Australian Government commits to claim damages from originator pharmaceutical companies where generic entry is unduly delayed

In its 2022-23 Budget, the Coalition Government has stated that it will continue to fund litigation against originator pharmaceutical companies that prevent generic versions of their drugs from listing on the PBS through unwarranted injunctions. 

In patent litigation between originator and generic pharmaceutical companies, the originator commonly seeks an interlocutory injunction to prevent the generic from launching a lower cost version of the originator’s drug pending judgment in the litigation.  The interlocutory injunction will have been warranted if the originator prevails in the litigation.  Otherwise, the generic will have been wrongly prevented from launching its version of the drug, and the PBS will have been wrongly denied access to a lower cost version, relating to the mandatory price reduction that occurs on listing of a second version of the drug and the resulting increased competition in the market.  Where the injunction is wrongly granted, the originator may ultimately be liable to pay damages to both the generic and the Government.

The Government has filed damages claims against originators in four such cases to date, against Wyeth in relation to generic venlafaxine, AstraZeneca in relation to generic rosuvastatin, Sanofi in relation to generic clopidogrel and Otsuka in relation to generic aripiprazole.  The Government’s claims against Wyeth and AstraZeneca were settled, but its litigation against Sanofi and Otsuka is ongoing.  The Budget refers to this pending litigation as a contingent asset of unquantifiable value.

It is clear from the Budget that, if the Coalition remains in power following the election (currently anticipated to take place in May 2022), any originators found to have wrongly prevented generic entry in the next Parliamentary term can expect to face Government claims for damages.  However, the Budget does not disclose the financial implications of this commitment, apparently due to “legal sensitivities”.  Originators will need to bear in mind their potential liability to the Government when considering whether to seek interlocutory injunctions to prevent generic entry, particularly where the validity or infringement of the patent in question is doubtful.  And as such litigation progresses towards trial, originators may be under increasing pressure to settle with generics to avoid the risk of incurring a significant liability to the Government.