Australia: Protecting pharmaceutical market share in Australia

March 22 2019

Background

The Australian government subsidises access to approved drugs via the Pharmaceutical Benefits Scheme (PBS). Under the scheme, the majority of the approved drug's cost is borne by the government in order to improve patient access.

A generic drug manufacturer may apply for listing on the PBS for their copy of the drug at any time because there is no patent linkage in Australia. The application for listing on the PBS, of itself, by the generic does not constitute patent infringement.

Upon listing of a generic drug on the PBS, there is a 25% immediate and mandatory price reduction for the originator drug. Significantly, this price drop is irreversible even if the generic drug is later removed from the market due to, for example, patent litigation. This issue forms the core of many pharmaceutical patent litigation cases in Australia, which highlights the different forms of patents that can be used to delay or prevent generic entry.

Preliminary injunctions

The irreversible price reduction of originator drugs resulting from listing of a generic may support an originator's claim that it would suffer irreparable harm, thereby strengthening their case for a preliminary injunction (PI) to prevent a generic from entering the market.

PIs are a useful way for originators to prevent generics from entering the market, as the law in Australia tends to favour patentees. Typically, an Australian court will only briefly consider the validity of the claims in question before granting a PI and the generic must establish a very strong case for invalidity for a court to not grant an injunction. Even if there is a good argument for invalidity courts tend to grant the PI; however, very recently the federal court decided against granting an injunction in a case involving a biosimilar, in part due to the strength of the invalidity claim.

Value of MoT and Swiss-style claims

In Australia, patent claims directed to methods of treatment (MoT) – a method of treatment comprising administering molecule X to treat disease Y – as well as Swiss-style claims–use of molecule X in the manufacture of a medicament for the treatment of disease Y–are both allowable.

Inclusion of both forms of claims covering approved indications in patents can be advantageous in the context of PIs. For example, Pfizer was awarded injunctive relief against Apotex for threatened infringement of its patent covering methods of treatment and Swiss-style claims relating to pregabalin. The court held that an offer made during the term of the patent to supply an infringing product after the term of the patent has expired will infringe a Swiss-style claim, but not a method of treatment claim. This decision highlights the importance of including both claim types in Australian pharmaceutical patents.

Method of manufacture patents

In addition to patents covering uses of drugs, claims directed to the methods of manufacture of approved drugs can be a valuable tool for companies to delay generic market entry. Recently, Janssen was granted a PI against Alphapharm (Mylan) for threatened infringement of Janssen's patent covering methods of manufacturing a precursor to its HIV drug darunavir. In that case, Alphapharm argued that the claims were not infringed and invalid. However, the court held that there was a risk of infringement and that the invalidity arguments were triable. The court granted the PI, which blocked the PBS listing of Alphapharm's generic version of darunavir, thereby preventing the price reduction of Janssen's products.

Australian courts are also relatively generous to patentees in obtaining preliminary discovery of manufacturing methods. For example, Pfizer was recently granted preliminary discovery of Samsung Bioepis' manufacturing process for producing etanercept. In that case, Pfizer successfully argued that due to the biosimilarity of Samsung's etanercept product with Pfizer's, there was a reasonable chance that it was produced using a similar method to Pfizer – with Pfizer's method protected by several patents – and preliminary discovery was granted.

Beware of the government

The government is under pressure to reduce its PBS expenditure from its current level of A$12 billion. One step taken by the government is to sue pharmaceutical companies, including Sanofi, Wyeth and AstraZeneca, whose patents were relied on for preliminary injunction but then later held invalid. In these cases, the government sought to recover its costs in continuing to subsidise the drug at the higher price, which would have been reduced by 25% if the generic copy had been allowed to list on the PBS. The first decision on this issue is expected this year and the defendant (Sanofi) is considering the risk sufficiently serious to mention in its overview of financial risk factors in its global investor report.

Therefore, although Australian law is generally favourable to originators, if the patent claims relied on for a PI are held to be invalid, then they risk being sued by the Australian government.