Injunction granted against PBS-listed generic

Injunction granted against PBS-listed generic

Merck & Co Inc v GenRx Pty Ltd [2006] FCA 1407 (31 October 2006, Moore J) 

The Federal Court has granted an injunction restraining GenRx from importing into Australia a generic version of Merck's FOSAMAX osteoporosis treatment (alendronate). Moore J granted the injunction in a judgment delivered two days after the hearing and on the day of the scheduled importation.

The decision is interesting for three reasons.

  1. Having sought the injunction shortly after learning that the generic versions had been included on the PBS, Merck obtained an injunction to prevent GenRx from “continuing to list or apply to list any one or more of those products for supply under the Pharmaceutical Benefits Scheme”. In other words, the injunction would seem to require GenRx to actively take steps to ensure the products are removed from the PBS.
  2. Merck was successful despite his Honour finding that:
    (a) there was a serious question to be tried on validity of the patent, and
    (b) a regime could have been put in place to ensure a third party met any order for damages against GenRx (a $2 company).
  3. The willingness to recognise the likely impact on the PBS price contrasts starkly with the approach in Hexal Australia Pty Ltd v Roche Therapeutics Inc.

The patent in suit claimed salts of 4-amino alendronic acid and there was no doubt that the proposed importation would infringe. GenRx’s defence was that the patent was not novel, in light of an earlier patent for an invention of Rosini et al (Rosini Patent).

Serious question to be tried

Despite finding that GenRx’s case of invalidity had limited prospects of success, the judge found that there was a serious question to be tried on validity. The prospects of success were limited because the Rosini Patent described 5-amino alendronic acid (not 4-amino) and the highest evidence of GenRx was that a person skilled in the art would follow one of the experiments in the Rosini Patent and be led directly and without difficulty to the 4-amino form. His Honour held that this did not meet the test of “disclosure of subject matter which, when performed, must necessarily infringe the patented invention”.

However, his Honour found that there was a serious question to be tried concerning validity because Merck had successfully enforced the Rosini Patent in the United States District Court of Delaware (a conclusion upheld on appeal in the Court of Appeals) against a generic drug manufacturer seeking to sell and distribute a generic version of FOSAMAX.

Adequacy of damages

Moore J also found that there was no question that Merck would suffer damage. According to his Honour:

It appeared to be accepted, and probably necessarily so, that Merck would lose sales, possibly lose market share and other generics may quickly enter the market to compete with the FOSOMAX line of products… It also appeared to not be seriously contested that Merck will lose the commercial advantages of being in the market with the patented products when the patent expires.

Ordinarily it should be possible to quantify this loss by reference to the decline in market share and PBS price. Moreover, GenRx and one of its proposed distributors (Symbion, a publicly listed company) offered undertakings to not request a reduction of the PBS benchmark price until final judgment. Further, his Honour did not agree with issues raised by Merck about whether it would be able to recover damages from GenRx given that it is a company with only two issued dollar shares. His Honour was prepared to put in place a regime to ensure that any order for damages ultimately made could be made efficacious and met by the third party manufacturer of the generic products.

Balance of convenience

However, despite all of the above reasons indicating that damages may indeed be adequate (and the finding, albeit reluctant, that there was a serious issue on validity) the Judge found that the balance of convenience favoured granting the injunction. Two particular factors seem to have been decisive.

First, his Honour noted that Merck’s losses are ultimately only financial losses for which damages can be awarded, but accepted that it will be difficult to assess with any real precision what those losses are so as compensate Merck for its actual loss. The judgment does not elaborate on the reason for this finding but it is possible that the Judge considered that allowing the GenRx generic products onto the PBS would encourage other generic versions as well. In such circumstances, undertakings from GenRx and Symbion to not seek a price reduction would not prevent third parties from seeking a reduction (nor indeed prevent the administrators of the PBS from implementing a price reduction of their own accord). His Honour also notes that “changes may be made to the PBS in the near future and how they might impact on any loss suffered by Merck would be difficult to gauge”. One can only speculate what changes were presented to his Honour in argument.

Secondly, his Honour took the view that GenRx had placed itself in its position quite deliberately and knowingly and approached this matter with its “eyes wide open”.

Since at least November 2004, when GenRx sought details of Merck’s patent from IP Australia, GenRx has known of Merck’s rights under the patent. A clear inference is available that since then, GenRx has set about making commercial arrangements to import drugs containing an active ingredient protected by Merck’s patent. It has done so for the purpose of gaining the commercial advantage of putting the second generic drug into the market. Those arrangements have included sponsoring the registration of the drugs on the Australian Register of Therapeutic Goods and sponsoring the inclusion of one of them in the Pharmaceutical Benefits Scheme.

There can be little doubt that GenRx has engaged in this conduct deliberately and with the knowledge that Merck’s patent would be infringed unless it was able successfully to impeach its validity. It could have done so by revocation proceedings. It has not and now calls in aid the consequences of not being able to give effect to the arrangements now in place. I give little weight to these complaints or concerns.

Conclusion

This decision shows that it is possible to obtain an interlocutory injunction restraining import even after the generic version has been listed on the PBS and where the Court finds that there is a serious question on the validity of the patent. It also suggests that, in assessing whether the generic company would be able to meet any subsequent damages claim if the injunction is a refused, the Court will look beyond the resources of that company and may be satisfied by a regime involving an unrelated third party.