A court ruling on a compensation suit -- ordering a generic company to reimburse the profit loss caused by the price cuts of original drugs due to patent infringement -- is raising stirs in the pharmaceutical industry.

On Feb. 8, the Patent Court ruled in favor of Lilly Korea on its compensation case against Myungin Pharmaceuticals regarding Zyprexa (Ingredient: olanzapine) and ordered the latter to pay 20 million won ($18,453).

Zyprexa is schizophrenia and bipolar disorder treatment developed by Eli Lilly. Lilly Korea has been selling the drug in Korea since 1998. The medication is a blockbuster product with the annual sales of 36 billion won.

Although the amount is less than the plaintiffs’ claim of 46.9 million won, industry officials have been closely watching the court’s decision as they can now be responsible for the original drug price cuts.

The patent case against Zyprexa goes back to 2008 when the Patent Court dismissed Hanmi Pharmaceutical’s request for an invalidation of the patented invention against Eli Lilly’s olanzapine.

Hanmi Pharmaceutical subsequently filed a petition in 2010 to seek an annulment of the trial decision. Then the Patent Court accepted Hanmi’s claims that the trial decision denied the creativity of the patented invention.

Both companies received sales approval for their generic version of the drug, in 2010. They had also registered an application for an evaluation from the Health Insurance Review and Assessment Service’s drug reimbursement evaluation committee after the patent expired. After Hanmi’s ruling, the two changed its application to "immediate sales after listing" and started selling the drug in early 2011.

The launch of the generic products led the Ministry of Health and Welfare to cut prices for Zyprexa by 20 percent.

However, the Supreme Court overruled the lower court’s decision and ordered to dismiss the original sentence in 2012.

Afterwards, Lilly Korea filed a compensation suit claiming that the two companies began selling their generic drugs before the patent expired on April 24, 2011. The company argued that such actions not only infringed upon their patent but also resulted in the lowering of the drug price, which in turn caused a loss of profit.

In Hanmi’s case, the Seoul High Court admitted that the company had breached Lilly’s patent, but dismissed the latter company’s claim that the release of the generic drug affected their profit. Lilly Korea appealed the decision to the Supreme Court.

However, in Myungin’s case, the Patent Court recognized the relationship between generic drug prices and original drug price cuts. The decision to decrease the cost of Zyprexa to 80 percent of its initial value was directly attributable to a series of sales activities, including a drug listing application for generic drugs. The court added that Myungin had acknowledged that the release of a generic drug could cut the price of the original prescription, in its ruling.

The case has caused a commotion among pharmaceutical companies as it can serve as a precedent to future instances, in which the compensation amount might be substantial when factoring in the duration of the patent infringement and the sale of the original drug.

Experts say that generic developers will need to take caution in applying for a generic product even if an initial ruling dismisses the patent of the original product.

corea022@docdocdoc.co.kr

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