Australia: Patent Term Extensions (PTEs) in Australia: under pressure - but safe for now

Last Updated: 8 September 2017
Article by Jacinta Flattery-O'Brien

Government responds to the Productivity Commission Report and the Courts find "Swiss-style" claims not sufficient for a PTE

The Australian Government, in its highly anticipated response to the Productivity Commission's Report, recommended only a minor change to the legislation relating to patent term extensions (PTEs). Almost simultaneously, in the equally eagerly-awaited decision of the Federal Court in Commissioner of Patents v AbbVie Biotechnology Ltd [2017] FCAFC 129, it was found that Swiss-style claims do not confer eligibility for a PTE.

Some context: pressure on the PBS budget

Pharmaceuticals are subsidised in Australia by the taxpayer-funded Pharmaceutical Benefits Scheme (PBS). With a population of about 24 million, the Government is under severe and sustained pressure to reduce PBS expenditure from its current level of $10bn, but it must do so in difficult circumstances: the average life-span of Australians is increasing as is the consumption of drugs, while the retirement age is not due to be lifted for some time.

Vertex, for example, appears to have recently borne the brunt of this downward pressure in a spectacular failure to reach agreement with the Pharmaceutical Benefits Advisory Committee (PBAC), the body that recommends new medicines for listing on the PBS. In a controversial decision, for the third time the PBAC refused to list Vertex' combination cystic fibrosis drug Orkambi (lumacaftor/ivacaftor; understood to have been offered at around $300,000 per patient per year) because, as reported by Vertex' General Manager Simon Bedson, the company would not agree to the PBAC request for a 90% discount on the price tag. Bedson has called on Greg Hunt, the Minister of Health and the person responsible for PBS expenditure, to step in and to over-rule the PBAC.

Tough price negotiations on individual items aside, however, it is clear that containing the PBS budget requires heavy reliance on entry of "cheap" generic products into the market, not least because an automatic reduction of 16% applies to the innovator company's product once a generic drug is listed on the PBS. The need to contain costs, however, has to be balanced with allowing pharmaceutical companies to reap the benefits of the many years of research and testing required to bring a new product to market.

A tension arises, therefore, when the Patent Office, an instrument of Government, grants a PTE to compensate a patentee for time required to test and obtain regulatory approval for a drug covered by the patent, because the result is that the "high" price to the PBS is maintained for longer.

Government response to Productivity Commission recommendations in relation to PTE provisions

s70 Criteria for obtaining a PTE – Government rejects PC's suggested restrictions

Under s70 of the Australian Patents Act 1990, a patent can be extended for five years beyond the standard 20-year term. A PTE is available for patents covering new active pharmaceutical ingredients, new formulations of known active pharmaceutical ingredients and new methods of producing known pharmaceuticals when the methods involve the use of recombinant DNA technology. In order to be eligible, more than five years must have elapsed between the filing date of the patent and the date on which regulatory approval for a product covered by the patent was obtained in Australia.

The Australian Productivity Commission Inquiry Report (PC Report), published in December 2016, recommended that PTE legislation be reformed such that extensions are only:

  1. available for patents covering an active pharmaceutical ingredient, and
  2. calculated based on the time taken by the Australian regulatory approval body to approve the drug over and above 255 working days (one year).

Many thought that this recommendation was likely to be approved by the Government and that PTEs may even be phased out completely over time – remaining unpersuaded by the argument that abolishing the system was not a "genuine" option as it would be contrary to our obligations under international agreements.

In its Response to the PC Report, published on 25 August 2017, the Government noted the Commission's finding that "extensions of patent term prolong market exclusivity and impose significant costs on consumers, Government and taxpayers. The Commission estimated that the cost to the Government (through additional costs to the Pharmaceutical Benefits Scheme) of providing extensions of patent term to pharmaceuticals is approximately $260 million per annum." and further acknowledged that "the effective patent life of extended Australian patents is 12 months longer at the median than those in the United States and the average expiry date of extended Australian patents is 18 months later than those in the United States".

It will come as a relief to innovators to note that, notwithstanding those comments, the Government indicated that it has "no plans to proceed with the recommendation in the form proposed by the Productivity Commission. The Government will discuss ways to improve the patent term extension system with the sector."

For the foreseeable future, therefore, innovators will continue to enjoy up to five years' additional protection beyond the 20-year term of their Australian pharmaceutical patent.

S76A Financial report by PTE recipients

Beneficiaries of PTEs will also be pleased to note that the Government will consider repealing s76A of the Patents Act 1990. This section of the Act is poorly worded and ambiguous in its intent. It relates to an obligation on the patentee to provide a financial report to the Government concerning the use of Government funds by organisations involved in the development of the relevant pharmaceutical product. However, due to its deficiencies, it was difficult for patentees to be certain of the requirements and attempts at compliance could, depending on the interpretation of the statute and the circumstances, be very onerous.

Notwithstanding the lack of any apparent penalty for non-compliance, through abundance of caution, Shelston IP's advice to PTE recipients has always been to comply or at least to make an effort to comply with the requirements as we interpreted them. However, we understand that some patentees may have chosen to ignore the s76A requirements.

The PC Report recommended that the Australian Government "reform s76A of the Patents Act 1990 (Cth) to improve data collection requirements for extensions of term, drawing on the model applied in Canada." and suggested rather sternly that "Thereafter no extensions of term should be granted until data is received in a satisfactory form."

Since the present author has lobbied for the reform/abolition of s76A, the Government's response is very welcome. Hopefully repeal of the section will be swift, particularly given that better methods of accumulating useful data are available as mentioned in the Government's response.

In that regard, Benjamin Mitra-Kahn, the Chief Economist of the Australian Patent Office, recently indicated that a database linking pharmaceutical patents with PBS costs will be launched by the end of 2017. We understand that the database will be limited to connecting the IP Australia table of pharmaceutical extensions ( Open Data IPGOD) with PBS expenditure data and hence patents that have not been extended would not appear.

Swiss-style claims do not confer eligibility for a PTE: relief for the PBS

From the moment the PTE provisions were introduced into the Patents Act 1990, the Patent Office Manual of Practice and Procedure clearly indicated that Swiss-style claims did not confer eligibility for a PTE and Patent Office practice was to refuse requests for PTE if they relied only on Swiss-style claims.

However, the case law developed in such a way that it became apparent that a claim to a method of producing a product (which could involve the use of recombinant DNA technology) could render a patent eligible for a PTE – even if the patent did not include a product-by-process claim directed to the registered pharmaceutical1 and, further, even if the claim did not explicitly mention a recombinant DNA step2.

AbbVie attempted to have three patents, namely AU2012261708, AU2013203420 and AU2013257402, extended. The patents include Swiss-style claims directed to use of the antibody adalimumab (AbbVie's Humira) in the manufacture of medicaments for the treatment of ulcerative colitis, Crohn's disease and rheumatoid spondylitis, respectively. It was argued essentially that the claims relate to a method of producing the pharmaceutical that involves the use of recombinant DNA and hence they fit within the criteria for PTE.

When the Patent Office refused to allow the PTE, AbbVie appealed to the Administrative Appeals Tribunal (AAT). It was a surprise to Australian attorneys, and presumably to the Patent Office, when they were successful. Given the number of patents that would have been eligible for a PTE and the consequent long-term impact on the PBS budget, not surprisingly, the Patent Office appealed the decision of the AAT to the Federal Court.

The Federal Court Appeal was upheld and the decision handed down on 18 August 2017 (Commissioner of Patents v AbbVie Biotechnology Ltd [2017] FCAFC 129). The Court found that Swiss-style claims "are not claims to pharmaceutical substances at all. [...] adalimumab is a pharmaceutical substance produced by a process that involves recombinant DNA technology. However, the claims in suit are not directed to adalimumab produced by recombinant DNA technology. They are directed to different subject matter. First, they are directed to a method or process in which adalimumab is used to produce a medicament. Secondly, they are directed to a medicament containing adalimumab that is to be used for specific therapeutic purposes [...]. These claims do not meet the requirements of [the relevant subsection of the PTE provisions]. (at 58 and 59)

The decision was anticipated given the longstanding practice of the Patent Office to refuse requests for a PTE based on such claims and the development of the precedent law surrounding PTE provisions. Nonetheless, Greg Hunt would have heaved a sigh of relief on hearing the news.

Conclusion

Granting of PTEs by the Patent Office impacts the already-stretched PBS budget. However, in rejecting the recommendation of the PC to amend the legislation to significantly reduce the number of patents that would be eligible for an extension, the Australian Government has sided with innovators ... for now. The outcome of the Government's foreshadowed consultation with the sector will not be known for some time and progress will be monitored with interest.

Meanwhile, the predictable return to "business as usual" in relation to the types of claims that confer eligibility for a PTE, while disappointing at one level, at least provides innovators with greater certainty regarding the life-expectancy of, and anticipated revenue streams from, their Australian patents.

Footnotes

1ImmunoGen Inc. [2014] APO 88 at 22-24

2 Novartis Vaccines and Diagnostics S.r.l. [2015] APO 2

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.

Shelston IP ranked one of Australia's leading Intellectual Property firms in 2015.

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

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

Authors
Jacinta Flattery-O'Brien
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Australia
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Norton Rose Fulbright Australia
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

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