Astrazeneca AB and Another v KRKA, d.d. Novo Mesto and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Sales |
| Judgment Date | 24 January 2014 |
| Neutral Citation | [2014] EWHC 84 (Pat) |
| Docket Number | Case No: HC10C02854 |
| Court | Chancery Division (Patents Court) |
| Date | 24 January 2014 |
[2014] EWHC 84 (Pat)
The Honourable Mr Justice Sales
Case No: HC10C02854
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Daniel Alexander QC & Mr Thomas Mitcheson (instructed by Bristows LLP) for the Claimants
Mr Bernard Livesey QC & Mr Andrew Lykiardopoulos (instructed by Innovate Legal) for the Defendants
Hearing dates: 5/11/13 – 18/11/13
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an application by the Defendants (respectively, "Krka" and "Consilient") for a payment of damages to be made by the Claimants (together, "AZ") under a cross-undertaking in damages given by AZ in respect of an interim injunction obtained by it to restrain the Defendants from introducing and selling a branded pharmaceutical product, Emozul, in the market in the United Kingdom. AZ obtained that injunction pending trial of its claim that Emozul infringed its patent rights in respect of its own branded pharmaceutical product, Nexium. The injunction was granted by Vos J on 8 October 2010.
AZ is an originator group, specialising in the discovery, development, manufacture and marketing of pharmaceuticals, protected by patents. AZ holds a European patent in respect of Nexium, effective in the United Kingdom, which is due to expire in May 2014. Nexium was launched in 2000. It was at that time, and through to 2011, the only product of its particular kind on the market, and as such commanded a high price.
Krka is a large generic pharmaceutical company, based in Slovenia. Krka is the manufacturer of Emozul.
Consilient is a pharmaceutical sales and marketing company with experience in the generics market in the United Kingdom, which was proposing to market and sell Emozul provided by Krka.
Nexium and Emozul fall within a class of drugs known as proton pump inhibitors ("PPIs"), which are used in the treatment of a range of gastric conditions of varying severity. PPIs are dispensed against a prescription written by a doctor, typically a GP.
For some time there have been a number of generic, low cost PPIs on the market using omeprazole and certain other active ingredients ("low cost PPIs"). Nexium uses a different active ingredient, esomeprazole. Nexium is considerably more expensive than the low cost PPIs. There is a small group of patients, of the order of about 5% of the population of patients using PPIs, for whom the low cost PPIs are not effective and for whom use of esomeprazole PPIs is necessary in the treatment of their conditions.
Emozul is also a drug which uses esomeprazole as its active ingredient. Nexium is produced in tablets, whereas the pharmaceutical form of Emozul is a capsule. Emozul was developed by Krka as a generic esomeprazole PPI, albeit one which was to be marketed with the Emozul brand name — a so-called branded generic drug.
Krka took considerable care to develop Emozul as a product which would not infringe AZ's Nexium patent, specifically with a view to being able to compete with Nexium in the market for esomeprazole PPIs. I am satisfied on the evidence I heard that Krka and Consilient believed that Emozul had been developed and produced in such a way that it did not infringe AZ's patent. Krka had, in fact, already launched Emozul in the face of opposition from AZ in Denmark in March 2010, some months before Consilient proposed launching Emozul in the United Kingdom.
At the beginning of the hearing, this appeared to be an issue of some significance, since AZ was maintaining a case that, even if the injunction had not been granted, Krka and Consilient would have been deterred from entering the United Kingdom market in a forceful way, and would instead have opted for what was termed a "soft launch" of Emozul, for fear of the risk of litigation against them by AZ relying on its patent rights. However, in light of the evidence given at trial, AZ came to accept that, on the balance of probabilities, in the absence of an injunction Krka and Consilient would have sought to enter the United Kingdom market with Emozul in a forceful manner, based on their belief that they would be vindicated at any trial in their contention that Emozul did not infringe AZ's Nexium patent. This means that it has become unnecessary to examine this issue in any more detail in this judgment, because it is now common ground that the case before me should on this basis proceed on the assumption that in the counter-factual scenario which I have to assess in order to determine the damages payable under the cross-undertaking in damages, the Defendants would not have chosen to market Emozul by way of a "soft launch" out of fear of the risk of litigation by AZ.
At the time AZ launched proceedings against the Defendants and obtained the injunction, it faced litigation in England brought by another generics company, Ranbaxy, to challenge the validity and extent of the Nexium patent. Ranbaxy wished to sell a generic esomeprazole PPI tablet in the United Kingdom. A speedy trial was ordered on the preliminary issue of infringement of the Nexium patent, which took place on 9–10 June 2011. On 15 July 2011, Kitchin J handed down judgment in favour of Ranbaxy, to the effect that the Ranbaxy generic tablet did not infringe AZ's patent.
AZ did not appeal. It concluded that the judgment in the Ranbaxy proceedings would mean that it could not succeed in its patent infringement claim against the Defendants in respect of Emozul. Therefore, on 18 July 2011 it informed the Defendants that it intended to apply to discharge the injunction against them. On 29 July 2011, the injunction was discharged.
After the failure of AZ in the Ranbaxy proceedings, a number of generic esomeprazole PPIs were launched in the United Kingdom market. Ranbaxy launched its generic tablet on 5 September 2011. The Defendants launched Emozul, as a branded generic in capsule form, in September 2011. Mylan launched a generic esomeprazole capsule in November 2011. Teva launched a generic esomeprazole tablet on 14 December 2011. In addition, AZ teamed up with Arrow, a well known generics company, to sell Nexium in Arrow packaging as an equivalent to a branded generic tablet. Arrow launched its branded generic Nexium tablet on 17 July 2011.
The entry of these various generic esomeprazole PPIs into the market, at prices well below the price of Nexium, had the effect of eating into Nexium's market share for esomeprazole PPIs and of driving down the price for such products. The arrival of a range of generic esomeprazole PPIs was a significant feature of the market for esomeprazole PPIs in the later part of 2011, which had an impact upon the success of Consilient's launch of Emozul in September 2011.
By the time AZ obtained the injunction against the Defendants in October 2010, Consilient had put in place full preparations for a launch of Emozul into the United Kingdom market. The injunction had the effect of keeping Emozul off the market between October 2010 and (allowing time for Consilient to prepare a new launch after the expiry of the injunction) September 2011, when Consilient was eventually able to proceed to launch Emozul.
In order to assess the damages payable by AZ under the cross-undertaking in damages I have to compare the extent to which Consilient was successful with Emozul in penetrating the market for esomeprazole PPIs from September 2011 onwards with the relevant counter-factual position, namely the extent to which Consilient would have been successful in penetrating that market if it had not been prevented from launching Emozul in October 2010.
In October 2010, Consilient planned to put Emozul on the market at a price 25% less than that charged by AZ for an equivalent dosage of Nexium. In September 2011, Consilient did in fact put Emozul on the market at a price 25% less than that of Nexium. However, as mentioned above, by that time other generic esomeprazole PPIs had entered or were just about to enter the market, driving down prices for esomeprazole PPIs, including Nexium and Emozul, and providing competition for those products.
It is agreed that the injunction deprived Consilient of an element of "first mover" advantage in trying to enter the market in October 2010 before other generic esomeprazole PPIs were available, and at a higher price for Emozul than could be charged from September 2011. However, there is a wide divergence between the parties regarding the extent of that first mover advantage and its value in terms of allowing the Defendants to make higher profits had Emozul entered the market in October 2010. AZ says the damages to be awarded should be of the order of £6 million. The Defendants say they should be of the order of £32 million.
The market for prescription drugs
PPIs are available to patients on the basis of a prescription written by a doctor, usually a GP. For the purposes of the NHS at the relevant time in 2011/2012 in England, Wales and Scotland, prescription drugs were paid for out of the budgets of Primary Care Trusts or, in Scotland, health boards (I will refer to all these entities as "PCTs"). I was told that in 2010/2011 there were about 200 PCTs. These were of varying sizes, with varying budgets and serving varying local populations. In Northern Ireland at the relevant time, prescription drugs were paid for out of the budget of a single health board (the Northern Ireland Health and Social Care Board — "the NI Board"). It is important to note, therefore, that there was a mismatch...
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