, on the balance of probabilities, Apotex would have sought PBS listing but for the PI.[5] The minority (Jagot and Beech-Jones JJ) agreed on this point.
In relation to Ground 2, the majority considered that the findings of fact by the primary judge where unanimously upheld by the Full Court, and found that none of the grounds of appeal suggested an error in judgement on the part of the Full Court.[6] In contrast, the minority considered that Ground 2 should succeed, with Jagot J (with whom Beech-Jones J agreed) expressing a view that the lower courts had not considered “the whole of the contemporaneous evidence”,[7] which her Honour considered weighed in favour of the Commonwealth on Ground 2.
Ultimately, the majority “emphatically” rejected, by a 3:2 majority, the Commonwealth’s appeal, noting that the “appeal does not concern any individual rights, nor expose any plain injustice or clear error” that would warrant a reconsideration of the factual findings of the lower courts.[8] In that regard, the majority considered the following factors, inter alia, worked against the Commonwealth:[9]
- the consequences for the Commonwealth that follow from those findings are insignificant;
- the Commonwealth is effectively inviting the Court to run a new trial without raising any point of general public importance;
- the findings of the primary judge and the Full Court were not clearly wrong; and
- it is not open to the Commonwealth on a third hearing of the issues to revisit findings of fact.
The majority’s comments regarding Sanofi’s grounds of contention, while strictly obiter, are also worth a closer look, as they:
- provide clarity regarding the period for which damages will be assessed in circumstances such as these (confirming that the Commonwealth’s original claim for damages was at least an order of magnitude too high); and
- hint at the possibility of providing the “usual undertakings” in a form that precludes the Commonwealth from making a claim on the usual undertakings.
Key takeaways
While the Commonwealth was again unsuccessful in its claim for damages pursuant to the usual undertakings given in these types of proceedings, the High Court in this case did not decide anything other than it should not revisit the findings of fact heard at first instance and revisited by the Full Court.
The Commonwealth will no doubt seek to avoid the evidentiary mistakes it made in future claims made pursuant to the usual undertakings, including in the ongoing claim by the Commonwealth against Otsuka and Bristol-Myers Squibb in respect of the litigation concerning aripiprazole (ABILIFY).
This decision also confirms that the party who seeks to enforce an undertaking given in these circumstances (here, the Commonwealth – but in other cases it may be another third party adversely affected by the granting of a PI) has the legal and evidentiary onus of proof in relation to causation of loss.
If you have any questions in relation to this matter, please contact Ashley Cameron (acameron@dcc.com) or Claire Gregg (cgregg@dcc.com).
[1] Commonwealth of Australia v Sanofi [2024] HCA 47 at [13]
[2] Ibid at [17]
[3] Ibid at [14], [188]
[4] Ibid at [15]
[5] Ibid at [16]
[6] Ibid at [20]
[7] Ibid at [240]
[8] Ibid at [2]
[9] Ibid at [10]