Posted: October 16th, 2020
Menzis Zorgverzekeraar N.V. and AnderZorg N.V. v. AstraZeneca B.V. and AstraZeneca AB, District Court The Hague 14 October 2020, Case no. C/09/541261 / HA-ZA 17-1084
On the 14th of October 2020 the Dutch District Court of The Hague has issued a noteworthy and ground breaking interlocutory judgment in the case of health insurance company Menzis against the pharmaceutical company AstraZeneca. Menzis is set to be rewarded compensatory damages due to the unjust enrichment of AstraZeneca and their role in the lack of price competition for their medicine Seroquel XR.
AstraZeneca markets the product Seroquel XR with the active substance quetiapine as medication for the treatment of schizophrenia and bipolar disorders. AstraZeneca’s European patent EP 0 907 364 sought protection for the formula in which said active substance is released more slowly into the bloodstream than their earlier (immediate release) versions of the same medicine.
Despite the fact that the validity of AstraZeneca’s patent was under attack in multiple court proceedings in The Netherlands and the UK as of 2011, AstraZeneca successfully prevented competitors from entering the market by enforcing said patent. The resulting lack of competition from generic versions of the medication, caused the prices for Seroquel XR to remain artificially high. In turn, health insurance companies were forced to compensate these high prices to their insured customers. By way of illustration, in 2012 the price difference between the earlier, immediate release version of Seroquel and a competitor’s generic alternative thereof (once the SPC of the initial substance patent was expired), was approximately EUR 0.51,- for every single 25 mg pill.
Mid-2014 the Dutch part of AstraZeneca’s slow release patent EP 364 was eventually invalidated. At the end of 2016, Menzis sued AstraZeneca in The Netherlands for unjust enrichment, claiming damages of more than 4 million euros (of which 1.2 million in interest). Menzis argued that AstraZeneca had claimed an exclusive market position that was not rightfully theirs, given that the patent was later on deemed to be invalid due to a lack of inventive step. Because of the enforcement of this patent, the release of cheaper, competitive generics was unjustifiably stalled for at least two years, the costs of which were borne by Menzis. Instead, Menzis would have liked to include such cheaper alternatives in their preference policy.
In its decision, the Dutch District Court first stresses that in line with standard case law of the Supreme Court (CFS Bakel / Stork), the sole fact that a patent is invalidated later on, does not yet make the patentee liable for maintaining that patent. However, the Court did hold AstraZeneca liable for executing an injunction decision that was based on the – later on invalidated – patent and that was issued in summary proceedings against competitor Sandoz in 2013, as standard case law dictates that enforcing such an injunction is at one’s own risk.
According to Menzis and the District Court, the undisputed direct consequence of the enforcement was that neither Sandoz, nor any other competitor dared to enter the market, which had major consequences for the entire quetiapine product market.
AstraZeneca’s defense that Menzis did not really suffer any damages as it probably passed the extra costs to their customers by charging a higher premium, was denied by the District Court. Whilst it was deemed true that, in fact, the customers had suffered the actual financial damages, the District Court confirmed that any claims for unfair enrichment passed from the customers to Menzis by way of subrogation as meant in article 7:962 (1) of the Dutch Civil Code. Consequently, the District Court held that AstraZeneca has to pay compensatory damages to Menzis.
The actual amount of damages has yet to be determined in subsequent procedural steps, because according to the Court the claimed amount of 4 million euros did not adequately take into account the relevant period for which damage could be claimed and other aspects such as the voluntary deductible of the insurance premiums.
Finally, the District Court mentioned that there is also a common interest for our society to prevent a patentee from profiting from a monopoly position that was gained by enforcing a patent that was actually invalid.
Considering this common interest, the decision seems to be in line with the recent debate about medicine prices and the attention that the pharmaceutical industry has recently received from both governments and the general public. However, actual liability or damages in relation to health insurers is a new development in The Netherlands, one that will certainly continue to be discussed heavily in the near future.
The judgment (in Dutch) can be found here.
Headnote: Ilse Werts, Taylor Wessing