The balance of convenience and justice
143 The applicants' case on the balance of convenience and justice can be summarised as follows.
144 First, the respondent's intended trade in the GH products is necessarily a new one, which has not yet commenced. On the other hand the trade in the Abilify products has existed for eight years, with first sales commencing in March 2004. The applicants are much more likely to suffer from a disturbance of the status quo than the respondent: Sigma at [59]; Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 219; Pharmacia Italia SpA v Interpharma Pty Ltd (2005) 67 IPR 397 at [52].
145 Secondly, the 772 patent has been granted for some years and only by the filing of its cross-claim, in answer to the allegations of infringement, has the respondent sought to challenge the validity of the relevant claims.
146 Thirdly, the respondent has acted with its "eyes wide open", particularly in light of evidence from its General Manager, Mr De Alwis, that the process usually followed by the respondent before bringing a new generic medicine to market in Australia is to evaluate the legal position, including, in particular, the existence of relevant patent rights. The respondent's desire to obtain a "first mover advantage" over its generic supplier competitors, to which I will refer below, is one which the respondent seeks to acquire solely at the expense of the applicants' monopoly rights. Any damage that the respondent contends it would suffer from being denied this "first mover" advantage only arises after its knowledge of those rights.
147 Fourthly, the damage to the applicants if there is no interim injunction (and they succeed at trial) will be significant, unquantifiable and irreparable.
148 Finally, the public interest will be served by the grant of an injunction.
149 The evidence shows that the applicants' market in Australia for aripiprazole, represented by the Abilify products, is an established one, and significant in terms of sales revenue. I have already noted that these products represent BMS Australia's second largest selling product range.
150 I accept that there will be a significant and inevitable erosion in the price at which BMS Australia can sell the Abilify products that are listed in the PBS Schedule if the respondent is not restrained in respect of its intended conduct.
151 Much evidence was adduced on how the PBS operates. The National Health Act 1953 (Cth) provides the framework for that scheme. I do not propose to descend to the detail of that framework for the purposes of these reasons. Those details are, of course, well-known to the parties. It is sufficient for me to note that, on the present evidence, I accept that the intended listing of the GH products in the PBS Schedule on 1 April 2012 will cause an immediate price reduction of 16% to the approved "price to pharmacist" of the Abilify products listed in the PBS Schedule. This will result in a corresponding price reduction in BMS Australia's selling price to wholesalers. I also accept that there is a significant risk that, even if the applicants are successful in obtaining final relief for patent infringement, the price reduction will be irreversible, save for the exercise of a ministerial discretion in BMS Australia's favour. How that discretion might be exercised is, at the present time, a matter of speculation. I certainly have no reason to assume that that discretion would be exercised in BMS Australia's favour. There is thus a significant risk that the price reduction will be operative for the remaining term of the 772 patent which expires in 2022.
152 BMS Australia would also be exposed to mandatory price disclosure and reporting obligations to the Australian Government to which it is not presently subject. There is a realistic possibility that, as a consequence of these obligations, further price reductions might be imposed in respect of the relevant products.
153 The possibility exists for BMS Australia to apply for a "brand price premium" in relation to the supply of the Abilify products listed in the PBS. If given, this premium will be paid by patients in addition to the usual co-payment for the prescription product. BMS Australia has not decided whether it would apply for a "brand price premium" if the 16% price reduction is implemented. The application of a "brand price premium" would alleviate to some extent the consequences of the 16% price reduction, but that could well be at the expense of sales volume in the face of more cheaply supplied GH products.
154 So far as the first applicant is concerned, any erosion in sales volume or prices for the Australian Abilify products may well have flow-on effects for it in the form of possible price reductions for the raw material it sells to Bristol-Myers Squibb Manufacturing Company and reduced royalties on Australian product sales to which it is entitled under its arrangements with the BMS companies.
155 I accept that, in this scenario, the losses to the applicants, as patentee and exclusive licensee respectively, will be very significant but also very difficult to quantify.
156 In this connection the evidence establishes that there are four promoted major medications on the Australian market that are indicated for the treatment of schizophrenia: olanzapine, risperidone, quetiapine and aripiprazole. The market for these medications is fluid in the sense that since December 2008 generic versions of risperidone have been available, and the patent for olanzapine has just expired. Thus the possibility exists of new and further competition in the supply of second generation antipsychotics.
157 If the GH products enter the market, as intended, then there is a real risk that other suppliers of generic aripiprazole will follow suit. Although the respondent pointed to some factors that might be said to militate against this risk, its own stated concern that it might lose a "first mover" advantage if an interim injunction is granted shows that even the respondent considers there to be some risk of other generic competition in the supply of aripiprazole. If the respondent is not restrained in the interim, there is every reason to suppose that other intending suppliers of aripiprazole will be encouraged to consider their position, with the possibility that further market entry will take place. If so, there is no reason to suppose that those suppliers would be restrained from supplying their products on the basis of a threatened infringement of the 772 patent. The evidence shows that four other suppliers of generic pharmaceuticals have listings in the ARTG for generic aripiprazole products. One of those suppliers has been restrained on an interim basis from selling its aripiprazole products in Australia. This is because of its threatened infringement of another aripiprazole patent that does not concern the GH products: Bristol-Myers Squibb Company & Anor v Apotex Pty Ltd (NSD 1116 of 2009).
158 This evidence shows that it will be difficult to predict changes to the size of the market and the impact, in terms of dollar value, of these changes if the GH products are permitted to be supplied. While the evidence suggests that the level of generic competition would not be likely to increase the market for aripiprazole as a whole, that competition would have an unpredictable impact on the market shares held by the various brands of aripiprazole in the market. For example, BMS Australia may be forced to drop prices even further in order to protect its market share in the face of any discounts or other incentives that might be offered by the respondent and perhaps other future entrants seeking to supply aripiprazole. I have no reason to doubt that all participants in the market would act competitively by striving to obtain market share, including by way of price competition.
159 Added to this likely future fluidity is the fact that the 772 patent has an unexpired term of approximately 10 years. The difficulty in calculating, in money terms, the likely loss or damage to be suffered by the applicants in the event of an enforced and quite possibly irreversible price reduction in respect of a fluid market over such a lengthy period of time is obvious.
160 The applicants have also called in aid some evidence of likely patient confusion based on the scenario that, if interim injunctive relief is not granted, some patients will be switched from the Abilify products to the GH products, and then switched back to the Abilify products if permanent injunctive relief is granted. It was argued that the likelihood of patient confusion, with an attendant lack of patient compliance with the medication, would be heightened in the present case because the treatment is for patients suffering from a mental illness.
161 I am bound to say that I do not find this evidence (adduced as it was from a deponent apparently exercising business-related functions within BMS Australia) to have any real persuasive force, particularly in the context where the method of claim 7 of the 772 patent is obviously directed to switching patients suffering from schizophrenia from other antipsychotics, and where both Professor Singh and Professor McGorry gave evidence that, in treating schizophrenia, patients are not uncommonly switched from one antipsychotic medication to another, perhaps several times throughout the course of the patient's treatment. In the absence of more cogent evidence, the increased likelihood of patient confusion by the presence of the GH products seems illusory. In the circumstances, I place little weight on this factor.
162 The respondent's case on the balance of convenience and justice, as it concerns the applicants' case on the threatened infringement of claim 7 of the 772 patent, can be summarised as follows.
163 First, the strength of its "Gillette defence" to the allegation of infringement should result in the determination of the present application in its favour.
164 Secondly, even without the "Gillette defence", there is no prima facie case that it will infringe claim 7 of the 772 patent. The present application should be dismissed on this basis.
165 Thirdly, its case on the invalidity of claim 7 of the 772 patent is very strong. This is to be weighed cumulatively with the strength (or lack thereof) of the applicants' infringement case.
166 Fourthly, even if there is a prima facie case on the issue of infringement, it is extremely weak and all the more so when weighed with the respondent's case on invalidity.
167 These submissions are answered, to a large extent, by my conclusion that the applicants have established a prima facie case of infringement of the 772 patent as it concerns claim 7. I accept, however, that it is necessary for me to weigh in the balance the apparent strengths and weaknesses of the parties' respective cases, along with all other matters that assist to inform me where the balance of convenience and justice lies at the present time.
168 The respondent developed a number of other arguments which, it submitted, showed that the balance of convenience and justice was in favour of withholding interim injunctive relief.
169 The respondent submitted that the applicants have overstated the difficulty of assessing their losses if the respondent is allowed to sell and supply the GH products. It submitted that those losses will be relatively easily quantified. In this connection it also submitted that the applicants' loss is only reflected in patients being switched from the GH products in the "complex circumstances" prescribed by the integers of claim 7 of the 772 patent. It submitted that the risk of infringement of claim 7 in this regard is "very low" or "extremely low" because there are a number of circumstances in which aripiprazole may be prescribed to treat schizophrenia or, indeed, cognitive impairment caused by treatment-resistant inveterate or chronic schizophrenia, without the claim being infringed. The respondent submitted that, accordingly, the circumstances in which infringement may occur are extremely limited and that any balance of convenience considerations relating to lost sales or an inability to calculate damages must take this into account.
170 For the reasons I have already given, I do not accept that, on the assumption that an entitlement to final injunctive relief is established, the applicants' losses will be relatively easily quantified if interim injunctive relief is withheld at the present time. In my view the contrary will be the case.
171 I also do not think that the respondent's submissions concerning the risk of infringement of claim 7 provides any real assistance to it. This is because its alleged liability to final injunctive relief for patent infringement stems from the operation of s 117(1) of the Act and, therefore, indirectly from the actual implementation of the method of treatment claimed in claim 7 of the 772 patent. Even accepting that there will be cases (perhaps many cases) when aripiprazole can be administered as a method of treatment that does not infringe claim 7, I am satisfied that there is a prima facie case that the GH products, if permitted to be supplied, will be administered in a method of treatment that does infringe the claim. When s 117(1) is invoked by reference to s 117(2)(b), any use of the product that would infringe the patent imposes a liability on the supplier by reason of the supply of the product, if the supplier has reason to believe that the product would be put to that use. Thus, in the present case, the respondent's liability for infringement, if finally established, would be fixed by the fact of its supply of the GH products.
172 So far as the quantification of damages is concerned, considerations of the kind to which the respondent has referred may be in play. But if so, those considerations only operate to further confound the assessment of damages and not to alleviate the burden that would be presented in undertaking that assessment.
173 The respondent also submitted that it would suffer prejudice if an interim injunction were to be granted. This submission was developed in the following ways.
174 The respondent submitted that it would be considerably prejudiced by the delay in getting the GH products to market. It submitted that it might be 12 months before the matter is ready for hearing on a final basis and that, taking into account a reserved judgment and an appeal, the proceeding might not be finally determined for two years.
175 As to that matter, I accept that it will take some time before the proceeding is ready for final hearing. However, it is the respondent who seeks to challenge the validity of the 772 patent. The timing of that challenge has been entirely within its control. Moreover, it raises a large number of grounds of alleged invalidity. I do not criticise it for doing so. But the time that will be necessary to prepare the case for final hearing is very much in its hands and will be substantially dependent on how it chooses to advance the case it wishes to bring. On the other hand, I do not see the case for infringement as raising a significant number of evidentiary issues. The case for infringement has been exposed, substantially, by the present application for interim relief.
176 Nevertheless, I do accept that the grant of interim injunctive relief will have the effect of delaying the respondent in getting the GH products to market if it is ultimately found to be entitled to supply those products lawfully. I accept that the delay may be a reasonably significant one.
177 In that connection the respondent submitted that the grant of an interim injunction would prejudice its ability to exploit a "first mover" advantage. It pointed to the fact that, whilst other suppliers of generic pharmaceuticals have registered aripiprazole in the ARTG, with one exception none has sought to market those products in Australia. It submitted that it is poised to take advantage of being the first supplier of generic aripiprazole. It submitted that this is a rare and valuable opportunity to secure a market position for the GH products with pharmacists, who are often reluctant to stock more than one generic brand of a particular pharmaceutical product, and to cross-promote its other pharmaceutical products using the GH products. It submitted that the longer it can be the sole supplier of generic aripiprazole in Australia, the stronger its market position will be.
178 I accept that the evidence discloses a benefit of being the "first mover" in the sense in which the respondent uses that term. It is clear, however, that that advantage is one that derives from what I have found to be a prima facie case of threatened infringement of the 772 patent. Thus it is an advantage that is sought to be derived at the expense of the applicants' asserted monopoly rights. I accept the applicants' submission that, in light of Mr De Alwis' evidence about the respondent assessing the patent position before bringing a new generic medicine to market in Australia, the "first mover" advantage is one that the respondent seeks to exploit with prior knowledge of the 772 patent. In this sense the respondent has acted with its "eyes wide open". Indeed, the acts that it has undertaken to date in anticipation of its supply of the GH products in Australia fall to be considered in the same way. This has been so in circumstances where the Abilify products have been on the Australian market for a number of years and the applicants' monopoly rights have remained uninterrupted and unchallenged, save for the one instance in the other proceeding to which I have referred: see [157] above.
179 Having made these observations I accept that, if final injunctive relief is not granted, the delay in bringing the GH products to market, caused by the granting of interim injunctive relief, is likely to result in loss to the respondent. The respondent submitted that the calculation of this loss will be "almost impossible to measure". In this connection I accept that there may be difficulties in calculating the respondent's loss and damage, but those difficulties are not as significant as the difficulties that would be present in calculating the applicants' loss and damage if interim injunctive relief is not granted. For one thing, if the respondent is correct in contending that the supply of other competing generic aripiprazole products is not imminent, then the assessment of the respondent's loss or damage would at least take place in a context where that assessment is over a relatively short period of time in a market that is more stable than is likely to be the case were the respondent to supply the GH products on and from 1 April 2012.
180 The respondent pointed to the possibility that the second applicant may itself introduce a generic version of the Abilify products and thus substantially alter the market and reduce the benefits to the respondent upon subsequently entering the market with the GH products. However, the second applicant's ability to introduce its own "generic" version of aripiprazole is a prospect that is and has been available to it at all times, whether or not interim injunctive relief is granted against the respondent.
181 Finally, the respondent pointed to a number of cases involving the supply of generic pharmaceutical products in which interim injunctive relief has been refused. While providing helpful examples of the application of the principles pertaining to the granting of interim injunctive relief in relation to broadly similar subject matter in a broadly similar context, the outcomes of those cases have limited utility in assisting the determination of the proper exercise of discretion in the present case. At the end of the day I must come to my own evaluation, weighing up the competing circumstances of the parties that have been presented in the evidence, as well as the competing strengths of the parties' respective cases.
182 Taking into account all the matters to which I have referred, I am of the view that the balance of convenience and justice favours the granting of interim injunctive relief in the present case. The only issue that remains is whether that conclusion is affected by the fact that the respondent has offered certain undertakings.
183 In this connection I have noted that the respondent has offered an undertaking to the Court with respect to the GENERICHEALTH products, which is acceptable to the applicants. That undertaking should be accepted.
184 I have also noted that, following the hearing of the present application for interim injunctive relief, the respondent offered an undertaking to the Court with respect to the marketing of the GH products. In substance that undertaking is not to advertise or promote the GH products specifically for the treatment of the disorders referred to in claim 7 of the 772 patent in circumstances where the patient has failed to respond to at least two of the antipsychotics referred to in that claim. The respondent has also offered an undertaking that, from 1 April 2012, it will send a letter to pharmacists every three months advising that the GH products are not to be substituted for the Abilify products on any non-PBS prescription. Finally, the respondent has offered an undertaking to keep full and proper accounts of all its sales of the GH products. This last-mentioned offer was made prior to the hearing of the application for interim injunctive relief.
185 I am not satisfied that these undertakings should be accepted in lieu of interim injunctive relief that would restrain the respondent from importing and supplying the GH products, or keeping those products for supply in Australia. Although such undertakings may to some extent alleviate the injury that is likely to be suffered through the supply of the GH products, the extent to which they would alleviate that injury is quite uncertain and will never be clear. More fundamentally, the undertakings will not prevent the imposition of the 16% price reduction and the consequences that would ensue for the applicants by reason of that reduction.