Australia: Differences in Trans-Tasman patent law: extension of term for pharmaceuticals

Last Updated: 11 July 2013
Article by Charles Tansey and Gareth Dixon

This is the latest in a series of articles intended to highlight some of the major differences between the patent laws of Australia and New Zealand. Whereas patentees are typically encouraged to view Australia and New Zealand as a "common market", the reality is that this impression may not be 100% accurate. As may be gleaned from previous articles in this series, our two countries are similar in many respects – socially, politically and economically. Therefore, it is perhaps a touch incongruous that at present, our respective patent systems are "same-same-but-different" in several important aspects.

In this article, we consider Trans-Tasman differences in respect of an "extension of term" for pharmaceutical patents. By "extension of term", we're talking about the same sort of thing as a Hatch-Waxman extension in the US, or a Supplementary Protection Certificate in Europe. In short, Australia offers one, New Zealand (presently) does not.

The main arguments advanced in favour of an extension of term for pharmaceutical patents are to ensure that the patent system provides adequate incentives for investment in the development of new pharmaceuticals; and to provide incentives for pharmaceutical companies to invest in the country providing for the extension. On the other hand, the main proposition against extending the term of a pharmaceutical patent is the cost that would be imposed on consumers; these costs occur directly through increased retail prices and indirectly though higher costs to the public health system.

As signatories to the TRIPs agreement, Australia and New Zealand are obligated to offer a minimum patent term of twenty years; there is no requirement to provide a longer term, although member states are free to do so should they wish. As will become apparent, Australia and New Zealand have each drawn very different "lines in the sand" in respect of balancing the arguments for-and-against a pharmaceutical extension of term.

Under section 70 of Australia's Patents Act 1990, the term of a pharmaceutical patent may be extended for up to five years subject to a patentee meeting certain, rather strict criteria. An extension of term is intended to provide some measure of compensation to a patentee, who before being able to sell a patented drug, must first conduct safety and efficacy tests to the satisfaction of the local authorities. Such tests are generally conducted after a patent application is filed, thereby reducing the effective patent life of the pharmaceutical. Taking an extreme scenario, by the time regulatory approval is obtained and a pharmaceutical is available "on the shelf", it may have only a few years of the "standard" 20 year patent term remaining. By comparison, the patentee of an electronic device, for instance, has no such regulatory constraints and is able to enter the market immediately.

According to the legislation, the term of an Australian standard patent may be extended on the basis of the "first regulatory approval date" of goods containing, or consisting of, the pharmaceutical substance, which are included in the Australian Register of Therapeutic Goods ("ARTG"). Of itself, this doesn't sound too onerous. However, such are the stakes involved in the case of any pharmaceutical "worth" extending, that the Government doesn't need to make it too easy for patentees – and several additional criteria must be met. Namely, a request an extension of term must be made within six months of the later of a) the date the patent was granted, or b) the date of first regulatory approval in the ARTG. The request cannot be made before the patent is granted and must be made before the end of the standard 20 year patent term. The length of the extension is generally 15 years from the date of first regulatory approval, and only then for a maximum period of 5 years. However, an extension will not be granted if the period between the filing date of the patent and the date of the first regulatory approval is less than 5 years. In combination, these criteria set the bar fairly high; a patentee certainly has to "earn" their extension.

But wait, there's more. For in practice, many of these criteria are interpreted somewhat narrowly. In H. Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70, it was found that the ARTG registration for the (+)-enantiomer of escitalopram was not the first entry of the ARTG for the pharmaceutical substance; registration for the racemic mixture had been obtained previously. As a consequence, the application for an extension of term should have been made within 6 months of the approval date of the racemic mixture.

A further example of just how restrictive the extension criteria are was provided in a decision of the Delegate of the Commissioner of Patents in Re: Searle LLC [2008] APO 31.

The Searle patent related to compounds useful as antiretroviral protease inhibitors. As the claims cover a pharmaceutical agent registrable on the ARTG, the patent was, per se, eligible for an extension of term. An extension was duly sought based on the substance "darunavir" (tradename: PREZISTA®). However, unbeknownst to the patentee, another compound ("amprenavir"; AGENERASE®) also falling within the scope of the granted claims had already been included on the ARTG some six years prior.

As mentioned previously, an application for an extension of term must be made within six months of the date of commencement of the first inclusion on the ARTG of goods that contain "any of the pharmaceutical substances" referred to in subsection 70(3). Accordingly, the eligibility of the Searle patent for an extension of term was not as straightforward as first thought.

In support of their conflicting assertions, the Delegate and the patentee placed emphasis on different words of ss.71(2)(b). The Delegate was initially of the opinion that "the first inclusion" was the critical feature of the subsection, and thus the extension application was required to have been made within six months of the earliest inclusion on the ARTG of "a relevant pharmaceutical substance", i.e., "amprenavir", some six years prior. The patentee in turn submitted that "any of the pharmaceutical substances" can be relied upon for the purposes of subsection 71(2). Accordingly, the patentee argued that the term "first inclusion" betrays the fact that a substance may have several entries in the ARTG with respect to different goods or different listings – and that the six month period is properly started afresh by each inclusion of a new substance on the ARTG. The respective and contrasting positions of the Delegate and the patentee reflect the fact that "any", as it is used to qualify the term "the pharmaceutical substances", can be either a determiner or a pronoun. Therefore, the Delegate's task essentially boiled down to an exercise in semantics.

Meanwhile, the patentee further noted that the earlier "amprenavir" product registration had been sponsored by a competitor, meaning that refusal of the sought extension would effectively deprive Searle of the full patent life otherwise owed to its product. The patentee asserted that this was contrary to the Explanatory Memorandum to the legislation, which justifies the extension provisions on the basis that they should provide an "effective patent life – or period after marketing approval is obtained, during which companies are earning a return on their investment – more in line with that available to inventions in other fields of technology".

However, the Delegate took the alternative view that it is the patentee who will generally sponsor inclusion on the ARTG; this marks the expected beginning of their exploitation (as per Alphapharm [2008] FCA 559 and 76 IPR 618). The Delegate then noted an untenable "double edged sword" argument in Pfizer (No.2) [2006] FCA 1176 and 69 IPR 525 wherein the patentee had sought to ignore certain goods of which they were not the sponsor, but to rely on other goods of which they were also not the sponsor. Accordingly, the Delegate was of the opinion that the only possible answer to the detriment question was that where earlier sponsored goods would infringe the patent rights of the patentee, an infringement action could properly be brought.

In ultimately refusing the application for an extension of term for the Searle patent, the Delegate applied Bennett J's reasoning in Pfizer (No.2) [2006] FCA 1176, in the context of section 77 (that which calculates the extension of term).

"Section 77 refers to the earliest first regulatory approval date. This recognises that the patent may cover more than one pharmaceutical substance and provides that the term of the extension is based on the earliest of the approval dates that apply to the patent" [emphasis added].

Despite the Delegate's decision being widely considered somewhat harsh, all was not lost. The patentee remained able to make a fresh application for an extension of term (of course, accompanied by an application for an extension of time under section 223 in which to do so) based on the earlier registration of "amprenavir". However, given the way in which the extended period is calculated under section 77, the relevant extension would have been approximately two years shorter than the extension sought on the basis of the later registration of "darunavir". Such an application was duly filed and the Searle patent was subsequently extended for nearly three years beyond its original 20 year term; it now expires in 2016.

Notwithstanding, this decision draws a line in the sand that "first inclusion on the ARTG" should be taken to mean the date of first inclusion of any pharmaceutical substance covered under a patent. Under the circumstances, it seems appropriate that the patentee was nonetheless able to obtain some measure of extension on the basis of "amprenavir". In the future, the respective timings of ARTG registrations versus section 70 applications suggest that others may not be so lucky.

The "take-home message" in respect of extension of term in Australia is that it is available – but it can also be something of a "minefield". As evidenced in respect of Alphapharm and Searle, there may be several "hoops to jump through" before any such request is determined. Of course, the flipside is that the lucrative nature of the Australian pharmaceutical industry means that it is often in a patentee's best interests to do so.

New Zealand patent law does not offer an equivalent to section 70 of the Australian legislation. Moreover, no equivalent is proposed in the Patents Bill 2008, which is presently awaiting debate before a Committee of the Full House (one of the final stages in the passage of new legislation in New Zealand).

In New Zealand, pharmaceutical extension of term was the subject of a governmental review dating back to a discussion paper released in June 2003. When all the "pros and cons" were considered, the NZ Government opted against enacting a pharmaceutical extension provision on the basis of its economic impact on consumers – and this is the side on which NZ's "line in the sand" has been presumed to lie.

However, enter the United States. In February 2008, the US announced that it would attempt joining negotiations with four Asia-Pacific countries: NZ, Singapore, Brunei and Chile (the "P4"), with a view to "gatecrashing" their negotiations toward the Trans-Pacific Strategic Economic Partnership ("TPP").

Whilst in theory, the opportunity to trade freely with the US would be a boon for the P4 countries, any such multilateral free trade agreement will inevitably come at a price; NZ would likely need to yield in certain areas in order to secure such a deal. With this in mind, the US Government publishes an annual report entitled Foreign Trade Barriers, in which it particularises laws and regulatory mechanisms of foreign countries that are considered significant barriers to US exports. In this document, US pharmaceutical companies have identified NZ's lack of pharmaceutical extension (and its prohibition on patents for methods of medical treatment – the subject of a future article in this series) as being an impediment to trade – and given the lobbying power of the "big pharma", the chances of the issue of pharmaceutical extension appearing at the US-P4 negotiating table would appear somewhat "real".

Although somewhat speculative, this could see NZ patent law aligned for compatibility with 35 USC 155 and 156, so that US "big pharma" are able to maintain their NZ patents for longer – and in turn, make greater profits. The trade-off, of course, is that the NZ consumer, who would then be required to pay more for healthcare, is afforded greater access to the US marketplace. In the case of the New Zealand dairy industry, free access to the US market would be priceless.

In September 2008, Washington announced that the US was to begin negotiations with the P4 "ASAP", and the first round of talks was scheduled for March 2009. However, in the short interim period, both the US and NZ changed government. Initial fears were that the incoming US administration may have been somewhat less FTA-friendly than were their predecessors – and whilst the March 2009 talks were inevitably postponed, President Obama announced at the September 2009 APEC meeting that a US-NZ Free Trade Agreement would go ahead. In terms of NZ's "bargaining chips" toward the FTA, pharmaceutical extension is likely to be high on the list.

In the interim, just as the NZ Patents Bill 2008 for a long while sat idle, so too did the P4 Agreement. However, several countries have since "joined", or are considering joining. Australia, Canada, Peru, Vietnam, Malaysia, Mexico and Japan are in the former group; South Korea, Taiwan and the Philippines are in the latter. Although President Obama had appeared keen to settle negotiations at the 2011 APEC Summit in Hawaii, the seventeenth round of negotiations took place recently in Lima, Peru.

Was it mere coincidence that the Patents Bill 2008 (with no extension of term) languished at #50 on the Parliamentary Agenda while the "P4+" negotiations continued? The cynic may think not.

NZ had previously decided against a pharmaceutical extension on the basis of its economic impact on local consumers. However, with a potential US-NZ FTA at stake, it is possible that the Patents Bill 2008 may yet undergo one or two changes before it is passed into law. However, if there's one thing we've learnt since 2004, when the first draft of the Patents Bill was tabled, it's to not hold our breath...

Shelston IP has experienced patent professionals dealing with extension of term issues on a daily basis. We would be pleased to assist with any extension of term concerns you may have.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Charles Tansey
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