We have written previously about the Australian Government’s struggle to manage the cost of its healthcare obligations and of the Productivity Commission’s recommendation [PDF 972KB] to amend the provisions for extending the term of pharmaceutical patents in Australia as a cost saving measure.

The Government, via the Minister for Industry, Innovation and Science and the Minister for Communications, has now responded [PDF 238.14KB] to the Productivity Commission’s recommendation and, in a surprising turn of events, has opted not to change the extension of patent term provisions, but to further consult with the sector to improve the patent term extension system.

The Government’s response provides the following key points:

  • The Government recognises the importance of patent protection to the pharmaceutical industry as a means for obtaining a return on substantial investment.
  • Pharmaceutical products are subject to a regulatory approval process which has a statutory timeframe of 255 working days, but which can be much longer.
  • The Government acknowledges that for many pharmaceutical products, the effective patent life in Australia is shortened by the regulatory approval process, albeit that it is not as short as in other jurisdictions such as the US.
  • The Government recognises the recent Strategic Agreement with Medicines Australia will deliver savings of $1.8 billion over five years to the Pharmaceutical Benefits Scheme.
  • Any consideration of changes to the extensions of term regime must strike a balance between ensuring that new pharmaceutical products are developed and that they are safe and effective, but also ensuring that they are accessible and affordable.

On the other hand, with regard to the Productivity Commission’s recommendation to monitor ‘pay for delay’ settlements (the practice where patent holders pay generic manufacturers to keep their products off the market), the Government has stated support in principle for such monitoring. The response recognises that pay for delay agreements have the potential to seriously harm competition and innovation in relation to pharmaceuticals, but that there is no evidence of such activity in Australia to date. This does not mean that no ‘pay for delay’ activity exists, but that mechanisms for monitoring such settlements need improvement. This is particularly the case if pay-for-delay agreements are reached overseas that potentially impact the Australian market.

The Government has stated that it will consider further options for implementing monitoring of ‘pay for delay’ settlements.

Further comments on the Government’s response to the Productivity Commission’s report on Intellectual Property Arrangements will follow shortly.