Evaluation of the probabilities and possibilities
548 Alphapharm was unaware of the method patent when it decided to pursue the opportunity it perceived would exist to supply generic extended release venlafaxine products on expiry of the compound patent in December 2008. In September 2007 Alphapharm applied for ARTG registrations for its products, which were to be sourced directly by Alphapharm from Pharmathen. In the ordinary course Alphapharm proposed to apply for its products to be listed on the PBS after they had been registered on the ARTG and to supply its products only under the PBS. Unlike Sigma, Alphapharm did not plan to launch its products in two stages, first on the private market for a period of some months, to be followed by PBS listing and supply under the PBS. To this end Alphapharm applied for PBS listing on 1 December 2008 but this application lapsed because Alphapharm had not obtained ARTG registration of its products. Because Alphapharm believed that the only impediment to its plans was the compound patent scheduled to expire in December 2008 it did not need to seek the approval of Mylan to apply for PBS listing because it did not perceive its launch to be at risk.
549 To obtain ARTG registrations for its products Alphapharm was required to submit a bioequivalence study. It did so and, after substantial time, effort and expense, obtained ARTG registrations for its Enlafax XR products, 150mg and 75mg, on 30 April 2009.
550 In late March 2009, however, Alphapharm became aware of the method patent.
551 Alphapharm accepted that once it became aware of the method patent there was no prospect that it would have been the first to apply to list its generic products on the PBS. It was not willing to trigger the 12.5% price reduction of Efexor-XR by being the first to obtain PBS listing or by obtaining PBS listing at the same time as any other generic. Alphapharm could hardly contend to the contrary given that in his 2009 affidavit Mr Hurley had said that because Wyeth alleged that Alphapharm's products infringed the method patent:
Alphapharm has decided that it cannot proceed with a PBS listing which would lead to a 12.5% price reduction being required of Wyeth under the PBS. Were Wyeth to be successful in these proceedings, the possibility that Alphapharm may have to compensate Wyeth for that price reduction represents a significant commercial threat to Alphapharm and an amount which would exceed the likely profits which could be made from sales of Enlafax.
552 It will be apparent that it was the mere allegation of infringement which caused Alphapharm not to seek PBS listing, which has nothing to do with the interlocutory injunctions.
553 Wyeth submitted this:
The evidence of Alphapharm's Chief Executive Officer at the relevant time, Mr Montgomery, is also specific on this point. He did not want Alphapharm to trigger the 12.5% price reduction for being the first generic listed on the PBS (or indeed be an "equal first generic" and share that responsibility with other suppliers), "and so [he] would not have caused Alphapharm to proceed to list on the PBS". Mr Montgomery quantified the extent of the risk at "12.5 million per year until patent expiry" (based on annual sales of $100 million and the mandatory price reduction of 12.5%). The Method Patent was not scheduled to expire until 2017, meaning that the potential exposure was in the order of $100 million. Mr Montgomery's position was, therefore, that even a proportion of that amount was an unacceptable level of exposure.
554 Perhaps uniquely in terms of the generics' evidence about PBS listing, Mr Montgomery's evidence accords with commercial rationality. The fact that he assessed the potential liability of PBS listing to be in the order of $100 million also undermines Mr de Alwis's unconvincing attempts to avoid this proposition. Further, it supports my conclusions that the evidence (particularly of Mr de Alwis and Mr Upiter) that Sigma and Generic Health would have sought PBS listing but for the interlocutory injunctions should not be accepted. The fact that Sigma stood to gain more benefit than Alphapharm from PBS listing may be accepted but confronted with a potential $100 million exposure, this evidence about Alphapharm's position in 2009 is strong contemporaneous evidence of the reasoning process of a commercially rational decision-maker.
555 The chance that Alphapharm would have sought PBS listing of its products at any time before the Sigma interlocutory injunction, accordingly, depends on Sigma or some other generic having first obtained PBS listing. To foreshadow further conclusions below about Generic Health and other generics having sought PBS listing at any time earlier than they did, I consider that Alphapharm's prospect of having sought PBS listing for its products before the Full Court's judgment in October 2011 depends solely on the possibility that Sigma might have obtained PBS listing on 1 December 2009. It necessarily follows that if Alphapharm needed to prove that it would have listed its products on the PBS at any time before it in fact did so on the balance of probabilities, Alphapharm's claim based on PBS listing and supply of its products must fail. If, as I consider to be so, the prospect of Alphapharm applying for PBS listing after Sigma had obtained PBS listing is the relevant issue then that prospect must be assessed along with Alphapharm's claim that in any event it would have supplied its products on the private market but for the interlocutory injunctions.
556 I accept Wyeth's proposition that contrary to Alphapharm's submissions it "is clear that Alphapharm had not previously undertaken a private launch of a product that was PBS listed by the innovator". Wyeth provided a convenient summary of the evidence disclosing Alphapharm's concerns about private market supply and what Sigma was doing which I adopt as follows:
(a) An email chain dated 4 May 2009 (originating with a pharmacist and reaching upper levels of Alphapharm management, including Mr Hurley) contained commentary on SPAL's private market offer, which was critical of Alphapharm's competitor for using language that "conjures up the image of PBS listing" where none was imminent, and suggested that "Pharmacists should be asking [SPAL] specifically when PBS listing will be".
(b) An email dated 5 May 2009 from a State Sales Manager to her sales team members suggested that they tell Alphapharm's customers to ask SPAL questions directed to the true nature of its private launch, which presumably it was hoped would make the take-up of an offer from SPAL less appealing:
1. What is the date for Sigma[']s product to be PBS listed?
2. Who carries the risk associated with any inventory should the product not be PBS listed?
3. Is the product A flagged?
(c) A document that was prepared for Alphapharm sales representatives emphasised that "Sigma is selling this product into Pharmacy with NO confirmation of a PBS listing. (You may care to ask your customer if Sigma can confirm or promise a date for PBS listing)" and, in contrast, stated that "Alphapharm's registration could allow us to launch our ENLAFAX-XR, however our position is not to launch at present. It is our view that it is in the best interests of our Pharmacy customers not to sell ENLAFAX_XR until we can confirm a PBS date".
(d) An Alphapharm "coaching tool" for sales representatives (which was distributed in early May 2009), similarly stated that "Alphapharm could have also launch[ed] our ENLAFAX-XR today however we took the decision not to launch as it is our view that it is in the best interest of our Pharmacy customers not to sell in the stock until we are able to confirm a PBS date. That way you are able to best manage your stock and prepare to substitute EFEXOR XR aggressively when the time comes".
(e) An email chain dated 13 May 2009, which originated with an Alphapharm sales representative and was escalated by a State Sales Manager to the Director of the Medical Division (Mr Robert Richardson), included bemusement at the idea that SPAL would structure a private offer to substitute a PBS listed product ("However stupid that seems!"), and an encouragement of patience in the face of SPAL's efforts ("I am frustrated by this as well, but we are following a strategy that we believe is correct, so it is important we hang in there").
557 The strategy that Alphapharm believed to be correct at this time, May 2009, was not to move immediately to private market supply without knowing when PBS listing could be obtained. This necessarily would have been Alphapharm's position under any relevant hypothesis because Wyeth did not seek the interlocutory injunction against Sigma until 22 May 2009. Even if Wyeth's threats to seek interlocutory relief could all be disregarded (which I do not accept), this would have been Alphapharm's position because at the time it believed that what Sigma was doing was contrary to the best interests of pharmacists and would give Sigma no longer-term advantage because the pharmacists would be stuck with stock they could not sell.
558 The following propositions by Wyeth should also be accepted about Alphapharm's change of mind in July 2009 to launch its products on the private market, all of which are in stark contrast to Alphapharm's usual practice when launching a new product:
(a) First, there was no strategy document setting out the benefits and challenges for the unprecedented private launch, or addressing the circumstances that had caused Alphapharm to reconsider the stance it had taken in the face of its principal competitor's marketing efforts over several months….
(b) Second, no modelling was done of the financial impact of a private launch of venlafaxine….
(c) Third, there was no promotional documentation produced to support sales representatives or sales managers in altering the message that had been conveyed on Alphapharm's behalf in the period up to and including May 2009…
(d) Fourth, there was no documentary record of a positive reception from pharmacy customers to Alphapharm's supposed change of position, and valuable private market offer. In particular, there are no documents or records substantiating any order placed in response to the verbal offers said by Mr Hurley to have been made by Alphapharm's sales managers…
559 Wyeth also noted that Mr Montgomery's evidence was that all launches at risk required Mylan's approval but there is no evidence that Alphapharm sought or obtained Mylan's approval for its 2009 private market launch. Alphapharm submitted that this proposition could not be advanced by Wyeth because it was not put to Mr Montgomery or Mr Hurley. I disagree. Mr Montgomery and Mr Hurley did say that all launches at risk required Mylan's approval but this evidence was evidence about the general policy position. They did not suggest that they had sought and obtained Mylan's approval for what occurred in July 2009. There is no evidence of any of the kind of information that Mr Montgomery identified as necessary to submit to Mylan for approval for an at risk launch when, had approval been sought and obtained, such evidence would be expected in the ordinary course. Mr Montgomery said that the process from 2007 when Mylan acquired Alphapharm was "a more comprehensive, formal process for the approval of product launches by Alphapharm" than previously and, in particular at risk launches "required that Alphapharm set out the risks and benefits of the launch". There is no evidence suggesting this occurred in 2009.
560 Wyeth submitted that:
…the evidence before the Court does not support a finding that in mid-2009 Alphapharm was preparing to make, or had made, a private launch of its generic venlafaxine as a serious commercial endeavour. On the contrary, the absence of documentary support for the case Alphapharm now seeks to advance undermines the veracity of that core contention.
561 If by "serious commercial endeavour" Wyeth means an endeavour in the hope that the supply could continue unrestrained by Wyeth and in the expectation that Alphapharm would make material profits from the endeavour, I agree. This does not mean, however, that Alphapharm necessarily would have taken the same approach if on 22 May 2009 Wyeth had not sought an interlocutory injunction against Sigma and, as relevant on my approach, on 14 August 2009 had not sought the interlocutory injunction against Alphapharm. At least one reason for this is that Sigma would have been selling its products on the private market leading to a high likelihood of increasing queries from Alphapharm's customers about Alphapharm's position and associated commercial pressure on Alphapharm.
562 Alphapharm's first order for generic venlafaxine products from Pharmathen was made on 22 May 2008 which pre-dates Alphapharm's discovery of the method patent. A second version of the order form (which removed a dosage strength for which Alphapharm did not receive ARTG approval) re-scheduled delivery for 4 July 2009. That order must have been deferred on Alphapharm's instructions before 4 July 2009 (and thus before Alphapharm was subject to an interlocutory injunction) because the products under that order did not arrive until 20 December 2011. It is not clear whether the order was deferred before or after 22 May 2009. If before it was not caused by Wyeth having sought interlocutory relief against Sigma on 22 May 2009. Nor was it caused by the Sigma interlocutory injunction granted on 3 June 2009 and it could not have been caused by Wyeth seeking the Alphapharm interlocutory injunction on 14 August 2009 or the operation of that interlocutory injunction which was granted on 25 August 2009. Mr Williams, Vice President Global Business Development of Pharmathen, said in an affidavit that "Alphapharm advised Pharmathen that it was not in a position to take delivery of the Product due to litigation with Wyeth".
563 I consider it overwhelmingly likely that the order was deferred because of the mere existence of the method patent and anticipated litigation rather than the Sigma interlocutory injunction (let alone the operation of the Sigma interlocutory injunction which had nothing to do with Alphapharm's products). But, as will be explained, this does not mean that Alphapharm's claim for the products it had to destroy must fail. It means only that Alphapharm did not have stock available for immediate supply to pharmacists when it launched its products in July 2009 and would not have had stock available then irrespective of the interlocutory injunctions. But for the Alphapharm interlocutory injunction, however, Alphapharm would have been free to consider its position from time to time in response to circumstances and necessarily would have done so given Sigma's continuing private market supply up to 1 December 2009.
564 Wyeth submitted that:
Alphapharm's contentions that it did in the real world make, and would in the counterfactual world have made, a genuine attempt to launch its generic venlafaxine products on the private market should be rejected. Both contentions fail on the evidence, which rises no higher than self-serving assertion by Mr Hurley, not properly corroborated by documentary evidence, and contradicted by a careful reading of Mr Montgomery's evidence.
565 I have already accepted above that what Alphapharm did in 2009 was not done in the hope that the supply could continue unrestrained by Wyeth and in the expectation that Alphapharm would make material profits from the endeavour. As such, I agree that it is not a reliable evidentiary foundation for what Alphapharm would or might have done if on 22 May 2009 Wyeth had not sought an interlocutory injunction against Sigma and on 14 August 2009 had not sought an interlocutory injunction against Alphapharm so that Sigma would have been continuing its private market supply with apparent success.
566 Alphapharm submitted that six matters supported the inference that it would have continued to sell Enlafax XR privately.
567 Alphapharm said that:
First, on 19 June 2009 Alphapharm filed proceedings NSD 596 of 2009 seeking revocation of the Method Patent. That indicates a firm intention to sell Enlafax XR and the belief that the Method Patent was invalid.
568 It may be accepted that this indicates a firm intention to sell Enlafax XR if the method patent was declared invalid. It does not say anything about Alphapharm's intentions before such a declaration.
569 Alphapharm said that:
Second, Alphapharm contested the application for the AII [the Alphapharm interlocutory injunction]. It is a necessary premise of Wyeth's submission that Alphapharm would not have sold Enlafax XR even in the absence of the AII, that Alphapharm went to the expense of contesting the AII without intending to sell Enlafax XR.
570 However, Alphapharm needed to contest the interlocutory injunction in order to ensure that its primary concern that Wyeth not de-list Efexor-XR would be addressed by Wyeth giving undertakings to that effect. Sigma had not obtained such an undertaking. Alphapharm had tried and failed to negotiate a deal to this effect with Wyeth. There would be no incentive for Wyeth to offer an undertaking not to de-list Efexor-XR unless it was forced to do so. From Alphapharm's perspective, the only way to force Wyeth to do so was to defend the interlocutory injunction application.
571 Alphapharm said that:
Third, Mr Hurley's understanding that Alphapharm's assessment that the Method Patent was invalid and not infringed was vindicated in so far as invalidity was determined by the Full Court.
572 Vindication by the Full Court cannot be relevant to what Alphapharm would or might have done in 2009. In any event, on 7 May 2009, a file note of a discussion with Alphapharm's lawyers says "much better non-infringement" than the lawyers had initially believed due to the hydrogel technology argument, but another file note of the same meeting records a need to "ask a formulator". A file note of 28 May 2009 records no more than that "we say non-infringement" but this was "not necessarily enough to outweigh" Wyeth's case for an interlocutory injunction as the Court would not want to deal with that argument in the context of an interlocutory injunction, and the result may be different from the Sigma interlocutory injunction due to "good non-infringement/validity" but "can't guarantee". Another file note of the same meeting records only that there was an "arguable", "strongly arguable even" case that the method patent was invalid. Subsequently, Alphapharm had counsel's advice that the arguments would not avoid an interlocutory injunction. In any event, it may be accepted that by July 2009 Alphapharm believed it had a good case of non-infringement and invalidity of the method patent but the legal advice it received, as would be expected, never suggested that it was certain to succeed and was always subject to the kind of caveats that lawyers routinely include in advice given the inherent risks and uncertainties of litigation.
573 Alphapharm said that:
Fourth, Alphapharm was sufficiently confident in its assessment that the Method Patent was invalid, such that even after being unsuccessful on this ground at first instance, it went to the considerable expense of pursuing an appeal
574 Again, this says little if anything about what Alphapharm would or might have done in 2009 but for the interlocutory injunctions.
575 Alphapharm said that:
Fifth, after being successful on the appeal, Alphapharm immediately commenced selling Enlafax XR, and listed Enlafax XR on the PBS on the first available date, namely 1 April 2012, notwithstanding that an application for special leave had been foreshadowed and filed by Wyeth. In that period, the Court would infer from the fact of selling on the private market and listing on the PBS that Alphapharm was prepared to and did place itself at risk of being liable to Wyeth for damages for patent infringement in the event that the High Court granted special leave to appeal and allowed the appeal.
576 As discussed elsewhere, this risk is of a different kind altogether from the risk as it existed and would have existed in 2009. Alphapharm had the benefit of a fully reasoned judgment from the Full Court. It knew that there was no right of appeal. It would have rightly assessed the risk after the Full Court's judgment as negligible or trivial which it could not have done in 2009 (and the same will be said for Generic Health which put a similar submission).
577 Alphapharm said that:
Sixth, Alphapharm's position in relation to the risk of damages is inherently plausible. Alphapharm's position, apparent from its evidence filed in these proceedings and by inference from the objective steps that it took in the course of the litigation, reflects a nuanced cost benefit analysis which indicated that the benefit of selling Enlafax XR, including making PBS sales, outweighed the cost/risk in circumstances where Alphapharm did not trigger the 12.5% price drop by being the first generic to list.
578 In fact, and as explained, Alphapharm did no cost-benefit analysis of its 2009 launch at all but if not for the interlocutory injunctions I consider it would have done so as part of an overall analysis of what it should do. If the Sigma interlocutory injunction had not been sought on 22 May 2009 then I cannot imagine that Alphapharm would have conducted itself as it did in July 2009 with its confined private market launch of its products, with no modelling, no analysis, no written documents, no marketing, and as I have said no serious expectation that it was undertaking a commercial endeavour that would continue or yield material profits.
579 If, as I consider, the seeking of the Sigma interlocutory injunction cannot be disregarded then while Alphapharm would have acted as it did up to 14 August 2009 it must also be posited that on 14 August 2009 Wyeth did not prosecute its claim for interlocutory relief against Alphapharm. In other words, Alphapharm would have been in the same position one way or another albeit a month or two earlier but for the Sigma interlocutory injunction. That is, it would have to decide what to do in circumstances where Wyeth asserted infringement, was litigating to that end on the basis it would claim final injunctions and damages against Alphapharm, Alphapharm was not willing to take the risk of PBS listing and believed that private market supply (as Sigma would have been undertaking) would not be in the interests of its customers, and Alphapharm could not negotiate a deal with Wyeth about not supplying in exchange for undertakings including an undertaking by Wyeth not to de-list Efexor-XR.
580 Before discussing this central issue of what Alphapharm would have done in these circumstances I need to deal with some of Alphapharm's other submissions. Alphapharm submitted that exhibits 44, 45 and 46 would not have existed but for Wyeth seeking the Sigma interlocutory injunction. These are the documents disclosing Alphapharm's concerns about what Sigma was doing. They are dated around 13 May 2009. The Sigma interlocutory injunction hearing was on 22 May 2009 and the Sigma interlocutory injunction was not granted until 3 June 2009. Contrary to Alphapharm's submissions, it follows that there is no relevant hypothesis available before 22 May 2009. There is only what in fact occurred. Submissions to this effect overlook the fact the sole focus of the undertakings is the operation of the interlocutory injunctions. While I have been prepared to take into account the seeking of the interlocutory injunction on the day each was heard, the focus of the undertakings on the operation of the interlocutory injunctions must always be kept in mind.
581 Alphapharm submitted this:
Further, the circumstances in May 2009 were significantly different from the circumstances that Alphapharm faced in the real world after 3 June 2009. After the SII [Sigma interlocutory injunction] had been granted, it was certain that Sigma would not PBS list in the short or medium term. As Alphapharm was not willing itself to trigger the 12.5% price reduction, it was also then a certainty that Alphapharm would not PBS list in the short or medium term unless another generic PBS listed, and there were none on the horizon at that time to Alphapharm's knowledge.
582 I accept that after 3 June 2009 and when it obtained counsel's advice Alphapharm would have known that it had no real prospect of avoiding an interlocutory injunction if Wyeth sought one.
583 Alphapharm submitted that:
Although a private launch with no immediate prospect of a PBS listing was not the optimal outcome for both Alphapharm and pharmacists, in Alphapharm's judgment that option was much better than no launch at all.
584 This assumes that Alphapharm in fact made such a judgment in 2009 when I do not accept that it did. Alphapharm, as noted, did no analysis at all before its 2009 launch, I infer because it knew that it would not be supplying for long.
585 Alphapharm's submissions about its mid-2009 launch were unconvincing. I deal with the material points below, but none of this means that Alphapharm's case must fail.
586 Mr Hurley did not give "clear evidence about his recollection of Alphapharm receiving orders for its generic venlafaxine products and that those orders were not dependent on Alphapharm listing its products on the PBS". He recalled one order of which there is no record in circumstances where Alphapharm had no product available and could not give a supply date.
587 Alphapharm also submitted this:
To take an example, Wyeth's position at all times has been that it could not maintain an interlocutory injunction against one generic if another generic was on the market. Accordingly, in the counterfactual that no interlocutory injunction was sought or obtained against Sigma, Wyeth would never have sought, still less obtained, an interlocutory injunction against Alphapharm. Thus, in that counterfactual the detailed correspondence between Mallesons and Gilbert + Tobin would never have occurred.
588 This, however, assumes away far too much given that the undertakings under which compensation is sought concern only the operation of the interlocutory orders.
589 Alphapharm submitted that "if Alphapharm's private market launch was merely some kind of ruse, it could have achieved such a ruse without exposing itself to the potential embarrassment of selling to its 11 key customers. The ruse could presumably have been achieved by going to one minor customer". I have already said that what Alphapharm did was not a ruse or sham but that does not mean it was undertaking a serious commercial endeavour to supply its products in the expectation of being able to continue to do so for material profit.
590 Alphapharm submitted that:
…there is absolutely no evidentiary basis for the suggestion that Mallesons (or any other adviser) ever told Alphapharm "that we have to threaten to launch in order to get Wyeth into court". No such suggestion was put to Ms O'Connell, who was cross-examined. Alphapharm's legal advice which raises the issue of seeking those undertakings from Wyeth, was given in a context where it was assumed that Wyeth would seek an interlocutory injunction against Alphapharm. There was no suggestion in that legal advice that Alphapharm should induce Wyeth to seek an interlocutory injunction.
591 This submission conflates a number of matters. One, I agree it was not and could not be suggested that Alphapharm's lawyers suggested Alphapharm should induce Wyeth to seek an interlocutory injunction. Two, an interlocutory injunction would not be ordered absent a real threat of allegedly wrongful conduct. While a party may consent to such orders being made against it, orders would not be sought or made without evidence of a genuine threat. Everything Alphapharm's lawyers said must have been premised on that fundamental proposition. In 2009 Alphapharm would have known or assumed that if it could not negotiate a deal with Wyeth about not de-listing Efexor-XR it had to present a credible threat of allegedly wrongful conduct before Wyeth could or would move for interlocutory relief and thus Alphapharm could address the risk which was its primary concern, of Wyeth de-listing Efexor-XR.
592 Alphapharm submitted that:
…the objective implausibility of Alphapharm undertaking such a complicated strategy of a ruse, and the seriousness of the allegation, tends strongly against it being true. It is a serious allegation to suggest that Alphapharm knowingly instructed its solicitors to misrepresent the position to Wyeth in relation to its launch plans in the letter of 22 July 2009 for strategic reasons. There can be no suggestion that Alphapharm's solicitors would have knowingly participated in making misleading statements (and no such proposition was put to Ms O'Connell, the responsible partner in 2009, in the course of her cross-examination), and nor is there any basis for thinking that Alphapharm would have kept its solicitors less than fully informed about its true plans.
593 Alphapharm is not to be criticised for responding to Wyeth's contentions and Wyeth did contend that Alphapharm's launch in July 2009 was not genuine. As discussed, however, Wyeth' description is a mischaracterisation. Alphapharm did what it did. It said it launched its products and it did so. However, I consider that it must be inferred that it did not necessarily do so expecting that it would be able to continue to do so in that confined and artificial manner for the purpose of making a profit. That inference is not only objectively plausible but in my view unavoidable on the evidence. As noted, it had no budget, no training material for pharmacists, and no marketing. However, what it did was not a ruse or sham and thus issues of misrepresentation and seriousness of the allegation do not arise.
594 Alphapharm submitted that:
In Ms Braithwaite's affidavit of 30 July 2009, she says:
"I am aware from my knowledge that Alphapharm is also an established and significant manufacturer of generic medicines in Australia and has a large salesforce, divided into three teams that market to retail pharmacists, doctors and hospitals. As such it also has the capacity to quickly achieve significant market share for venlafaxine products as are discussed in paragraph 56 of my first affidavit, with the consequences which are discussed in paragraphs 57 and following of my first affidavit."
In her affidavit of 12 August 2009, prepared by her after reading Mr Hurley's affidavit of 10 August 2009 and learning that there was a private market only launch in which 11 key customers had been contacted, and only one order had been finalised, Ms Braithwaite nevertheless maintained her evidence from her 28 July 2009 affidavit that Alphapharm's private market activities would cause Wyeth irreparable harm unless Alphapharm was restrained… In other words, Wyeth's evidence, prepared in the knowledge of and in response to Alphapharm's evidence that it had contacted 11 key customers, was that Alphapharm's anticipated private sales would cause Wyeth irreparable harm. Indeed, Ms Braithwaite expressly contested Mr Hurley's proposition that on the private market launch Alphapharm would be likely to attract a maximum of 30% of the non-concession market. Ms Braithwaite maintained the view in her earlier evidence that Alphapharm could achieve half of the total market.
595 As will be explained later, Ms Braithwaite's evidence is important but this aspect of it is difficult to follow. For present purposes, it is sufficient to say that it must be inferred that Ms Braithwaite was assuming that Alphapharm would engage in a full-scale commercial supply of its products in 2009 if not restrained, despite her apparent belief that Alphapharm's launch was not of that kind (as it was not), and that other generics would then also enter the market. Ms Braithwaite also plainly did not consider that a private market supply was likely to fail. To the contrary, she believed it would succeed in taking significant market share from Wyeth.
596 Further, Wyeth had to assume that Alphapharm was or if not restrained would be engaged in a serious commercial endeavour and that if there were no generic competition Alphapharm was operating on the basis that it could achieve a maximum market share of 13.5%. This was what Mr Hurley said in his 2009 affidavit. It cannot be doubted that if this occurred Wyeth's belief that it would suffer irreparable harm was reasonable. This does not mean that the evidence now available is to be disregarded.
597 Alphapharm submitted that:
Despite Wyeth being willing to put an incomplete picture to Mr Hurley in cross-examination as to what Ms Braithwaite might have thought, Ms Braithwaite was never called. The Court can safely assume that had she been called, Ms Braithwaite would not have advanced what is now put as Wyeth's case. The appropriate inferences include that Ms Braithwaite would not have indicated that she had been misled about the scope of Alphapharm's private launch plans, but rather that (as her affidavits said in 2009) she considered that a launch to 11 key customers and the taking of one order was the first stage of an activity which, if not enjoined, would lead to extensive sales on the private market by Alphapharm.
598 This again must be unravelled. In 2009 Ms Braithwaite had no option other than to believe that Alphapharm was or if not restrained would be engaged in a serious commercial endeavour and that if there were no generic competition Alphapharm was operating on the basis that it could achieve a maximum market share of 13.5%.
599 Alphapharm submitted this:
Wyeth's contention is audacious and wrong. By that contention, Wyeth seeks to impeach the judgment it obtained on the interlocutory application, without calling a single witness who swore an affidavit on the interlocutory application to suggest that in light of new facts known to them, the evidence they gave in support of the interlocutory application would have been different.
600 I do not agree that this has anything to do with impeaching the Alphapharm interlocutory judgment. It was not a sham for Alphapharm to tailor its launch of its products to the circumstance of knowing it would be restrained. Its launch was not a hoax or sham. However, it was not what it would have done but for the anticipated interlocutory injunction against it. Alphapharm did what it did and Wyeth and the Court acted on that basis. In 2009 Alphapharm was never called upon to decide what it should do but for the interlocutory injunctions. This is a matter of inference from the evidence. Evidence about Alphapharm's strategies, beliefs and intentions in 2009 is part of that evidence. Alphapharm's suggestion that Wyeth should have called Ms Braithwaite to say what evidence she would have given in 2009 if she knew in 2009 about all of the evidence now available concerning Alphapharm's strategies, beliefs and intentions in 2009 is particularly baffling. One, the starting point for this kind of analysis is that Wyeth did not seek the interlocutory injunction on 14 August 2009. Two, Alphapharm's approach in 2009 was based on the correct belief that it would be restrained. What it would have done but for the interlocutory injunctions is not necessarily the same as what it did. As such, this kind of evidence, in effect what would Ms Braithwaite now says she would have said in 2009 if she knew in 2009 about the evidence available only now, is irrelevant.
601 Alphapharm referred to various aspects of Mr Hurley's evidence as if they all supported the proposition that he had decided a full-scale commercial supply on the private market would be in Alphapharm's best interests. In fact, the evidence quoted was directed to Alphapharm's preference not to have to confront the litigation. Even the last piece of evidence that, "I would have preferred to launch the product and take the product to market and generify the product. I didn't want an interlocutory injunction", is not evidence that Mr Hurley wanted to supply on the private market only. What he undoubtedly wanted was to be able to "generify" venlafaxine by PBS supply in the ordinary course but he could not do that because of the litigation (rather than the anticipated interlocutory injunction).
602 Alphapharm submitted that:
Wyeth approaches the matter as though Alphapharm acted by unitary motivation. In fact, like all sophisticated and well advised commercial parties, Alphapharm had several motivations. The primary, and most compelling motivation, as indicated by Mr Hurley's answers extracted above, and as reflected in any rational commercial assessment of the situation before and after it knew about the existence of the Method Patent, was to enter the market both privately and on the PBS. After Sigma was enjoined, and it became clear Alphapharm would not list on the PBS, its primary motivation was to sell privately (and to list on the PBS once another party had listed).
603 I agree that multiple motivations are likely. Otherwise, however, this submission is simply wrong. Alphapharm's rational commercial assessment after the method patent was that it was not going to seek PBS listing unless and until another generic had obtained PBS listing. It also made no rational commercial assessment about its private market launch in 2009 because it did not have to, knowing (as it did) that it would be quickly restrained. Accordingly, its primary motivation in fact was not and could not have been to supply on the private market. Its primary motivation in fact was to commence supply on the private market to prompt Wyeth into seeking interlocutory relief so that it could argue that the price of any interlocutory injunction should be for Wyeth not only to give the usual undertaking as to damages but also to undertake not to de-list Efexor-XR. If interlocutory relief had not been sought on 14 August 2009, however, Alphapharm would then have had to re-consider its position having regard to all of the circumstances at that time. Alphapharm would have been in the same effective position (albeit earlier in time) had Wyeth not sought the Sigma interlocutory injunction on 22 May 2009.
604 Alphapharm submitted that:
Mr Hurley was cross-examined further to the effect that fighting the interlocutory injunction from Alphapharm's point of view had the potential to serve two useful purposes for Alphapharm, one of which was said to be extracting an undertaking in relation to delisting Efexor XR in a form which Alphapharm wanted. Mr Hurley candidly admitted that was a relevant purpose. It was neither improper nor unexpected to attempt to make the best of an adverse situation in which interlocutory relief was sought against the company and was likely to be granted. However, it was never put to Mr Hurley that the cross-undertaking not to delist was the sole useful purpose of Alphapharm fighting the interlocutory injunction, and his answer at T582.1 - 11 could not be so taken, particularly in light of his answer at T582.20 which rejected the second suggested useful purpose offered by the cross examiner. Further, Mr Hurley consistently gave evidence of the kind he gave at T582.25 - 27:
But I'm suggesting your defence of the interlocutory injunction proceedings, as you understood it, wasn't because you had any serious intention to pursue in any concerted fashion a private launch?---We did have that intent.
Again, there is no reason why that evidence would not be accepted, and every reason why it would be accepted, having regard to its consistency with Mr Hurley's contemporaneous sworn affidavit evidence in 2009.
On any view, Alphapharm's primary purpose of contesting the interlocutory application was the prospect, however slim, that Alphapharm would succeed in resisting the interlocutory injunction and be free to sell Enlafax XR on the private market (in the absence of a competitive generic product), even if the legal reality was that it was highly likely not to succeed.
605 I agree that Alphapharm did not act improperly. I disagree that it had to be put to Mr Hurley that Alphapharm's sole purpose in commencing private supply was to extract the undertakings. Wyeth's focus, properly, was on Alphapharm's real, substantial or moving purpose. I have also explained why Mr Hurley's evidence is unreliable. Apart from this, the submission is internally inconsistent. Alphapharm's primary purpose would hardly have been private market supply of its products if, as the submission appears to accept, it knew that it was going to be restrained from doing so. It is for this reason, as I have said, that the evidence of what Alphapharm did in 2009 is not a reliable foundation for inferring what it would or might have done but for the interlocutory injunctions other than to the extent that it shows that Alphapharm would not have been the first to apply for PBS listing and, unlike Sigma, had concerns about supplying its products on the private market pending the resolution of the litigation.
606 There are other inconsistencies between Alphapharm's submissions and Mr Hurley's evidence. As noted, Mr Hurley refused to acknowledge that he knew that it was inevitable, certain or even highly probable that Wyeth would seek interlocutory relief if Alphapharm commenced the private supply of its products. Mr Hurley would accept only that the thought this was "probable". Yet Alphapharm submitted, as was the fact, that "there is no doubt that Wyeth was aggressively asserting its purported legal rights". In this context, Mr Hurley's insistence that he did not think it was inevitable, certain or even highly probable that Wyeth would seek interlocutory relief if Alphapharm commenced the private supply of its products did not enhance the apparent reliability of his evidence about issues he perceived to be in contest.
607 Alphapharm submitted that "Wyeth's present contention seems to be that anything short of Alphapharm consenting to the injunction, in the light of the advice it had received, evidences a collateral purpose". This is not Wyeth's contention. Nor is it my conclusion. Indeed, the whole notion of "collateral purpose", to my mind, is a distraction. So too is the issue whether the launch was "genuine". If not a sham (which it was not), it is not clear what this means. In any event, Wyeth is entitled to contend that, but for the interlocutory injunctions, Alphapharm would not have supplied its products at all, just as Alphapharm is entitled to contend to the contrary. And both are entitled to refer to all available evidence in support of their contentions and to argue that the evidence supports different inferences about Alphapharm's strategies and intentions in 2009.
608 Alphapharm submitted that:
The flaw at the heart of Wyeth's approach of unduly focusing on litigation strategy and ignoring the underlying commercial motivation is pointed out in the English decision of AstraZeneca Ab v KRKA dd Novo Mesto [2015] EWCA Civ 484 (Court of Appeal). In that case, the recognition by a generic party of the legal reality that an injunction would be granted, to the point of consenting to the interlocutory injunction, did not deprive the party of any right to recover. That was a litigation decision which did not undermine the underlying commercial motivation of the party, which was to get onto the market. Here Alphapharm contested the interlocutory injunction, and legitimately sought to obtain concessions from Wyeth that were necessary to preserve to the extent possible the commercial benefit that might eventuate at the conclusion of the litigation. That is incapable of undermining Alphapharm's primary commercial motivation to get on the market.
609 There is no doubt Alphapharm wanted to preserve the potential for PBS supply of its products pending the resolution of the litigation which depended on Wyeth not de-listing Efexor-XR. The issue, however, is not what Alphapharm's commercial position would have been but for the method patent and the litigation. The answer to that question is obvious in that but for the method patent and the litigation Alphapharm would have supplied its products on the PBS as soon as it could have done so and would not have bothered with private market supply. The issue is what Alphapharm's commercial position would have been in the face of the method patent and the litigation and but for the interlocutory injunctions (or, in my view, but for the Alphapharm interlocutory injunction). My conclusion is that what Alphapharm did in 2009 was directed to ensuring Wyeth did not de-list Efexor-XR so that the commencing of private supply of its products must be understood as a means to achieve that end and not as reflective of its commercial motivations in the face of the method patent and the litigation. This conclusion is not inconsistent with the Alphapharm interlocutory injunction. It engages none of the doctrines of preclusion on which Alphapharm relied. And it does not mean Alphapharm was perpetrating a sham on Wyeth.
610 Alphapharm submitted that:
The matters set out in Mr Hurley's first affidavit state the sworn evidence of Mr Hurley in 2009, upon which he was not challenged in 2009. They are divorced from and unaffected by the present forensic contest. They provide a reliable framework for the court to find that in the absence of the AII [Alphapharm interlocutory injunction], Alphapharm would have continued to make private sales and listed on the PBS as soon as it could do so without triggering the 12.5% price drop.
611 Things Mr Hurley said in his affidavit in 2009 (for example, about the legal advice and the order Alphapharm received) have been exposed to be inaccurate or materially incomplete. Things he said in affidavits thereafter are unreliable for the reasons given. In these circumstances, where he would not have expected to be tested on his 2009 affidavit because it concerned an interlocutory application only and where Alphapharm had its own forensic objectives in 2009, it is difficult to give weight to any of Mr Hurley's evidence.
612 Alphapharm referred to a series of matters it said all supported the inference that but for the interlocutory injunctions it would have supplied its products privately and obtained PBS listing provided another generic had obtained it first. The matters, most of which have been discussed above, are:
(a) Alphapharm made an application for registration of Enlafax XR on the ARTG in or around September 2007, in three strengths, 37.5mg, 75mg and 150mg;
(b) the application for registration on the ARTG was delayed by the fact that the TGA did not accept Alphapharm's request for a bio-study waiver on the 37.5 mg Enlafax XR product, and as a result the ARTG listing was not complete when the Molecule Patent expired in December 2008;
(c) however on 1 December 2008, Alphapharm applied for listing of Enlafax XR on the PBS on 1 April 2009, and indicated that Alphapharm would forward as soon as possible the approval letter from the TGA, and by no later than 15 January 2009;
(d) as at 1 January 2009, the Molecule Patent had expired, Mr Hurley was not aware of any other Patent potentially preventing the launch of Enlafax XR, and he anticipated that Alphapharm would obtain TGA and PBS approvals and launch Enlafax XR on the PBS on 1 April 2009;
(e) by 15 January 2009, the TGA approval had not been provided and accordingly the first PBS application effectively lapsed on that day - Alphapharm did not receive an ARTG registration for the Enlafax XR products until the end of April 2009, following a decision to abandon the 37.5 mg strength product which was delaying the application;
(f) in March 2009, in the course of Wyeth's preliminary discovery application against the Department, Mr Hurley became aware that Wyeth was the owner of the Method Patent and was attempting to obtain information about the identity of those who had registered generic venlafaxine products on the ARTG, which enlivened for him the risk of Alphapharm being liable for damages arising from the 12.5% price decrease if Alphapharm was the first to list on the PBS, and Enlafax XR infringed the Method Patent;
(g) given he understood the market was worth about $100 million in annual sales, a liability of 12.5% of that figure per year was a very high risk when weighed against the returns Alphapharm could potentially expect from sales of its own product;
(h) however, Mr Hurley considered that if another generic company had already listed on the PBS and triggered the price decrease, Alphapharm would not be potentially liable for those "price reduction" damages on the originator's own product, but only for sales lost by the originator to Alphapharm;
(i) Mr Hurley formed the view that Wyeth was likely to take steps to assert its patent through legal action, irrespective of Alphapharm's view of the validity or otherwise of Wyeth's patent;
(j) in March 2009, Mr Hurley became aware that Sigma had filed revocation proceedings in respect of the Method Patent, which caused Mr Hurley to consider that there was a reasonable likelihood that Sigma had filed an application for PBS listing prior to 1 May 2009 for a 1 August 2009 listing date;
(k) on 4 May 2009, Alphapharm received a letter from Wyeth's lawyers, Gilbert + Tobin, regarding Enlafax XR, and informing Alphapharm that Wyeth had filed a cross-claim against Sigma for infringement of the Method Patent, and that Wyeth was seeking an interlocutory injunction against Sigma;
(l) the Gilbert and Tobin letter of 4 May 2009 asserted infringement of the Method Patent by Enlafax XR, and sought an undertaking that Alphapharm would refrain from importing supplying or offering to supply the Enlafax XR products in Australia, with the threat that Alphapharm would be sued for patent infringement, including an application for interlocutory relief, unless that undertaking was provided;
(m) on 1 June 2009, Alphapharm sent a letter to the PBS enclosing a PBS listing application, requesting listing on 1 August 2009. Whilst Mr Hurley was unable to locate the final version of the letter of 1 June 2009, he was able to locate a draft, which is Exhibit MH-20, and the version of the letter received by the Commonwealth conforms with the substance of MH-20;
(n) importantly for present purposes, the letter of 1 June 2009 made it clear that Alphapharm's application for PBS listing was:
"made on the condition that it can be withdrawn by Alphapharm prior to 1 August 2009 without triggering a price reduction of 12.5% for the originator product, should Alphapharm consider that withdrawal necessary.
This condition is critical to Alphapharm. If the PBS is not able to accept the application on that condition, please inform us immediately";
(o) while the application was filed out of time to achieve listing on 1 August 2009, the condition is consistent with Alphapharm having not yet made a decision as to whether it would be willing to trigger the 12.5% price reduction, but confirms that it was reserving to itself the ability to withdraw the application if it decided it did not wish to do so;
(p) on or shortly after 3 June 2009, Mr Hurley became aware of the SII [Sigma interlocutory injunction], as a result of which it became obvious to him that Sigma would not trigger the price decrease on 1 August 2009 as any application it may have submitted would now have to be withdrawn, and that if no other generic company had applied for PBS listing on that date, and Alphapharm proceeded to list on that date, Alphapharm's listing would have been the sole trigger of the 12.5% price decrease; and
(q) Mr Hurley formed the view very shortly after becoming aware of the SII, that it would not be advisable for Alphapharm to trigger the 12.5% price drop by being the first, or equal first, to list an extended release venlafaxine product on the PBS.
613 As already discussed, these matters disclose that but for the method patent and the litigation Alphapharm would have proceeded with its proposed PBS listing and supply of its products. These matters also disclose Alphapharm's unwillingness, faced with the method patent and the litigation, to be the first generic to list its products on the PBS due to the fear of being liable to Wyeth for the 12.5% price reduction. These matters do not show that but for the interlocutory injunctions Alphapharm would have been willing to accept the risks of liability associated with supply or that Alphapharm would have pursued supply, particularly not mere private supply when it perceived this to be unprecedented and contrary to the best interests of pharmacists (and, I infer, potentially contrary to its own interests given its sell or return policy). Rather, if confronted by the circumstances that would have existed but for the interlocutory injunctions Alphapharm would have to have done what it did not have to do in 2009 - assess all of the potential risks and benefits it might hope to obtain by supply, private supply only if no other generic obtained PBS listing and under the PBS if and when another generic obtained PBS listing. Alphapharm could do so on only the basis of legal advice of its prospects and exposures and advice about its likely market success, as well as with Mylan's approval for a launch at risk (which, tellingly, I infer it did not obtain in 2009 because it knew it would shortly be restrained and thus, in truth, its launch was not at risk in any material sense).
614 I will not deal with all of Alphapharm's other submissions about Mr Hurley's evidence. I have given sufficient reasons already for rejecting that evidence. What is now relevant is to record that irrespective of my views about the reliability of his evidence I have no doubt that, in common with the relevant people at Sigma (and Generic Health), Mr Hurley knew his business well and knew how to formulate strategies which would be in the best interests of Alphapharm given that Alphapharm's business was making profits from supplying generic products in a highly competitive market.
615 Otherwise, I accept Alphapharm's submissions that the following matters would be relevant to what Alphapharm would or might have done but for the interlocutory injunctions:
(1) Sigma was Alphapharm's biggest competitor and Alphapharm had received questions about its intentions from pharmacists aligned to it given Sigma's private market supply;
(2) "…if Sigma was able to offer a full range of products including venlafaxine, but Alphapharm was not, Sigma would have an opportunity to take customers and business from Alphapharm" because of the practice of generics to bundle products and the nature of the market in which many pharmacists were wholly aligned with one or other generic (in the sense that the pharmacist or group of which the pharmacist was part would buy all of a generic's range and hold only some products from other generics). I accept that the risk that Alphapharm might lose ground to Sigma if Sigma continued with its private market supply (or PBS supply if Sigma obtained PBS listing) would be a very important factor in Alphapharm's consideration of its positon;
(3) "if Sigma launched a venlafaxine product and Alphapharm did not, it was less likely that patients who were satisfied on Sigma's product would switch to an alternative generic" at some later time; and
(4) "it was…important to Alphapharm to be seen as a market leader" so that if Sigma was supplying venlafaxine on the private market Alphapharm would have to give real consideration to its position about private market supply (and equally if Sigma was supplying venlafaxine under the PBS after PBS listing, Alphapharm would have to give real consideration to its position about PBS listing and PBS supply). This is particularly so in circumstances where Sigma and Alphapharm were both large competitors with extensive sales forces and also were months ahead of their nearest competitor in obtaining ARTG registrations (Generic Health, which was a small player and not in a comparable position to Sigma or Alphapharm in terms of capacity to penetrate the market).
616 These are the objective contemporaneous circumstances in which Alphapharm would have found itself in mid-2009 but for the interlocutory injunctions. The only material difference between my approach (the operation of the Alphapharm interlocutory injunction alone may be disregarded) and the generics' approach (even the threat of the interlocutory injunctions must be disregarded) is one of timing, the relevance of which effects the notional PBS listing dates.
617 While I also accept that if "both Alphapharm and Sigma had been on the PBS in 2009, this would have created a thriving PBS market for generic venlafaxine which would have made it nearly commercially impossible for Wyeth to remove Efexor XR from the PBS", we know that Alphapharm was dependent on Sigma or another generic first obtaining PBS listing before it would consider obtaining PBS listing for the purpose of PBS supply.
618 Alphapharm also referred to Mr Hurley's evidence that "an additional benefit of a private market launch was that it would have been difficult for Wyeth to withdraw Efexor XR from the PBS as part of its strategy to switch the market to Pristiq, because Wyeth would have effectively given up any patients that were prescribed venlafaxine to generic venlafaxine". In other words, PBS listing and the associated 12.5% price reduction, which created such an enormous exposure for the first generic to obtain PBS listing, was not essential to achieving the objective of making it difficult for Wyeth to de-list Efexor-XR. No doubt Alphapharm would have preferred for it be impossible for Wyeth to do so, but this is exactly the kind of strategic thinking I would expect such a person as Mr Hurley to have considered if Alphapharm had not been restrained on 14 August 2009. I thus accept that its fear of Wyeth switching patients to Pristiq provided Alphapharm with some incentive to proceed with private market supply on a commercial basis if not enjoined.
619 However, I do not accept that the fact that Mr Joscelyne prepared financial forecasts between 22 April and 28 April 2009 "is a powerful contemporaneous indicator that in the absence of the interlocutory restraints Alphapharm would have sold Enlafax XR on the venlafaxine market with the expectation of reaching those forecasts". As noted, the forecasts assumed PBS supply. Alphapharm decided it would not pursue PBS supply because of the method patent and anticipated litigation. Accordingly, in the absence of the interlocutory injunctions, it cannot be the case that Alphapharm would have sold its products on the private market with the expectation of reaching those forecasts. The evidence relates only to Alphapharm's intentions and expectations leaving aside the method patent and the litigation, which is an impermissible hypothesis.
620 What I do accept is that but for the interlocutory injunctions Mr Hurley would have obtained similar forecasting from a person such as Mr Joscelyne about private market supply but did not do so before the launch in mid-July 2009 because he knew Alphapharm would be restrained. This confirms that the mid-July 2009 launch was far from Alphapharm's usual practice and bears no resemblance to what Alphapharm would have done but for the interlocutory injunctions. But for the interlocutory injunctions, before any private market launch or before any "ramping up" of private market supply after mid-July 2009, Alphapharm would have financially modelled the expected outcomes over the longer-term on the basis that if it wished to compete with Sigma it would have to bring to bear all of its expertise and capacities.
621 Mr Montgomery, Alphapharm's CEO, made decisions in conjunction with Alphapharm's senior leadership team the most senior member of which (apart from Mr Montgomery) was Mr Hurley. Mr Montgomery said:
…it was Mark Hurley and I who primarily drove the strategy and execution of the project. Mark Hurley was heavily involved in the decisions I made regarding venlafaxine, and he and I liaised very closely together on this project. I respect Mark's strategic decision-making very highly. It was not just a matter of me taking notice of his views on such matters either - Mark and I discussed these types of decisions extensively with each other; we talked through the factors relevant to the decision, we debated them and, ultimately, we nearly always ended up coming to a common view.
622 Mr Montgomery assumed that if the method patent was valid Wyeth's damages would be greater than Alphapharm's profits whether or not Alphapharm had triggered the 12.5% price reduction (which it would not do). Again, I accept this and consider it discloses the position any commercially experienced decision-maker would have reached.
623 Mr Montgomery said that:
…after Mylan acquired Alphapharm in 2007, a more comprehensive, formal process for the approval of product launches by Alphapharm was introduced. Any launch which was considered to carry a risk of legal proceedings being brought against Alphapharm was considered to be "at risk". All at risk launches required Mylan approval. When seeking Mylan approval for an at-risk launch, it was required that Alphapharm set out the risks and benefits of the launch. On the risk side, the proposal which Alphapharm would put to Mylan assumed that Alphapharm would launch and sell its product, and that it would not be prevented from doing so by a Court injunction. Thus the risk, as I understood it, and which Alphapharm assumed when putting its proposal to Mylan, was Alphapharm's exposure, if it was subsequently found liable for infringement of a third party's patent rights, to having to pay the patentee's damages, or handing over Alphapharm's profits.
624 Accordingly, it must be inferred (contrary to the fact) that Mr Montgomery and Mr Hurley would have had available to them all relevant information about the potential risks and benefits to Alphapharm of whatever decision Alphapharm would or might have been contemplating. In this regard, unless and until another generic obtained PBS listing Alphapharm would not be contemplating PBS listing. Because of the overwhelming likelihood (indeed, the certainty in my view) that Sigma would be supplying on the private market, a necessary inference is that Alphapharm would be contemplating private market supply. And indeed it was in fact. There is no reason to infer that there was any chance Alphapharm would have acted differently from how it did act which was to do nothing until 22 May 2009 because at that time it believed that Sigma's private market supply was not in the best interests of pharmacists and, in effect, may ultimately fail once pharmacists worked out that no PBS listing was to be forthcoming in the near future.
625 If Wyeth had not applied for interlocutory relief against Sigma or it, Alphapharm would have had to carry out the full risk-benefit analysis needed for Mylan to review any private market launch. Mr Montgomery and Mr Hurley would have decided what to recommend to Mylan based on the circumstances at the time and the results of the analysis in the context of Alphapharm being and wishing to remain a leader in a highly competitive market.
626 In contrast to Mr Hurley, Mr Montgomery was not subject to extensive cross-examination. In particular, his opinions about what he was likely to have recommended and his beliefs about Mylan's likely decision-making were not directly challenged. While I still prefer to give the most weight to the objective contemporaneous evidence, Mr Montgomery appears to possess a capacity unique amongst the witnesses called by the generics, to give evidence about hypothetical facts which makes sense in the context the generics would have been in but for the interlocutory injunctions.
627 As noted, Mr Montgomery would not have recommended to Mylan that Alphapharm be the first generic to obtain PBS listing due to the potential exposure to liability to Wyeth in the order of $100 million if Alphapharm triggered the price reduction in Efexor-XR. Mr Montgomery also would not have recommended that Alphapharm risk listing on the same day as another generic for this reason. In other words, he would not permit Alphapharm to apply for PBS listing unless and until another generic had obtained PBS listing. As a result, he would not have sought Mylan's approval for any launch "at risk" based on Alphapharm being the first generic to obtain PBS listing of its products. This was so irrespective of the strength of legal advice about Alphapharm's prospects of having the method patent declared invalid or its products not infringing the method patent. As discussed, this position not only reflects Alphapharm's evidence in 2009 but also commercial sense. It is powerful evidence of what a responsible decision-maker would have done in 2009 in all of the circumstances including the drive to compete and make profits from the supply of generic products.
628 Mr Montgomery said that if Sigma had obtained PBS listing then he would have recommended to Mylan that Alphapharm also apply for PBS listing because:
(a) Alphapharm's exposure to damages would be lower because it would not have been responsible for triggering the 12.5% price reduction for Wyeth products;
(b) as Alphapharm would have been later in the market than Sigma, Sigma would have captured a greater market share and hence Alphapharm's damages exposure (in terms of the sales it would have taken from Wyeth) would have been lower than if Alphapharm had been the first to enter the market; and
(c) at the time, he believed that Wyeth was undertaking a deliberate strategy of undermining the market for venlafaxine by promoting Pristiq and putting no promotion into Efexor.
629 Mr Montgomery considered that in these circumstances:
…there was a better than even chance that Mylan would have accepted my recommendation to launch Enlafax XR and list it on the PBS after Sigma had definitely listed its product on the PBS and been responsible for triggering the 12.5% statutory price reduction.
630 If, however, Alphapharm could not apply for PBS listing because Sigma (and no other generic) had first obtained PBS listing, Mr Montgomery said he would have sought Mylan's approval for a private supply of Alphapharm's products at risk involving, in effect, a ramping up of the launch in July 2009 to a full-scale commercial supply on the private market. Mr Montgomery believed that, in these circumstances, "there was a high likelihood that Mylan would have accepted my recommendation to conduct a private launch of this kind".
631 But for the interlocutory injunctions I consider that the position would have been this. Alphapharm would still have deferred its first May 2008 order of stock because of the mere existence of the method patent and the litigation. At this time it would have still considered Sigma's private market supply unprecedented and likely to leave pharmacists with stock they could not sell because Alphapharm considered that pharmacists would not be interested in purchasing generic venlafaxine for private market supply given that Efexor-XR was PBS listed. Alphapharm would still have its sale or return with a refund policy so would have been concerned to financially model the likely costs and benefits of a private market supply of venlafaxine. It would still have decided that by reason of the mere existence of the method patent and the litigation it would not under any circumstances risk triggering the 12.5% price reduction in Efexor-XR by being the first generic to obtain PBS listing of its products or obtaining PBS listing at the same time as another generic. As such, it would not apply for PBS listing until another generic had obtained PBS listing. Its focus, as a result, would be Sigma's continuing private market supply and its apparent success.
632 Alphapharm's immediate response to Sigma's continuing private market supply would have been exactly the same as Alphapharm's actual response to Sigma's private market supply before 22 May 2009. Alphapharm would consider it unprecedented and likely to leave pharmacists with stock they could not sell. However, it would not have considered the issue of likely success in the terms framed by Wyeth relating to the ethical obligations of pharmacists. Confronted by Sigma's ongoing private supply of Sigma's product from May 2009 onwards, however, Alphapharm necessarily would have been forced to confront the question whether or not it should continue with its view that only PBS supply would be sensible. Showing the same care for its own commercial interests as it had consistently demonstrated, Alphapharm would ensure that it made the best informed decision it could on the basis of up to date and comprehensive legal and financial advice including advice about the potential success of private market supply if Alphapharm brought to bear all of its expertise and about its potential exposure to Wyeth. The legal advice, which would have been to the general effect that Alphapharm had good prospects of success at least in respect of the invalidity of the method patent, would have made clear that the prospects could not be put any higher than good and that litigation is inherently risky.
633 Alphapharm was not and would not have been in the same position as Sigma which was effectively driven to supply on the private market due to the $3 million of stock it had purchased. Alphapharm had purchased stock (far less than Sigma) but had deferred delivery in circumstances where payment was not due until delivery. Further, Alphapharm had never planned to supply on the private market only whereas Sigma had always planned on private market supply followed by PBS supply within three months. The change in position for Alphapharm was thus greater than it was for Sigma. Alphapharm also doubted that Sigma's apparent success reflected supply on the basis of no PBS listing in the reasonably foreseeable future and was determined that it should not do what it thought Sigma may well be doing (that is, supplying on the basis that the carrot of PBS listing was reasonably foreseeable). Alphapharm also knew it would not be the first to market as Sigma had already gone to the market, but the evidence shows that the earlier a generic can make it to the market the better its prospects of securing market share and being the second to market would have been important to Alphapharm. Alphapharm was not subject to the same kinds of general financial pressures to which Sigma was subject but Alphapharm no doubt also wanted a "win" in the sense that a company in a highly competitive industry always wants a win. Sigma had also committed itself to a full-scale supply of its products on the private market whereas Alphapharm had not.
634 Taking into account all of the circumstances identified, I consider that there is one factor which would have outweighed all others from Alphapharm's perspective in any hypothetical analysis. It is that Sigma would have been continuing to supply pharmacists on the private market when Alphapharm also would have been able to do so. To my mind, in the context of this industry and Alphapharm's place within it, this fact alone would have made it highly likely that Alphapharm would have decided it needed to compete with Sigma so that Mr Montgomery would have made the recommendation to Mylan that Alphapharm enter the private market. In circumstances where Alphapharm would have been advised that its ultimate prospects of not being liable to Wyeth were good albeit not without risk and Sigma was continuing to supply, Alphapharm would have perceived there to be a strong imperative for it also to supply its products on the private market. While Mylan would have been the final decision-maker, faced with these circumstances, it is difficult to conclude that Mylan would not have approved a launch at risk on the private market to enable Alphapharm to compete with Sigma.
635 I accept that I cannot exclude the possibility that Alphapharm's assessment might have been that there was a real risk that it might not be able to interest pharmacists in private market supply of its venlafaxine products if, as Alphapharm would have insisted, its sales representatives made clear to pharmacists that it could not be assumed that PBS listing would be achieved in the foreseeable future due to the patent litigation. I do not consider, however, that Alphapharm would have been deterred by the prospect of pharmacists having to switch patients back to Efexor-XR if the method patent was valid and infringed by Alphapharm's products. Nor, as I have said, do I accept that pharmacists would have given weight to this risk. What must be accepted is that, confronted by continuing supply by Sigma, Alphapharm would perceive a strong commercial need for it to compete given that it had ARTG registrations and could supply its products by arrangement with Pharmathen. What must also be accepted is that Alphapharm would have taken steps to put itself in the best position it could to maximise its chances of success using all of its capacities to do so. As noted, Mr Hurley's capacity for strategic thinking cannot be doubted. Given its sales and marketing resources and experience, Alphapharm would have been able to put forward a strong case to Mylan to support entering the market in competition with Sigma. Mylan thus would have made its decision on this basis.
636 As a result, I would assess the likelihood of Alphapharm, with Mylan's approval, committing to or scaling up its mid-July private market launch to be 90%. I accept that the possibility Alphapharm would not have done so cannot be excluded as merely speculative as Alphapharm might have considered the prospects of successful private market supply not worth the continuing effort or might have failed to persuade Mylan to approve the full-scale commercial supply on the private market because it seemed to be contrary to conventional wisdom in the generic industry. In my view, however, the prospect that Alphapharm would have ceased further supply from that date would not be assessed to be higher than 10%. The success or otherwise of this private market venture would have been assessed on a continuous basis but some short-term losses would not have caused Alphapharm to cease supply if Sigma was continuing to supply.
637 In terms of the timing issue, Alphapharm in fact launched its products on a confined basis on 17 July 2009. The hearing of the Alphapharm interlocutory injunction occurred on 14 August 2009. In these circumstances and consistent with the discussion above to the effect that it is the Alphapharm interlocutory injunction alone which had a potential adverse effect on Alphapharm relevant to the terms of the undertakings, it should be inferred that there would have been a 90% probability that Alphapharm would have been supplying its products on the private market on a full scale commercial basis from 14 August 2009. As will be explained below, the econometric analysis assumes that Alphapharm commenced supply of its products on the private market on 22 July 2009. In the overall context of this matter and given that Alphapharm in fact launched on 17 July 2009, I consider it appropriate to adopt the start date for commercial supply to the private market by Alphapharm of 22 July 2009.
638 In respect of PBS listing, Alphapharm would not have applied for PBS listing until another generic had obtained PBS listing. However, if another generic had obtained PBS listing then Alphapharm would have known that it was not going to be responsible for the 12.5% reduction in the price of Efexor-XR, would have been concerned to protect its competitive position, and would still believe the risk of liability to Wyeth was low. Again, these objective circumstances also accord with Mr Montgomery's assessment that he would have been willing to recommend to Mylan PBS listing and PBS supply in these circumstances.
639 I have concluded above that there was a 20% chance that Sigma would have applied for PBS listing in time to obtain PBS listing of its products on 1 December 2009. If this conclusion is maintained (as it must be for this hypothesis), there must also then have been a substantial prospect that Alphapharm would have applied for PBS listing as soon as possible after 1 December 2009. Mr Montgomery considered that the prospect of Mylan approval for a PBS listing application to be "better than even". Given the objective circumstances, I consider the prospect highly likely. I cannot accept that, in such a case, Alphapharm would merely continue private market supply, allowing Sigma to reap the rewards of PBS supply.
640 Having regard to the objective circumstances, on these hypothetical facts, I would assess the likelihood of Mylan approving Alphapharm seeking PBS listing for the purpose of PBS supply to be high. If Alphapharm was on the private market, my estimate is that there was a 90% probability that in the event of another generic first obtaining PBS listing Alphapharm also would have applied for PBS listing as soon as it could thereafter for the purpose of PBS supply and a 10% possibility that it would not have done so but elected instead to continue with its private market supply.
641 If Alphapharm had not been supplying its products on the private market, I would still estimate the probability of it having applied for PBS listing in the hypothesised circumstances as high given my view that the material factors which would have weighed on Alphapharm's mind were the need not to trigger the 12.5% price reduction (which would be irrelevant on this hypothesis) and the competitive need to enter the market against Sigma and be early to do so compared to other generics (which would be the driving factors on this hypothesis). In these circumstances, I would estimate the probability of it having applied for PBS listing in the hypothesised circumstance of Alphapharm not supplying its products on the private market to be 80% and the probability of it having continued not to supply its products to be 20%.
642 In respect of the timing issue relating to PBS listing for Alphapharm, on the basis of the 20% chance of Sigma having applied for and obtained PBS listing on 1 December 2009, it should be taken that the probabilities discussed above relate to Alphapharm's products being been added to the PBS list on 1 March 2010 (reflecting a three month period from a posited application date of 15 December 2009 as referred to in paras 24 and 25 of the statement of agreed facts). Alphapharm had already applied for PBS listing of its products before it became aware of the method patent. It would have immediately become aware of PBS listing of Sigma's products. There is no reason to think Alphapharm would not have been able to submit its listing application by 15 December 2010 which would have enabled it to obtain PBS listing of its products on 1 March 2010. As noted, if Alphapharm's mere anticipation of an interlocutory injunction because of Wyeth's threats or the Sigma interlocutory injunction may be disregarded (contrary to my view), then the prospect of Alphapharm obtaining PBS listing would operate from the earlier date of 1 December 2009 because, on this approach, it would have had to confront Sigma obtaining PBS listing on 1 August 2009, rather than 1 December 2009.
643 As with Sigma, Alphapharm would not have been concerned its products might not be listed on the PBS. It would not have been concerned by the need to give an assurance of supply and would have done so. It would have no concern about the statutory guarantee of supply provisions. Further, no anticipation of what Wyeth might do in competitive response to generic supply or otherwise would have weighed on Alphapharm's mind.