Spanish Court issues damages ruling in pharmaceutical case

Summary

On 23 June 2023, the recently created Section 32 of the Madrid Appeal Court, specialising in patents, handed down a judgment (no. 18/2023) that is of great interest to the pharmaceutical industry for the following reasons:

• Firstly, due to the detail with which it addresses the issue of damages arising from an infringement of a pharmaceutical patent and its supplementary protection certificate ("SPC").
• Secondly, and what is even more novel, the court attributed the liability derived from the reduction of the price of the original drug only to the holder of the first generic drug that launched before the expiry of the patent and SPC. It did not attribute liability derived from the reduction of the price to the rest of the companies that launched subsequently, despite also launching when the patent and the SPC were also still in force.

Background of the case

Launch of generics

The claimants were the owner and exclusive licensee in Spain of a patent protecting the use of the active ingredient raloxifene in the preparation of a medicament for preventing or treating osteoporosis. The drug was protected by a patent expiring on 28 July 2012, and subsequently by a SPC, valid until 5 August 2013.

The defendants were two companies that launched their generic drugs on the market before the expiration of the patent and the SPC, but did so at different times. The first company launched its generic in May 2011, while the second company did so in January 2012. (This time difference was decisive for the imputation of liability arising from damages to each of the defendants as we discuss below.)

Following the launch of the first generic drug in May 2011, the so-called “homogeneous group” was created, consisting of drugs with the same active ingredient, dosage form, content, pharmaceutical form and route of administration. The grouping therefore was formed by two original raloxifene drugs, marketed under the trade marks OPTRUMA and EVISTA, together with the first raloxifene generic.

Innovator’s response

Under the lower price system, pharmacists have to dispense the lowest priced drug of those that were part of the same homogenous grouping. Consequently, to match the price of the marketed generic, the claimants reduced the price of their drugs by 40%.

In January 2012, the second generic of raloxifene entered the marketed and was included in the same homogeneous grouping. Later, between July 2012 and during 2013, seven other generics from other companies were launched, but the claimants did not issue proceedings against them.

The claimants elected to claim as lost profits the benefits obtained by the defendants not only for the quota reduction effect, but also for the price reduction effect. In other words, not only for the units they stopped selling due to the direct competition caused by the generics, but also for the 40% by which the price of the original drugs had to be reduced once the homogeneous grouping was formed.

Madrid Appeal Court’s decision

In view of the background described above, the Madrid Appeal Court attributed the damages derived from the price reduction effect only to the company responsible for the launch of the first generic drug. It also did so for the entire period from the price reduction of the innovator until the expiration of the SPC on 5 August 2023. This was despite that in January 2012 the second generic had already entered the market and, subsequently from July 2012 to 2013, seven others launched also (whose holders were not sued).

The Madrid Appeal Court considered that the successive generics were incorporated subsequently to a situation already created by the first generic launched to the market. Therefore, in the words of the court, they can be held liable for other responsibilities related to their infringing conduct, but not for causing the price reduction of the original drugs. In the court’s view the corresponding homogeneous grouping is formed for each presentation when a generic drug enters the market for the first time. Therefore, the imputation of liability is justified for the entire time span from the price reduction to the expiration of the exclusive right.

However, the court did acknowledge that the situation would have been different if it had been proven in the proceedings that there had been successive price reductions as a result of the entry of new generics on the market.

Comment

For now, this is an isolated decision, so it is not known whether other courts in Spain will follow the same criterion or not. In the meantime, this ruling could impact upon the strategic decisions of generic drug manufacturers.