Australia: Full Federal Court confirms that the act of applying for PBS listing is not an offer to supply a pharmaceutical product

In a recent appeal case heard by the Full Court of the Federal Court of Australia, the Court has confirmed that merely making an application for listing of a patented pharmaceutical product on the Pharmaceutical Benefits Scheme (PBS) would not infringe the patent.¹

Background

Earlier this year Justice Nicholas held that an application for PBS listing of the respondents' pregabalin products (Generic Pregabalin), where listing was to take place after patent expiry, would "fall short of offering to sell or otherwise dispose of the products"² which would have amounted to an infringement of the patent in suit. We summarised Nicholas J's decision here.

As part of the application for listing, the respondents would have to assure the Minister, by way of an undertaking, that they would have sufficient stock to meet demand in time for the commencement of PBS listing.

In appealing Nicholas J's decision to the Court, the appellants argued that his Honour had not recognised the fact that by making an application for PBS listing, the respondents would be making an offer to the relevant Minister that they would assure supply of the Generic Pregabalin during "the guaranteed period". They argued that the fact that the supply would not commence until after patent expiry was made was not relevant, because the offer had been made prior to patent expiry. They argued that the assurance that the respondents would have to give in the course of applying for PBS listing was an act of exploitation within the meaning of the Patents Act 1990. By making the application for listing prior to expiry, the respondents would obtain a commercial benefit from the patent and infringe the appellants' statutory monopoly.

The respondents argued that the Generic Pregabalin products could be lawfully supplied as soon as the patent expired because they were listed on the Australian Register of Therapeutic Goods³, the only issue being that if the Generic Pregabalin products were not also listed on the PBS, the price would not be capped and no subsidy would apply to those products.

The appeal was expedited because the respondents would need to make an application by 1 May 2017 in order to obtain the first listing date after expiry of the patent (being 1 August 2017, shortly after the patent expires on 16 July 2017).⁴

The decision

In a joint decision rejecting the appeal, Justices Jagot, Yates and Burley agreed with Nicholas J that the word 'offer' in the definition of 'exploit' was not confined to its contractual meaning and that it bore its ordinary meaning as defined in standard dictionaries (for example, "to present or tender for acceptance or refusal").

The fact that the respondents would be required to assure the Minister that they would be able to supply the Generic Pregabalin products during the guaranteed period was not an offer to the Minister to supply the products to third parties. The Court held that what the Minister accepts (or rejects, as the case may be), is the determination of a brand of a pharmaceutical under s 85(6) of the National Health Act 1953, not the assurance from the respondents that it will be able to supply Generic Pregabalin products. That assurance is instead a pre-condition to the Minister making a determination at all.

The Court rejected the characterisation of the assurance as an offer to supply, noting that the statutory guarantee of supply provisions does not come into effect until PBS listing occurs (which in this case would be after the patent expires). The assurance was no more than an assurance that stock will be available to meet demand once the Generic Pregabalin products are listed on the PBS and did not amount to an offer to supply.

Conclusion

For some time it has been an open question as to whether the assurance of supply, given to the Minister as part of the PBS application process, would be considered to be an infringing offer to supply. Where the PBS listing is not to take place until after expiry of the patent that question has now been answered.

Footnotes

¹ Warner-Lambert Company LLC v Apotex Pty Limited [2017] FCAFC 58.
² Apotex Pty Ltd v Warner-Lambert Company LLC (No 3) [2017] FCA 94, Nicholas J at paragraphs [33]-[35].
³ Seeking and obtaining such listing is not an infringement of a patent: see Patents Act 1900, s 119A.
⁴ There are cross appeals which are yet to be heard and determined.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories