Dr Reddy’s Laboratories (UK Limited) and others v Warner-Lambert Company LLC and Pfizer Limited

This judgment of Zacaroli J is from the first in a series of trials in which various generics companies as well as certain NHS entities (together the “Inquiry Claimants”) are seeking damages under cross undertakings given by Warner-Lambert/Pfizer (the “Inquiry Defendants”). These cross-undertakings were given in return for the relevant companies being restrained from entering the market by interim injunctions, contractual undertakings or other Court Orders (together the “Relevant Orders and Undertakings”) based on Warner-Lambert’s patent for the use of pregabalin for treating pain (the “Patent”). Damages are also being sought in respect of unjustified threats of infringement proceedings (the “Threats”).

The damages claims follow the UK Supreme Court finding the relevant claims of the Patent to be invalid (see Warner-Lambert v Generics (UK) Ltd [2018] UKSC 56).

There are 35 Inquiry Claimants seeking damages against the Inquiry Defendants in various actions (the “Inquiry Claims”). The Inquiry Claimants can be divided into three groups (i) Gx seeking damages based on lost profits from sales of a skinny label product; (ii) Gx claiming on the same basis but based on a full label product; and (iii) NHS England and other national health bodies.

How to best manage the inquiries has been the subject of earlier hearings, but in the present judgment Zacaroli J had been asked to determine two preliminary issues relating to the counterfactuals which should be used when assessing the level of damages suffered by the Inquiry Claimants, namely:

“(a) what are the appropriate counterfactual assumptions over the period from 8 July 2014 (expiry of Pfizer’s data exclusivity) to present upon which to determine any damages payable to each of the Inquiry Claimants in the Inquiry Claims?

(b) to what extent (if not already answered at (a)) are findings of fact binding as between different parties in these proceedings?”

Before the trial itself, the parties were asked to seek to agree some possible counterfactual assumptions. Those assumptions (slightly edited for simplicity) are set out below. Zacaroli J’s finding as to those assumptions is shown immediately after each question:

1. Is it correct to assess the counterfactual for each Inquiry Claim on the assumption that the same Threats, Relevant Orders and Undertakings were or were not made across all the Inquiry Claims? Yes

2. Is it correct to assume, as a matter of law, in the counterfactual for each Inquiry Claim that none of the Threats, Relevant Orders and the Undertakings were made? Yes

3. In determining the amount of damages (if any), is it appropriate to assess the Inquiry Claimants’ loss on the assumption that any or all of the claims of the Patent were known by all to be invalid at all relevant times following expiry of Pfizer’s data exclusivity on 8 July 2014? No

4. Is it correct to assume, as a matter of law, that the Inquiry Defendant could not have restrained prescribers or dispensers from prescribing or dispensing pregabalin for pain and/or restrained generic manufacturers from launching full label products? No

5. Is it correct to assume, as a matter of law, that the Inquiry Defendant could not have threatened any parties with patent infringement proceedings? No

6. Is it correct to assume, as a matter of law, that the Inquiry Defendant could not have restrained launch of full label products by Sandoz or other manufacturers? No

As set out above, in relation to the first two assumptions, Zacaroli J held that a consistent counterfactual was appropriate across all Inquiry Claims and in this counterfactual it was necessary to assume not only the removal of the Relevant Order, Undertaking or Threat upon which that Inquiry Claim is based, but also the removal from the counterfactual of the other orders, undertakings or threats in relation to other parties which it turns out, for the same reason (invalidity of the Patent), were wrongly made.

Zacaroli J considered this single counterfactual to be a way in which the Court could adopt a fair and reasonable view of the compensation. As the market was a finite one, the question as to what loss was suffered as a result of a Relevant Order would be answered by the share of the market that would have been enjoyed by each generics company, but for the distortion to the market by the wrongly made order. The market share of one market participant could not be identified without identifying what market other market players would have achieved. Allowing different counterfactuals for different claims could result in the Inquiry Defendants paying more in aggregate by way of compensation than the total loss that could have been caused in a single counterfactual world. Whilst it was common ground that there was a lack of English authority on this specific issue, Zacaroli J noted the decision of the Federal Court of Australia in Sigma Pharmaceuticals PTY Ltd v Wyeth [2018] FCA 155 and stated it directly supported his conclusion.

Zacaroli J disagreed with the third of the six assumptions on the basis that it contravenes the principle that compensation is limited to that which flows from the “wrongful” order as in SmithKline Beecham PLC v Apotex Europe Ltd [2007] FSR 6. In fact, it was said that if the NHS parties’ claim for compensation under an order requiring the NHS to provide guidance on the prescribing of pregabalin was made on the assumption that all parties knew the Patent to be invalid, it would be equivalent to awarding compensation for the existence of the Patent and the Inquiry Defendants’ defence of it in the litigation.

Assumptions 4-6 related to whether the Inquiry Defendants could have taken certain steps. Whilst the Judge found that they could have taken each of these steps, importantly whether they would have done so is factual issue which was therefore not for determination in this trial.

Zacaroli J therefore held in response to preliminary issue (a) that in assessing the counterfactual for each Inquiry Claim none of the Relevant Orders, Undertakings or Threats should be considered to have been made. On issue (b) he considered this was a case management issue and should be addressed at a further case management conference.

We now await the further case management hearing to understand the next steps in this complex litigation. It appears from the judgment of Zacaroli J that the Court will try and find a way for common issues (e.g. the market share each participant would have gained) to be heard together to assist in fairness to the parties as well as Court time and resources. Having said this, the Inquiry Defendants can still continue to agree certain facts with each Inquiry Claimant (though they will not have any binding effect on another Claimant).

A copy of the judgment can be found here.

Headnote by Emma Irwin and Katie Cambrook, Bristows LLP