In one of the few decisions of its kind, the UK High Court recently assessed the damages to be paid to a generic pharmaceutical company under a cross-undertaking in damages. While some aspects of the decision are specific to the UK pharmaceutical reimbursement scheme, the judgment will be a useful reference point for parties involved in similar litigation in Australia. In particular, the case involved the generic claiming to have lost the 'first mover advantage' as a result of the interlocutory injunction obtained by the patentee.

The patentee, AstraZeneca, marketed 'Nexium', a protein pump inhibitor (PPI) containing the active ingredient esomeprazole.

KRKA developed its own esomeprazole PPI, 'Emozul', which it planned to launch in October 2010. However, AstraZeneca commenced infringement proceedings against KRKA, and on 8 October 2010 successfully obtained an interlocutory injunction restraining KRKA from proceeding with the proposed launch. In securing the injunction, AstraZeneca were required to give the usual cross-undertaking in damages.

At that time, AstraZeneca was also involved in infringement proceedings against another generic pharmaceutical company, Ranbaxy. In July 2011, the Court held that Ranbaxy's product did not infringe AstraZeneca's patent. As a result, on 29 July 2011 the interlocutory injunction in the KRKA proceeding was discharged, leaving KRKA free to enter the market.

KRKA ultimately launched Emozul in September 2011. By that time, other generic versions of Nexium had entered the market, including AstraZeneca itself teaming up with Arrow to launch a branded generic version, and others followed shortly after KRKA's launch. This was a vastly different competitive environment to the one KRKA had been restrained from entering in October 2010.

KRKA, along with Consilient, a pharmaceutical sales and marketing company which proposed to market and sell KRKA's Emozul in the UK, each claimed damages from AstraZeneca under the cross-undertaking. KRKA and Consilient claimed damages in the order of £32 million, whilst AstraZeneca argued the damages figure was around £6 million.

By the time the generic parties' application was heard in November 2013, there was actual market data available for esomeprazole PPIs. The Court framed the assessment of damages as a comparison between:

• KRKA's actual success in selling Emozul from September 2011 onwards; and 

• the counterfactual scenario, being the market share KRKA would have obtained from October 2010 onwards if not restrained from launching Emozul.

While it has been left to the parties' respective expert witnesses to try to agree the final damages figure, the Court accepted the majority of the generic parties' evidence and submissions as to the way in which the counterfactual scenario was to be assessed.

Ultimately, the Court held that it was very likely Consilient would have persuaded the relevant health boards and National Health Service administrative bodies to promote a switch to Emozul shortly after the proposed launch by KRKA, and it therefore would have obtained a significant share of the market within the first 12 months after launch. However the Court also held that a 20% reduction in damages was appropriate, to account for uncertainty and vicissitudes.

The Court was primarily influenced by the direct evidence from Medicine Managers called by both parties as to their likely response had KRKA been able to proceed with the launch of Emozul, at a discount to Nexium, in October 2010. Medicine Managers are experienced pharmacists employed by the NHS and responsible for guiding and influencing the prescribing practices of general practitioners in the UK, with a view to minimising overall NHS expenditure.

AstraZeneca sought to rely on:

• the actual sales of Emozul when KRKA did enter the market in September 2011, which resulted in a lower market share than the generics claimed would have been achieved in October 2010; and 

• a comparison with the introduction of a branded generic anti-depressant to compete with an originator product, Effexor, which again resulted in a lower market share for the generic product than that claimed for Emozul.

However the Court found both comparators unhelpful, because:

• other generic esomeprazole PPIs had entered the market by September 2011, so competitive discounting had started. On the contrary, there was no reliable evidence that other generics would have entered the market in or shortly after October 2010. Further, the Marketing Managers gave evidence that once Emozul had entered the market, there would have been a general disinclination to promote further switching to other generics; and 

• the Marketing Managers gave evidence that it was comparatively more difficult to encourage switching for anti-depressants, compared to a switch from Nexium to Emozul.

AstraZeneca also argued that it would have reduced the price of Nexium if Emozul had made significant headway in the market. However, this submission was dismissed because AstraZeneca did not put forward sufficient evidence to address complications arising from the fact that the UK price is used as the reference price for Nexium in other European countries.

A court in Australia is likely to consider similar issues to those raised in this case, including:

• the most appropriate counterfactual scenario to inform the assessment of damages, including the actual sales ultimately achieved when the generic party does enter the market, and the performance of other competitors in similar scenarios;

• the likely conduct of the other party in response, had the generic party been able to enter the market;

• whether other competitors would have entered the market at the relevant time; and

• what discount should be applied to accommodate the uncertainties inherent in assessing damages based on an 'unknown' figure such as the generic party's likely market share.

Accordingly, litigants in Australia can take some guidance from this case, in particular when determining the type of evidence that should be prepared in support of their case regarding the assessment of damages pursuant to the usual undertaking.