Australia’s review of pharmaceutical patents

Article  \  4 Jul 2013

In particular, the review board stated that its role was: evaluate whether the system for pharmaceutical patents is effectively balancing the objectives of securing timely access to competitively priced pharmaceuticals, fostering innovation and supporting employment in research and industry.

[Including] an analysis of the current pharmaceutical extension of term provisions, which have not been reviewed since their introduction in 1998…The review panel is particularly interested in evidence of whether the current system for pharmaceutical patents supports or hinders innovation, investment and competition.

The review defines a pharmaceutical patent as “a patent for a medicine or that directly relates to a medicine”.  This includes patents directed to active ingredients, formulations, production methods and uses of a medicine.

Although the review will consider several issues, such as patent standards, infringement and issues relating to Therapeutic Goods Administration in Australia, this article will only discuss pharmaceutical extensions of term.

The Australian Patents Act 1990 provides for the possibility of extending the term of a pharmaceutical patent.  The extension of term is provided to offset the amount of time it may take for a product to gain regulatory approval in Australia.  Until a product is approved, it cannot be marketed, which means that the patent holder cannot make any commercial gains from its patented product. 

The Background and Suggested Issues paper notes that:

The introduction of the extension of term provisions was estimated to result in an additional cost to the Pharmaceutical Benefits Scheme (PBS) of $6 million in 2001-02, increasing to $160 million in 2005-06, due to delays in the introduction of generic products.

The PBS has a similar role to Pharmac in New Zealand in that it provides Government-subsidised medicines.

Under the Australian Patents Act, if:

  • a patent claims a pharmaceutical substance per se; and
  • there are goods containing that substance on the Australian Register of Therapeutic Goods; and
  • there is at least five years from the filing date of the patent and the date regulatory approval is first gained,

then an extension of term of up to five years can be applied for, which can potentially extend the term of the patent from 20 to 25 years.  However, the Australian Patents Act also provides what is known as a regulatory review exemption.  This means that a third party (for example, a generics manufacturer) may use a patented invention if it is solely for the purpose of gaining regulatory approval in Australia or similar approval in another country.

The review board asked for submissions on two points.  Firstly, whether the length of the extension of term was appropriate and secondly, whether the breadth of pharmaceutical patents eligible for an extension of term was appropriate.

The Pharmaceutical Patents Review Draft Report has now been published.  Forty-three parties made submissions in response to the background paper. 
The Draft Report notes that a key stated objective of patent term extensions was “[e]ncouraging and attracting investment in pharmaceutical R&D in Australia”.  However, the review panel stated that “It is not clear…how the provisions achieve this objective, nor has the case been made in submissions to this review that they do in fact meet this objective.”
Australia must retain an extension of term provision, as this is a requirement of the Australia-United States Free Trade Agreement.  There is no term specified for the extension; Australia is just required to provide for extensions of term.  The review panel’s draft recommendation is that pharmaceutical patent extensions of term should be reduced and that some of the savings gained by the Government through this reduction should be used to fund research and development in Australia.

The panel also suggested that the extension of term provisions should be changed so that when a pharmaceutical patent receives an extension of term, the extension will not continue longer than the period of protection for the same product in countries that are major trading partners.  This recommendation will assist generics manufacturers in Australia, which the panel states, “...may be disadvantaged if overseas-based manufacturers are positioned to enter the Australian market immediately (and before their Australian competitors) due to their advantage in supplying other markets beforehand.”

In response to the question of the types of pharmaceutical patents eligible for an extension of term, unsurprisingly, the Generic Medicines Industry Association submitted that extensions of term should be limited to patents claiming new active ingredients.  In contrast, pharmaceutical companies believed that the present scope for extensions, which includes both active ingredient patents and new formulations containing known active ingredients, was appropriate, or should even be broadened. 

The review panel stated that the current approach of allowing extensions for drugs and formulations but not for methods of use seems reasonable because “...products based on these inventions are desirable, require considerable R&D and are prevented from entering the market until regulatory approval is given.”  The review panel did not think that any convincing evidence for expanding the scope of patents allowed to apply for extensions of term (such as patents directed to methods of treatment) had been provided.  The panel therefore recommended that the “...Government should maintain the current approach that allows extensions for drugs and formulations but not for methods of use and manufacture”.
Thus, the review panel’s draft recommendations are to retain the current scope of patents that are eligible for patent term extensions, but to reduce the term of extension that is available.  This approach seeks to balance the rights of patent holders to exploit their inventions with the need to provide competition in the market and affordable medicines to the public.

In comparison with Australia’s patent law, the New Zealand Patents Act 1953 does not provide any provision for a patent’s term to be extended beyond the usual 20 year term, even for products that need to obtain regulatory approval.  It does, however, include a similar regulatory review exception as in the Australian Patents Act.  This exemption allows a third party to use an invention provided that the use reasonably relates to the development and submission of information required under New Zealand law (such as seeking regulatory approval).  This is intended to assist generics manufacturers to prepare for market entry upon expiry of a pharmaceutical patent.

This article was published in NZ BioScience.