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Servier successful before Henderson J in introducing defence based on the Department of Healths prescribing reimbursement practices

We are now into the Autumn season and the Michaelmas term, which means an influx of new court judgments.  This author was delighted to stumble upon the latest decision in the intriguing litigation between Secretary of State for Health and Others v Servier when browsing through the recent list of Chancery decisions ([2016] EWHC 366 (Ch)).  This long running saga concerns the thorny intersection of patent rights and antitrust claims, and now - an added attraction in the form of the governments role in providing prescribing guidance to healthcare professionals, and making changes to the NHS drugs tariff for reimbursement.

The IPKat was rather less enthused by the decision.

Background

Servier are the suppliers of the original, branded version of Perindopril, which was supplied in the UK under the brand name "Coversyl". Perindopril is an angiotensin-converting enzyme inhibitor ("ACE inhibitor") which is used in the treatment of hypertension and congestive heart failure. Patent EP 1 296 947 (the 947 Patent) was a patent for a particular crystalline form of Perindopril – the alpha crystalline form - which Servier applied for in 2001, and which was in 2007 held to be invalid for lack of novelty and obviousness in Les Laboratories Servier v Apotex Inc ([2007] EWHC 1538 (Pat), upheld by the Court of Appeal [2008] EWCA Civ 445.) In those proceedings it was held that one of Serviers pre-existing process patents, EP 0 308 341, led to the production of the alpha form as its inevitable result.

Following a decision of the European Commission, the Secretary of State for Health ("DoH") has brought a claim in the High Court of England & Wales alleging that Servier tortiuously interfered with the DoHs economic interests by unlawful means in that it procured, defended and enforced the 947 Patent.  The DoH also alleges breach of Article 102 of the TFEU, on the basis that Servier was dominant on the market for the supply of Perindopril or for the supply of ACE inhibitors in the UK between 2011-2007, and that it abused its dominant position.  Further, it claims an infringement of Article 101, on the basis that Servier concluded anti-competitive settlement agreements with various generic suppliers which precluded those companies from challenging the 947 patent, or from supplying generic Perindopril in the UK (i.e. pay for delay). 

Similar legal proceedings have been issued by the Scottish, N Irish, and Welsh health authorities, and the cases have been linked and are proceeding in parallel.

Application to re-amend Defence

This decision concerned an application by Servier to re-amend its Defence, in a form which can be summarised as follows:

1. The Claimant failed to take reasonable steps to encourage switching from the prescription of Perindopril to the prescription of cheaper alternative ACE inhibitors in generic form (the "prescribing argument").  This: (a) results in a failure of the Claimant to mitigate its loss; (b) amounts to contributory negligence in relation to the tortious interference claims; and (c) broke the chain of causation/rendered any damage suffered by the Claimant too remote. 

The DoH opposed this amendment on the basis that it is not reasonable arguable.  The DoHs opposition was motivated by concerns that giving disclosure of all documents formerly held by Primary Care Trusts (predecessors to clinical commissioning groups) in relation to the prescribing argument, and addressing it in witness evidence and at trial would be extremely burdensome and expensive.

2. The Claimant failed to act expeditiously in moving Perindopril into category M (i.e. the generic price category) of the NHS Drug Tariff. This proposed amendment was not challenged by the DoH.

The Scottish, N Irish and Welsh health authorities did not oppose Serviers application to amend.
 
Analysis of the Court

It was common ground that the test for "not reasonably arguable" is the same as the summary judgment standard under Civil Procedure Rule Part 24, namely, whether the amendment has a real as opposed to fanciful prospect of success.  The DoH submitted that there was a fundamental inconsistency between the prescribing argument and the nature of the causes of action. Claims under articles 101 and 102 are aimed at protecting consumers from market power being created artificially or exploited by producers in order to raise prices above competitive levels. It would be incompatible to reduce Serviers liability on the basis that the DoH (essentially the consumer) should never have purchased the product at the inflated price in the first place. 

Henderson J analysed five separate arguments advanced by the DoH for saying that Serviers mitigation defence based on the prescribing argument had no real prospect of success (only the first will be analysed in this report, it being of particular interest). The court noted that the doctrine of mitigation cannot come into play before the relevant breach of contract has occurred.  The issue then was whether the case against Servier involves: (a) allegations of a series of separate infringements of their rights occurring on each occasion when they purchased branded Perindopril; or (b) allegations of certain specific infringements of their rights at specific times which produced a series of losses stemming from those infringements on each occasion that Perindopril was subsequently bought. Ultimately, the issue turned on the form of the DoHs pleading. There was no clearly pleaded foundation for the proposition that each and every supply of Perindopril involved the accrual of a fresh cause of action.  Instead, the claim was framed in the sense that the specific infringements alleged against Servier had the result that generic entry into the market was unlawfully delayed and the consequence that Servier was able to continue charging its normal price for branded Perindopril. The prescribing argument was properly advanced as a failure to mitigate.

The DoH submitted that the prescribing argument could not provide a defence of contributory negligence, because the alleged negligence is not the effective cause of the loss, but merely the occasion for it.  Henderson J noted that this was a highly fact-specific issue which was unlikely to be suitable for summary determination.  It was reasonably arguable that the ongoing levels of purchase at Perindopril at a high price were caused in part by the DoHs conduct in failing to encourage switching to other ACE inhibitors.  Similarly, it is possible that this alleged failure of the DoH amounted to a break in the chain of causation.  In light of the above, Serviers "prescribing argument" defence in its various guises was allowed. 

Comment

So far as this GuestKat is aware, this is the first occasion on which prescribing and reimbursement matters have been raised by way of defence in a claim made by public healthcare authorities against a pharmaceutical company.  The 31 page judgment is a juicy one, and well worth a read for those interested in this area. It is worth remembering that the standard for introducing pleading amendments is a low hurdle, and it remains to be seen whether any of these defences will gain traction with the Court in due course.   

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