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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> AstraZeneca AB & Anor v KRKA dd Novo Mesto & Anor [2015] EWCA Civ 484 (21 May 2015) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2015/484.html Cite as: [2015] EWCA Civ 484

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
The Hon Mr Justice Sales
[2014] EWHC 84 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		21st May 2015

Lord Justice Kitchin:

Introduction

1. This is the appeal of the claimants (together "AZ") against the judgment of Sales J (as he then was) given on 24 January 2014 and his consequential order awarding to the defendants a sum in excess of £27 million on an inquiry as to the damages they had suffered as a result of an interim injunction. It is said to be the largest award ever made by the Patents Court upon an inquiry of this kind.
2. The proceedings concern a pharmaceutical called esomeprazole. This is a proton pump inhibitor ("PPI") and it is used in the treatment of ulcers and various other conditions in which it is desirable to inhibit gastric acid secretion. It is one of a number of similar PPIs but there is a population of patients for whom those other PPIs are not effective and for whom the use of esomeprazole is necessary for the treatment of their various gastric disorders.
3. In 2010 AZ had a monopoly in the United Kingdom in respect of esomeprazole as a result of the patent protection afforded by a European patent which was due to expire in May 2014. They enjoyed that monopoly through the production and sale of a tablet formulation of esomeprazole called Nexium. Sales of Nexium in the United Kingdom amounted to around £65 million and, as the judge noted, it commanded a high price.
4. The first defendant ("Krka") is one of Europe's leading generic pharmaceutical companies and has its manufacturing base in Slovenia. The second defendant ("Consilient") is a small pharmaceutical sales and marketing company which, before 2010, had never made any profit. In September 2010 the defendants sought to bring to the United Kingdom market an esomeprazole capsule called Emozul. It was in all material respects bioequivalent to Nexium and the defendants intended to launch it at a price 25% lower than the list price of Nexium. AZ thereupon issued proceedings for infringement of the patent and applied for an injunction to restrain the defendants from marketing Emozul pending trial. In their evidence in support of that application AZ maintained that 90% of AZ's market for Nexium was accessible to the defendants and that if an injunction was not granted it was inevitable that AZ would suffer a significant loss of sales.
5. The defendants believed that Emozul did not infringe the patent but, conscious of the approach taken by courts in this jurisdiction to the grant of interim injunctions, concluded they had no realistic alternative but to agree to submit to AZ's application, and that they duly did on the basis that AZ gave the usual cross-undertaking in damages. At about the same time, another generic company, Ranbaxy, began proceedings in respect of the same patent, challenging its validity and seeking a declaration of non-infringement in respect of its own esomeprazole tablet. A trial of the infringement issue took place in June 2011 and, in a judgment given on 15 July 2011 ([2011] EWHC 1831 (Pat), [2011] FSR 45), it was held that Ranbaxy's product did not infringe. Shortly afterwards, AZ notified the defendants that it proposed to lift the injunction and an order for its discharge was made by Floyd J (as he then was) on 29 July.
6. The judgment in the Ranbaxy proceedings had a significant impact upon the market for it opened the door to the marketing of generic esomeprazole products by a series of other companies. Arrow, together with AZ, began to sell a generic tablet in July 2011; the defendants launched Emozul in September; Mylan launched a generic capsule in November; and TEVA launched a generic tablet in December. The introduction of all of these generic esomeprazole products into the market had the predictable consequence of driving the price down and had a significant impact upon the success of the launch of Emozul. Moreover, the defendants lost the opportunity to enjoy almost a year as the only generic available to the market. This loss, described as the loss of the "first mover" advantage, was, so the defendants maintained, of vital importance to the case and it formed the basis for their claim for damages in excess of £32 million in respect of their losses, not just during the period of the injunction but also following the launch of Emozul in 2011.
7. AZ responded that this was a grossly inflated claim. They highlighted the fact that Nexium was supplied in the form of a tablet and in doses of 20mg and 40mg whereas Emozul was available only in the form of a capsule, although again in doses of 20mg and 40mg. Accordingly, upon being presented with a prescription for "esomeprazole tablets", a pharmacist could dispense generic esomeprazole tablets but not esomeprazole capsules such as Emozul. They contended that this rendered it much harder for the defendants to penetrate the market for it required first, persuading the relevant bodies, that is to say, in England, Wales and Scotland, the Primary Care Trusts and the health boards (collectively, the "PCTs") and, in Northern Ireland, the Health and Social Care Board (the "NI Board"), to make a switch and then for those bodies to implement that switch by persuading their GPs to change their prescribing practices. They also maintained that, despite investing nothing whatsoever in research and development themselves, the defendants chose to offer Emozul at only a modestly discounted price and together with an inherently unattractive price guarantee. AZ maintained that, in all these circumstances, the defendants' claim was divorced from reality. They accepted that the defendants had incurred modest losses as a result of the injunction but assessed them, on an overall basis, at only £3 to 6 million. The figures for which the parties contended were therefore nearly an order of magnitude apart.
8. The parties advanced their respective cases in very different ways. The defendants' case was explained by Mr Crosbie, a director of Consilient, and assumed that the greater the amount a PCT had to save, the greater would be its propensity to switch. They developed this case through the evidence of a series of Medicine Managers from different PCTs located in different parts of the United Kingdom. The Medicine Manager is the key individual within a PCT or, in Northern Ireland, the NI Board, and is responsible for providing guidance and assistance to GPs to encourage them to prescribe the cheapest types of relevant drugs to their patients and so minimise the overall drugs bill for the NHS each year. The Medicine Managers chosen by the defendants as witnesses were from PCTs which were spending a relatively large sum each year on Nexium and were therefore likely to make relatively greater savings by switching to Emozul. The defendants contended that it was possible to extrapolate from the evidence these witnesses gave (and from the evidence given by various other Medicine Managers called as witnesses by AZ) as to how the market as a whole would have behaved but for the injunction.
9. AZ's approach was very different. They relied upon the expert evidence of Dr Helen Jenkins, a leading economic analyst, who took as her starting point what actually happened when Emozul was launched in 2011. She ascertained the market share which the defendants secured, backdated it to 2010 and adjusted it upwards to take account of the loss of the first mover advantage the defendants would have enjoyed had they launched Emozul one year earlier. In carrying out this exercise she also had regard to a number of other cases, the circumstances of which were, she said, closely comparable to those of the present case. This approach yielded a result which was, so AZ contended, in line with Consilient's own expectations at the time, based upon a solid foundation in fact and supported by credible and carefully considered expert evidence.
10. The judge preferred the case advanced by the defendants. He came to the conclusion that the severe cost pressures on PCTs and the relative simplicity of promoting a switch in prescribing behaviour in favour of Emozul would, but for the injunction, have led to a high level of switching in the period after October 2010, broadly in line with the estimates given by the defendants. He also found that this would have created a market for Emozul which the defendants would have been better able to protect against the later launch by other companies of generic esomeprazole products. Nevertheless, he recognised that Medicine Managers had a tendency to exaggerate the extent to which they would have been successful in their switching campaigns, and this and various other uncertainties in the approach adopted by the defendants led him to reduce the sums he would otherwise have been minded to award by 20%.
11. Upon this appeal AZ contend that the judge has fallen into error in over 50 different respects. Many of these seem to me to be attempts to challenge the judge's findings of fact. However, at the hearing, Mr Daniel Alexander QC, who has appeared with Mr Thomas Mitcheson QC on behalf of AZ, as he did below, has focused his submissions on what he contends amount to three fundamental errors of principle. He submits first, the judge had no proper basis for drawing the conclusions he did from the evidence of the limited number of Medicine Managers who appeared at the trial and fell into error in failing to attach any or any significant weight to the actual behaviour of the market when Emozul became available in 2011 or to the behaviour of the market in relation to other comparable products. Second, the uncertainty discount of 20% was wholly inadequate and in arriving at it the judge failed to take into account a series of obviously relevant matters. Third, the judge has assumed that PCTs and the NI Board would have begun to implement switching immediately after the launch of Emozul. This, says Mr Alexander, was contrary to the defendants' own pleaded case and had no basis in the evidence. Overall, continues Mr Alexander, the judge has awarded to the defendants a sum which far exceeds Consilient's own contemporary projections and has been arrived at on a basis which is flawed. He submits the judge ought instead to have adopted the principled approach for which AZ contended.

The relevant principles

12. The parties were agreed before the judge and before this court that the general principles to be applied in assessing the damages payable under a cross-undertaking given in respect of the grant of an interim injunction are those explained by Norris J in Les Laboratoires Servier v Apotex Inc [2008] EWC 2347, [2009] FSR 3. In that case 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 or 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."

13. I would respectfully endorse that summary but it may be helpful to say a little more about the loss of a chance. Sales J addressed this at [39] in these terms:

"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."

14. It can be seen that in this case Sales J has found that but for the injunction the defendants would have sought to enter the market with Emozul, and would have done so with, as he put it, full force and effect. Accordingly this is not a case in which he was required to assess the loss of the chance of the defendants taking this course or of taking it in a particular way. However, he was then required to quantify the loss the defendants have suffered. This necessarily required him to undertake an evaluation of the degree of success they would have achieved and the profits they would have made but for the injunction, and in carrying out that exercise to take into account all significant factors but to ignore speculative possibilities. If and in so far as he considered that it was necessary to apply a discount to reflect the various uncertainties inherent in the assessment of this counterfactual scenario then, it seems to me, it was appropriate for him to do so. Further, this was necessarily a fact sensitive evaluative exercise of the kind with which this court is reluctant to interfere unless he has erred in principle or is plainly wrong for some other reason.
15. Reverting to Servier, Norris J then went on to clarify the approach to be adopted in these terms:

"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)."

16. The first and second of these clarifications have no bearing on this appeal and I shall say no more about them. However, the third is relevant and again I would endorse it. The application for an interim injunction in this case was supported by a witness statement from Mr Mark Jones, the president of the AZ group company responsible for marketing Nexium in this country. He expressed great apprehension about Consilient's marketing plans and maintained that since Emozul was "substitutable with Nexium tablets, over 90% of AZ's market would appear to be accessible to the defendants from launch" and that the entry of Emozul into the market would lead to a significant loss of market share for Nexium or a downward price spiral. Faced with this evidence, the defendants formed the view that they would not defeat the application and so submitted to the injunction. In my judgment this is just the kind of evidence which supports the adoption of a liberal but fair assessment of loss.

The background

17. There are two aspects of the background which I must summarise: first, the market for prescription drugs; and second, the events leading up to the proposed launch of Emozul by Consilient in October 2010.

The market for prescription drugs

18. The judge described the market for prescription drugs in some detail in his judgment from [18] to [33]. For the purposes of this appeal, the following aspects of that description are, I think, particularly material.
19. PPIs are prescription drugs and at the relevant time were paid for out of the budgets of the PCTs or, in Northern Ireland, the NI Board. These bodies supervised the provision of primary health care services within their respective regions and exercised their functions within strict financial constraints. This was something of which GPs were aware, and they were also conscious that if savings were not made wherever possible in relation to the NHS drugs bill there would have to be cuts in funding elsewhere in the system for other important NHS services.
20. GPs have considerable freedom to prescribe drugs which they regard as clinically appropriate for their patients. Generally, they will keep to those listed in the local formulary and are trained to prescribe medicines by their non-proprietary names rather than by brand names. So, prior to the events giving rise to these proceedings, a GP who considered it appropriate to prescribe esomeprazole would normally have done so by generating a prescription for esomeprazole tablets rather than Nexium.
21. Pharmacists providing prescribed drugs against prescriptions presented by patients are reimbursed by the Department of Health ("DH") in accordance with the Pharmaceutical Price Regulation Scheme (referred to by the judge as "the PPRS" or "the Drug Tariff"). The judge summarised how this scheme works at [20]:

"… 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."

22. The vast majority of PPIs supplied to patients in the primary health care field are dispensed by pharmacists. They buy their stocks of these medicines from the relevant suppliers and, when they supply the drugs to patients, recover from the PCT or the NI Board the price of the drugs shown in the Drug Tariff. As the judge explained, this feature of the market opens up the possibility of drugs companies offering special financial incentives if their drugs are prescribed.
23. I must next say a little more about the Medicine Managers. Each of these managers is in charge of a team of pharmacists and other support staff whose job is to provide guidance and assistance to GPs. The judge summarised the way they work in these terms at [22]:

"…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."

24. As the judge went on to explain, GPs will not necessarily change their prescribing behaviour in the light of advice and guidance given by Medicine Managers and their decision whether or not to switch their prescribing habits may depend upon a range of factors, including the complexity of the switch envisaged and the effort required to review patients to put it into effect. So also, patients may exhibit a degree of resistance to any change in the drugs prescribed for them, depending upon factors such as the nature of their illnesses and how willing they are to accept advice from their GPs about changing. Nevertheless, as the judge held, the widespread understanding by GPs of the tight constraints on the public funding available to the NHS meant that their general attitude 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 inconvenience to themselves.
25. The judge found that there was a striking consistency in the evidence given by the Medicine Managers at the trial as to their approach in deciding whether to adopt a particular switch and promote it to the GPs in their area. He explained it in these terms at [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."

26. In short, he found that, at the material time, a cost saving of the order of £50,000 would generally trigger serious consideration of the implementation of a switch but that financial pressures meant that many PCTs would promote a switch in order to try to achieve costs savings of much less than this. Importantly too, Medicine Managers kept a look for out for indications of new generic drugs that might enter the market. The judge described this practice, often called "horizon scanning", and the reason for it in these terms at [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."

Preparations for the launch in October 2010

27. Against the background I have described, the task facing Consilient in October 2010 and then in September 2011 was relatively clear. It needed to persuade the Medicine Managers in the PCTs to encourage their GPs to switch their prescribing habits in relation to esomeprazole and, instead of prescribing esomeprazole tablets in one of the two available dosage forms, to prescribe esomeprazole capsules or, alternatively, Emozul, again in one of the two available dosage forms. It therefore decided to pitch the price of Emozul at 25% less than the price of the equivalent dosage of Nexium.
28. Consilient also decided to offer a price guarantee to those PCTs who were prepared to encourage the prescribing of Emozul by its brand name. The defendants contended it would have encouraged PCTs to promote a switch from Nexium to Emozul but the judge considered it would have been unlikely to have had this effect because PCTs were wary of promoting branded products on a switch. Conversely, he also rejected a submission advanced on behalf of AZ that the guarantee would have suggested to Medicine Managers that it was likely that other low cost generic esomeprazole PPIs in either capsule or tablet form would be coming on to the market in the near future. In his view, there was nothing in the guarantee that would have given Medicine Managers that impression. The judge therefore found that this guarantee would have had little impact on the market one way or the other.
29. Responsibility for the practical preparations for the launch of Emozul in the summer of 2010 fell to Mr David Browne, who had some experience of marketing of pharmaceutical products. He explained and the judge accepted that Consilient had put in place a team of four key account managers and that this team would have been sufficient to cover the whole of the United Kingdom in an effective way for it would have had a ready and receptive audience amongst Medicine Managers and would have allowed Consilient to get its marketing message home without significant difficulty. Moreover, all of Consilient's launch preparations were in place by early October.
30. Nevertheless, an early assessment made by Consilient in mid-2010 indicated that, although Emozul would be likely to capture a share of the market, its gain would be relatively modest and significantly below the market share which the defendants contended at the hearing that they would have achieved in the counterfactual scenario. So, for example, in December 2009 Consilient produced a projection of a 25% market share over three years with a slow up-take at the start. In May 2010 it was projected that a launch in August 2010 would gain a market share of 26% by December 2010 and that sales would then plateau.
31. AZ placed great reliance upon these early estimates. However, the judge considered they were overtaken by three matters. First, in the summer of 2010 members of Consilient's sales force had meetings with a number of Medicine Managers who were very positive about the likelihood of switching from Nexium to Emozul on the grounds of price. Second, in August 2010 Consilient drew together what was described as an "advisory board" comprising five PCT pharmacists and one hospital pharmacist to assist it to understand whether its proposed offering of Emozul at a 25% discount to Nexium would be likely to attract the support of the PCTs. It seems that all those attending this board were very positive about the proposal and said they would proactively switch to Emozul to save money. The judge accepted that the views they expressed were genuine and sincere and provided a significant indicator regarding the likely reactions of PCTs to the launch of Emozul in the counterfactual scenario. Further, they undoubtedly provided considerable encouragement to Mr Browne and Consilient at the time.
32. The judge also heard evidence from a total of 16 Medicine Managers who appeared at the trial. This cohort comprised 12 Medicine Managers from the group of PCTs with potential costs savings of £50,000 or more called by the defendants, and four drawn from the group of PCTs with potential costs savings of less than £50,000 called by AZ. The judge found the evidence given by all of these witnesses very persuasive. In his view they formed a good representative sample of Medicine Managers from around the country and allowed him to form an impression of the factors of importance in the operation of the market. Importantly, there was, he thought, a strong and broad consensus amongst them in relation to the main points in issue and this greatly increased his confidence that it was just and appropriate to treat their evidence as reliable. I should mention two particular matters which arose from their evidence and about which the judge made relevant findings.
33. The first was that PCTs had a general wish to switch patients in need of PPIs from expensive esomeprazole PPIs to low cost PPIs using different active ingredients such as omeprazole or lansoprazole. This emerged during a meeting of the advisory board and was confirmed by the evidence given by the Medicine Managers called at trial, and it led AZ to contend that it would have deterred Medicine Managers from encouraging a switch from Nexium to Emozul. The judge rejected this submission for the reasons he gave at [51]:

"… 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."

34. The second concerned the impact of the price guarantee and general horizon scanning. As I have said, the judge was not persuaded that the price guarantee would have indicated to Medicine Managers that other generic esomeprazole PPIs were likely to appear earlier than 2014. Indeed, he considered that general horizon scanning for new, low cost products would have been a matter of much greater importance. However, as to that, he found there was no significant evidence that such scanning would have indicated that low cost generic esomeprazole PPIs were likely to arrive on the market in the near future. To the contrary, the positive reaction of Medicine Managers and pharmacists consulted by Consilient in the summer of 2010 and the evidence of the Medicine Managers who appeared before him at trial indicated that the market had no expectation in 2010 that low cost generic esomeprazole PPIs would come on to the market earlier than 2014.
35. In light of all of this evidence the judge drew the following important conclusions:

"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."

The parties' cases at trial and the judgment

36. I must begin by providing a rather fuller explanation of the way in which the parties developed their respective cases in the evidence and the assumptions underlying their calculations of loss.
37. The defendants' case was set out in points of claim and a schedule of loss but was presented and explained at trial through the evidence of Mr Crosbie. It is important to note that, although he explained the claim advanced by the defendants, he was not put forward as an expert witness or as someone who had had direct contact with the PCTs. In these circumstances the judge rightly did not place weight upon his evidence about the market. Nevertheless, it provided a helpful elaboration of the way the defendants put their case, how they arrived at the various figures for which they contended and of the assumptions upon which their underlying calculations had been made.
38. The defendants divided the market for esomeprazole into four main parts. The first part, Northern Ireland, accounted for just over 11% of the whole market and a complete switch from Nexium to Emozul or to esomeprazole in capsule form would have resulted in savings in excess of £1 million per annum. The defendants contended that the NI Board would have implemented a switch within one month of the date of the launch of the product and that 70% compliance by GPs would have been achieved within 12 months.
39. The PCTs were placed into one of three categories according to their level of spending on esomeprazole at the relevant time. The first contained 51 of the highest spending PCTs, each with potential savings in excess of £100,000 per annum and together accounted for just over 53% by volume of the market. The defendants assumed that 90% of these would have taken the decision to implement switching on average three months after the launch date and that average compliance would have reached 80% six months later.
40. The second contained 75 PCTs with potential savings in excess of £50,000 per annum but less than £100,000 per annum and together accounted for just over 34% by volume of the market. The defendants contended that 75% of PCTs in this category would have made the decision to implement switching on average four months after the launch date and that average compliance would have reached 70% eight months later.
41. The third contained those PCTs with potential savings less than £50,000 per annum and together accounted for just over 13% of the market. The defendants contended that 50% of these PCTs would have made the decision to implement switching on average six months after launch and that average compliance would have reached 50% 12 months later.
42. I would emphasise that the defendants did not seek to establish these losses through the evidence of Mr Crosbie but rather through the evidence of the 12 Medicine Managers they called as witnesses, the evidence of Mr Browne as to the marketing preparations Consilient had undertaken and the evidence of Mr Simon Coates-Walker who was employed by Consilient to replace Mr Browne and was responsible for the marketing preparations for the launch of Emozul in September 2011. The defendants also relied upon the evidence of Mr Stephen Furniss, an expert in the operation of the pharmaceutical market and the PPRS.
43. AZ's case was, as I have said, advanced primarily through Dr Jenkins. The thrust of her evidence was that the court should take the relatively modest actual share secured by the defendants when they came to the market in 2011, backdate it to 2010 and adjust it upwards by 30%, having regard to the difference between the situation in 2010, when there was merely a prospect of more generic competition, and the situation in 2011, when other generics had actually entered the market. Dr Jenkins also relied upon the degree of success achieved by the anti-depressant Venlalic. This is a branded generic venlafaxine product which was launched in competition with the original product, Effexor, in 2009. In this case the penetration of the market achieved by the branded generic was considerably less than that which the defendants contended they would have achieved in the counterfactual scenario in October 2010.
44. AZ recognised that this approach did not yield a perfect solution but contended that it was much more credible and secure than that of the defendants and should have been adopted. As I have mentioned, they also called as witnesses four Medicine Managers from PCTs with potential cost savings of less than £50,000 and, importantly, another expert, Mr Robert Carlisle, who had extensive experience of marketing pharmaceutical products, including a lansoprazole PPI.
45. The judge found the evidence given by the Medicine Managers of great assistance. It was, as I have said, generally consistent. The judge also thought that their number and geographical spread was reasonable and proportionate and further, that, in light of the foregoing, their evidence provided a reasonable indication of the likely reactions of Medicine Managers throughout the country. He also considered it significant that the picture he derived from that evidence regarding the operation of the market was confirmed by Mr Carlisle's evidence.
46. By contrast, the judge did not find the comparative situations relied upon by AZ to be persuasive guides in assessing the counterfactual scenario. As for the limited success achieved by Emozul once it entered the market in 2011, the market had, in the judge's view, been transformed by the entry of low cost generics. Turning to Venlalic, the judge considered that this was not a good comparator, essentially for the reasons given by Mr Furniss. He explained that prescribing behaviour for anti-depressants is very different from that in relation to PPIs because treatment with anti-depressants is chronic and long term rather than short term and episodic, as it is for PPIs, and prescribers are reluctant to switch patients who appear to be benefiting from a particular anti-depressant because of a recognised and pronounced placebo effect relating to the use of a medicine that the patient believes is working.
47. This brought the judge to his overall conclusions. He began with some general observations about the pressures on Medicine Managers:

"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."

48. The judge also recognised that Medicine Managers might have had a slight tendency to exaggerate and that there were, inevitably, various uncertainties inherent in any launch of this kind. These matters led him to apply a 20% discount for reasons which he elaborated in these terms:

"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)."

49. There followed an analysis by the judge of the position of the NI Board and the PCTs themselves. In his findings, the judge reduced the four categories relied upon by the defendants to three by combining two of them together. Dealing first with the NI Board, the judge reasoned as follows at [74(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."

50. The judge then dealt with all those PCTs with potential savings of £50,000 or more at [74(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."

51. As for those PCTs with potential annual savings of less than £50,000, the judge concluded at [74(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."

52. Finally, the judge dealt with the residual parts of the market, namely dispensing doctors and the secondary care sector but he considered that these raised no issues separate from those arising in relation to the NI Board and the PCTs.

The appeal

53. I have summarised the general criticisms of the judge's approach which are advanced on behalf of AZ on this appeal. Mr Alexander has developed those criticisms in turn and, at the outset, has focused his attention on the weight placed by the judge upon the evidence of the Medicine Managers.
54. As I have explained, the parties are supplying their pharmaceuticals into a complex market in that it involves two tiers, that is to say the PCTs and the GPs and is price regulated. In these circumstances, says Mr Alexander, it is simply not possible to draw conclusions about the behaviour of the market as a whole from the evidence of a few individuals, the Medicine Managers, called from only one tier of it. Second, those Medicine Managers called by the defendants to give evidence were all drawn from one particular sector of the market, namely those PCTs that had most to gain from switching. Further, and taken as a whole, the Medicine Managers who gave evidence were not in fact representative of Medicine Managers throughout the United Kingdom in any event. In that regard, Mr Alexander continues, it is important to have in mind that the perspective of any Medicine Manager is inevitably somewhat limited and that such an individual can only depose to what his or her PCT might recommend. The missing element in such an approach is whether GPs will pay any attention to that recommendation. Nevertheless, says Mr Alexander, the judge found this evidence reliable and probative and in so doing he fell into error. Instead, he should have concluded that a fair assessment of the losses sustained by the defendants could only be derived from a consideration of the actual behaviour of the market following the launch of Emozul one year later and the degree of success achieved upon the introduction of comparable products such as Venlalic.
55. I should say at the outset that I have no hesitation in accepting that, particularly in the case of a complex market such as this, evidence of true comparables is likely to be of great assistance to the court in assessing what would have happened but for the grant of an injunction. Further, I recognise the force of the arguments advanced by Mr Alexander on behalf of AZ as to the relevance of what happened after the launch of Emozul in September 2011 and after the launch of Venlalic. In the case of Emozul, it gained only 10% market share by September 2012 and around 14% by March 2013. Mr Alexander contends that these market shares are a reasonable indication of the share that Emozul would have gained in the period following its launch in September 2010 because, at least in principle, it is the same market for the same molecule, the same distributor was involved in both launches and the preparations for launch were similar.
56. As for Venlalic, this involved the launch of a branded generic tablet into a capsule market in which, like esomeprazole, a high proportion of prescriptions were written as open scripts, that is to say not by reference to brand name. Venlalic was launched in May 2009 and achieved a market share of only 14% in 12 months and 30% after 18 months. Further, it was offered at around a 35% discount to the existing capsule and in additional strengths in an attempt to differentiate the brand.
57. The insuperable difficulty facing AZ on this appeal is, however, that the behaviour of Emozul in 2011 and that of Venlalic in 2009 were decisively rejected by the judge as being true comparables. As for Emozul, the judge found that by 2011 the market had been completely altered by generic competition. A competitive price war had opened up and this in turn fundamentally changed the cost-benefit analysis for Medicine Managers as to whether to put time, effort and resources into promoting a switch from Nexium to Emozul or esomeprazole capsules. As he put it, it was expected that this new highly competitive market would drive prices down without PCTs having to promote a switch. Further, if Emozul had had the opportunity to capture a market share in 2010 by securing a change in the prescribing practice of GPs, there would have been a general disinclination to try to promote further major switches as other generic esomeprazole PPIs came on to the market. This reinforced his view that the defendants would have enjoyed a considerable first mover advantage had they been able to launch Emozul one year earlier. In my judgment these conclusions had ample support in the evidence. For example, Mr Rowe from Ashton, Leigh and Wigan PCT described the position in 2011 as "game over"; and Mr Small from Norfolk PCT said it generated a "whole different context" and "negated the whole point of doing" switching. Even Mr Carlisle accepted that once esomeprazole was generically available, the desire to switch evaporated and that the prospect of achieving switching was "finished".
58. Venlalic fared no better. Mr Alexander has attacked the judge's finding that it was flawed as a comparable by referring us to some evidence of Mr Crosbie suggesting that in 2010 the defendants themselves were looking at it as a relevant model. Against that, however, the judge had the evidence of Mr Furniss, which he was entitled to find persuasive, that Venlalic did ultimately secure a significant overall market share of over 66% in England and Wales but took some time to achieve that market share in the light of the particular circumstances surrounding the prescribing of anti-depressants. This evidence was, the judge rightly considered, supported by four of the Medicine Managers, namely Lady Yassaie, Mr Hinstridge, Mr Small and Ms Turner. Indeed Lady Yassaie described the switch as the most difficult she had done. Accordingly, and just as in the case of the 2011 launch of Emozul, I am satisfied that the judge was entitled to reject Venlalic as a relevant comparator.
59. So I come to Mr Alexander's criticisms of the judge for relying as he did upon the evidence of the Medicine Managers. I have no doubt that the judge was fully conscious of the fact that those Medicine Managers called by the defendants were drawn primarily from the group of PCTs with potential cost savings from a switch of at least £50,000 per annum. Nevertheless, he was properly satisfied that they provided reasonable coverage of the whole of the United Kingdom and, importantly, that there was a good deal of sharing of experience and ideas within the Medicine Manager community. Those Medicine Managers called by the defendants were a good representative sample and from the evidence they gave the judge was able to form a fair impression of the factors of importance in the operation of the market generally.
60. It is also highly material that this evidence was confirmed by the evidence given by the Medicine Managers called by AZ and by their market expert, Mr Carlisle. It must be recalled that AZ's Medicine Managers were drawn from PCTs with potential costs savings from a switch of less than £50,000, but in significant and important respects they gave evidence which was supportive of the evidence of the Medicine Managers called by the defendants. So too Mr Carlisle confirmed in cross-examination that Medicine Managers would, in general, be interested in switching if it might generate savings of more than £50,000 per year. This was, as he put it, the "kick-in" figure at which they would start to think that a switch might be attractive.
61. Accordingly, this was not a case in which the judge was faced with conflicting evidence. To the contrary, the witnesses painted a consistent picture that Medicine Managers had limited resources; that they approached issues such as this on a cost-benefit basis; that they had to weigh the potential savings from promoting a switch against the costs for their team of so doing and assisting GPs to implement it; and that in light of the austerity measures introduced after 2008, many PCTs were concerned to try and achieve costs savings of less than £50,000.
62. It is also important to have in mind that it is an essential part of the job of a Medicine Manager to form close relationships with GP practices; to guide GPs in relation to prescribing practices; and to encourage GPs to prescribe the cheapest types of relevant drugs for their patients. These different parts of the market therefore work co-operatively together to minimise the overall drugs bill for the NHS each year and it seems to me the Medicine Managers were therefore particularly well placed to assist the judge as to how both they and GPs would have been likely to react to the launch of Emozul in 2010.
63. Mr Alexander next complains that the judge took no proper account of the fact that the defendants arbitrarily divided the market into different kinds of PCT, and wrongly attached weight to inadmissible evidence of Mr Crosbie which purported to support the defendants' approach. In support of these submissions Mr Alexander referred us first, to aspects of the evidence of AZ's expert, Dr Jenkins. She maintained in her first report that the defendants had significantly overstated the value of their claim for damages and that their assumptions about the market share that Emozul would have gained and the price they would have achieved but for the injunction were overly optimistic. She also expressed the view that the factors affecting the decision to take up a new product varied considerably from one PCT to another and that in these circumstances the extrapolations made by the defendants were unreliable. In support of these propositions Dr Jenkins produced figures for Emozul and Venlalic in which the uptake of each of these drugs was plotted against potential annual savings by PCTs. She explained that no correlation could be found and that this demonstrated that the switching propensity of PCTs was driven mainly by factors other than savings potential. I reproduce below Dr Jenkins' figure 3.2 relating to Emozul, and her equivalent figure for Venlalic showed a similar pattern :

64. Founding himself upon this evidence, Mr Alexander contends that the judge wrongly proceeded on the basis that price was the only or the overwhelmingly dominant consideration affecting the decision of any particular PCT and that he ought instead to have attached weight to the degree of market penetration in fact achieved by Emozul after its launch. Further, he continues, it was only by adopting this course that the judge could have hoped to arrive at a reasonable estimate of the sales that Emozul would have achieved had it been launched one year earlier for it would necessarily have taken account of all of the variable factors to which he failed to give any or any proper attention.
65. I am prepared to assume that figure 3.2 does show that, following the launch of Emozul, there was no significant correlation between the size of a PCT and the propensity of that PCT to promote switching. But I do not accept that this would have been so in the counterfactual scenario. This point was specifically addressed by the judge at [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. The judge found that the market very quickly became a free for all with prices driven down by general generic competition and with the result that there was little point in any particular PCT investing time and effort into the promotion of a switch from Nexium to Emozul or, indeed, any other generic. Against this background it is, I think, far from surprising that there is little or no correlation between the market share achieved by Emozul and potential annual savings by PCTs. Figure 3.2 therefore provides scant support for Mr Alexander's submissions. Venlalic was of even less relevance because the market into which it was sold was very hard to penetrate for the reasons I have explained.
67. By contrast, the judge was, it seems to me, entitled to rely upon the evidence of the Medicine Managers called at trial and the evidence of Mr Carlisle that PCTs would have carried out a cost benefit analysis in the counterfactual scenario and that those PCTs with potential for annual cost savings of £50,000 or more and the NI Board would have been strongly in favour of promoting the switch with prompt effect. In all the circumstances I am entirely satisfied the judge was entitled to draw the overall conclusions he did at [57] and [58] of his judgment which I have set out above.
68. Mr Alexander also complains that the judge wrongly attached weight to the evidence of Mr Crosbie and, in particular, to his estimates of the market penetration that Consilient would have achieved in the counterfactual and the losses that the defendants have therefore suffered. Mr Alexander contends that these figures were inconsistent with Mr Crosbie's own contemporary estimates and, in substance, no more than speculation. In that regard Mr Alexander referred us to the interruption by the judge of his cross-examination of Mr Crosbie on the first day of the trial (at pages 172 to 176):

"MR. JUSTICE SALES: All right. I am a little bit concerned that we are talking up time now on cross-examination of material which, strictly, probably is not admissible evidence. I am not going to make a ruling. But witnesses commenting on other evidence is not of assistance to the court, unless they are an expert; and Mr. Crosbie, very frankly, said he is not an expert.

MR. ALEXANDER: My Lord, the only reason I am doing it is because I do not want it to be said at some later stage, "Oh, you did not challenge the witness in relation to the fundamental assumptions that he is putting forward." So, I do feel I need to challenge it, up to a point.

MR. JUSTICE SALES: Well, just on that, I do not consider that it is necessary for you to challenge this witness in relation to assumptions which are sought to be made good by other evidence from witnesses who can speak to the relevant facts where this witness cannot. I make that clear now."

69. Mr Alexander continues that, notwithstanding this interruption, the judge proceeded to rely upon and attach weight to Mr Crosbie's evidence in reaching the findings he did at [74] of his judgment which I have set out above.
70. I believe that these submissions mischaracterise the approach that the judge has taken. I think it is clear that he did proceed in precisely the manner he indicated that he would. He took Mr Crosbie's evidence as an expression of the case that the defendants were advancing but not as evidence in support of it. For that the judge looked elsewhere and he found it in the evidence of the Medicine Managers. Indeed, he said in terms at [35] of his judgment that Mr Crosbie was not put forward as an expert witness or someone who had contact with PCTs and he therefore did not place weight upon the evidence about the market which he gave.
71. Mr Alexander has developed four further points in support of the overall submissions to which I have referred. First, he contends that the judge failed to take proper account of the evidence of the Medicine Managers that there was a general expectation that esomeprazole would become fully generic and that this would have had an impact upon the rate of uptake in the counterfactual scenario and certainly much sooner than 2014 when the patent was due to expire.
72. I do not accept that this is so. The judge had careful regard to all of the evidence before him but came to the conclusion that there was no expectation that any other generic esomeprazole PPI product would be introduced into the market by any other provider any earlier than in fact occurred. He was fully conscious that the Medicine Managers engage in horizon scanning but in this case there was nothing on the horizon to see. The impediment for other providers was the fear of AZ's patent for Nexium, and it was a fear that was properly founded in AZ's vigorous efforts to reinforce their patent rights until judgment was given against them in the Ranbaxy action.
73. Mr Alexander's second contention is that the judge failed to take proper account of Consilient's price guarantee. As the judge correctly observed, this guarantee would only have applied in the case of prescriptions for the branded generic, that is to say those which expressly referred to Emozul. Mr Alexander accepts that the judge was right to say that this guarantee would not have promoted switching but submits that he failed to take into account that unless Consilient had offered a guarantee which was not limited to branded prescriptions, there would have been no reason for PCTs to take up the offer since they would then have been locking themselves into a branded product which might become more expensive than the generic competition.
74. I do not accept that the judge made any error of the kind for which Mr Alexander contends. The price guarantee was intended to act as an incentive to Medicine Managers to encourage GPs to prescribe by brand name. It may or may not have had that effect. But this not does not in any way detract from the fundamental point that PCTs stood to save 25% if they could persuade GPs to prescribe esomeprazole capsules.
75. Mr Alexander's third submission is that the judge failed to attach any weight to the fact that Consilient's contemporary projections were much lower than the losses which the defendants contended they had suffered. Further, continues Mr Alexander, there was no evidence before the judge upon which he could properly conclude that Consilient ever revised these estimates upwards.
76. I am not impressed by this argument. It was another matter which the judge had well in mind. He found, as I believe he was entitled to, that Consilient became increasingly optimistic as it prepared for the launch and particularly so following the meeting of the advisory board in August. The pharmacists in attendance were very positive about the proposal and, as the judge observed, the views they expressed were likely to be unbiased and so genuine indicators of their views regarding the likely reactions of PCTs to the launch of Emozul.
77. The fourth point made by Mr Alexander is that the judge fell into error in his assessment of the degree to which the lower volume PCTs would have taken up Emozul in the counterfactual scenario. Specifically, says Mr Alexander, the judge had inadequate evidence to support a finding that PCTs in the £50-£100,000 per annum saving category would ever have been persuaded to promote switching at the rate he found at [74(ii)] and further, that he took no proper account of the evidence of Mr Crosbie that PCTs likely to save less than £30-£50,000 per annum were not Consilient's target market and that Consilient had devoted no resources to them.
78. I can deal with these submissions quite shortly. It is entirely true to say that Mr Crosbie gave evidence that the lower volume PCTs would not have been the focus of Consilient's marketing efforts. But that does not mean to say that the Medicine Managers in these lower value PCTs would not have heard of the launch and, in the light of all of the evidence before him, the judge was entitled to conclude as he did that the financial pressures upon them were such that a relatively modest degree of implementation of switching would still have occurred. As for the PCTs likely to save in excess of £50,000 per annum, the judge had ample evidence before him to justify his conclusion that the potential to make savings at or above this level would have triggered considerable interest.
79. That brings me to Mr Alexander's next general submission, namely that the judge's uncertainty discount was wholly inadequate. I recognise the importance of this issue because, as Mr Alexander emphasises, a modest increase in the discount would make a substantial difference to the overall result.
80. Mr Alexander has elaborated this contention as follows. He submits that the judge did not explain how he arrived at the uncertainty discount of 20% or why it was appropriate to apply it across the board to all categories of PCT. Indeed, says Mr Alexander, the discount appears to have been arbitrary and the judge ought rather to have evaluated all of the matters giving rise to uncertainty in this case and explained to what extent, if at all, he considered it appropriate to take them into account. Moreover, says Mr Alexander, the judge arrived at a result which was well out of line with that in other cases.
81. The judge's essential reasoning on this issue is certainly very concise. Nevertheless, I am satisfied that it is adequate and that it would not be appropriate for this court to interfere with the conclusion to which he has come. My reasons are these. First, in considering the substantive issues, the judge has made an assessment of the likely speed and degree of penetration of the market by Emozul in the counterfactual scenario. Hence, for each category of PCT, the judge has recognised that only a proportion of those PCTs would have taken the decision to promote switching and that such switching would have taken some time to implement.
82. Second, the exercise which the judge carried out was one which was inherently imprecise. It was therefore appropriate for him to consider whether or not there were, inherent in his assessment, uncertainties which he might not have adequately have taken into account and, if so, to estimate the discount he should apply.
83. Third, the judge considered that, in the circumstances of this case, the Medicine Managers might have had a subconscious tendency to exaggerate their ability to influence the behaviour of their GPs, and that there might have been some variation in the ability of the overall body of PCTs effectively to take up costs savings by arranging for prompt switching. These and certain other difficult-to-predict vicissitudes justified the application of a 20% discount. The judge has therefore identified those particular aspects of the case which rendered it appropriate to apply an uncertainty discount and he has considered the size of the discount that they justify. He was clearly of the view that the discount should be relatively modest in size. It seems to me that he has therefore done precisely what he was required to do.
84. Fourth, the uncertainty discount, if any, which it is appropriate to apply in any particular case must be determined upon the facts of that case and little if any assistance can be derived from looking at the discounts arrived at by other judges in different circumstances. There is not and cannot be any benchmark or yardstick. It follows that the judge cannot be criticised for arriving at a discount which is smaller than that which has been applied in other cases.
85. The final matter with which I must deal is AZ's complaint that the judge has wrongly assumed that PCTs and the NI Board would have begun to promote switching immediately after the launch of Emozul in the counterfactual scenario. Mr Alexander submits that the defendants accepted (and the trial was conducted) on the basis that there would inevitably have been a time lag between the launch date and the decision of any PCT to promote switching and yet the judge has arrived at a conclusion which makes no allowance for any such time lag and is even more favourable than that for which the defendants contended.
86. I do not accept these submissions. The judge has made findings which are properly founded upon the evidence before him. He was not bound to accept or reject in their entirety the case and arguments advanced by the defendants and, taking, by way of example, those PCTs with potential savings in excess of £50,000 per annum, he has concluded that Emozul would have achieved a market share of 80% one year after launch, subject to the uncertainty discount of 20%. In so doing I am satisfied he has taken into account both the time it would have taken PCTs to decide to promote switching and the time it would have taken to secure compliance with those decisions. Further, once the uncertainty discount is taken into account, as I believe it must be, he has not arrived at a figure which exceeds that which the defendants claimed.
87. For all of these reasons, I would dismiss this appeal.

Lord Justice Floyd

88. I agree.

Lord Justice Longmore

89. I also agree.