Chugai Pharmaceutical Co., Ltd. ("Chugai") filed a patent infringement action in the Tokyo District Court against Iwaki Seiyaku Co., Ltd., Takata Pharmaceutical Co., Ltd., and Pola Pharma Inc. (the "Defendants") for manufacturing and selling generic drugs. In the lawsuit, Chugai sought damages caused by reduction of price of Chugai's original drug caused by price listing of the Defendants' generic drug. On July 27, 2017, the Tokyo District Court issued a judgement in favor of Chugai and ordered the Defendants to jointly pay damages. (Tokyo District Court, Case No. 2015 (wa) 22491)
Background
Chugai is a pharmaceutical company that manufactures and sells the original drug OXAROL ointment and lotion. OXRARL is a drug for treatment of psoriasis vulgaris, and includes maxacalcitol as an active ingredient. Chugai owns Japanese Patent No. 3,310,301 relating to manufacturing method of maxacalcitol (the "Patent"), jointly with Columbia University.
The Defendants purchased maxacalcitol substance from DKSH Japan K.K. DKSH Japan imported maxacalcitol substance manufactured by Cerbios-Pharma SA. The Defendants obtained marketing approvals for maxacalcitol medicine (the "Generic Drug") from the Ministry of Health, Labour and Welfare of Japan (the "MHLW") on August 15, 2012, and the price of the Generic Drug was listed in the MHLW's price list on December 14, 2012. Then, the Defendants started to sell the Generic Drugs in Japan.
The manufacturing method of maxacalcitol adopted by Cerbios-Pharma SA. (which used materials and intermediate materials that have a trans-structure) was different from the method claimed in the Patent (which required use of materials and intermediate materials that have a cis-structure). However, in a separate patent infringement action that Chugai brought against the Defendants (in which Chugai sought injunction), the Supreme Court of Japan eventually ruled that the manufacturing method of maxacalcitol adopted by Cerbios-Pharma SA falls under the technical scope of the Patent under the Doctrine of Equivalents (Supreme Court judgment issued on March 24, 2017).
On April 1, 2014, the MHLW revised the price of Chugai's drug listed in the MHLW's price list, from 138.00 JPY/g to 123.20 JPY/g. In Japan, the MHLW determines and annually reviews prices of drugs to be used for social insurance purposes, and publishes the prices in its drug price list. Under the MHLW's rules, when a generic drug is listed in the price list, the price of the original drug in the price list will be reduced. The revision of the price of Chugai's drug was triggered by the price listing of the Generic Drug.
Chugai field a patent infringement action against Defendants in the Tokyo District Court, seeking: (i) damages caused by losing market share of Chugai's drug due to sale of the Generic Drug; and (ii) damages caused by reduction of prices of Chugai's drug caused by the price listings of the Generic Drug.
Judgment
The Tokyo District Court judged that the Defendants are liable for both damages (i) and (ii) stated above, and ordered Defendants to pay the following:
For damages (i):
- Defendant Iwaki Seiyaku Co., Ltd.: around 200 million JPY
- Defendant Takata Pharmaceutical Co., Ltd.: around 129 million JPY
- Defendant Pola Pharma Inc.: around 170 million JPY
For damages (ii):
- All the Defendants (joint and several liability): around 580 million yen
The Court found that the reduction of Chugai's drug price was caused by the price listing of the Generic Drugs, since Chugai's drug price would not have been reduced if the price of the Generic Drug had not been listed in the MHLW's price list. The Court found that the Defendants shall be liable for damages caused by the reduction of Chugai's drug price.
Comments
This is the first judgment issued by a Japanese court that ruled on the issue of whether generic drug manufacturers are liable for damages caused by reduction of price of the original drug.
When the defendant starts selling infringing products in the market, the price of the plaintiff (patent owner)'s products will often decrease as a result of competition in the market. Prior to this judgment, there were many opinions asserted by scholars and practitioners that the plaintiff should be entitled to recover damages caused by such price decrease. However, in a Japanese patent infringement action, it is generally quite difficult to prove a nexus between the act of infringement and and the plaintiff's damages, unless the plaintiff relies on one of the clauses in the Patent Act that presumes such a nexus under certain conditions. Since the nexus between the defendant's release of the infringing product and the decrease of the price of the plaintiff's products is not covered by such clauses, it is often quite difficult to claim damages caused by such price decrease.
In the current case, there was no dispute between the parties that the price reduction of the original drug was caused by the price listing of the generic drug. In other words, there was no dispute that there was a clear nexus between the price reduction and the act of patent infringement. However, in future cases, there is a possibility that damages caused by price decrease will be awarded in cases other than drug cases.
Written by: Ms. Kiyoko Nakaoka (Attorney at Law, Patent Attorney)