Mylan gets green light to export HIV drugs to Venezuela

demand-evidence-and-think-critically-13At a time when the DHC is coming under the scanner for some controversial ex parte interim injunction orders in high stakes disputes, it is heartening to read a well reasoned order by the AP/Telangana HC in the patent infringment matter between Bristol-Myers Squibb (BMS) and Mylan over anti-retroviral drug ‘Atazanavir’. On 5th December, Justice A. Rajasheker Reddy rejected an appeal against the trial court decision denying the interim injunction application, noting that the applicants failed to demonstrate a prima facie case.

[Warning: Long post ahead]

BMS filed a case of infringement against Mylan earlier this year after the latter entered into an agreement with the Pan American Health Organization (PAHO) for the supply of anti-retroviral drug ‘Atazanavir’ worth Rs. 4.5 crore to Venezuela. ‘Atazanavir’ finds a place on the WHO list of essential medicines, is a key anti HIV drug and first on the WHO recommended list for second-line HIV treatment. BMS had been the sole supplier of this drug (brand name Reyataz) to the government of Venezuela for at least 5 years before Mylan entered the scene.

‘Immunity from suit agreement’

On 17th April, 2011, Mylan entered into an ‘immunity from suit agreement’ (similar to a voluntary license) with BMS for the distribution of Atazanavir to certain countries across the world sans any royalty payments. As per BMS’ submissions, the agreement was restricted to certain scheduled countries which explicitly excluded Venezuela. When Mylan won a nearly identical tender with PAHO in 2012, BMS sued them in a New York court for breach of contract. They lost the case with the judge noting that nothing under the agreement prevented Mylan from selling the product directly in other countries, but that “BMS may have a cause of action against Matrix for its sales in Venezuela under relevant patent or other laws.” BMS’s appeal against this decision is presently pending before the US courts.

After Mylan won their second tender for supply of atazanavir with PAHO earlier this year, BMS filed a patent infringement suit against them in the local courts in Hyderabad. The trial court rejected their interim injunction application both ex parte and after hearing both sides. BMS’ appeal forms the basis for the present judgment. See Spadika’s post for more on the history of this litigation.

The judge first spelled out the three step test for grant of an interim injunction from Colgate Palmolive (India) Ltd., v. Hindustan Lever Ltd [1999 (7) SCC 1]: a) prima facie case b) irreparable loss which cannot be compensated in monetary terms c) balance of convenience in its favour.

I. Prima Facie Case

Burden of Proof

BMS has two process patents in India for two intermediate compounds (Patent Nos. 210496 and 206217 for manufacture of chloroketones and oxobutanes respectively) relevant for the manufacture of a precursor compound for atazanavir.  On the question of prima facie case of infringment, the applicant submitted that under Section 104-A of the Patents Act, they only need to prove that

i) the respondents were manufacturing a product identical to the product obtained by the patented process and

ii) that they had taken reasonable efforts to determine what process was used by the respondents in obtaining the same

after which the burden of proof shifts on the respondent to prove that they did not use the patented process to obtain the product.

The respondents argued that they were not manufacturing the precusor compound themselves, but were purchasing it from a third party who was not using the patented process to manufacture the same. They further submitted that process patents only protect against manufacture and sale of an identical product as per Section 104-A.

Section 104-A: Burden of proof in case of suits concerning infringement:

(1) In any suit for infringement of a patent, where the subject matter of patent is a process for obtaining a product, the court may direct the defendant to prove that the process used by him to
obtain the product, identical to the product of the patented process, is different from the patented process if,-

(a) the subject matter of the patent is a process for obtaining a new product; or
(b) there is a substantial likelihood that the identical product is made by the process, and the patentee or a person deriving title or interest in the patent from him, has been unable through
reasonable efforts to determine the process actually used:
Provided that the patentee or a person deriving title or interest in the patent from him, first proves that the product is identical to the product directly obtained by the patented process.

The court held that on a reading of Section 104-A “[t]he products being identical is sine quo non for applicability of Section 104-A of the Act. Only when the court comes to the conclusion that there is an identical product manufactured by the defendant similar to that of the plaintiff, then the Court can call upon the defendant to produce the particulars of the process by which his product is manufactured. It is only then, if the defendant refuses to furnish the particulars of the process, the Court may draw adverse inference and invoke Section 104-A.”

Since the patents are for intermediate compounds, the court held that Section 104A would not shift the burden of proof onto the respondents.

Emphasis on scientific evidence

The court then reviewed the evidence presented by the applicants and found that it failed to introduce sufficient evidence that the respondents were using the patented process to manufacture atazanavir:

“It is pertinent to note that the appellant has not produced any evidence to show that any technology protected by the suit patents covering preparation of alpha-chloroketone and substituted oxobutane was provided to the respondent. The appellant has not produced any scientific evidence to show that the process used by the respondent is same as that of the appellant in manufacturing of Atazanavir. Unless some scientific evidence affidavit of any expert in the relevant field, is filed and proved, as held in the judgment reported in FDC Limited & others v. Sanjeev Khandelwal [2007 (35) PTC 436 (Mad.)], the appellant is not entitled for injunction.”

II. Irreparable loss 

The respondent argued that the applicant could easily be compensated monetarily if they win the infringement suit and hence fail the ‘irreparable loss’ test. The Court agreed with this argument and further ordered the respondent to to furnish a Bank Guarantee before the trial Court to the extent of 5% of the cost of Atazanavir to be supplied to Venezuela every time.

III. Balance of Convenience

On the point of balance of convenience, the respondents cited Hoffman-La Roche Ltd. v. Cipla Ltd., [(2008) 37 P.T.C. 71 (Delhi H.C.)] to argue that an injunction order would be at detriment to public interest. The applicant, on the other hand, argued that public interest only refers to public interest in India and not a third country. The court noted these submission but did not pronounce on the issue of public interest.

Branded and Generic Partnerships

The recent past has seen a series of voluntary license agreements between branded and generic pharmaceutical companies in the attempt to promote access to medicines. Shamnad comments on this trend in the context of the recent Gilead licenses in this post and mulls that “we can no longer expect our home-grown generic companies to guard this turf. Growing partnerships between them and global innovators will mean fewer patent challenges.” In another earlier post on the Gilead licenses, I asked, “Do these VL agreements limit the scope for generic manufacture, even if the Sovaldi patent application fails?” This Atazanavir case plays out this fear. The trend seems to be: MNCs enter into agreements with generics to distribute essential drugs in certain territories. They can then avoid patent oppositions or patent validity challenges. They can also use the agreement to limit generic entry in countries where patent applications are pending or have been denied.

Sure enough, BMS’ patent application for atazanavir in Venezuela was rejected by the Patent Office while another application is undergoing opposition proceedings (Caveat: I am unsure about the present status of the opposition. See this post). Their arrangement with Mylan for supply of the drug to India and certain Sub-Saharan African countries leaves out significant middle income countries, particularly those in South America, who have to then bear the exorbitant branded prices (same story with Gilead). While BMS did not collect royalties for this distribution, Gilead is presently earning 7% on the generic distribution of its drug Sovaldi. Gilead also faces patent oppositions in several jurisdictions, a fact that has taken the back seat since it entered into this agreement with nearly all its generic competitors. With a decrease in litigation and a 7% royalty thrown in, the licenses don’t seem to be too bad a deal. For the branded pharma companies, that is.

The New York court’s decision that Mylan’s supply to Venezuela does not violate its contractual obligations can be easily amended through careful contract drafting. What, then, does this new era of generic-brand drug partnerships really signal for access to medicines? Is contract going to substitute strong IP? In the meanwhile, we will keep you updated on the High Court’s decision on merits.

H/T to Sandeep Rathod for letting us know about the decision.

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