Neil Sadler

Bayer’s “Double Down” Damages Award for Patent Infringement

Neil Sadler

Apr 19 2017

Patents

Bayer Pharma AG (Bayer) pursued Generic Health Pty Ltd (GH) for damages for patent infringement.  In a recent Federal Court decision, GH had been found to have infringed a patent for a pharmaceutical combination of ethinylestradiol (EE) and drospirenone (DRSP) for use as a female oral contraceptive (OC).[1]

Bayer’s claim

Bayer elected damages and claimed a total of $25,751,336 plus interest.

Sales history

Bayer sold its commercial embodiment of the OC Yasmin from August 2002.

From January 2012, GH started to sell its OC Isabelle as a bioequivalent of Yasmin.

Pursuant to a judgment of Jagot J, after a liability hearing on 4 April 2013 and an unsuccessful appeal to the Full Federal Court, on 19 June 2014, GH was required to cease selling Isabelle.

Bayer’s defensive measure

In accordance with established policy, Bayer had previously had obtained approval from the Therapeutic Goods Authority its own lower cost version of Yasmin which was called Pettibelle. It started selling Pettibelle on 20 June 2014.

Bayer’s counterfactual

Bayer contended that it was entitled to base its damages calculations on making every infringing sale of GH itself in the counter factual scenario it presented. Further, it argued it was entitled to maintain its higher profit margin in respect of the less profitable Pettibelle sales for 2 years after Isabelle was withdrawn from sale.

It succeeded on both counts.

How prescriptions worked

It was found that doctors prescribed OC on the basis of the originator brand of OC and continued to do so after Isabelle was introduced. There was no evidence that any doctor ever prescribed Isabelle. Provided that the prescribing doctor did not tick a box “brand substitution not permitted” a pharmacist was able to supply a customer with Isabelle on a prescription for Yasmin. Isabelle could not be supplied in response to a prescription for any OC apart from Yasmin.

Full recovery for lost sales

Justice Jagot made an inference that women would continue to use Yasmin unless subject to a major life event which may cause them to interrupt their use of an OC, cease using an OC or change OC.

A woman could only obtain Isabelle if she had a prescription for Yasmin. The only OC for which Isabelle could be substituted was Yasmin.

Her Honour found that every sale of Isabelle was a lost Yasmin sale in those circumstances. Unlike the market for clothing, equipment and many other consumables here there was, in effect, very limited consumer choice and no substantial substitutability.

The evidence supported the conclusion that the likelihood of any sales of Isabelle which were not lost sales of Yasmin represented nothing more than a very small possibility. Accordingly, there was no reason to make an adjustment of even 1% for sales not picked up in the counter factual (Bayer’s alternative position).

Recovery of lower Pettibelle margins for two years

In respect of the lower gross margin on Pettibelle sales it seems that this was a defence mechanism by GH to prevent end users who had become accustomed to cheaper OCs being lost to Bayer.

Justice Jagot found no cogent reason for concluding that the damages for patent infringement should not extend to loss resulting from the patent holders reasonable and timely actions to redress the effects of infringement, particularly where, as in the present case, those actions would have been reasonably foreseeable to the infringer while the infringing acts were occurring.

Bayer could not recover the loss resulting from the cheaper price of Pettibelle in perpetuity but the period of two years was reasonable.

The writer suggests that should a male oral contraceptives become widely available suitable names might be Farage, Boris, Vlad or Donald!

[1] Bayer Pharma AG v Generic Health Pty Ltd [2017] FCA 250