Generics behaving badly? BMS v Teva illustrates UK judicial mood towards generic launch plans (Part I)

A naughty AmeriKat being dragged home by her MomKat

The AmeriKat would love to give you the impression that she was a model child right up until she left for college.  However, although her MomKat would, of course, say that the AmeriKat was the sweetest child she may pause when forced to comment about her teenage years.  Bad behavior in teenage years is not unique to the AmeriKat.  But, any child will tell you, even when you are well into your twenties, thirties (or even forties), parents will still relish any opportunity to remind you of your teenage bad behavior.

The court also likes to remind parties of their bad behavior.  In the decision of 9 July 2013 in BMS v Teva [2013] EWHC 1958, Mr Justice Birss assumed the role of the "remember when you..." parent in respect of Teva's launch plans.  Unfortunately for Teva, its prior conduct in launching its generic products at-risk featured heavily in the decision.

Background

The case concerned  BMS's patent and SPC covering efarinez, a non-nucleoside reverse transcriptase inhibitor which is used to control HIV infections.  The active ingredient is sold under the brand name SUSTIVA and in formulation under the brand name ATRIPLA.  The patent expires on 3 August 2013 and the SPC expires on 19 November 2013.  On 9 January 2012, Teva was granted a marketing authorization for the generic version of efarinez.

Upon realizing that Teva had a generic marketing authorization, BMS believed that there was a risk Teva was going to launch its generic product before the expiry of the SPC.  BMS's solicitors wrote to Teva on 1 December 2011 asking what Teva's plans were.  Teva told BMS that it was none of its business - its launch plans were confidential and it didn't have tell BMS (or, importantly, the court).  BMS construed this to be a threat, initiated proceedings and applied for an interim injunction.  Teva sought to strike out the application but Birss J rejected the strike out and an interim injunction was granted in March 2012.

Teva accepted that the patent and SPC covered efarinez and that the validity of the patent was not at issue.  The trial subject to July's judgment was whether Teva had in fact threatened to launch its generic product pre-expiry of the BMS patent and SPC which justified BMS commencing proceedings.  If there was such a threat the injunction would continue in the form of a final injunction until the expiry of BMS's SPC on 19 November 2013.

The arguments

BMS argued that in early 2012 it was concerned that Teva was about to launch efavirenz because, namely, (i) there was and is a significant market for the drug in the UK; (ii) Teva had obtained marketing authorization approval 2 years in advance of the expiry of the SPC; (iii) Teva failed to engage in correspondence with BMS as to their launch plans; (iv) Teva's previous behavior with respect of atorvastatin illustrated that Teva had previously launched at risk; (v) Teva could obtain a significant "first mover" advantage if Teva launched early; and (vi) the difficulties in calculating the loss for BMS were Teva to launch.

Those that work in the pharmaceutical industry know that generics covet the "first mover" advantage.   If a generic drug company can start selling its generic version of a branded product before any other generic, then they need only to make a modest discount of the branded price which is often much higher than the cost of manufacturing the generic product.  As soon as other generics enter the market and start competing the price falls rapidly to a level dictated by the generic companies costs of sales and profit margin.

One way to be sure to secure a first mover advantage is to launch "at risk", i.e. before the relevant rights, be it patent or SPC rights, expire.  As recited in the judgment, in 2010 Teva engaged in correspondence with Warner-Lambert stating that it intended to launch generic atorvastatin in November 2011 (after the expiry of the relevant SPC) but then "surreptitiously launched the product on a very large scale in June 2011, before expiry, and without any notice to the patentee."

Further, internal Teva e-mails adduced under a Civil Evidence Act notice, purported to show that after it had obtained a positive Committee for Medicinal Products for Human Use (CHMP )opinion and would therefore obtain a marketing authorization which would make a launch possible, senior staff in Teva started a review to give active consideration to such a launch.

The judge held that the mere obtaining of a marketing authorization for efavirenz nearly two years prior to patent expiry did not itself establish that Teva intended to launch before expiry. However, during cross-examination one of Teva's witnesses "accepted that he was familiar with the idea that part of Teva's strategy is to launch at risk of patent infringement in some cases (e.g. atorvastatin)."  However, based on this evidence, the judge stated that he had

"no reason to infer that Teva's motivation in commencing and scheduling its efavirenz project was driven by an intention to launch efavirenz before expiry of the BMS patent.  Nevertheless it is also plain that if Teva does manage to obtain a marketing authorization for a product sufficiently in advance of expiry to make a launch at risk feasible, that creates an opportunity which Teva well understands for it to launch at risk before expiry."

The judge continued:

"The most likely explanation for the materials I have been shown and the evidence as a whole is that in October 2011 Teva started to give active consideration to the possibility of launching efavirenz in the UK before 19th November 2013 but had not concluded that consideration by the time the relevant people inside Teva received the first letter from BMS's solicitors."

Baby Squid was often getting letters from generics
about their intended launch plans.  Unfortunately,
without any thumbs, he was unable to forward
them to the true recipient, Bristol-Myers Squibb

When the parties engaged in correspondence, Teva refused to divulge its launch plans as it considered these plans confidential. Although this policy did not accord with examples of Teva being prepared to disclose its plans to solicitors acting for other originator companies in similar circumstances, the judge stated that although not universally applied the policy was not simply created for this case.  However, he rejected the idea that

"this information is of a character that a sophisticated patent litigant like Teva could credibly claim that divulging to the relevant originator (under suitable undertakings to prevent its wider dissemination) that Teva had an unequivocal plan to launch a product only after the SPC expired would cause Teva any damage at all."

On the other hand, continued the judge, if Teva did plan to launch at risk than that information would be commercially sensitive because the last person Teva would wish to tell would be BMS as they could then do something about it.  One of Teva's witnesses accepted "that the policy maximised Teva's chance of being able to surreptitiously launch the product without being injuncted and that Teva stood to make money from such an at risk launch".

The judge also accepted that Teva were prepared to launch at risk if they chose to do so and that they were able to do so at short notice.  He did not accept that the nature of the market for efavirenz (selling to hospitals subject to tenders, as opposed to atorvastatin which was sold to retail pharmacies) greatly changed the ability and opportunity for Teva to launch at risk.

Continued in Part II.