Korean Supreme Court Finds Generic Company Not Liable For Damages Caused By At-Risk Launch Of Generic Drug

Published date22 July 2021
Subject MatterIntellectual Property, Litigation, Mediation & Arbitration, Food, Drugs, Healthcare, Life Sciences, Patent, Trials & Appeals & Compensation, Food and Drugs Law
Law FirmYulchon LLC
AuthorMr Samuel SungMok Lee, Min Seung KU, Sang Tae Jeong and Cho Rong Yun

(Supreme Court Decision No. 2016Da260707 dated November 26, 2020, Decision No. 2018Da221676 dated November 26, 2020)

On November 26, 2020, the Supreme Court of Korea held that generic drug manufacturers were not responsible for damages incurred by an original pharmaceutical company resulting from the automatic price reduction of the original drug caused by the at-risk launch of a generic drug, i.e., its commercial entry before expiration of a patent that was not finally determined to be invalid.

[Case Background]

According to the "packaged medicine price reduction policy" implemented in April 2012, the maximum price of an original drug on the reimbursement drug list is reduced according to the notice issued by the Minister of Health and Welfare, if (i) a generic drug manufacturer designates or changes the expected sales date to "immediately after listing" in the application for drug approval and (ii) such drug enters the market before the expiration of the patent covering the original drug.1

The controversy stems from the question of who will be responsible for the damages for reduced maximum price of an originator drug and lost sales when a generic manufacturer launches at risk (i.e., before the patent expires) and the generic product is later found to have infringed the originator's patent. This damages analysis is in addition to the conventional patent infringement damages. This case provides the first in-depth analysis of this controversial issue.

Generic drug manufacturers Hanmi Pharmaceutical and Myung In Pharm. Co. Ltd. launched their generic drugs after the Patent Court held invalid the patent covering Zyprexa (an antidepressant), which was developed by Eli Lilly. However, the Korean Supreme Court later reversed and found the patent valid, thereby overturning the earlier Patent Court Ruling of invalidity. In this case, while the conventional compensation amount for the reduction in original drug sales was relatively small, the reduction in the original drug price was tens of times larger.

The timeline of facts is provided in the table below.

December 31 2009 Patent ruled to be valid by the Patent Court
February 2010 Drug approval & listing (Hanmi Pharm)
March 2010 Drug approval & listing (Myung In Pharm)
November 5, 2010 Patent ruled invalid by the Patent Court
November 10, 2010 Change of expected sales date (immediately after listing) & product sales (Hanmi Pharm)
November 23, 2010 Change of expected sales date (immediately after listing) (Myung
...

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