Australian report questions benefits of patent term harmonisation

The government’s Pharmaceutical Patents Review Panel released its draft report yesterday and is seeking public comments. The report evaluates “whether the system for pharmaceutical patents is effectively balancing the objectives of securing timely access to competitively priced pharmaceuticals, fostering innovation and supporting employment in research and industry”.

The 249-page report looks at many different issues, but raises particular concerns about patent term length as well as the duration of pharmaceutical patent extensions. In particular, the report points to the increase of the protection term of 20 years for all patents as required by TRIPs, noting that this change does not necessarily yield any benefit to Australia, or even patentees for that matter. Similarly, the Panel argues that Australia agreed to provide an extension for pharmaceutical patents as part of its free trade agreement with the US “without careful regard to whether this was in our own economic interest”.

The paper suggests that Australia may in fact be hurt by these longer patent terms. Not only may the government be paying more to purchase drugs protected by lengthy patent terms, but Australian generics may be put at a disadvantage. For example, the longer terms may force Australian generic manufacturers to move production overseas, whether producing for international markets where the drug has no patent production or stockpiling in anticipation of the domestic patent’s expiration. Such restrictions, the report argues, send jobs overseas and make it harder for Australian manufacturers to gain a “first mover” advantage in the generics market.

The paper also takes the position that the lengthier patent terms do not necessarily encourage investment by innovator companies. It states that it “found it difficult to believe that the prospect of additional returns from an extension of the then 16 year standard patent life could materially influence investment decisions made many years beforehand”.

Similarly, the report argues that though the cost involved in drug development is high, the incentives needed to encourage innovation may be overstated, noting that according to one study, innovator pharmaceutical companies enjoyed more than triple the profitability of non-pharmaceutical companies between 1998 and 2009. It characterised the patent extension as an indirect subsidy for the pharmaceutical industry. The report suggests that it might be more efficient to shorten the extension length to save the government hundreds of millions of dollars in drug costs, and use some of those savings to provide direct subsidies for R&D.

The full draft report may be found here. Public comments should be made to pharmapatents@ipaustralia.gov.au until April 30. Previous submissions, including those filed by Pfizer, Novartis, and Cancer Voices Australia are also available at the panel’s website.