When (unquantifiable) loss is more: another interlocutory battle between originator and generic
Sigma Pharmaceuticals (Australia) Pty Ltd (ACN 004 118 594) v Wyeth  FCA 595
In the recent Federal Court decision of Sigma Pharmaceuticals (Australia) Pty Ltd (ACN 004 118 594) v Wyeth  FCA 595 the patentee, Wyeth, successfully applied for interlocutory injunctive relief restraining Sigma from supplying a generic drug used to treat patients suffering from central nervous system disorders including depression.
Facts of the case
US company Wyeth is the registered proprietor of an Australian patent entitled ‘Extended Release Formulation’ which is for a method of treating patients with a drug called venlafaxine hydrochloride which is used for the treatment of, amongst other things, depression. Wyeth’s Australian subsidiary, Wyeth Australia, sells an extended release formulation of this drug in Australia which is called Efexor-XR. Efexor- XR is the highest selling antidepressant drug in Australia.
Wyeth’s patent claimed a method of treating a patient for depression by administering orally a single daily dosing formulation of venlafaxine hydrochloride which provided a therapeutic blood plasma concentration of venlafaxine over a 24 hour period, with a peak between about 4 and 8 hours after administration. Before the patent’s priority date, venlafaxine hydrochloride was administered two or three times a day which often resulted in side effects of nausea and vomiting.
Sigma had a bioequivalent drug to Wyeth’s Efexor-XR for which it obtained registration on the Australian Register of Therapeutic Goods (ARTG) on 26 February 2009. The name of Sigma’s drug is Evelexa-XR. Whilst it had engaged a third party to carry out searches, Sigma did not become aware of Wyeth’s patent until 6 March 2009, which was also the date on which Sigma’s drug’s registration on the ARTG was first publicly disclosed.
Sigma commenced these proceedings on 1 April 2009, claiming that Wyeth’s patent was invalid. Wyeth filed its cross-claim on 1 May 2009 claiming patent infringement against Sigma. Sigma launched its drug on 1 May 2009, however deliveries of product to pharmacies were not due to commence until 1 June 2009. Wyeth’s interlocutory injunction application to restrain Sigma from supplying the generic drug was heard on 22 May 2009.
Justice Sundberg, applying the principles outlined by the High Court in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57, set out the test for determining an interlocutory injunction application as follows:
“(a) whether there is a serious question to be tried, or whether Wyeth had made out a prima facie case in the sense that, if the evidence remained the same, there was a probability that at trial it would be entitled to relief;
(b) whether Wyeth would suffer irreparable harm, for which damages would not be an adequate remedy, unless an injunction was granted; and
(c) whether the balance of convenience favoured the granting of an injunction.” Justice Sundberg’s findings in relation to these elements are summarised below.
Serious question/prima facie case
His Honour noted that factors (a) and (c) above were related in the sense that whether there is a serious question or a prima facie case should not be considered in isolation from the balance of convenience.
In a patent case, this requires assessing both the patentee’s infringement case as well as the respondent’s invalidity case. However, the respondent’s invalidity case has to be sufficiently strong for the Court to refuse the patentee’s application at this stage without going on to consider the remaining interlocutory injunction factors: Interpharma Pty Ltd v Cmr of Patents (2008) 79 IPR 261. (In a subsequent successful application for an interlocutory injunction by Wyeth in respect of the same patent before Justice Jagot in the case of Alphapharm Pty Limited v Wyeth  FCA 945, Alphapharm argued that Wyeth’s prima facie case on the question of validity had to be a strong one for it to be entitled to an interlocutory injunction. This argument however was rejected by the Court in favour of a number of authorities, including Interpharma Pty Ltd v Commissioner of Patents (2008) 79 IPR 261).
Sigma conceded that there was a serious question to be tried as to infringement. Further, the Court concluded Wyeth’s case was reasonably strong. This was no doubt because Wyeth led unchallenged expert evidence in relation to the features of Sigma’s product that concluded that the use of Evelexa-XR used the method claimed in Wyeth’s patent.
Sigma alleged that Wyeth’s patent was invalid due to it not disclosing a new manner of manufacture, and that there was a lack of inventive step, fair basis and novelty. A brief summary of the Court’s findings in relation to each of these arguments follows:
Manner of New Manufacture
In order to be a manner of new manufacture, it is necessary for the specification to disclose an ”invention”. (This is an additional requirement to that of novelty and inventive step). Sigma and Wyeth led conflicting evidence on this issue. Justice Sundberg ruled that if Sigma’s witness’s evidence was accepted at trial, the Court would likely conclude there was no new manner of manufacture, and accordingly, he held that Sigma had established a prima facie case in this regard. (Whilst Wyeth took the opportunity to improve its evidence in its subsequent application against Alphapharm, Justice Jagot concluded in his reasons for judgment that as neither expert was cross-examined, it was impossible to prefer one expert’s testimony over the other. Like Justice Sundberg, Justice Jagot also concluded that the respondent had established a prima facie case of invalidity on the basis of lack of manner of new manufacture).
The Court found that Sigma had established a prima facie case that the invention would have been obvious to a person skilled in the art in light of the common general knowledge in Australia before the priority date (which it found to be 25 March 1996). Justice Sundberg found that the field of the invention was the formulation of extended release formulations of drug components. Sigma’s expert witness gave evidence that before the priority date the benefits of extended release formulations were well known, and such drugs were known and available on the market.
Some parts of Sigma’s expert’s evidence were challenged by an expert giving evidence for Wyeth. However, the Court commented that at an interlocutory stage it was not in a position to conclude whose evidence was preferable. (In Wyeth’s application against Alphapharm, additional evidence was again led by Wyeth, however, Justice Jagot concluded that the parties’ evidence was in conflict and that at an interlocutory level, Sigma had established a prima facie case).
His Honour was of the view that Sigma did not have a prima facie case for invalidity based on lack of ”fair basis”. For an invention to be patentable in Australia, the claims defining the invention must be fairly based on the matter described in the specification. In the leading case of Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2004) 217 CLR 274 the High Court stated that there must be a ”real and reasonably clear disclosure” of what is claimed in the body of the specification such that the alleged invention is broadly described in the body of the specification. The High Court also said that the words ”real and reasonably clear disclosure” do not limit disclosures to preferred embodiments. Justice Sundberg added that the words also do not limit disclosures to examples.
(Unsurprisingly, in Wyeth’s subsequent application against Alphapharm, Justice Jagot also found there was no prima facie case for invalidity based on lack of fair basis. Justice Jagot pointed out that the specification contained a statement identical to claim 1, and, like Justice Sundberg, stated that the statements on which Alphapharm were relying were an example of one embodiment).
Wyeth claimed that the priority date of the patent was 25 March 1996. (The Australian patent application was filed on 30 October 2003, it being a divisional of another Australian patent application filed on 10 October 2000, which itself was a divisional of another Australian patent application filed on 30 March 1997. The earlier applications are incorporated by reference into the specification of the patent, and the patent claims a priority date of 25 March 1996 based on the filing of a United States application).
Sigma’s novelty argument was primarily reliant upon Sigma successfully arguing that the priority date was later than that claimed by Wyeth. Wyeth’s evidence, which was accepted, was that the relevant text in the US document was the same as in the Australian patent, and that accordingly, ”the US document makes reference to the same method as the [Australian] Patent”. Accordingly, there was no prima facie case based on lack of novelty.
Sigma’s product was the only generic venlafaxine hydrochloride on the Australian market. Sigma therefore submitted that any reduction in sales of Wyeth’s product would translate directly into sales by Sigma of its product. Sigma provided a number of undertakings upon which it relied to assert that Wyeth would not suffer irreparable harm if the interlocutory injunction was not granted, including that it would keep a record of its sales and associated expenses, not list its product on the Pharmaceutical Benefits Scheme (“PBS”) (a scheme through which the Australian government subsidises the cost of prescription medicine, making it more affordable for consumers and hence more attractive to purchase), and would not provide benefits (such as discounts) to purchasers tied with the purchase of another Sigma product.
Despite these undertakings, Justice Sundberg found that Wyeth’s damages based on lost royalties would not be adequate. He found that if an injunction were not granted, Wyeth would be likely to suffer losses which would be difficult to quantify. Details of these losses are as follows:
- Loss of market share.
Wyeth led evidence that the decision to substitute an originator drug with a generic drug happens at the pharmacy level, and that is to whom generic companies market (as opposed to medical practitioners). Because of this and the size of Sigma’s sales force, it was thought that Sigma’s product would quickly take market share from Wyeth’s product, possibly up to 50%.
Whilst Sigma’s undertaking not to have its product listed on the PBS would have the effect of decreasing Wyeth’s loss on the one hand (because Sigma’s product would then not be subsidised and would therefore not be cheaper), Sigma in any event intended to supply the product to pharmacies outside the PBS. Sigma thereby expected it would compete with Efexor-XR. The value of Sigma’s undertaking in relation to not listing on the PBS was therefore questionable and Sigma’s actions would likely result in Wyeth Australia losing significant market share for its product.
Further, Wyeth submitted that Sigma would sell the product at a lower price than Wyeth and thereby induce patients to change brands. This would also result in a decrease of Wyeth’s market share.
- Loss of profit margin
Wyeth also submitted it would incur losses due to having to reduce the price of the product in order to remain competitive with Sigma’s product’s price.
- Other unquantifiable losses
In 2007 and 2008 there were 5 other applications for ARTG registration of products containing venlafaxine. Accordingly, if the Court did not restrain Sigma from entering the market, other generic companies would likely also enter the market. Quantifying Wyeth’s damages would then be impossible, because a loss of sales of Wyeth’s product would not translate directly into sales of Sigma’s product. (Justice Jagot in Wyeth’s application against Alphapharm agreed with and applied this part of Justice Sundberg’s reasoning).
Justice Sundberg concluded that a new entrant into the market would have an effect which may be unpredictable and irreversible. If Sigma was not restrained and Wyeth succeeded at trial, he doubted whether Wyeth would ever be able to resume the position it currently occupied.
Balance of Convenience
Justice Sundberg held that the balance of convenience lay in favour of granting the interlocutory injunction. In assessing the balance of convenience, he had regard to the following:
Sigma’s product had only just been launched whereas Wyeth’s product had been sold for some time. Wyeth would therefore be much more likely to suffer from a disturbance of the status quo than Sigma. (Alphapharm submitted in Wyeth’s interlocutory injunction application against it that there was no stable status quo because Wyeth was allegedly in the process of shifting the market from Efexor-XR to another of Wyeth’s products for treating depression, Pristiq. In doing so, it relied on evidence that Wyeth was marketing Pristiq intensively, and was not marketing Efexor- XR. However, Justice Jagot said that was not surprising given Pristiq was a new product and Efexor-XR was an established product. Wyeth also undertook not to remove Efexor-XR from the PBS, and Justice Jagot said that the evidence indicates that there is and there will for the foreseeable future remain an established trade in Efexor-XR. His Honour said Wyeth is entitled to protect its status quo and that was particularly important given there were up to five generic suppliers which were likely to enter the market if not restrained).
Regardless of whether Sigma knew, or should have known, of the patent prior to 6 March 2009 (when it claimed it became aware of the patent), after that date it persisted with the preparations for the launch of its product. It incurred set up costs aware that they may be wasted expenses. Sigma had proceeded ‘with its eyes wide open’. (Justice Jagot was similarly critical of Alphapharm in Wyeth’s subsequent application, including, at least to some extent, Alphapharm’s failure to immediately challenge the validity of the method patent upon becoming aware of it).
If Sigma’s product came on to the market, and Wyeth succeeded at trial, there was a risk that patients would be confused with the change in appearance of the medication which, in depressed patients, could lead to problems with the regular taking of the medication. Justice Sundberg said that this raised a point of public interest in that vulnerable people, including patients suffering from a mental illness, should not be subjected to confusion as a result of the refusal of interlocutory relief, and the possible later removal of Sigma’s product from the market should infringement be found at trial.
The success of an originator drug company applicant in seeking interlocutory injunctive relief ordinarily depends on its ability to establish that damages would not be an adequate remedy, and in the case of the respondent generic company, to formulate undertakings which ameliorate any prejudice the originator might suffer.
Accordingly, when your interests lie with the generic respondent, a careful examination of the applicant’s evidence is warranted so that answering material can be filed to show that damages will be an adequate remedy for the originator’s loss and that effective undertakings can be proffered. In Roche Therapeutics Inc v GenRx Pty Ltd (2007) 71 IPR 546, the Court’s view was that the originator applicant’s damages would be lost sales. The generic respondent provided undertakings (for example, to maintain comprehensive and verifiable sales records) which had the effect that the applicant’s damages would be readily quantifiable. The respondent successfully opposed the injunction application.
When, on the other hand, your interests lie with the originator, the focus should be on identifying loss that is not readily quantifiable and irreparable, such as loss of market share as Wyeth was able to establish, or the unpredictable and irreversible effect the introduction of the generic brand would have, such as in this case, Wyeth’s subsequent application against Alphapharm and Apotex Pty Ltd (formerly GenRx Pty Ltd) v Sanofi-Aventis (2008) 78 IPR 485.
Although each decision on an application for interlocutory injunctive relief turns on the particular facts of the case, Justice Sundberg’s decision neatly details the issues to be argued by an originator company – rapid loss of the originator’s market share, sale price reduction to counter discounting, the adverse effect of other generics entering the market and so the impossibility to quantify loss, the generic’s entrance to the market aware of its risks, and finally, the undesirable confusion that is likely to affect a vulnerable section of the public, the consumers of prescription drug products.