Australia: The FTA´s Impact On Generic Pharmaceuticals And The PBS: Much Ado About Nothing?

Last Updated: 23 September 2004
Article by Nicholas Tyacke

Most Read Contributor in Australia, November 2017

Key Point

  • The FTA amendments to the Therapeutic Goods Act will have a limited impact and have little to do with "evergreening" of patents.

There has been a great deal of public debate regarding the impact of the US Free Trade Agreement, as implemented by the US Free Trade Agreement Implementation Act 2004, on the Pharmaceutical Benefits Scheme and the Australian generic pharmaceutical industry. In fact, the relevant provisions are of a very minor nature and, oddly, have little, if anything, to with the issue of "evergreening" of patents (that is, the accumulation of multiple patents and patent applications regarding a single pharmaceutical product, with a view to extending patent coverage of some kind for as long as possible). The effects on the PBS are likely to be relatively subtle and only fully revealed over time.

Under current law, the Therapeutic Goods Administration ("TGA"), in making its decision whether to list or register a pharmaceutical product, so it can be sold in Australia, does not consider whether the product falls within the scope of an Australian patent, or even whether an infringement action has been commenced against the applicant with respect to the product that is the subject of its application for listing or registration. Many were concerned that Article 17.10.4 of the FTA, which talks of preventing the marketing of a pharmaceutical product or a use of such a product during the life of a patent which "claims" that product or such use and of notifying the patentee of an application to the TGA for such product or use, was intended to impose restrictions on the TGA's consideration of applications for generic pharmaceuticals.[1]

The implementing bill as initially proposed by the Government included provisions for the notification of the TGA by an applicant for listing of a generic pharmaceutical product of any, or the absence of any, applicable Australian patent, but did not expressly prevent (and indeed requires notwithstanding) the listing of the product once the required notification has been given. There was concern, however, that the effects of this notification procedure might lead to patentees commencing legal proceedings alleging patent infringement to prevent the listing of generic pharmaceuticals. This concern led to certain additional provisions being proposed by the Opposition, which were designed to discourage the commencement of unfounded or vexatious legal proceedings. In this article, we consider the Act including both sets of provisions, as enacted.

Notification of the TGA and any affected patentee

The Act amends sections 25, 26 and 26A of the Therapeutic Goods Act 1989 to make the registration or listing of the applicant's goods contingent on the applicant giving the TGA one of two types of "certificates" -- the first, that the applicant will not market "in a manner, or in circumstances, that would infringe a patent," or the second, that the applicant will market during the life of a patent covering the product and has notified the patentee of the application to the TGA. Significantly, however, the Secretary must proceed to register or list the goods if the applicant gives it the certificate required under the new section 26B(1) without inquiring into the certificate's correctness. It is interesting to note, in passing, that the vagueness of the amendments is such that, in certain circumstances, an applicant to the TGA may be entitled to certify under either of the section 26B certification types. Only the second type of certification requires the applicant to have given the patentee notice of its application for listing or registration.

The only restraint on an applicant’s choice of certification is imposed by the new section 26B(2), which makes the giving of a certificate that is "false or misleading in a material particular" an offence subject to a significant fine. Although this section appears to impose strict liability for a false certification, an applicant is able to submit the first certificate , which doesn't require notice to the patent holder, if it is "acting in good faith" and "believes on reasonable grounds" that it will not market in a manner or circumstances that would infringe a valid claim. The penalty provision thus is unlikely to act as a serious deterrent to a generic applicant in its decision to submit the first, rather than second, certificate.

The significance of this amendment is not clear. It is possible that it may have the effect of putting a patentee on notice of the TGA application earlier than it would otherwise be, but it need not slow the process of the application for TGA approval at all. However, the steps required by an applicant to the TGA to list a generic pharmaceutical product and the making of the TGA application, if undertaken before the expiry of the initial 20 year term of a relevant patent, may themselves be an infringement of the patent: see Smith Kline & French Laboratories Ltd v A-G (NZ) [1991] 2 NZLR 560 [22 IPR 143] (although this decision did not relate to the application for Government approval as such, but the importation and use of the relevant drug for the purposes of such application). If that is so, then the patentee has an opportunity to commence proceedings against the generic applicant, in effect to prevent the TGA application proceeding, and the steps preparatory to marketing of a generic product, and as a consequence gain a considerable time advantage, because the preparation and the application could not start until after the patent's expiry.

Provisions designed to discourage improper legal proceedings

In response to the concerns, however, that these provisions might be abused in some way by pharmaceutical patentees, the Opposition proposed, and the Government accepted, certain amendments to the legislation in respect of the first form of certification – that is, one of non-infringement.

The amendments introduce a new section 26C to the Act which requires a patentee, before commencing any proceedings alleging the infringement of a patent in respect of therapeutic goods the subject of a certification under the new section 26B(1), to certify to the TGA that it will commence proceedings in "good faith", that the proceedings have a "reasonable prospects of success", and that those proceedings will be conducted "without unreasonable delay". The amendments also impose significant penalties if that certificate is "false or misleading in a material particular" or, having given the certificate, the patentee breaches its terms.

In addition, the new section 26D adds a requirement that, if any application is made for an interim or interlocutory injunction, the Federal Attorney-General must be notified and become a party to the proceedings (unless the Attorney-General gives written notice to the court that he or she does not want to be a party). Furthermore, in addition to penalties if the certificate given is false or misleading in a material particular, if an interim or interlocutory injunction is granted but the patent infringement proceedings are subsequently dismissed or abandoned and the court declares that the proceedings brought by the patentee were baseless, vexatious or not reasonably pursued, the court may award the original TGA applicant compensation (including by way of an account of profits, which are not usually available in these circumstances), as well as make an award of damages to the Commonwealth, and/or any State or Territory, for costs incurred and damages suffered by it as a consequence of the grant of interlocutory relief.

These remedies will certainly make a patentee think twice about commencing any proceedings seeking interlocutory relief, not least because of the significant politicisation of the proceedings as a consequence.

Amendments will not take effect unless the FTA is ratified

None of these amendments to the Act will come into effect unless the United States and Australia ratify the Agreement later this year. However, it seems highly unlikely that the United States could object to the amendments made by the Opposition, unless for purely political motives. They are only a deterrent for manifestly wrongful conduct, and arguably do little to change the existing obligations of any person commencing proceedings for infringement of a patent. Apart from the greatly different scale of pecuniary penalties possible in the unlikely event a court was ever persuaded to make such a declaration, Order 11 of the Federal Court Rules already requires an applicant's solicitor to certify to the court that the factual and legal material available at the time of commencing the litigation provides a proper basis for each allegation in the statement of claim. A solicitor's general obligations to the court also arguably already address the first two of the above certification requirements, while the timely conduct of the litigation is already controlled by the court.

Neither the provisions originally proposed by the Government, nor the Opposition’s amendments, have any relationship to the PBS, other than the fact that, before being considered for inclusion in the PBS a pharmaceutical product must be listed by the TGA. The PBS was established by and is governed by the National Health Act 1953 together with the National Health (Pharmaceutical Benefits) Regulations 1960. While the FTA does require changes to the process by which pharmaceuticals are to be subsidised under the PBS, allowing for more access by the drug companies during the decision-making process, the Act does not include changes to the PBS required by the FTA. At present, such changes are merely the subject of a public consultation document.

There are a number of other provisions of the FTA relating to pharmaceutical products which either do not require a change to Australian law at the present time, or which have not been implemented, no doubt pending further consideration.

[1] Under US law, for example, an applicant seeking regulatory approval for the marketing of a generic pharmaceutical product must file one of four certifications, each of which will determine when (and if) the FDA (the regulatory body) can approve its application. A Paragraph I Certification states that no brand name drug patent has been submitted to the FDA, a Paragraph II Certification states that a relevant patent has expired, a Paragraph III Certification states that the relevant patent has expired and a Paragraph IV Certification states that the applicant intends to market during the life of a patent alleged to cover its product, but it contends that the claims of that patent are invalid and/or will not be infringed by its product. In the case of a Paragraph IV Certification, a patentee has 45 days from notice of that certification to bring an action for patent infringement. During that 45 day period, the FDA cannot approve the generic application. If an action is commenced within that period, regulatory approval of the generic product is automatically stayed until the earliest of (a) the date the patent expires, (b) a court determination of patent non-infringement or invalidity or (c) 30 months from the date the patentee was notified of the Paragraph IV Certification.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions