Pharmaceutical industry regulation in Australia comprises a number of regulatory frameworks administered by separate government departments or agencies. These include:
- the framework for gaining marketing authorisation for pharmaceutical goods, including their entry on the Australian Register of Therapeutic Goods (ARTG) (administered by the Therapeutic Goods Administration (TGA));
- the framework of the Pharmaceutical Benefits Scheme (PBS) under which the Australian government subsidises the supply of certain pharmaceutical goods to Australian citizens and residents (administered by Department of Health);
- the framework for promoting competition and consumer protection as required by the Competition and Consumer Act 2010 (Cth) (CCA) (administered by the Australian Competition and Consumer Commission (ACCC) and other state agencies); and
- the framework for extending the term of pharmaceutical patents, which is contained within the provisions of the Patents Act 1990 (Cth) (the Patents Act) (administered by the Australian Patent Office).
Legislative and regulatory frameworki Authorisation
The Therapeutic Goods Act 1989 (Cth) (the TG Act) and the Therapeutic Goods Regulations 1990 (Cth) (the TG Regulations) establish the legal requirements for the import, export, manufacture and supply of therapeutic goods in Australia. They detail the requirements for listing, registering or including medicines, medical devices and biological products on the ARTG, as well as many other aspects of the law, including advertising, labelling, product appearance2 and product recall.3
Unless it is exempt or otherwise authorised by the TGA,4 a therapeutic good must be approved by the TGA and entered on the ARTG before it can be marketed or supplied in, or exported from, Australia.
State and territory legislation also imposes requirements relating to pharmaceutical substances, including the scheduling of substances and the safe storage of therapeutic goods.5ii Pricing and public purchasing of pharmaceuticals
The PBS is a programme under which the government subsidises the supply of certain medicines to Australian citizens. All medicines that have been approved to be dispensed to patients at a government-subsidised price are listed on the PBS Schedule.
The Repatriation Pharmaceutical Benefits Scheme (RPBS), administered by the Department of Veterans Affairs, is a scheme that provides pharmaceutical benefits to eligible veterans and war widows and widowers.6 Pricing and reimbursement arrangements for the supply of pharmaceutical benefits under the PBS are automatically translated across to the RPBS.7
The PBS legislative provisions relating to the supply and pricing of pharmaceutical benefits are located in Part VII of the National Health Act 1953 (Cth) (the NH Act) and include a number of provisions relating to the supply of pharmaceutical benefits (Division 2), payment for the supply of pharmaceutical benefits (Division 3), recovery of payments for the supply of pharmaceutical benefits (Division 3AA), price reductions for new brands of pharmaceutical items (including both single and combination items) (Division 3A, Subdivision A-D) and price disclosure price reductions (Division 3B, Subdivision A, B, D, E).
In relation to the public purchasing of pharmaceuticals, Section 99 of the NH Act provides that a dispenser (pharmacist or approved medical practitioner) who has supplied a pharmaceutical benefit is entitled to be paid by the Commonwealth an amount equal to the Commonwealth price of the pharmaceutical benefit as at the time of the supply (or, if certain conditions are satisfied, an amount based on the Commonwealth price). The 'Commonwealth price' is defined in Section 84(1) of the NH Act.
In practice, patients pay an amount for a PBS-subsidised medicine (referred to as the patient co-payment), and the remainder of the cost is paid by the government directly to the dispenser. For general patients, the maximum cost for a pharmaceutical benefit item is A$42.50, while for concession card holders (e.g., RPBS patients), the maximum cost is A$6.80, together with any special patient contribution, brand premium or therapeutic group premium that is applicable.8iii Patent duration
Australian patent law is governed by the Patents Act. There are two types of patents provided under the Patents Act: standard patents and innovation patents. Innovation patents are, however, being phased out, with new applications for innovation patents having ceased to be accepted from 26 August 2021.
A standard patent has a term of 20 years from its effective filing date,9 while the term of an innovation patent is eight years from its effective filing date.10Extension of term
Patent term extension is available for standard patents but not for innovation patents.
The term of a standard patent relating to pharmaceutical substances may be extended, in certain circumstances, for up to five years.11 To qualify for patent term extension, the patent must contain at least one claim to one or more pharmaceutical substances per se, or pharmaceutical substances that are produced by a process involving the use of recombinant DNA technology, that is in substance disclosed in the complete specification of the patent.12
The available term of the extension is equivalent to the period between the filing date of the patent and the first regulatory approval date, which is the date any product containing the pharmaceutical substance is first listed on the ARTG, minus five years.13
The patent term cannot have been previously extended.iv Encouraging innovation in the pharmaceutical sector
The TG Act, the Patents Act and the NH Act all include provisions that encourage innovation.
The patent term extension provisions in Section 70 of the Patents Act are, in part, in recognition of the fact that the patentee's reward for pharmaceutical patents may be diminished by reason of regulatory approval processes.
The data exclusivity provisions in Section 25A of the TG Act provide a five-year data exclusivity period commencing on the first day of the therapeutic product becoming registered. Within the exclusivity period, regulatory authorities cannot, without the permission of the innovator (in writing), use the preclinical and clinical data of the innovator's product to assess an application for registration of a generic or biosimilar. The data exclusivity provisions in the TG Act do not extend to protect information relating to a new indication or orphan drugs.
The NH Act provides that PBS-listed drugs are to be assigned to formularies identified as F1 or F2. The F1 formulary is for medicines for which only a single brand is listed, often because it is patented or an innovative medicine. In contrast, the F2 formulary contains medicines for which multiple brands are registered or for which a single brand medicine is registered that is interchangeable with multiple brand medicines at the patient level. The listing of a drug as F1 or F2 will affect its pricing.
When a new medicine is listed on the PBS as F1, its price is not linked to the price of any similar medicine in F2. Because F1 medicines are not interchangeable at the individual pharmacy level with other brands, the PBS price will not be affected by the pricing of other drugs until a bioequivalent or biosimilar brand is listed and upon which the medicine moves from F1 to F2.v Effect of competition laws on the pharmaceutical sector
The CCA is enforced and administered by the ACCC, an independent statutory authority.14 The ACCC is also the only national agency dealing generally with competition or antitrust matters. The CCA regulates the following types of conduct that are relevant to the pharmaceutical sector:
- anticompetitive acquisitions;15
- exclusive dealing and resale price maintenance;16
- resale price maintenance;17
- anticompetitive agreements, including concerted practices;18
- misuse of market power;19 and
- cartel conduct, including price-fixing, output restrictions, market sharing and bid rigging.20
Since 13 September 2019, an intellectual property exemption was removed from the CCA, meaning conditions in intellectual property transactions are treated like any other dealing from a competition law perspective.
The following maximum civil penalties apply for breach of the CCA:21
- for corporations, the greater of:
- A$10 million;
- three times the value of the benefit from the act or omission; or
- where the benefit cannot be calculated, 10 per cent of the corporation's annual turnover in the preceding 12 months; and
- for individuals, A$500,000.
Individuals found guilty of cartel conduct could face criminal or civil penalties, including up to 10 years in jail or fines of up to A$420,000 per criminal cartel offence, or both, and a pecuniary penalty of up to A$500,000 per civil contravention.
It is illegal for a corporation to indemnify its officers against legal costs and any financial penalty. Other forms of relief relating to the cartel offence include injunctions, orders disqualifying a person from managing corporations and community service orders.
For corporations, the maximum fine or pecuniary penalty for each criminal cartel offence or civil contravention (whichever applies) will be the greater of:
- A$10 million;
- three times the total value of the benefits obtained by one or more persons and that are reasonably attributable to the offence or contravention where benefits cannot be fully determined; or
- 10 per cent of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.22