Is it all about transparency?

According to the TGA, the review was in response to the many requests it receives regarding:

• the status of new products whereby the grounds of the request may be regarded as compassionate
  
• the need for government to be appropriately transparent in its regulatory activities.

Compassionate considerations arise out of situations where:

• a new product has become available in another country
• it has been found to be effective but it is unknown if or when the product may become available to the Australian public.

As a result of the review, the TGA advanced a number of options for public consideration and comment. Submissions received by the TGA, where possible, were published in June 2020.

Of the options advanced, we focus here on option 2, which in essence provides that all new applications would be published after they had been accepted by the TGA for evaluation. Whilst this would certainly satisfy compassionate concerns and increase transparency of a government agency, doing so would significantly change the way in which regulation of pharmaceutical products intersects with the patent system. In essence, it would tip the balance in favour of pharmaceutical patent holders, as compared with third party generic businesses, because a patent holder would have knowledge of a generic product well in advance of when such a product could be sold. This foreknowledge must be regarded as commercially valuable and an unintended consequence of pursuing option 2 as a means to satisfy compassionate concerns.

Pharmaceutical regulation in the US and Australia

In the US, the Food and Drug Administration (FDA) is responsible for the regulation of pharmaceutical products. Under US law, the FDA is prohibited from publishing the fact that an application for the approval of a product has been filed. Such information is considered to be commercially sensitive, although it is recognised that an applicant may choose to otherwise publish such information.

Similar to the US, in Australia the TGA has the responsibility for the regulation of pharmaceutical products. As with the FDA, the TGA does not publish information about new applications. Publication does not occur until approval is given and the product has entered onto the Australian Register of Therapeutic Goods (ARTG). Unless an applicant chooses to disclose a filing, this is the first opportunity for the public to be aware of the availability of the product.

The FDA and TGA diverge

In the pharmaceutical industry, patents play a critical role in providing innovative businesses with market exclusivity (for at least 20 years) in a jurisdiction were a patent has been granted. In some jurisdictions, it may be possible to obtain a further five year extension to the period of exclusivity.

Of course when patents expire, it is open for a third party to enter a market with a generic product. But what happens when a third party wants to enter a market with a generic version of a patented product?

In the US, the FDA is responsible for the “Orange Book” which in essence is a compilation of authorised products and patents associated with those products. It is the patentee’s responsibility to ensure that its relevant patents are listed for each of its products. In this way, a third party may determine if its generic product would infringe a patent, and assess the validity of such a patent. When a third party files An Abbreviated New Drug Application (ANDA) with the FDA, it must file a Paragraph IV Certificate and notify the patent holder. The notice to the patent holder must include the factual and legal basis of the opinion held by the third party as to non-infringement and/or invalidity. The patent holder then has 45 days to commence litigation against the third party. If litigation is not commenced, the FDA may approve the ANDA following its review process.

By contrast, Australia has no such equivalent “Orange Book” process. Rather, there is a requirement that the third party filing for regulatory approval either provide a Certificate to the TGA that it does not infringe a valid patent or advise the relevant patent holder of its product. Unsurprisingly, third parties usually provide a Certificate. Once the Certificate is provided, review of the application by the TGA proceeds, and when approved, the subject product is listed on the ARTG. Therefore, unlike the US, this is the first time that a patent holder is aware of the generic product and its approval.

The effect of ARTG listing

ARTG listing permits the sale of the generic product and as such, triggers an automatic reduction in the price that the Australian Federal Government pays for the original product under the Pharmaceutical Benefits Scheme (PBS).

Accordingly, a patent holder must decide if it believes its patent is infringed, valid and capable of enforcement against the generic product and then act promptly to commence litigation to restrain such a potential infringement.

Restraining patent infringement

It has been usual for a patent holder to seek an urgent interlocutory injunction through the Federal Court as a means of restraining such a third party infringement. In the past, injunctions had been readily granted. However, there has been a distinct shift towards allowing the sale of the alleged infringing product, with the question of infringement and patent validity decided at a subsequent, full trial.

The downside to obtaining an injunction

A condition of obtaining an injunction is an undertaking by the patent holder to compensate an alleged infringer, if the patent is invalid or not infringed. Such an undertaking extends to the Commonwealth by virtue of the additional amounts paid under the PBS to the patent holder, as compared with the lower amount payable to the third party generic. Of the three instances that have occurred, two were confidentially settled, and in a third, reviewed here, the Commonwealth was unsuccessful. This lack of success arose out of the lack of generic supply, not because of a lack of potential entitlement. Whilst this case is now the subject of an appeal by the Commonwealth, we believe such an appeal will be unsuccessful.

Are pharmaceutical patent holders unduly disadvantaged?

It may be perceived that, as a result of the ARTG process and the ability of the Commonwealth to be compensated, patent holders are somehow disadvantaged. In response, both the Pharmaceutical Patents Report 2013 and Chapter 10 of The Productivity Commission's September 2016 Report into Intellectual Property Arrangements should be considered.

Of all of the recommendations contained in these reports, there is no suggestion that the current patent certification regime for generic products is in need of reform. Indeed, the TGA review indicated that its consultation was not an opportunity to relook at the issues canvassed in these reports.

It is therefore surprising that option 2 would be advanced by the TGA, in view of this qualification around the scope of its consultation and given it would significantly amend the current regime, to the advantage of patent holders.

The alternative options

Compassionate concerns around generic products are likely to be insignificant. Therefore, pursuing TGA option 4, essentially publication of all non generic product applications accepted for evaluation and leaving generic products to publication on the ARTG, would satisfy compassionate concerns without disturbing the current regulatory balance between patent holders and generic product applicants.

A modification to option 4 could be to make publication optional to all applicants. Under this option, it would be unlikely for a generic applicant to consent to publication. For all other applicants, it would be expected that, in relevant circumstances, an applicant would act compassionately and consent to publication.