European pharmaceutical company succeeds in case against English NHS trust for breach of drug development agreement

European pharmaceutical company succeeds in case against English NHS trust for breach of drug development agreement

A Luxembourg-based pharmaceutical company has succeeded in an action in the High Court of England and Wales in which it alleged that a drug manufacturing division of an NHS trust was in breach of a drug development agreement (DA) relating to a treatment for lung disease.

SciPharm S.a.r.l claimed that the loss of a good manufacturing practice licence (GMP) by Moorfields Eye Hospital NHS Trust, trading as Moorfields Pharmaceuticals, constituted a breach of an agreement it had entered into in 2011, and sought nearly 1.8 million euros in losses. The defendant denied that the obligation functioned in the manner contended for by the claimant, and argued that no such term could be implied into the contract.

The case was heard by Deputy Judge Andrew Hochhauser KC. Ali Sinai appeared for the claimant and Dr Andrew Lomas for the defendant.

Absolute requirement

The DA was initially made between the defendant and an Austrian company, CompLex, after the latter required to find a new manufacturer for the drug, which it sought to develop commercially. The claimant, which was owned by the same investors as CompLex, was later substituted into the agreement by novation in place of CompLex. Manufacturing later commenced; however it was suspended in November 2013 after the Medicines and Healthcare Products Regulatory Agency identified failures to comply with GMP.

On 19 December 2013, without prior notice to the claimant, the defendant voluntarily suspended manufacturing again. It appeared that the defendant was unable to carry out aseptic filling and sterile terminalisation in the preparation of the vials containing the product in accordance with GMP. Although it was frequently stated on behalf of the Defendant that its remedial action plan would result in a successful further audit by the MHRA, and the resumption of manufacturing, this did not happen and, eventually, in January 2015, the Defendant closed its site.

It was the claimant’s case that, properly construed, the defendant’s obligations under the agreement were a long-term commitment intended to take the product through to the commercial sales stage. It was obliged to carry out all development in accordance with GMP and thus the requirement to maintain GMP status was absolute and could be implied into the contract.

For the defendant it was submitted that there was no basis on the face of the DA to read in an obligation to maintain GMP until final determination of a generic manufacturing authorisation in Austria. To imply an evergreen GMP obligation into the contract would require the claimant to establish that it was a standard industry practice, which it had not done.

Commercially unrealistic

In his decision, Deputy Judge Hochhauser began: “Under clause 4.5, the Defendant committed to co-operate with the Claimant to achieve ‘Clinical Study Approval and Marketing Authorisation for the Product.’. In my judgment that work and the Defendant’s obligations under the DA were not limited to a simple ‘fill and finish’ agreement to produce 12 clinical study batches which it produced. They went further than that.”

He continued: “The Defendant’s interpretation of clause 4.1 restricting its obligations to the production of the 12 clinical study batches is, in my view, commercially unrealistic, because it means that those batches and the related data could not be used in relation to the [Austrian application], if the Defendant lost its manufacturing licence or closed down its manufacturing facility.”

Addressing what losses were recoverable from the defendant, the Deputy Judge said: “At the time the DA was entered into it was envisaged that the Defendant would be the manufacturer and the steps that had to be taken by the Defendant included performing the Development of Product and co-operating with the Claimant to achieve marketing authorisation for the Product. The fact that both parties were taking a commercial risk in not having a Supply Agreement in place, does not prevent recovery of the costs incurred by the Claimant in being able to ensure the fulfilment of the Defendant’s obligations under the DA by a third party, giving it the benefit of the bargain entered into.”

He concluded: “It was common ground that if a new manufacturer were to be chosen, that the process validation would have to be redone. That does not, however, in my judgment preclude the Claimant recovering the costs which it has incurred in completing the Defendant’s obligations under the DA, which it was unable to fulfil, and the additional expenditure related thereto, in order to bring the MAA to a determination.”

Having determined that the claim succeeded on liability, Deputy Judge Hochhausen invited the parties to consider whether an agreement could be reached on a figure for quantum and interest, with a further hearing date fixed in the event they could not.

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