England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		24/01/2014

Mr Justice Sales :

Introduction

1. This is an application by the Defendants (respectively, "Krka" and "Consilient") for a payment of damages to be made by the Claimants (together, "AZ") under a cross-undertaking in damages given by AZ in respect of an interim injunction obtained by it to restrain the Defendants from introducing and selling a branded pharmaceutical product, Emozul, in the market in the United Kingdom. AZ obtained that injunction pending trial of its claim that Emozul infringed its patent rights in respect of its own branded pharmaceutical product, Nexium. The injunction was granted by Vos J on 8 October 2010.
2. AZ is an originator group, specialising in the discovery, development, manufacture and marketing of pharmaceuticals, protected by patents. AZ holds a European patent in respect of Nexium, effective in the United Kingdom, which is due to expire in May 2014. Nexium was launched in 2000. It was at that time, and through to 2011, the only product of its particular kind on the market, and as such commanded a high price.
3. Krka is a large generic pharmaceutical company, based in Slovenia. Krka is the manufacturer of Emozul.
4. Consilient is a pharmaceutical sales and marketing company with experience in the generics market in the United Kingdom, which was proposing to market and sell Emozul provided by Krka.
5. Nexium and Emozul fall within a class of drugs known as proton pump inhibitors ("PPIs"), which are used in the treatment of a range of gastric conditions of varying severity. PPIs are dispensed against a prescription written by a doctor, typically a GP.
6. For some time there have been a number of generic, low cost PPIs on the market using omeprazole and certain other active ingredients ("low cost PPIs"). Nexium uses a different active ingredient, esomeprazole. Nexium is considerably more expensive than the low cost PPIs. There is a small group of patients, of the order of about 5% of the population of patients using PPIs, for whom the low cost PPIs are not effective and for whom use of esomeprazole PPIs is necessary in the treatment of their conditions.
7. Emozul is also a drug which uses esomeprazole as its active ingredient. Nexium is produced in tablets, whereas the pharmaceutical form of Emozul is a capsule. Emozul was developed by Krka as a generic esomeprazole PPI, albeit one which was to be marketed with the Emozul brand name – a so-called branded generic drug.
8. Krka took considerable care to develop Emozul as a product which would not infringe AZ's Nexium patent, specifically with a view to being able to compete with Nexium in the market for esomeprazole PPIs. I am satisfied on the evidence I heard that Krka and Consilient believed that Emozul had been developed and produced in such a way that it did not infringe AZ's patent. Krka had, in fact, already launched Emozul in the face of opposition from AZ in Denmark in March 2010, some months before Consilient proposed launching Emozul in the United Kingdom.
9. At the beginning of the hearing, this appeared to be an issue of some significance, since AZ was maintaining a case that, even if the injunction had not been granted, Krka and Consilient would have been deterred from entering the United Kingdom market in a forceful way, and would instead have opted for what was termed a "soft launch" of Emozul, for fear of the risk of litigation against them by AZ relying on its patent rights. However, in light of the evidence given at trial, AZ came to accept that, on the balance of probabilities, in the absence of an injunction Krka and Consilient would have sought to enter the United Kingdom market with Emozul in a forceful manner, based on their belief that they would be vindicated at any trial in their contention that Emozul did not infringe AZ's Nexium patent. This means that it has become unnecessary to examine this issue in any more detail in this judgment, because it is now common ground that the case before me should on this basis proceed on the assumption that in the counter-factual scenario which I have to assess in order to determine the damages payable under the cross-undertaking in damages, the Defendants would not have chosen to market Emozul by way of a "soft launch" out of fear of the risk of litigation by AZ.
10. At the time AZ launched proceedings against the Defendants and obtained the injunction, it faced litigation in England brought by another generics company, Ranbaxy, to challenge the validity and extent of the Nexium patent. Ranbaxy wished to sell a generic esomeprazole PPI tablet in the United Kingdom. A speedy trial was ordered on the preliminary issue of infringement of the Nexium patent, which took place on 9-10 June 2011. On 15 July 2011, Kitchin J handed down judgment in favour of Ranbaxy, to the effect that the Ranbaxy generic tablet did not infringe AZ's patent.
11. AZ did not appeal. It concluded that the judgment in the Ranbaxy proceedings would mean that it could not succeed in its patent infringement claim against the Defendants in respect of Emozul. Therefore, on 18 July 2011 it informed the Defendants that it intended to apply to discharge the injunction against them. On 29 July 2011, the injunction was discharged.
12. After the failure of AZ in the Ranbaxy proceedings, a number of generic esomeprazole PPIs were launched in the United Kingdom market. Ranbaxy launched its generic tablet on 5 September 2011. The Defendants launched Emozul, as a branded generic in capsule form, in September 2011. Mylan launched a generic esomeprazole capsule in November 2011. Teva launched a generic esomeprazole tablet on 14 December 2011. In addition, AZ teamed up with Arrow, a well known generics company, to sell Nexium in Arrow packaging as an equivalent to a branded generic tablet. Arrow launched its branded generic Nexium tablet on 17 July 2011.
13. The entry of these various generic esomeprazole PPIs into the market, at prices well below the price of Nexium, had the effect of eating into Nexium's market share for esomeprazole PPIs and of driving down the price for such products. The arrival of a range of generic esomeprazole PPIs was a significant feature of the market for esomeprazole PPIs in the later part of 2011, which had an impact upon the success of Consilient's launch of Emozul in September 2011.
14. By the time AZ obtained the injunction against the Defendants in October 2010, Consilient had put in place full preparations for a launch of Emozul into the United Kingdom market. The injunction had the effect of keeping Emozul off the market between October 2010 and (allowing time for Consilient to prepare a new launch after the expiry of the injunction) September 2011, when Consilient was eventually able to proceed to launch Emozul.
15. In order to assess the damages payable by AZ under the cross-undertaking in damages I have to compare the extent to which Consilient was successful with Emozul in penetrating the market for esomeprazole PPIs from September 2011 onwards with the relevant counter-factual position, namely the extent to which Consilient would have been successful in penetrating that market if it had not been prevented from launching Emozul in October 2010.
16. In October 2010, Consilient planned to put Emozul on the market at a price 25% less than that charged by AZ for an equivalent dosage of Nexium. In September 2011, Consilient did in fact put Emozul on the market at a price 25% less than that of Nexium. However, as mentioned above, by that time other generic esomeprazole PPIs had entered or were just about to enter the market, driving down prices for esomeprazole PPIs, including Nexium and Emozul, and providing competition for those products.
17. It is agreed that the injunction deprived Consilient of an element of "first mover" advantage in trying to enter the market in October 2010 before other generic esomeprazole PPIs were available, and at a higher price for Emozul than could be charged from September 2011. However, there is a wide divergence between the parties regarding the extent of that first mover advantage and its value in terms of allowing the Defendants to make higher profits had Emozul entered the market in October 2010. AZ says the damages to be awarded should be of the order of £6 million. The Defendants say they should be of the order of £32 million.

The market for prescription drugs

18. PPIs are available to patients on the basis of a prescription written by a doctor, usually a GP. For the purposes of the NHS at the relevant time in 2011/2012 in England, Wales and Scotland, prescription drugs were paid for out of the budgets of Primary Care Trusts or, in Scotland, health boards (I will refer to all these entities as "PCTs"). I was told that in 2010/2011 there were about 200 PCTs. These were of varying sizes, with varying budgets and serving varying local populations. In Northern Ireland at the relevant time, prescription drugs were paid for out of the budget of a single health board (the Northern Ireland Health and Social Care Board - "the NI Board"). It is important to note, therefore, that there was a mismatch between the persons writing the prescriptions which would lead to patients being provided with prescription drugs and the bodies which would bear the cost of providing those drugs.
19. The annual drugs bill for the NHS is huge, and efforts have been made to keep it under control, notwithstanding the freedom of GPs to prescribe any drug (from an extensive range) which they regard as clinically appropriate for their patients. Two aspects of these efforts are relevant in this case.
20. First, the Department of Health ("DH") has set up a scheme known as the Pharmaceutical Price Regulation Scheme ("the PPRS" or "the Drug Tariff") which sets out the prices of drugs which the NHS will pay by way of reimbursement to local pharmacies and dispensing doctors who provide prescribed drugs against prescriptions presented by patients. The DH engages in periodic negotiations with the Association of the British Pharmaceutical Industry and pharmaceutical companies which sell branded drugs to set the relevant reimbursement prices in the PPRS. In effect, in most cases it is the prices in the PPRS which represent the prices at which pharmaceutical companies sell their products to the NHS. In some cases pharmaceutical companies may supply their products to pharmacies (or dispensing doctors) at prices lower than shown in the PPRS, while the pharmacies (or dispensing doctors) can recover the PPRS prices from the PCTs, so as to provide an incentive to pharmacies (or dispensing doctors) to encourage prescribing of those products in their local areas; but where such discounting occurs there are mechanisms in the operation of the PPRS whereby after a period the PPRS prices are brought into line with the lower discounted prices in fact being used to supply those products.
21. There are various categories or groupings of drugs in the PPRS. For present purposes, three categories are relevant: (i) Category C – drugs which are not readily available as a generic, where the price is based on a particular proprietary product (or, in some cases, a particular manufacturer or supplier); (ii) Category A – drugs which are readily available, including in generic form, for which the DH determines the price by using a weighted average of prices used in the market by manufacturers and suppliers (there being a short time lag between periodic re-setting of these prices to allow for collection and assimilation of market data); and (iii) Category M – drugs which are readily available, including in generic form, for which the DH determines the price as an average of the prices charged by generics companies in recent months, based on information submitted by manufacturers (again, with short time lags between adjustment of the Drug Tariff price to allow for collection and assimilation of market data). For drugs in Category C, the relevant manufacturer/distributor sets the Drug Tariff price (albeit a price arrived at after a process of negotiation with the DH or adjustment to remain within general pricing parameters set under the PPRS as a whole). For drugs in Categories A and M, the Drug Tariff price reflects pricing data information derived from the market. The majority of generic drugs are listed in Category M.
22. Secondly, PCTs and the NI Board employed experienced pharmacists as Medicine Managers to provide guidance and assistance to GPs to encourage them to prescribe the cheapest types of relevant drugs for their patients, in order to minimise the overall drugs bill for the NHS each year. The Medicine Managers are in charge of teams of pharmacists and other support staff who are tasked with providing such guidance and assistance. The Medicine Managers and their teams seek to foster close relationships with GP practices to gain their trust and willingness to follow their advice regarding prescribing practices. The teams also provide direct support to GP practices to effect any switches in drugs being prescribed. They do this by going into the practices and reviewing their computerised patient records to identify patients who might be eligible for a particular switch in the drugs being prescribed for them in order to save money, and then supporting the GPs in reviewing whether a switch is indeed justified in the case of those patients and, if it is, assisting the GPs in contacting patients to explain why a switch is being proposed in their cases.
23. The patient reviews which may have to be undertaken to decide whether a switch in prescribed drugs is justified vary between different forms of illness and different types of medicine. In some cases, a switch may be simple, in the sense that it is easy to see that for most patients there are no clinical difficulties involved in moving between different drugs. In other cases, the patient reviews required may be far more elaborate and time-consuming, where evaluative clinical judgments may be required taking account of the results of various tests (e.g. blood tests) before it can be determined that a switch is justified for an individual patient.
24. There may be greater or lesser resistance on the part of patients to accepting a change in the drugs prescribed by them, depending on factors such as their illness and how willing they are to accept advice from their GP about changing. Similarly, there may be greater or lesser resistance on the part of prescribing GPs to switching drugs prescribed depending on a range of factors, including the complexity of the switch envisaged and the effort required to review patients to put it into effect, an unwillingness to disrupt relationships with patients and a degree of inertia or simple resistance to change. GPs will not necessarily automatically change their prescribing behaviour to follow advice and guidance given by Medicine Managers.
25. On the other hand, there was a widespread understanding from before 2010 within the medical community, including GPs, that there were tight constraints on the public funding available for the NHS and if savings were not made wherever possible in relation to the NHS drugs bill there would be cuts in funding elsewhere in the system for other important NHS services. It is very probable that the general attitude of GPs to any proposed switch of prescribed drugs to save money for the NHS would be favourable and that they would seek to be co-operative to a considerable degree, even at the cost of some limited inconvenience to themselves in making a switch. Medicine Managers and their teams work very hard to impress upon GPs the need for and appropriateness of particular switches which the Medicine Managers regard as justified, and for the most part secure a reasonably high degree of compliance by GPs in making such switches - though always depending on the extent to which the Medicine Managers and their teams can minimise the effort required by busy GPs, working hard in their practices, to effect a switch.
26. Some GP practices use computerised aids to encourage GPs to prescribe the cheapest available appropriate drugs when making a new prescription. In particular, a significant number (but by no means all) use a computer programme called "ScriptSwitch" which operates by means of a drop down dialogue box when a new prescription is to be written, to prompt the GP to choose particular, cheaper variants of the relevant drugs. Medicine Managers often have the means to change the entries on Scriptswitch, to reflect the advice they give to GP practices. On the evidence, Scriptswitch is generally used only when a new prescription is issued to a patient for some treatment, and not to effect switches of patients already being prescribed a particular drug onto other equivalent prescriptions for the same drug. The availability or otherwise of Scriptswitch within GP practices was therefore a factor of limited significance in the present context. In relation to the market for esomeprazole PPI prescriptions, Krka and Consilient were focused on trying to win the market for ongoing repeat esomeprazole PPI prescriptions for the rump of patients who had been tried on other, cheaper forms of PPIs without success and had ended up being prescribed esomeprazole PPIs.
27. For a drugs company which wishes to enter a particular sector of the drugs market and hopes to persuade GPs to switch to prescribe its drugs, the principal lever which it will seek to use is to engage the interest and support of Medicine Managers in PCTs, in the hope that they will then issue guidance and provide practical support to GPs to encourage them to make the switch on the ground, when writing prescriptions for patients. In seeking to do this, the main selling point for the entering drugs company to persuade Medicine Managers is the price savings which a switch will achieve for their PCTs. The entering drugs company will obviously be looking to maximise its profits, so will have to strike a balance in trying to set its price at an attractive level for Medicine Managers, but still at a level to generate as much profit as possible. In the present case, in both October 2010 and September 2011 Consilient and Krka decided to pitch the price of Emozul at 25% less than the price of an equivalent dosage of Nexium. They needed to secure a switch in prescribing practice, either to get GPs to write prescriptions for Emozul as a named product (rather than Nexium) or to write prescriptions in a generic way for esomeprazole PPIs in capsule form (the form in which Emozul was produced), rather than in tablet form (which was the pharmaceutical form of Nexium).
28. As regards the general approach of Medicine Managers when deciding whether to adopt a particular switch and promote it with GPs in their area, there was a striking consistency in the evidence of the Medicine Managers who appeared as witnesses. It is, unsurprisingly, a question of cost-benefit analysis. A Medicine Manager contemplating a potential switch has to consider the costs for their team of promoting the switch and assisting GPs to implement it, the opportunity cost in terms of losing other possible costs-saving switches of other drugs as a result of deploying their limited resources to promote this switch and the potential savings for the PCT to be derived from the switch. There is a broad consensus among Medicine Managers, which is well understood in the industry (for example, AZ's industry expert, Mr Carlisle, confirmed it), that a costs saving of the order of £50,000 will generally trigger serious consideration of implementation of a switch. In addition, in the highly straitened financial circumstances of PCTs after the financial crash of 2008 and public austerity measures after that, many PCTs were concerned to try to achieve costs savings of much less than this by promoting switches.
29. Medicine Managers may be willing to meet representatives of drugs companies who are seeking to promote switching of drugs, but often may not be. In both cases, however, Medicine Managers will generally give careful attention to written promotional material and costs savings claims which are sent to them. They do not take these claims at face value, but will conduct their own due diligence reviews to test the viability of the claims to save costs.
30. As part of their job, Medicine Managers engage in what was termed "horizon scanning", looking for indications of new generic drugs about to enter the market in the foreseeable future to which switching might be possible to save money. If new, cheap drugs are about to enter the market, that will affect the cost-benefit analysis referred to above. It may not be cost-effective for Medicine Managers to devote a lot of effort to effecting a switch in prescribing behaviour to one drug, if it can be seen that another, cheaper drug is just about to come onto the market and further effort will be required to effect switching to that drug. In those circumstances, it may make more sense to wait a bit and then organise switching to the newer, cheaper drug.
31. In early 2011 the Government announced major changes to the organisation of the NHS. PCTs were to be replaced by larger conglomerated organisations known as Clinical Commissioning Groups (or CCGs). This change meant that there was a significant degree of disruption in the established systems and personnel in place for dealing with controlling the NHS drugs budget. New drugs review committees had to be established and Medicine Managers had to apply for re-appointment within CCGs. There was evidence from various sources which indicated that this disruption had an impact on the ability of entrant drugs companies to get through to and engage the attention of the relevant decision-makers to persuade them of the merits of particular switches in this period. In my judgment, this distraction factor among Medicine Managers and PCTs preparing for the arrival of CCGs operated as a negative factor upon the effectiveness of switching campaigns in this period which had not existed in October 2010, when the personnel and procedures in place were well-established.
32. The largest part of the market for esomeprazole PPIs is in the primary care field. For most of that market, the supply of the drugs to patients is made by pharmacies in the areas of the PCTs or the NI Board. However, 8% of the market is by way of supply by dispensing doctors (typically GP practices, often in rural areas where pharmacies may be far away, which operate their own dispensaries to supply prescribed drugs). Pharmacies and dispensing doctors operate by buying in stocks of drugs from relevant suppliers and, when they supply drugs to patients, then recovering from the PCT or the NI Board the price for the drugs shown in the Drug Tariff. This feature of the market opens up the possibility of drugs companies offering special deals to dispensing doctors to give them additional financial incentives to switch the drugs to be prescribed.
33. There is also a market for esomeprazole PPIs in the secondary care field, in nursing homes and so on. Consilient planned to tender for certain substantial contracts in the secondary care field.

The witnesses

34. The witnesses all gave evidence in a straightforward and honest way. It is not necessary to comment on them in great detail.
35. The witnesses of fact for Consilient and Krka were as follows:

i) Luke Crosbie is the part-time Executive Chairman of Consilient, who gave evidence about Consilient and its role. He also gave evidence about the nature of the market and explained Consilient's claims, but he was not put forward as an expert witness or as someone who had had direct contact with PCTs and I did not place weight on his evidence about the market. Parts of his evidence consisted of commentary on the evidence of others, which was not appropriate for inclusion in a witness statement;

ii) Borut Lekše is the Deputy Chief Executive Officer and Head of Legal Affairs for Krka. His evidence was mainly directed to Krka's efforts to avoid AZ's Nexium patent and the willingness of Krka to compete forcefully with Emozul against Nexium. As I have explained, that is not an issue which I now have to address;

iii) David Browne is experienced in the sales and marketing of pharmaceutical products. He joined Consilient in February 2010 to undertake the tasks of marketing and selling Consilient's branded Women's Healthcare products (which included generic oral contraceptives) and to oversee the preparations for the launch of Emozul in the summer of 2010. He left Consilient at the end of 2010. His evidence was mainly directed to the marketing preparations for the launch of Emozul in 2010, since these were the arrangements which would have been put into operation in the counter-factual scenario in October 2010;

iv) Simon Coates-Walker is also experienced in the sales and marketing of pharmaceutical products. He was employed by Consilient to replace Mr Browne. Mr Coates-Walker's evidence was mainly directed to the marketing preparations for the launch of Emozul in September 2011 and the experience of trying to enter the market at that stage;

v) Consilient and Krka adduced evidence from a substantial number of Medicine Managers from around the country: Peter Rowe, Maha Yassaie, David Oxley, Ian Small, Shaun Green, Duncan Petty, Helen Liddell, Trevor Hinstridge, Kathryn Turner (for the NI Board), Joseph Brogan (also for the NI Board), Andrew Mumby and Michael Curson. These witnesses were drawn primarily from the group of PCTs with potential costs savings from a switch from Nexium to Emozul in 2010 of £50,000 p.a. or more and provided coverage of all of England, Wales, Scotland and Northern Ireland. It is clear from their evidence that there is a good deal of sharing of experience and ideas within the Medicine Manager community generally. In my view, these witnesses provided a good representative sample of Medicine Managers from which the Court could obtain a good impression of the factors of importance in the operation of the market generally. In important respects, the general picture to be derived from their evidence was confirmed by Medicine Manager witnesses called by AZ and by AZ's market expert, Mr Carlisle. The NI Board has an extant claim against AZ under its cross-undertaking in damages in favour of third parties under the injunction, for losses suffered by it as a result of the injunction, which prevented it from making costs savings by switching from Nexium to Emozul in the period from October 2010. Accordingly, the NI Board has a financial interest to emphasise the extent of the switch it would have made had the injunction not been granted. I gave careful consideration to the evidence of Ms Turner and Mr Brogan bearing this in mind, but I do not consider that it had any impact on the evidence they gave.

36. The witnesses of fact for AZ were as follows:

i) Richard O'Toole is the current Head of Cornerstone Brands and Supply Chain at AZ. At the relevant time he was in AZ's Commercial Team at Head Office, with responsibility for aspects of AZ's strategy in marketing Nexium. He worked on AZ's strategy to respond to loss of market exclusivity for Nexium as an esomeprazole PPI, including the move to release Nexium as an Arrow branded generic product. The most significant part of his evidence related to the possible response by AZ if, in the counterfactual scenario, Consilient made headway in penetrating the market for esomeprazole PPIs, by way of AZ dropping the price of Nexium to compete more effectively against Emozul. As with Mr Crosbie, Mr O'Toole's witness statement contained commentary on the evidence of other witnesses and the expression of opinions which were inappropriate for inclusion in the statement of a witness of fact;

ii) A Civil Evidence Act notice was served in respect of evidence of Mark Jones, who had given the evidence for AZ in support of its application for the injunction. By the time of trial, Mr Jones's evidence had been overtaken by fuller and better evidence from other sources and did not significantly add to that evidence;

iii) The evidence of Medicine Managers adduced by AZ came from Katy Jackson, Alexander Miller, Benjamin Woodhouse and Paul Gouldstone. These witnesses were drawn from PCTs with potential costs savings from a switch from Nexium to Emozul of less than £50,000. In certain respects they gave evidence supportive of and broadly in line with the evidence of the Medicines Managers called by Consilient and Krka. As a general comment on the evidence about the market, the Medicine Manager evidence called by Consilient and Krka provided much better coverage of the relevant market, particularly for the important sector of PCTs with potential costs savings in respect of esomeprazole PPIs in 2010 of £50,000 or more.

37. Each side called expert evidence as follows:

i) Stephen (James) Furniss was called by Consilient and Krka as an expert on the pharmaceutical market and operation of the PPRS. He gave evidence about the suitability and relevance for the purposes of comparison with the esomeprazole PPI market of certain drugs and their impact upon release into the market referred to by the expert economist called by AZ, Dr Helen Jenkins. The principal comparator to which Dr Jenkins made reference was an anti-depressant, venlafaxine, available in capsule form as an originator product called Effexor which in 2009 became available in a cheaper, branded generic tablet form called Venlalic. Mr Furniss disputed that the impact of Venlalic upon the market for venlafaxine, which was relatively modest, provided a good guide to what would have happened if Emozul had been released into the market for esomeprazole PPIs in 2010 rather than 2011. Mr Furniss's evidence was that prescribing behaviour for anti-depressants is very different from that in relation to PPIs, and that any switching in relation to the former would be expected to be more difficult to achieve than in relation to the latter. This is because treatment with anti-depressants is chronic and long term rather than short term and episodic, as for PPIs, and prescribers would be reluctant to switch existing patients who appeared to be benefiting from a particular anti-depressant, because of a recognised and pronounced placebo effect relating to use of an anti-depressant that the patient believes is working. Although Mr Furniss is not himself a clinical expert, his evidence about this was supported by evidence from Medicine Managers who did have that expertise, in particular Lady Yassaie (also, Mr Hinstridge, Mr Small and Ms Turner). Lady Yassaie's evidence was that trying to effect a switch from Effexor to Venlalic had been one of the most difficult she had ever tried to promote, and was of a wholly different order of difficulty from that which would have been associated with trying to effect a switch from Nexium to Emozul in 2010. I found all this evidence persuasive;

ii) Gervase MacGregor was called as an accountancy expert by Consilient and Krka, to give evidence regarding the calculations of the loss they claimed to have suffered. He did not have experience himself of the relevant market, and his calculations depended on input in terms of resolution of factual and legal issues by the Court. Helpfully, he and Dr Jenkins were able to agree between themselves a range of issues affecting the calculation of the damages to be awarded. At the end of the day, there was little dispute between them regarding the proper approach to the calculation of the losses, depending on the input assumptions to be made arising from determination of factual and legal issues by the Court;

iii) Dr Jenkins, called by AZ, is an expert economist with particular expertise in relation to the operation of the pharmaceutical market. She gave evidence both about the calculation of damages (conferring in that regard with Mr MacGregor) and about what she proposed as the appropriate way to approach assessment of the likely loss suffered by Consilient and Krka in relation to the counterfactual scenario of a release of Emozul in October 2010. I consider this evidence in more detail below;

iv) AZ also called Robert (Roy) Carlisle as a witness with extensive experience of marketing pharmaceutical products, including a lansoprazole PPI. He commented on the marketing arrangements made by Consilient to prepare for the launch of Emozul in 2010 and about the operation of the pharmaceutical market. I did not find his criticism of the extent of the preparations made by Consilient persuasive. The arrangements were put in place by Mr Browne, who is himself someone with very extensive marketing experience in the pharmaceutical industry, and were regarded by him as being entirely suitable to achieve an effective launch of Emozul; and I saw no good reason to doubt his assessment made on the ground at the relevant time. As to Mr Carlisle's evidence regarding the operation of the market, I found it broadly confirmed the picture to be derived from the evidence given by the Medicine Managers, whose evidence in any event carried more weight (as being evidence of the persons directly concerned with deciding on the ground whether to support particular switches or not).

The legal framework

38. By the end of the hearing, there was substantial agreement between the parties regarding the legal principles which the court should apply. They agreed that the court should follow and apply the principles identified by Norris J in Les Laboratoires Servier v Apotex Inc. [2008] EWHC 2347; [2009] FSR 3 regarding the assessment of damages due under a cross-undertaking in damages given in respect of the grant of an interim injunction. At paras. [5]-[9], Norris J said this:

"5. The principles of law sufficient to enable me to quantify compensation in this case may be shortly stated:-

(a) The undertaking is to be enforced according to its terms. In the instant case (as in many others) it is that Servier will comply with any order the court may make "if the court…finds that this Order has caused loss to the defendants." The question for me is therefore: what loss did the making of the Order and its continuation until discharge cause to Apotex?

(b) The approach is therefore essentially compensatory and not punitive;

(c) The approach to assessment is generally regarded as that set out in the obiter observation of Lord Diplock in Hoffmann-La Roche v Secretary of State for Trade [1975] AC 295 at 361E namely:-

"The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction: see Smith v Day (1882) 21 Ch D 421 per Brett LJ at p427."

(d) What Apotex was trying to do (and what the Order restrained it from doing) was to enter a new market for the sale of generic perindopril. It was denied exploitation of this opportunity. The outcome of such exploitation is attended by many contingencies but Chaplin v Hicks [1911] 2 KB 786 establishes (per Vaughan Williams LJ at p.791) that whilst "the presence of all the contingencies on which the gaining of the prize might depend makes the calculation not only difficult but incapable of being carried out with certainty or precision" damages for the lost opportunity are assessable.

(e) The fact that certainty or precision is not possible does not mean that a principled approach cannot be attempted. The profits that Apotex would have made from its exploitation of the opportunity to sell generic perindopril depend in part upon the hypothetical actions of third parties (other potential market participants) and in part upon Servier's response to them. A principled approach in such circumstances requires Apotex first to establish on the balance of probabilities that the chance of making a profit was real and not fanciful: if that threshold is crossed then the second stage of the inquiry is to evaluate that substantial chance (see Allied Maples v Simmons & Simmons [1995] 1 WLR 1602). As Lord Diplock explained in Mallett v McMonagle [1970] AC 166 at 176E-G

"…. in assessing damages which depend on its view as to what…. would have happened in the future if something had not happened in the past, the Court must make an estimate as to what are the chances that a particular thing….. would have happened and reflect those chances, whether they are more all less than even, in the amount of damages it awards…"

(f) The conventional method of undertaking this exercise is to assess damages on a particular hypothesis and then to adjust the award by reference to the percentage chance of the hypothesis occurring. In many cases it is sufficient to postulate one hypothesis and make one discount: but there is no reason in principle why one should not say that either Scenario 1 or Scenario 2 would have occurred and to discount them by different percentages. That is the course which Mr Watson QC urged in the present case: and I note that it has some support in Earl of Malmesbury v Strutt & Parker [2007] PNLR 570.

6. Although that summary is probably a sufficient statement of the principles that I must apply in determining this case I should clarify my approach to the relevant principles in three respects.

7. First, I am following the obiter guidance contained in the opinion of Lord Diplock in Hoffmann-La Roche because, on the evidence and argument presented at trial, it is sufficient to enable me to determine the issues that arise. For my own part, I think it should be recognised that the award is of equitable compensation (not of damages strictly so called) and that there may be occasion to examine whether such equitable compensation should be fettered by rigid adherence to common law rules; and further, that if common law rules are to be applied, whether those relating to contract are more appropriate than those relating to tort or some other breach of duty (in which connection it will be noted that the judgment of Brett LJ upon which Lord Diplock founded his view referred to "[a] contract with or duty to the opposite party"). The difference between the two sets of common law rules would be important, for example, in the context of aggravated or exemplary damages for a blatant or cynical interference with a defendant's right to enter a pharmaceutical market with a generic drug by means of a second generation patent that is a "try on" (to adopt the language of Jacob LJ).

8. Second, proceeding on the footing that the enquiry on the cross undertaking is to be conducted according to the principles applicable to contractual damages, I should record that the form of the case before me has meant that I have not been called upon to consider whether it is appropriate to depart from the conventional contractual basis of assessment and instead to apply the exceptional "restitutionary" basis of assessment in contract considered in Attorney General v Blake [2001] 1 AC 268. Where what is found to be a wrongful extension of patent protection results in a benefit to the patent holder which exceeds and outstrips the loss which is occasioned to the generic company whose market entry is delayed then it seems to me that "restitutionary damages" might be called for (notwithstanding the rejection by the Court of Appeal in Smithkline Beecham v Apotex [2006] EWCA Civ 658 of the argument for a general restitutionary claim based on unjust enrichment and enforceable by parties and non-parties alike). In the present case I know only (because it was accepted in argument) that the profits made by Servier from the sale of perindopril during the period of the wrongfully granted injunction "significantly exceed" the maximum sum which it can be called upon to pay on the present enquiry.

9. Third, whilst it is for Apotex to establish its loss by adducing the relevant evidence, I do not think I should be over eager in my scrutiny of that evidence or too ready to subject Apotex' methodology to minute criticism. That is so for two reasons, quite apart from an acceptance of the proposition that the very nature of the exercise renders precision impossible. (a) Whilst, in order to obtain interlocutory relief, Servier will not have had to persuade Mann J that it was easy to calculate Apotex' loss in the event of the injunction being wrongly granted, it will have had to persuade him that that task was easier than the calculation of its own loss in the event that the injunction was withheld. The passages I have cited from its skeleton argument and evidence show that it did so. Having obtained the injunction on that footing it does not now lie in Servier's mouth to say that the task is one of extreme complexity and that the court should adopt a cautious approach. Having emphasised at the interlocutory stage the relative ease of the process, it should not at the final stage emphasise the difficulty. (b) In the analogous context of the assessment of damages for patent infringement, in General Tyre [1976] RPC 197 at 212 Lord Wilberforce said:-

"There are two essential principles in valuing the claim: first, that the plaintiffs have the burden of proving their loss: second, that the defendants being wrongdoers, damages should be liberally assessed but that the object is to compensate the plaintiffs and not to punish the defendants."

The principle of "liberal assessment" seems to me equally applicable in the present context. Although a party who is granted interim relief but fails to establish it at trial is not strictly a "wrongdoer", but rather one who has obtained an advantage upon consideration of a necessarily incomplete picture, he is to be treated as if he had made a promise not to prevent that which the injunction in fact prevents. There should as a matter of principle be a degree of symmetry between the process by which he obtained his relief (an approximate answer involving a limited consideration of the detailed merits) and that by which he compensates the subject of the injunction for having done so without legal right (especially where, as here, the paying party has declined to provide the fullest details of the sales and profits which it made during the period for which the injunction was in force)."

39. The parties also largely agreed on the approach to be adopted to assessing the value of the loss of the chance for Consilient to enter the market in October 2010 under the approach set out in Allied Maples Group Ltd v Simmons & Simmons [1995] 1 WLR 1602, CA, and as explained by the House of Lords in Transport for London (London Underground Ltd) v Spirerose Ltd [2009] UKHL 44, at [44], and by the Court of Appeal in Vasiliou v Hajigeorgiou [2010] EWCA Civ 1475, [53]-[55]. By the end of the hearing and closing submissions, AZ accepted that Consilient and Krka had shown on the balance of probabilities that but for the grant of the interim injunction they would have sought to enter the market from October 2010 with full force and effect, seeking to win as much market share for Emozul as they could using the marketing resources Consilient had put in place. No distinct assessment was required of what might have happened in a different counterfactual scenario, if Consilient and Krka had limited their marketing efforts, out of fear of the damages they might have to pay AZ if it later transpired that they acted in infringement of AZ's patent in respect of Nexium.
40. A significant issue which did arise and was not resolved by agreement related to the approach the court should adopt to the question whether AZ would at some point have sought to drop its price for Nexium if Emozul had made significant headway in the market for esomeprazole PPIs. The position in relation to this was somewhat complicated by the fact that AZ's primary case was that Emozul would not have made sufficient headway in the market to cause AZ to drop the price for Nexium. But the greatest difficulty was caused by a lacuna in the evidence presented by AZ. In his witness statement, Mr O'Toole said that if the market share of Nexium dropped by a minimum of 20%, AZ "would have reduced its list price by 10-15%". However, he also said that such a response, if proposed by him, would have required clearance from AZ colleagues in Europe because of possible knock-on effects on AZ's profits in other European markets, by reason of "reference pricing". This part of his evidence was amplified in the course of cross-examination. If Mr O'Toole had proposed a price reduction, that proposal would have gone for formal review by others within AZ who would have assessed what impact a price reduction might have on profits elsewhere in Europe. In particular, in certain other European countries the UK price for Nexium is used as the reference point to determine the price payable for Nexium in those countries, so if there were a reduction in price in the UK then that would also reduce AZ's prices and hence profits in those countries (where, as yet, it was not facing any immediate prospect of competition from Emozul).
41. A cost-benefit analysis would have been required, weighing up the profits potentially to be saved in the UK market (by trying to conserve market share against Emozul, albeit at lower unit prices) against the profits which would be lost in other European markets. Mr O'Toole did not know about the parameters governing this cost-benefit analysis (such as the size of the other European markets for Nexium, the profits being made in those markets and the extent of exposure of those markets to a price reduction for Nexium in the UK). It is possible that such an analysis would have indicated that AZ would have been overall better off maintaining the price of Nexium in the UK, even against the prospect of losing market share to Emozul, in order to preserve its profit margins elsewhere. These were all matters within the knowledge of AZ, but it called no evidence to explain this critical dimension of the dispute regarding the extent of the loss of profits experienced by Consilient and Krka. Consilient and Krka were thus deprived of evidence within AZ's control which would have enabled them to evaluate and quite possibly challenge AZ's claim that it would have reduced the price of Nexium in the way outlined by Mr O'Toole. The Court was disabled from making a critical evaluation of that claim.
42. Where a party elects not to adduce evidence available to it in relation to a relevant matter, the court may draw inferences of fact against that party: Wisniewski v Central Manchester Health Authority [1998] Lloyds Rep Med 223, 240; Herrington v British Railways Board [1972] AC 877, 930G-H (Lord Diplock); The Law Debenture Trust Co. Plc v Elektrim [2009] EWHC 1801 (Ch), [176]. Since it must have been obvious to AZ that evidence about its own cost-benefit analysis comparing the UK and European markets would be relevant to assessment of this issue, which had been raised by AZ itself, but it chose not to adduce such evidence, I consider that the just and appropriate approach in the circumstances of this case is to assess the counterfactual scenario on the footing that AZ would not have dropped the price for Nexium in the face of significant inroads into its market share by Emozul. Putting it another way, AZ did not persuade me that there was any real or significant possibility that it would have reduced its prices for Nexium in the counterfactual scenario.
43. There is no basis in the evidence for thinking that there was any real possibility that any other generic esomeprazole PPI product would have been introduced into the market by any other providers any earlier than in fact occurred. The main impediment for other providers was fear of AZ's patent in respect of Nexium, which AZ sought vigorously to enforce until judgment against it in the action against Ranbaxy. Krka did not share that fear, because of the work it had done to come up with a product which it was satisfied did not infringe that patent.

Assessment of the counterfactual scenario

44. In my judgment, Consilient had made appropriate preparations for an effective marketing campaign in October 2010 to launch Emozul into the market. Mr Browne had put in place a team of four Key Account Managers, which he considered would be adequate and appropriate to cover the whole of the UK in an effective way. I accept his assessment. In the circumstances of 2010, the cost savings to be offered by a switch from Nexium to Emozul were sufficiently attractive in the market circumstances that prevailed at the time that it is likely that this marketing team would have secured a ready and receptive audience amongst Medicine Managers which would have allowed them to get their marketing message home across the whole country without significant difficulty. I also consider that the media campaign planned by Consilient for 2010 was reasonable and appropriate.
45. All Consilient's launch preparations were in place by early October 2010. It had received notification from the DH that Emozul was to be included in Category C of the Drug Tariff with effect from 1 November 2010. Without the interim injunction, it is probable that Emozul would have been launched by about the middle of October 2010. AZ sought to point to delays in Consilient getting its marketing underway in September 2011 in order to suggest that the launch would have been similarly delayed in the counterfactual scenario. I do not agree with this. In the counterfactual scenario, Consilient was already poised to make its full launch when the interim injunction was granted, and there was a considerable premium attached to launching promptly. In September 2011, by contrast, Consilient had been surprised by the abandonment of the injunction in July 2011 and had had to ramp up its launch arrangements from that point.
46. The early assessment by Consilient by about mid-2010 was that, although Emozul would be likely to capture market share when launched, the gains would be comparatively modest and significantly below the market share which Consilient and Krka now say they would have achieved in the counterfactual scenario. In December 2009, for example, Consilient produced a projection of 25% market share over three years with a slow uptake at the start. In May 2010, Consilient's projection was that a launch in August 2010 would gain market share of 26% by December 2010 which would then plateau on the basis of other generic entrants. Mr Browne was more cautious in his expectations than Mr Crosbie. AZ sought to rely upon this evidence in responding to the damages claim at trial.
47. However, I do not consider that the early estimates by Consilient about what might be achieved carry significant weight as guides for the Court. They were overtaken by three things. First, in the summer of 2010 members of Consilient's sales force had meetings with a small number of Medicine Managers (including Mr Hinstridge), who proved to be very positive about the likelihood of switching from Nexium to Emozul on grounds of price.
48. Secondly, on 17 August 2010 Consilient arranged for five PCT pharmacists and one hospital pharmacist, drawn from target PCTs in the class with larger prospective costs savings if they switched to Emozul, to attend what was referred to as an "advisory board", to provide advice to Consilient whether its proposed offering of Emozul at a 25% price reduction below Nexium would be likely to attract support of PCTs for a switch. As explained in the evidence of Mr Browne and Ms Liddell, who were present, all those attending were again positive about the proposal, and said they would proactively switch to Emozul to save money (notwithstanding that Emozul was a branded generic, and the general disposition of Medicine Managers is antipathetic to branded prescribing). The experience of those used to dealing with such advisory boards, which are a common feature in preparing for the launch of pharmaceutical products, is broadly to the effect that the pharmacists attending them will seek to give their unbiased and (if they feel it justified) critical views about a proposed new product. So the positive reactions of the pharmacists at this advisory board were significant genuine indicators of their views regarding the likely reactions of PCTs to the launch of Emozul. I see no reason to doubt the genuineness and sincerity of the views expressed at the advisory board. Mr Browne and Consilient were greatly encouraged by the response at the advisory board and became more optimistic regarding the likely market share which Emozul might achieve.
49. Thirdly, and most importantly, the Court itself heard direct evidence from a range of Medicine Managers as to their likely response to a launch of Emozul at that price discount to Nexium in October 2010. This was better, more representative and more compelling evidence about what would have happened in the counterfactual scenario than was available to Consilient in the early part of 2010.
50. One factor which was referred to at the advisory board and in the evidence of the Medicine Managers was the general wish of PCTs to switch patients in need of PPIs from expensive esomeprazole PPIs to low cost PPIs using different active ingredients such as omeprazole or lansoprazole. AZ suggested that Medicine Managers would not have wished to detract from their efforts to achieve this by seeking instead to encourage a switch from Nexium to Emozul.
51. I do not find this suggestion persuasive. It is true that PCTs wished to encourage the use of low cost PPIs wherever possible, but they had been actively campaigning to achieve this for some considerable time before October 2010 and are likely to have assessed that they had probably achieved as much as could reasonably be expected to deter prescribing of esomeprazole PPIs by GPs. Experience showed that there was a small rump of patients (about 5% of those using PPIs) for whom use of esomeprazole PPIs had been found still to be necessary or unavoidable. By October 2010, therefore, the practical issue was whether there was some attractive way in which the drugs cost in relation to this rump of patients who were being prescribed esomeprazole PPIs could be reduced. A switch to Emozul represented a way (in practice at the time, the only way) in which this could be achieved. Moreover, the reaction of the pharmacists at the advisory board and the strong consensus among the Medicine Managers who gave evidence was that this would be an easy switch to implement.
52. Another issue discussed at the advisory board and again in the evidence and submissions at trial was the value (or otherwise) of a further price guarantee which Consilient proposed to offer PCTs who switched to Emozul and encouraged prescribing it by its brand name, as distinct from simply by way of generic prescription for esomeprazole in capsule form. Although there was some debate about this at trial, it is likely that the price guarantee which Consilient would have offered in the counterfactual scenario would have been in the following terms (this being the latest iteration of what was proposed before the interim injunction was granted):

"Price Guarantee

It is possible that over time there potentially could be esomeprazole products in either capsule or tablet form introduced by other suppliers to the UK. Consilient Health confirm that in the event that alternative esomeprazole products to the Emozul® range in either capsule OR tablet form are marketed with a lower NHS list price, or a lower category A reimbursement price, or a lower category M reimbursement price than the Emozul® brand price, then Consilient Health will reimburse the difference between the Emozul® brand price and the lowest available reimbursement price to your PCO for all scrips in your PCO which are written for Emozul®. This will be rebated quarterly and calculated based on the prescription information provided by your PCO for that period. This means that if your PCO recommends prescribing Emozul®, it can be assured that it is receiving the best value esomeprazole capsules or tablets in the future.

Cost of switching

Consilient Health understands that there is a cost associated with a PCO implementing and encouraging compliance for a prescribing recommendation switch to Emozul®. To support this, Consilient Health is offering an additional rebate per pack to PCOs for all Emozul® scrips written in your PCO as set out in the table below. This will be rebated quarterly and calculated based on the prescription data provided by your PCO for that period. This rebate per pack will be applicable while the NHS list price for Emozul® remains as set out in the table below and while the Price Guarantee above does not result in a price differential rebate.

Brand name Pack Size NHS List Price Rebate

Emozul® 20 28 £13.88 £0.69

Emozul® 40 28 £18.89 £0.94

The Continuity of Pricing commitment and the Price Guarantee are given until at least June 2012 and assume that current reimbursement systems remain in place. Consilient Health Limited reserves the right to renegotiate terms in the event of a major industry change in pricing arrangements."

53. On my assessment of the evidence, the price guarantee which Consilient would have offered would have been of little effect in encouraging PCTs to promote a switch from Nexium to Emozul esomeprazole capsules. PCTs generally were wary of promoting branded products on a switch. The main driver in favour of a switch, which I find would have been a very powerful one, was the price reduction being offered by Consilient.
54. AZ sought to submit that the price guarantee would in fact have had a deterrent effect upon PCTs with respect to their willingness to promote a switch from Nexium to Emozul/esomeprazole in capsule form, since it would have suggested to Medicine Managers that it was likely that low cost generic esomeprazole PPIs in either capsule or tablet form would be coming onto the market in the near future. That would mean that Medicine Managers would think it better to wait for that to happen, rather than devote time and effort to promoting a switch to Emozul in 2010 which would soon be overtaken by events.
55. I was not persuaded by this submission. Medicine Managers understand very well that at some point when a patent comes to an end generic drugs are likely to appear, and would have been aware that this was likely to be the case in relation to Nexium in the medium term, in about 2014. The fact that Consilient would have offered a price guarantee in the counterfactual scenario would not, on the evidence, have been taken as any clear suggestion that generic esomeprazole PPIs were likely to appear more quickly than that. Of greater importance for the assessment made by Medicine Managers would be their own horizon scanning for new, low cost products. There was no significant evidence that such scanning would have suggested that low cost generic esomeprazole PPIs were likely to arrive on the market in the near future. The positive reaction of Medicine Managers and pharmacists consulted by Consilient in the summer of 2010 and the evidence of the Medicine Managers called by Consilient and Krka from PCTs with more substantial potential cost savings that they would have promoted a switch to Emozul are strongly indicative of the absence of any expectation in the relevant market in 2010 that low cost generic esomeprazole PPIs were due to come on the market in the near future.
56. AZ also sought to suggest that the form of Consilient's offer of Emozul combined with the price guarantee would have been off-putting to Medicine Managers, because it would have appeared to be complex and difficult to understand. I do not accept this. The basic proposition of attraction to Medicine Managers would have been that Emozul offered an equivalent treatment to Nexium at a price reduction of 25%. That would have been easy to understand. The addition of a possible price guarantee in certain circumstances in addition to that would not have confused anyone.
57. My assessment on the evidence, therefore, is that PCTs' and the NI Board's perceptions in the counterfactual scenario had Emozul been launched in October 2010 would have been that (i) there was a fixed and in practice irreducible rump of patients for whom prescribing of esomeprazole PPIs would be likely to continue indefinitely; (ii) there was no prospect of another, lower cost source of esomeprazole PPIs becoming available on the market in the near future; (iii) a switch to Emozul would represent the only practical way of reducing the substantial cost of esomeprazole PPIs being prescribed for a substantial period of time; and (iv) arranging a switch to prescribe Emozul or esomeprazole PPI capsules would be simple and straightforward and could be expected to encounter little resistance from patients and GPs. Consilient, with Krka standing behind it as supplier of Emozul, would have been regarded as a reliable source of supply for PPIs.
58. Accordingly, in my view, the cost-benefit analysis which Medicine Managers would have carried out for PCTs with potential annual cost savings of £50,000 or more and the NI Board, had Emozul been launched in the counterfactual scenario in October 2010, would have been strongly in favour of promoting the switch with prompt effect. Also, even among those PCTs with potential cost savings of less than £50,000 there would have been a reasonable proportion (representing, in my assessment, about 40% of the esomeprazole PPI market in relation to such PCTs) of Medicine Managers who would similarly have decided that it was appropriate to promote the switch with prompt effect.
59. Perhaps the most important area of dispute at trial was about the appropriate methodology the Court should adopt on the evidence before it to the evaluation of financial value of the chance to enter the market for esomeprazole PPIs which was lost by Consilient and Krka as a result of the interim injunction. Consilient and Krka submitted that the Court could and should proceed on the basis of, in particular, the evidence given by the Medicine Managers who were called as witnesses at the trial. AZ, on the other hand, submitted that this was an unsafe guide for various reasons, and that the Court should instead follow and adopt the alternative methodology employed by Dr Jenkins.
60. Dr Jenkins and AZ were critical of an approach to assessment of likely behaviour of Medicine Managers in the counterfactual scenario which depended upon giving weight to their evidence in answering the question what they would have done in that scenario, referring in that regard to academic studies of persons responding to questionnaires in surveys, which conclude that there tends to be a bias to exaggerate the impact of monetary incentives in relation to hypothetical scenarios in some circumstances. Dr Jenkins referred to the evidence of Medicine Managers as suffering from "hypothetical" or "cheap talk" bias, which is regarded as an issue in the academic literature in relation to survey construction. The suggestion was that I should for this reason discount the evidence given by the Medicine Managers at the hearing.
61. I reject this suggestion. I did not find this academic material of assistance. The function of the Court at a trial is to assess the evidence it hears for itself, bringing to bear its own understanding of the surrounding circumstances and making its own evaluation of the sincerity, reliability and credibility of evidence given, in the context of an overall assessment of probabilities and of possible prejudices or incentives to embroider or distort. This is not a matter for expert evidence. For example, other than in wholly exceptional circumstances, a Court will not receive expert psychologist evidence regarding whether a witness is likely to be lying, embroidering or telling the truth, but will make its own assessment of this. Similarly, it is not appropriate for the Court to rely on academic studies of the kind put before me in making its assessment of the evidence given by witnesses as in this case.
62. I heard the Medicine Managers give evidence, explain what actions they would have taken and give their reasons for that. My assessment is that their evidence was credible and reliable. There was, moreover, a strong and broad consensus among them on the main points which greatly increased my confidence that it was just and appropriate to treat their evidence as credible and reliable. Further, I am satisfied that Consilient and Krka called a good representative range of Medicine Managers as witnesses, such as to provide a reasonable indication of the likely reactions of Medicine Managers throughout the country. The number and geographical spread of those called as witnesses, particularly in view of the similarity of the evidence given on the issues in the case, was reasonable and proportionate to the matters to be determined at trial.
63. By contrast with reliance on the evidence of Medicine Managers, the main guides to the counterfactual scenario on which Dr Jenkins and AZ relied were (i) comparison with what happened when Emozul did eventually enter the market in September 2011 (when its penetration of the market for esomeprazole PPIs was considerably less than that which Consilient and Krka said would have been achieved in October 2010, relying on the evidence of the Medicine Managers) and (ii) comparison with what happened when the branded generic anti-depressant Venlalic was launched in competition with Effexor in 2009 (when, again, the penetration of the market achieved by the new entrant was considerably less than that which Consilient and Krka claimed Emozul would have achieved if launched in October 2010). Also, in relation to both comparator situations, Dr Jenkins highlighted that there was not a strong correspondence a year after launch between PCTs which stood to make larger savings by effecting a switch and the degree of market share achieved by the new entrant within those PCTs, with a view to drawing the inference that other factors affected PCT switching behaviour than simple cost savings.
64. I did not find either of the comparator situations which Dr Jenkins and AZ sought to emphasise persuasive as guides to assessment of the counterfactual scenario. There were major differences between each of the comparators and the counterfactual scenario which prevented them from being useful indicators of what would have happened in the counterfactual scenario. I found the evidence of the Medicine Managers far more persuasive and credible as a guide to what would have happened in that scenario.
65. The limited success of Emozul once it entered the market for esomeprazole PPIs in 2011 is not a good guide to what would have happened if it had been allowed to enter the market in 2010. As mentioned above, by September 2011, other, cheaper generic esomeprazole PPIs either had entered or were about to enter the market, after AZ lost its case against Ranbaxy based on the patent for Nexium, with judgment handed down on 15 July 2011. On 17 July 2011, Arrow launched what was in substance a branded generic esomeprazole PPI capsule in conjunction with AZ; on 5 September 2011 Ranbaxy launched a generic esomeprazole PPI tablet; in November 2011 Mylan launched a generic esomeprazole PPI capsule; in December 2011 Teva launched a generic esomeprazole PPI tablet. In short, by the time Consilient was released from the interim injunction the market for esomeprazole PPIs had been completely transformed by the entry of low cost generics which had not been on the horizon in October 2010. A competitive price war had opened up, and this in turn transformed the cost-benefit analysis for Medicine Managers about whether to put time, effort and resources into promoting a switch from Nexium to Emozul/esomeprazole PPI capsules. The expected operation of the newly highly competitive market for esomeprazole PPIs would produce cost savings by natural general downward pressure on prices without PCTs necessarily having to promote a switch to Emozul. Emozul faced far greater difficulties in taking market share in this competitive environment than it would have done in the much more restricted competitive environment in October 2010, analysed above.
66. It is also relevant that if Emozul captured market share in 2010/early 2011 through a change in prescribing practice promoted by Medicine Managers, it is likely that there would have been a general disinclination to try to promote further major switches as other generic esomeprazole PPIs came on the market. It would generally have been cost-effective to wait for downward pressure on prices from generic competition, bringing the PPRS prices of both Nexium and Emozul down with it under the mechanisms described above. This feature of the case again tends to reinforce an overall assessment of the considerable financial value of first mover advantage for Consilient, had it been able to enter the market with Emozul in October 2010.
67. Furthermore, the evidence supports the contention of Consilient and Krka that the reorganisation of the NHS announced in early 2011 had a significant disruptive effect on the decision-making procedures within PCTs, which made it more difficult in September 2011 for Consilient's sales force to gain access to relevant decision-makers and then to persuade them to devote the effort necessary to arranging to promote switching behaviour. Also, the resources which Consilient was prepared to devote to trying to win market share for Emozul in September 2011 were less than those it had allocated for a launch in 2010.
68. Consilient also referred to some other factors which operated after the launch in 2011 with a negative effect on the ability of Emozul to penetrate the market, which would not have applied in relation to a launch in 2010. Emozul had to be de-listed from the PPRS in 2010 after the injunction was granted and there were administrative delays in getting it restored to the PPRS in 2011. Consilient also faced disruptions to its supplies and spurious out-of-stock reports (which in fact related to a PPI capsule produced by Mylan, not Krka) which damaged its reputation with PCTs and prescribers after September 2011, which were associated with particular circumstances at that time and would probably not have been present in the counterfactual scenario. I think these are factors, albeit of lesser significance, which further serve to undermine the appropriateness of using Emozul's actual performance from September 2011 as a comparator.
69. I also consider that the launch of Venlalic in 2009 was flawed as a comparator, for the reasons given by Mr Furniss and supported by the evidence of the Medicine Managers (particularly Lady Yassaie) about the difficulty of promoting a switch in prescribing anti-depressants as compared with the ease with which a switch from Nexium to Emozul could have been achieved: see paragraph [37] above. Dr Jenkins also referred to other comparators (in particular, the launch of Laxido in May 2008 and Peptac before 2000), but attached less weight to these. In my view, the circumstances of launch in each case were significantly different; and again, this evidence does not outweigh the far better and more persuasive evidence provided by Medicine Managers regarding the counterfactual scenario. In relation to Laxido, for example, Mr Petty gave a convincing explanation why the switch environment was very different, an important factor being that there are many more patients taking macrogol laxatives (of which Laxido was a new entrant) with lower potential costs savings, which affects the cost-benefit analysis which Medicine Managers would undertake in relation to that switch.
70. Dr Jenkins also sought to derive support for her more conservative estimate of the degree of market penetration by Emozul in the counterfactual scenario from a report by the European Commission into the pharmaceutical sector dated 8 July 2009, Pharmaceutical Sector Inquiry: Final Report. As she summarised the Commission's findings, "the average market share of full generic entry is around 40% after one year and this is associated with a 22% price differential (on average) between the originator and the generic product", and she suggested that the market share which one would expect to be gained by a branded generic entrant would be less than this. Again, however, I did not find this evidence persuasive. As is clear, it addresses average figures, and is not tailored to the specific circumstances of this particular market in the particular context of a launch in 2010. I agree with Mr Furniss's assessment that the report is not helpful in providing guidance in this case.
71. A further comparator prayed in aid by AZ was the performance of certain generic oral contraceptives marketed by Consilient to PCTs. These achieved 24% market share in three years. Again, however, the relevant market for use of oral contraceptives is very different from that for PPIs. There are specific factors which tend to make the oral contraceptives market more resistant to changes of prescription (there is significant brand loyalty and potential savings for PCTs are comparatively low) and this comparator again provides no real guidance in the present context.
72. No doubt factors other than simple cost savings would operate to varying degrees in different PCTs, introducing a degree of drag into the extent to which Medicine Managers could expect to succeed in their campaigns to promote any switch in prescribing behaviour, including in relation to Nexium and Emozul. This was acknowledged in the evidence of Medicine Managers and in their estimates of the sort of levels of switching they would have expected to achieve, based on their experience of other switching campaigns, at levels which could be of about 70% or so within three months of launch and could reach 80% or higher GP compliance. However, the severe cost pressures on all PCTs in 2010 and the simplicity of promoting a switch in prescribing behaviour in favour of Emozul would, in my judgment, have meant that cost savings associated with that switch would have been the major factor which would have operated in the circumstances of the counterfactual scenario, driving and leading to a high level of switching in the period after October 2010 broadly in line with the estimates given by Consilient and Krka and supported by the Medicine Manager evidence called by them.
73. To accommodate what may have been a slight tendency to underestimate the drag factor in all of this (a subconscious tendency of Medicine Managers to exaggerate the extent to which they would have been successful in their switching campaigns in the counterfactual scenario), to allow for variation within the overall body of PCTs in their ability effectively to take up cost savings by arranging for prompt switching and to take account of simple, difficult-to-predict vicissitudes in the position which would have applied in the counterfactual scenario (of the unexpected kind which partially affected the effectiveness of Emozul's launch in September 2011: see para. [68] above), I consider that a reduction in the sums claimed as damages in respect of the PCT market of 20% is appropriate (this also covers such minor factors as the fact that gelatine was used in the Emozul capsules, making them potentially unattractive to vegetarian patients).

Relevant findings

74. In my assessment, in the counterfactual scenario:

i) It is very likely that Consilient would have persuaded the NI Board to promote a switch to Emozul/generic esomeprazole capsules shortly after launch in October 2010, by about the end of October 2010. The NI Board was under considerable pressure to reduce costs, particularly in relation to PPIs. A switch from Nexium to Emozul would have made savings for the NI Board of the order of £1.7 million p.a.. Mr Browne met Ms Lesley Edgar from the NI Board on 3 September 2010, and the NI Board showed a strong interest in switching to Emozul at that stage. That contemporaneous evidence is supported by the evidence of Ms Turner and Mr Brogan at the hearing. I do not consider it at all likely that the NI Board would have been deflected from promoting the switch by the fact that an unusually high proportion of PPI prescribing in Northern Ireland (about 13%) was for esomeprazole PPIs (at the time, Nexium), and the NI Board also wished to promote uptake by GPs of other, low cost PPIs. The high level of esomeprazole PPI prescribing made it particularly important to seek to address the high cost associated with that, and (as with PCTs on the mainland) there would have been no great difficulty about promoting a two-pronged strategy of encouraging switching away from esomeprazole PPIs while also, to the extent that esomeprazole PPIs had to be used, encouraging a switch from Nexium to Emozul/generic esomeprazole capsules. In broad terms, an uptake of 70% in relation to esomeprazole prescribing in Northern Ireland by the end of the first year would have been likely, and would probably have stabilised at about that level. A 20% reduction to allow for possible vicissitudes and uncertainty is appropriate;

ii) It is very likely that Consilient would have persuaded PCTs with potential annual savings of £50,000 or more to promote a switch to Emozul/generic esomeprazole capsules shortly after launch in October 2010. Consilient and Krka say that 90% of PCTs with potential annual savings of over £100,000 and at least 75% of PCTs with potential annual savings between £50,000 and £100,000 would have switched. Subject to the adjustment I have mentioned, I agree with those estimates. The evidence indicated that the structures for PCTs to identify and implement prescription switches to save costs were more advanced than in Northern Ireland, where the NI Board was a new body which replaced others in the period 2009/2010. I consider that an uptake of 70% across the board of esomeprazole PPI prescribing within these categories of PCT would have been likely within six months after launch in October 2010 and would have climbed to about 80% after the first year. A reduction of 20% to allow for vicissitudes and uncertainty is appropriate;

iii) It is likely that Consilient would have persuaded a substantial proportion (which I assess at 40% of this sector of the esomeprazole PPI market) of PCTs with potential annual savings of less than £50,000 to promote a similar switch. This reflects the intense pressure on PCT budgets at all levels and size of PCT to find cost savings in order to protect NHS services generally. A fair assessment of the rate of uptake in this sector of the market is that it would have been somewhat lower (reflecting the different priority level likely to be attached to it), at 50% over 12 months. Again, a further adjustment by way of reduction of 20% is appropriate;

iv) It is likely that Consilient would have persuaded a substantial proportion of dispensing doctors (which I assess at 50% of this sector of the market) to make the relevant switch to prescribe Emozul/generic esomeprazole capsules within a period of about six months. There are three main organisations which manage manufacturer discount schemes for dispensing doctors in the UK, and there is evidence that AZ was operating discounting incentives in this market. Consilient would have been competing with these schemes to try to win market share, and would have had a reasonable chance of gaining a significant part of this market because it was strongly competitive on price as against Nexium. The price of Emozul to the dispensing doctors, after discounts, would have been about 45% lower than the ordinary Drug Tariff price. Again, an adjusting reduction of 20% is appropriate;

v) It is very likely that Consilient would have succeeded in securing the contracts in the secondary care sector which it hoped to bid for. AZ propose a 10% reduction to allow for possible vicissitudes and uncertainty in relation to this element of the loss, and I consider that this is appropriate;

vi) I do not consider that it is appropriate to make any further allowance for what was termed a "general switch" in relation to new patients being prescribed PPIs. There would have been some element of a shift to Emozul for new patients in the counterfactual scenario, but the figures are speculative and are in my view sufficiently and fairly covered by the compensation figures indicated above.

75. The levels of esomeprazole PPI prescribing which in fact occurred within the full range of PCTs, the NI Board and dispensing doctors in the relevant period from October 2010 are known from published data and conveniently give figures for the size of the relevant sectors of the market in that period. Mr MacGregor makes the correct assumption that the compensation is to be assessed by reference to a deduction of the planned launch costs in October 2010 rather than the lower costs associated with the actual launch in September 2011. Both Mr MacGregor and Dr Jenkins agree that, though somewhat crude, it is appropriate to assess the compensation payable by reference to a prediction of market share arrived at after assessment of the likely peak point of market penetration by Emozul, but with a simple cut off in 2015.
76. I believe that these findings resolve the relevant outstanding disputes between the parties, and allow for a final damages calculation to be agreed by Mr MacGregor and Dr Jenkins. The parties should now seek to agree the final figures and the order to be made by the court. They have liberty to make further representations if other matters require to be resolved by the court before a final order can be made.