Two pharmaceutical companies, one Kenyan and another from India, are locked in a Sh1.4 billion legal dispute concerning rights to manufacture and distribute 45 life-saving medicines in Kenya.
The case currently in the High Court, which also implicates Kenya's Pharmacy and Poisons Board (PPB), centres on allegations of brand infringement and regulatory failures involving the essential medicines, exposing potential regulatory gaps in Kenya's drug oversight.
The gist of the commercial dispute pitting India’s Prism Life Sciences Limited against its former business partner in Kenya, Galaxy Pharmaceuticals Limited, is the sale of pharmaceutical products used in the treatment of various chronic illnesses, including heart diseases, atherosclerosis, and diabetes mellitus.
Prism Life Sciences sued, seeking damages of $11 5 million (Sh1.4 billion) from Galaxy and the industry regulator Pharmacy and Poisons Board (PPB) jointly as compensation for profits and sales of two years covering 2023 and 2024.
However, Galaxy has denied any liability and wants the damages, if any, to be apportioned to PPB over the alleged failure to discharge its duty as the market watchdog.
The case of Prism relates to alleged breach of trust and conspiracy between Galaxy and PPB to deprive it of the ownership of its pharmaceutical products and brands.
Court filings show that Prism entered the Kenyan market in 2005 and appointed Galaxy as its Local Technical Representative.
They established a business arrangement where Prism would manufacture, export, and market its pharmaceutical products while Galaxy would assist in the importation, distribution, and sale of the products in the Kenyan market.
According to Prism, the relationship deteriorated in 2022 after Galaxy engaged other pharmaceutical manufacturers and suppliers.
Prism alleges that Galaxy also indirectly acquired a pharmaceutical company by the name Prism Medico & Pharmacy Ltd from India via its subsidiary company called Galaxy Vitacare Private Limited, registered in India. It alleges that Galaxy owned 25 percent of the majority shares in Galaxy Vitcare.
“Upon the acquisition of Prism Medico & Pharmacy Ltd from India by the first defendant (Galaxy), it was not long before the first defendant began importing the same list of products exported by the plaintiff under the same brand names and exactly the same artwork, pattern, and color scheme of the secondary packaging (boxes),” narrated Prism.
However, Galaxy has denied the allegations and attributed the Prism’s woes to PPB. It says it received certificates, licenses, and approvals from PPB, a move that created a legitimate expectation that Galaxy had satisfied all necessary regulatory requirements, and that the products in question had been lawfully and properly authorised for distribution in the Kenyan market.
“The first defendant maintains that it acted lawfully and in good faith, relying on the second defendant's (PPB) statutory mandate to approve, register, and regulate pharmaceutical products,” says its advocates.
As such, Galaxy says any alleged liability solely stems from PPB's failure to properly discharge its statutory duty and the legitimate expectation created through its actions.
Galaxy wants the court to order PPB to solely pay any amount of damages that may be awarded to Prism for allegedly failing to discharge its regulatory functions.
Also sought is a declaration that Galaxy is entitled to be indemnified by PPB against any claim for compensation, damages, or costs that it may be condemned or ordered to pay to Prism.
The outcome could set a precedent for oversight of lifesaving drugs in Kenya, where regulatory gaps have previously raised concerns about patient safety.
“The first defendant (Galaxy) states that should the court find any failure, defect or irregularity in the approval, registration or regulatory oversight of the pharmaceutical products that are subject to the suit herein, such failure is attributable solely to the second defendant's (PPB) breach of its statutory duty and/or negligence under the Pharmacy and Poisons Act and requisite Rules and Guidelines,” says Galaxy’s advocates.
In its response to the claim, Galaxy accuses PPB of failing to properly assess, scrutinise, and verify the contested pharmaceutical products before granting registration certificates and licences, as required under its statutory mandate.
It argues that PPB issued certificates and licences without conducting adequate due diligence or ensuring full regulatory compliance under the applicable laws and guidelines.
Another claim is that PPB failed to detect or correct any errors or irregularities in the registration process of the contested drugs, either at the point of approval or during the lifecycle of the pharmaceutical products.
“Galaxy complied fully with all statutory and regulatory requirements under the Pharmacy and Poisons Act and the relevant rules and guidelines and was duly issued with the requisite approvals, licences and registration certificates by the second defendant (PPB) in respect of the pharmaceutical products which are the subject of the suit,” argue the advocates.
PPB, which is yet to respond to the allegations in court, is mandated to protect and promote the health of the public by regulating the profession of pharmacy and ensuring access to quality, safe, efficacious, and affordable health products and technologies.
Prism, which was incorporated in 2002, to deal with the business of manufacturing, distribution, and sale of pharmaceutical products, argues that its business arrangement with Galaxy recorded significantly high revenue volumes.
For example, they recorded significant revenue growth, with exports totaling $2.6 million (Sh335.9 million) between 2020 and 2022 before the relationship soured.
Among the reliefs sought in court is a permanent injunction restraining Galaxy from importing, warehousing, distributing, marketing, selling, trading, or dealing with the pharmaceutical products owned or of a similar molecule owned by Prism.
Pending determination of the dispute, in July this year, the High Court struck out an affidavit filed by Prism in support of its application for an order stopping Galaxy from distributing the products.
This followed a finding that the affidavit was inadmissible because it lacked proper authentication and had unverified annexures.
The court’s rejection of Prism’s affidavit weakened its interim bid to halt Galaxy’s sales, though the broader case remains unresolved.
