Pharma patents review draft report - A hard pill for innovators to swallow

5 April 2013

On 15 October 2012, the Government announced that a Panel had been appointed to conduct a review of pharmaceutical patents. A copy of our IP Watch article regarding the announcement and the Review’s terms of reference can be found here.

On 2 April 2013 a draft report was released. Stakeholders have until 30 April 2013 to make written submissions in response to the draft report, with the final report to be provided to the Government on 30 May 2013.

This In Brief touches on the following five major recommendations contained in the Panel’s report.

Proposed reduction to extensions of term with the Government to subsidise R&D

The current extension of term regime in the Patents Act (Act) was introduced to provide an effective patent term of 20 years (in line with the term available for inventions in other fields of technology) and bring Australia into line with the position in other major jurisdictions.  The Act allows an extension of up to five years, depending on the time taken to obtain regulatory (TGA) approval.

The Panel notes the expense to the Government arising from extensions of term, through the PBS, and considers that it would be cheaper and more efficient to reduce extensions of term (without proposing a specific period) and for the Government to provide direct subsidies to encourage R&D.

Innovators will be sceptical of the proposal (particularly due to the lack of detail surrounding these presumably discretionary subsidies) and will correctly identify that it ignores the purposes for which the present regime was introduced.

Proposal to align patent expiry dates with those in other countries

The Panel expressed concern that innovators are delaying seeking regulatory approval in Australia with the consequence (given the link between the date of regulatory approval and the duration of any term extension) that the term of their Australian patent expires after than the equivalent patent in other jurisdictions. The Panel proposes, as alternatives:

  1. amending the Act so that the relevant regulatory approval date is the date when approval was granted in specified jurisdictions (being trading partners); or
  2. amending the Act so that a patent expires when the term of the equivalent patent expires in other countries.

Providing an incentive for innovators to obtain regulatory approval as early as possible will ensure that Australians obtain access to medicines faster. However, the alternatives proposed do not account for:

  • the varying speeds at which regulatory authorities process applications;
  • uncertainties that often arise with respect to identifying the “correct” regulatory approval date (and, consequently, the correct expiry date); and
  • the differences in extension of term provisions between jurisdictions (it would essentially have the effect of making the least generous regime applicable across jurisdictions).

Proposed amendment to correct anomalies caused by Court decisions

The Panel is inclined to accept that amendment to the Act is required to avoid the outcomes of the Federal Court’s decisions in H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70 and Merck & Co Inc v Arrow Pharmaceuticals Ltd [2003] FCA 1344.

In Lundbeck the Full Court held that the regulatory approval date on which an extension of term should have been based related to a product that did not fall within the scope of the claims of the patent for which the extension was sought. In Merck the Court held that the correct regulatory approval date related to a product that only “contained” the claimed substance as an impurity.

The Panel proposes amendment to s70(3) to clarify that “the ARTG registration on which an extension of term is based is that of the relevant product, the use of which would infringe the claim.”

This amendment is a welcome proposal which, if implemented, will ensure that the regime operates in accordance with Parliament’s intention when the provisions were enacted.

Contributory infringement

S117(2)(b) of the Patents Act makes it infringement to supply a product if the supplier “had reason to believe” that the person to whom the product is supplied would put it to an infringing use.

Generic companies have found this provision to present an obstacle in the context of method of treatment patents. These generic companies have, on several occasions, sought to carve out the indication (disease) to which the patent relates by not including it on the product information for a product when seeking approval from the TGA (commonly referred to as “skinny labelling”).

However, courts have found (particularly in interlocutory injunction cases) that due to the prescribing practices of doctors and dispensing habits of pharmacists, the sale of such a product (even with a “skinny label”) may be infringing.

The Panel proposes amending s117 to provide a defence to infringement where the supplier takes “reasonable steps” to ensure the product will only be used in a non-infringing manner. Further, it is proposed that where the product has a “skinny label”, there will be a presumption that “reasonable steps” have been taken.   

Transparency register

The Panel supports the introduction of a system whereby:

  • a company that obtains regulatory approval needs to identify on a “transparency register” any of its relevant patents;
  • when another company (i.e. generic company) applies to for regulatory approval it would need to provide, to the TGA and patentee, a certificate concerning possible infringement;
  • incentives are provided for generic companies to challenge patents (e.g. a period of exclusivity or a share of the PBS savings).

The benefits of a “transparency register” include:

  • infringement proceedings could be commenced earlier and concluded before regulatory approval has been granted; and
  • generic companies will avoid the expense of having to identify all the patents that may be relevant to the relevant pharmaceutical product.

It is likely that industry participants will make further submissions before the Panel finalises the report and provides it to the Government. 

The content of this publication is for reference purposes only. It is current at the date of publication. This content does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.

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David Fixler

Partner. Melbourne
+61 3 9672 3173