Australia: Generics Emboldened In Australia

Developments in Australian law and practice over the last year have been keenly followed by innovator pharmaceutical/biotechnology companies and generic drug manufacturers alike. Below we review a selection of the relevant cases and changes to Australian patent law.

Australia has become the next frontier in the global battle between Pfizer and the Indian generic manufacturer, Ranbaxy, over patents covering the blockbuster drug atorvastatin calcium, sold as Lipitor. The taxpayer-funded Australian Pharmaceutical Benefits Scheme (PBS) spent more than A$500 million ($412 million) on Lipitor in the financial year 2005/2006. It is the most widely prescribed cholesterol-inhibiting drug in Australia. Accordingly, the case is of public interest.

Two Australian patents were at issue: a first patent (AU 601981) that Pfizer claimed covered Lipitor within a broad claim; and a second patent (AU 628198) that claims the relevant specific enantiomer of atorvastatin calcium (the R-enantiomer).

Ranbaxy did not challenge the validity of the first patent. Rather, it chose to argue that, when properly construed, the relevant claims covered only the racemate form of the invention’s compounds, that is, an equal mixture of two enantiomers, being the R and S enantiomers. The applicant, Warner-Lambert (owned by Pfizer), successfully argued for a wider construction covering the single enantiomer of atorvastatin, sold as Lipitor. Court orders were to restrain Ranbaxy from importing into Australia, or selling or supplying in Australia, any pharmaceutical product containing atorvastatin calcium as its active ingredient.

On the other hand, the Court ordered that the second patent, or the enantiomer patent as it was termed, be revoked on the grounds of misrepresentation and lack of utility.

During examination of the enantiomer patent, the applicant relied on an argument that the R-enantiomer is 10 times more active than the racemate to overcome objections on the grounds of novelty and obviousness. Ranbaxy argued that Warner-Lambert had overstated the potency of the R-enantiomer, and that this amounted to a misrepresentation to the Patent Office that was material to the grant of the patent.

The Court found that the specification as a whole and the data it contained did not support the representation that the potency of the R-enantiomer was 10 times higher than that of the racemate. It was also found that the applicant had taken only a selection of the available data to illustrate the higher potency.

The Court ordered that the patent be revoked on the ground that this constituted misrepresentation before the Patent Office that had been material to the grant of the patent and, further, that the patent was invalid due to lack of utility in that it did not achieve the promise of the invention (10-times higher activity).

Both patents were extended until 2012 but the enantiomer provides protection for about four months longer than the first patent. Given the volume of Lipitor sales, and the fact that entry of a generic product onto the market results in an immediate reduction of 12.5% in the cost of the innovator drug to the PBS, revocation of the enantiomer patent would have significant implications for Pfizer’s revenue in Australia.

Both sides have appealed the decision.

Australian Patent 741818, in the name of Merck and entitled "Method for inhibiting bone resorption," related to a method of treating osteoporosis by orally administering alendronate while minimizing or reducing adverse gastrointestinal effects.

At first instance in the Federal Court, Arrow (a local generic manufacturer) sought to revoke certain claims on the ground that they did not claim a manner of new manufacture. Under Australian practice, in addition to meeting the requirements for novelty, inventive step and utility, an invention must meet a threshold of inventiveness "on the face" of the specification. That is, it must be a "manner of new manufacture" when read in light of the description provided by the applicant. (This requirement is a remnant from the Statute of Monopolies of 1623).

Justice Giles ordered the disputed claims be revoked after considering documents incorporated by reference into the specification, stating that he could conclude from the disclosures that "in substance, each claim relates to the use of a known substance with known properties for a known purpose in a known manner".

The decision was appealed and affirmed by the Full Federal Court (FFC) which stated:

Leave to appeal to the High Court was refused and, as such, the FFC decision sets a precedent that extends the law relating to manner of manufacture.

In assessing manner of manufacture, all disclosures made in the specification can be considered and combined – unlike the assessment of inventive step in which, for a document to be considered relevant, it must be established that the skilled addressee could reasonably have been expected to have ascertained, understood and regarded it as relevant. When the hypothetical skilled addressee does not read the patent literature, in some instances it can be difficult to have a prior art patent document considered for inventive step. Moreover, for applications filed before April 2002, prior art documents cannot be combined (except in exceptional circumstances) when considering inventive step. As such, the prior art base relevant to manner of manufacture can be broader than that for inventive step.

Many life science patents feature several documents incorporated in their entirety by reference, in particular those drafted in the US. Given the outcome of this case, the manner-of-manufacture argument is likely to be heard more frequently in Australian courts.

Under Australian practice, an extension of the term of a patent covering a pharmaceutical may be granted if more than five years have elapsed between the date of filing of the patent and the date of first regulatory approval.

"The first regulatory approval date" is defined in the Patents Act as interalia "the date of commencement of the first inclusion in the Australian Register of Therapeutic Goods". Since the establishment of the Australian Register of Therapeutic Goods (ARTG) under the Therapeutic Goods Act of 1989, relevant medicines and medical devices approved for supply in, or export from, Australia are entered on this Register. When approved for supply in Australia the product is "registered" on the ARTG and when approved for export from Australia it is "listed" on the ARTG.

Pfizer used ARTG "registrations" to obtain extensions of term in respect of four patents relating to their products Norvasc (amlopidine) and Relpax (eletriptan). On becoming aware that products covered by the patents had been listed on the ARTG (for export only) prior to the ARTG registrations, the Commissioner directed that the Patent Register be amended to shorten the extensions of term allocated to the patents.

Pfizer appealed to the Federal Court and argued that the relevant first date of regulatory approval for each pharmaceutical was the date of registration for marketing approval in Australia or for importation into Australia, rather than the earlier listing for export only.

The appeal was dismissed on the basis that the words "the first inclusion in the ARTG" as they appear in the legislation are clear and unambiguous and simply mean the first entry on the ARTG.

The Full Federal Court recently upheld the Federal Court decision and special leave to appeal to the High Court was refused. Accordingly, the extensions of term for the two patents covering Norvasc were reduced by 10 months. Both patents expired in April 2007 allowing early entry of generic products onto the Australian market which, at about A$60m in the 2005/06 financial year, is not insubstantial. The terms of the two patents covering Relpax were reduced by 13 and 5 months but are not due to expire until 2014 and 2015 respectively.

Accordingly, those seeking export approval in Australia should make note of the potential consequences in respect of any request for extension of term of a patent.

Springboarding is the term used to refer to actions taken towards obtaining regulatory approval for a pharmaceutical substance before the relevant patent expires. Previously, these activities would be an infringement, unless they were carried out in respect of a patent for which the term had been extended. After amendments to the Patents Act by The Intellectual Property Laws Amendments Act 2006, springboarding activity is now permissible at any time during the life of any pharmaceutical patent ie those covering pharmaceutical substances, methods of producing the substance and products relating to the substance such as metabolite or prodrug. This paves the way for earlier entry of some generic products – in particular those covered by patents that had not been extended – onto the Australian market.

Given fast-track growth in the generic manufacturing industry and aggressive competition for market share, it is not surprising that generic manufacturers are entering into litigation in Australia – particularly when, for certain products, potential profits are high. Emboldened by the recent case law and changes to Australian patent law that favour generic manufacturers, we expect to see an increase in the challenge to pharmaceutical patents from both local, established generic manufacturers and those entering the market from overseas. We also expect to find grounds that received little attention in the courts until now, such as misrepresentation and lack of manner of manufacture, being used to effect by generic manufacturers.

Further developments might also be on the way. The Australian government has commissioned The Advisory Council on Intellectual Property (ACIP) to review post-grant patent enforcement. The issues paper suggests, for example, the introduction of post-grant oppositions and provisions for temporary customs seizure of goods that allegedly infringe a patent. We look forward to the debate.

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.