Abstract
On 15 October 2012, the Australian Government announced a review into whether the pharmaceutical patent regime in Australia properly balances the encouragement of innovation with timely access to competitively priced pharmaceuticals. The review comes at a time when the Australian Government has already implemented sweeping changes to Australia's patent law, including a review of Australia's second-tier innovation patent system. The review process provides for an expedited 6-month process in which public submissions are to be called for, hearings with interested stakeholders completed and a final report to be issued in April 2013.*
*Now extended.
At the centre of the review lies the regime for the extension of pharmaceutical patents for up to 5 years to compensate for regulatory delays in obtaining marketing approval for new drugs.
The terms of reference require the three-member panel charged with delivering the final report to have regard to:
The availability of competitively priced pharmaceuticals in the Australian market The role of Australia's patent system in fostering innovation and hence to bringing new pharmaceuticals and medical technologies to the market The role of the patent system in providing employment and investment in research and industry The range of international approaches to extensions of patent term and arrangements for pharmaceutical inventions Australia's obligations under international agreements (including free trade agreements and the World Trade Organisation agreements) Australia's position as a net importer of patents and medicines Question 1: Is the breadth of pharmaceutical patents eligible for an extension of term appropriate?
A Suggested Issues Paper released in November 2012 poses 11 questions. A brief summary of those questions and some of the issues raised is set out below.
Australia's current pharmaceutical patent term extension regime provides for an extension of up to 5 years for patents relating to “pharmaceutical substances per se”. This has been interpreted to extend to new pharmaceutical substances, new formulations of known drugs, recombinant DNA, new forms of existing pharmaceutical substances, formulations characterised by non-active components and combinations of known drugs.
The extension of pharmaceutical patent term provisions were enacted, in their current form, in January 1999. The government announced at the time that the intention was to achieve 15 years of effective patent life for pharmaceutical products.
The innovator pharmaceutical lobby in Australia has argued that the extension of term provisions are too restrictive for patent owners, are not sufficient to encourage innovation and do not, in effect, provide for 15 years patent life.
In contrast, the generic pharmaceutical sector has argued that the extension of term provisions are too broad and that innovation and competition is consequently inhibited. The generic sector argues that the concept of “pharmaceutical substance per se” has been given too broad a scope with the consequence that the stated intent of the Australian Government, permitting extensions of term only for claims to new and inventive substances, has been overlooked.
A matter of considerable discussion and debate in Australia is the position with respect to the extension of Lundbeck's escitalopram patent.
Under the extension of term provisions, the period of the extension is determined by the first regulatory approval date of goods containing or consisting of the patented pharmaceutical substance.
In the case of escitalopram that patentee calculated its extension of term based on the first regulatory approval date for its Lexapro product. The active ingredient in Lexapro was the (+) enantiomer of citalopram. However, the patentee had previously marketed Cipramil which was the racemate of citalopram.
The issue was whether the first relevant regulatory approval date was that for Cipramil (the racemate) rather than Lexapro (the (+) enantiomer).
Ultimately, the court reasoned that the appropriate first regulatory approval date was that for Cipramil given that the racemate version “contained” both the (+) and (−) enantiomer of citalopram. The patentee subsequently applied to the Australian Patents Office for an extension of time within which to make application for a patent term extension based on Cipramil. That extension of time request was granted notwithstanding that the period of the time extension was 132 months. The decision was appealed to the Administrative Appeals Tribunal which upheld the extension and a further appeal to the Federal Court has now been filed.
Question 2: Is the length of the extension of term provided for appropriate?
The innovator sector argued that the current patent term extension provisions do not achieve a 15-year effective patent term for many pharmaceutical patents. Consequently, some innovator perspective commentators have suggested that the extension of term provisions should allow extensions of between 6 and 8 years to ensure that a greater proportion of pharmaceutical patents achieve the 15 years of effective term.
However, to allow extensions of term for up to, for example, 8 years would mean that a pharmaceutical patent could be entitled to a term as long at 28 years. A term of such length would come at a very considerable cost to Australian society by keeping competitively priced generic products off the market for an even longer period of time.
There must be a balancing exercise involved with respect to pharmaceutical patent term extensions. Certainly, it is difficult to argue with the proposition that innovator companies ought to be able to recoup their very considerable research and development expenditure by having an effective patent term.
It is to be queried, however, wether the balance to be struck justifies what, in effect, would amount to a minimum 5-year extension.
Question 3: Are the recent amendments to increase the thresholds for the grant of an Australian patent appropriate in the context of pharmaceuticals? If not, why not and what further changes are necessary? Question 4: Do the systems for opposition and re-examination provide appropriate avenues for challenging the granting and validity of a pharmaceutical patent?
As even the Issues Paper concedes, the recent amendments made in Australia by the “Raising the Bar” Act substantially raise patentability standards in Australia to those comparable with Australia's major trading partners. Those new standards do not, however, come into operation until April 2013. It will take some period of time before there can be any reasoned assessment of how effective the Raising the Bar changes to Australian patent law are and their implications for the pharmaceutical sector.
One of the important changes introduced by the “Raising the Bar” Act is a change to the standard against which patents and applications are assessed during examination, re-examination and opposition. Currently during re-examination or opposition the patent applicant is given the benefit of the doubt and the Patents Office may only refuse to grant a patent if it is the case that the patent, if granted, would be clearly invalid. The changes to Australian patent law will introduce a stricter “balance of probabilities” standard to determining whether a patent application is valid or not.
The changes to the system for opposition and re-examination made by the “Raising the Bar” Act ought to considerably strengthen the ability of the Patents Office to refuse the grant of patents which are of questionable validity.
Question 5: Do interlocutory injunctions, as the law is currently applied, provide appropriate relief in cases involving pharmaceuticals?
As the law currently stands in Australia, there is a high degree of likelihood, in most cases where infringement of a pharmaceutical patent is alleged, that the patentee will be entitled to an interlocutory (preliminary) injunction to prevent generic market entry pending trial on the merits.
That outcome is more likely than not in most cases as a result of 2 things:
the fact that, arguably, little or insufficient weight is given by the Australian courts to the grounds of invalidity which are often asserted against the patent in suit; the presumption that the status quo ought to be maintained in order to prevent the patentee from suffering irreparable and unquantifiable financial harm by the introduction of a generic product pending trial. This latter presumption occurs principally because of Australia's pharmaceutical price subsidisation regime which, in most instances, mandates an automatic and irreversible price reduction which the government pays for pharmaceuticals upon the introduction of a first generic entrant for the drug involved. Question 6: Is Australian law on contributory infringement appropriate in relation to pharmaceuticals?
There has been discussion, in the past, as to whether a mechanism should be implemented to enable the government to restore the monopoly price of a pharmaceutical in the event that a generic product is allowed onto the market pending trial, and thereby triggering the relevant price discount, where at trial (or after appeal) the relevant patent is found valid and infringed. If such a mechanism were to be enacted it would take some force out of the argument that generic entry will inevitably involve an irreparable and uncompensated downward price spiral in respect of the patentee's product.
Contributory patent infringement in Australia is provided for in section 117 of the Patent Act 1990. The provision operates to deem the supply of a product to be an infringement of a patent where the use of the product would itself amount to an infringement.
The rub for generic suppliers is that infringing end use can be established in 3 ways:
Where the product is only capable of one use. (Where the product is not a staple commercial product) if the supplier had reason to believe it would be used for an infringing use; Where the supplier induces an infringing use. Question 7: Are the current timeframes in which infringement proceedings must commence appropriate for pharmaceutical patents? Question 8: Are follow-on patents being used to inappropriately extend protection for pharmaceuticals? If so, how? And, if they are, is this sound policy and what changes, if any, are needed? creating and seeking to patent non-synergistic combination products and then moving the market late in the term of a compound patent to the combination product or; re-formulation prior to patent expiry and monopolising the method associated with the re-formulated product profile; development and patenting of “new” salt forms of known products alleged to provide new and “surprising” advantages. Question 9: Is the law on data exclusivity appropriate?
Recent court decisions in Australia mean that it will almost never be the case that a newly launched generic pharmaceutical would be considered to be staple commercial product meaning that, if the generic supplier has reason to believe the product will be put to an infringing use, it will be caught by the contributory patent infringement provisions. This, coupled with the fact that the carve-out of patented indications from product information and labelling documentation have not been held sufficient to necessarily deprive the generic supplier of having reason to believe that the product might be used for an off label, but infringing, use have caused the generic industry in Australia to call for changes to the contributory infringement provisions to align more closely to the position which, for example, pertains in the United States.
S120(4) of the Australian patents Act 1990 allows up to 6 years following an alleged infringing act for an action to be commenced. The 6-year period for bringing action is consistent with the limitation period which applies in the case of other tortious conduct and therefore does not seem inappropriate. There is no evidence that innovator companies are waiting for long periods of time before commencing patent infringement proceedings.
A range of measures can be deployed by patentees in the pharmaceutical sector in an attempt to delay generic entry. These actions are not new or surprising. They may, for example, involve:
However, it is debatable as to whether any specialised or particular legislative change is required to deal with this type of activity. Arguably, the existing mechanisms by which so-called “follow-on” patents can be challenged in Australia provide a sufficient mechanism and safe guard to the generic pharmaceutical sector to sufficiently ameliorate the effects of such spurious patents. If the patents are meritorious then, presumably, they will be held valid.
In Australia, the data exclusivity provisions of the Therapeutic Goods Act apply to data relating to the active substance itself but not to formulations or uses of that substance.
Certain commentators, writing from an innovator perspective, have suggested that consideration ought to be given to extending the term of data exclusivity or providing data exclusivity in respect of data submitted to support new formulations or new uses of active agents.
Australia's current data exclusivity provisions that provide for 5 years protection are broadly in line with international expectations and there seems to be no reason why that period ought to be extended.
Nor does there appear to be any reason, in principle, why data exclusivity should be extended in Australia to cover new indications or new formulations of existing actives. The protection available by means of the patent law in relation to such development sought to be sufficient protection to encourage such incremental innovation without the necessity of extending the data exclusivity provisions as well.
Question 10: Are the laws on patent certificates appropriate?
Australia does not have a patent/regulatory linkage system as such. There is no provision in the Therapeutic Goods Act which prevents approval being given to a generic product by reason of the fact that a patent or patents may exist which are relevant to that product.
However, the sponsor of a generic product must provide a certificate to the Therapeutic Goods Administration in order to obtain marketing approval which certificate must either state that the generic supplier, in good faith and on reasonable grounds, believes that the marketing of the drug will not infringe a valid claim of any patent that relates to the goods or, alternatively, that a patent exists and that the applicant proposes to market the product during the term of the relevant patent and has notified the patentee of the application for approval.
In almost all instances, the first type of certificate is given and the only requirement is a good faith belief, based on reasonable grounds, either that the relevant patent is non-infringed or that it is invalid or both. That requirement is most usually satisfied by the obtaining of a freedom to operate advice.
In that sense, the hurdle to be overcome by a generic supplier in giving such a certificate is low however the issues paper does not propose a Hatch-Waxman type system of patent linkage in Australia.
Patent owners must also provide certain certificates. Before commencing an infringement action in respect of a pharmaceutical patent against a generic supplier, the patent owner must certify that the proceedings are being commenced in good faith, have reasonable prospects of success and will be conducted without unreasonable delay. There are substantial penalties available for providing a false certificate, but there would have to be extreme circumstances before it could be established that a certificate of that kind was given falsely.
In summary, the certificates provided for under the Therapeutic Goods Act do not appear to be particularly useful or practical and one might therefore question whether they ought to remain in place at all.
Question 11: Are the laws on copyright of product information appropriate?
An express provision (s44BA of the Australian Copyright Act 1968) was introduced in 2011 stating that there is no enforceable copyright in material relating to product information leaflets for the purpose of supply of a medicine. This includes generic pharmaceutical supply. However, the provision does not apply retrospectively.
An argument could be made for extending this “safe harbour” provision so that it does have retrospective effect.
Conclusion
The Issues Paper includes a number of appendices that outlines the state of Australia's global position in pharmaceutical innovation and manufacturing and the interface of regulatory, governmental and IP policies on Australia's medicinal spending.
Amongst the statistics, approximately 8.5% of all patents filed in Australia between 2008 and 2011 are in the technology classification pharmaceutical or cosmetic.
This is a little greater than double the WIPO and USPTO percentages in equivalent classifications around the same periods.
Of note only 67 (3.3%) of the 2017 patents in the biotech, pharmaceutical and cosmetics classifications originated in Australia, compared with 43% originating from the United States. Australia is also a net importer of pharmaceutical manufactured goods by a factor of around 2.5:1 over the last several years.
In line with this is the imposition and expectations of the Australian-United States Free Trade Agreement which came into force in 2005 and the expectation of research-based pharmaceutical companies to have their IP rights strongly protected in a jurisdiction to ensure that both world competitive pricing and delivery of state-of-the-art medication are available to the Australian public.
It remains to be seen whether this review will provide any controversial recommendations to Australian law-makers that will ease the burden on generic pharmaceutical manufacturers, incentivise innovation in the generic field or bolster the IP provisions for research-based pharmaceutical organisations. The Australian pharmaceutical industry has a mercifully short time to find out.