The Pharmaceutical Benefits Scheme

Australia has for many years had a system, the Pharmaceutical Benefits Scheme (PBS), as a means of providing medicines to patients at affordable prices. At the heart of the PBS are the significant subsidies paid to the suppliers of the medicines. Unsurprisingly, suppliers aim to have their medical products listed on the PBS as this will clearly maximise sales.

Once a medicine has been approved by the Therapeutic Goods Administration (TGA) and listed on the Australian Register of Therapeutic Goods (ARTG), a supplier may request listing on the PBS. This listing process is essentially a cost/benefit decision.

If a medicine is subject to patent protection then the PBS listing will be exclusive to the patentee. However, once a medicine becomes generic, the subsidy paid to the original supplier is automatically significantly decreased.

Sanofi’s Plavix patent

Clopidogrel was a Sanofi originated anti-clotting drug sold under the brand name Plavix and the subject of patent 597784. It was listed on the PBS and enjoyed “blockbuster” sales.

Apotex challenges the Plavix patent

In 2007, Apotex sought to enter the Australian market with its own clopidogrel product whilst patent 597784 was in force. Although Apotex achieved ARTG listing and then applied for a PBS listing, it subsequently withdrew the PBS application. Consequently, when Sanofi was successful in obtaining an interlocutory injunction preventing Apotex from marketing its product, Apotex did not have a pending PBS listing application. In fact, Apotex did not obtain a PBS listing until 1 May 2010. In order to obtain the injunction Sanofi had given “the usual undertaking as to damages”.

In an initial Federal Court decision, claim 3 of patent 597784 (which covered Plavix) was found to be valid and infringed. However, on appeal, all claims of patent 597784 were found to be invalid and the interlocutory injunction was found to have been wrongly granted.

Apotex then relied on the interlocutory stage undertaking to obtain a compensation settlement with Sanofi.

Commonwealth of Australia claim - AU$325 million in compensation

Since Plavix was PBS listed, the Commonwealth contended in its claim for compensation that it had been required to pay Sanofi at a rate higher than it otherwise would have in circumstances where the Apotex product had also been PBS listed. On the assumption that Apotex would have achieved PBS listing by 1 April 2008, the amount claimed by the Commonwealth was AU$325 million.

Failure of the Commonwealth claim

In order for the Commonwealth to succeed in its claim, two requirements had to be met. Firstly, that Apotex would have applied for PBS listing, and secondly that PBS listing would have been achieved. On the evidence put to the court, the Commonwealth failed to prove that on a balance of probabilities, the first requirement would have been met. It was therefore unnecessary to consider the second requirement although likely it would have been met.

A critical part of the Commonwealth’s evidence was that of Roger Millichamp, managing director of Apotex, and in particular, the taking of a decision to seek PBS listing. The Commonwealth maintained that “but for” the existence of the interlocutory injunction, Apotex, on Roger Millichamp’s authority would have sought PBS listing. However, Nicholas J found that Mr Millichamp would have required approval from the Apotex Canadian parent company through its owner, Dr Sherman. Relevantly Dr Sherman had not been called as a witness by the Commonwealth.

Accordingly, it was reasonable to conclude that there would not have been a timely PBS listing application by Apotex.

The future

Since Dr Sherman was murdered in mysterious circumstances in December 2017 we will never know whether approval for PBS listing was given or not.

What we can know is that any “usual undertaking as to damages” will expose a patentee to a potential claim for compensation by the Commonwealth where a timely PBS listing has been sought and obtained by an alleged infringer. In this regard it is important to recognise that obtaining a PBS listing does not constitute patent infringement (Warner-Lambert Company LLC v Apotex Pty Ltd (2017) 249 FCR 17).