LAST week’s High Court decision in Alphapharm Pty Ltd v H Lundbeck A/S highlights yet again how Australia is being poorly served by patent law to the benefit of international pharmaceutical companies.
The case involved a classic piece of “ever-greening” by an international patent holder. Ever-greening is where the holder of a patent over a pharmaceutical seeks to extend the life of the patent by all sorts of tricks and loopholes in the law.
While the patent remains valid, the patent-holder has exclusive rights to production.
Alphapharm has been making generic drugs in Australia for 30 years. It and other generic drug makers wait until the patent on a new drug runs out, usually in 20 years, and then produce it at a much lower price.
It can do this because the patent specifications are public documents and the generic producers can start work on the new chemical formula almost the moment the patent begins, so they are ready to produce when it ends.
The patent-holders, meanwhile, start applying for extensions of time on various grounds set out in the Patents Act.
They also start applying for new patents for what is the same active ingredient but delivered in a slightly different way. In effect, they get another 20 years of exclusive production and high prices because doctors, quite reasonably, will prescribe the drug with the best delivery process and the best therapeutic outcome.
Hazel Moir, an intellectual-property expert at the ANU, and Deborah Gleeson, Lecturer in Public Health at La Trobe University, have pointed to another insidious result of attempts to extend patents by ever-greening.
They say that every new drug that goes on to the Pharmaceutical Benefits Scheme must be approved by the Therapeutic Drugs Administration. That means there must be clinical trials of the drugs.
But with ever-greening the efficacy of the essential ingredient is already known. If a patient has the disorder they should at least have the old version of the drug. But in clinical trials they must be given a placebo – in other words be given no treatment, when an effective treatment is already known. They are being subjected to unnecessary clinical trials.
That aside, the costs of extending patents is astronomic.
At stake in last week’s case was at least $20 million in infringement damages.
Alphapharm has been producing and selling a generic form of Escitalopram, an anti-depressant, for about two years. If Lundbeck’s application for an extension were successful that production would be infringing and Alphapharm would have to surrender its profits to Lundbeck.
And that is what has happened. The cheaper generic producer has lost and so has the Pharmaceutical Benefits Scheme.
The High Court pointed to the complexity and difficulty of the Patents Act and regulations. That much was made obvious by the fact that the court split three-two. So the finest legal minds in the country were almost split down the middle.
Accordiing to Moir and Gleeson, Australian patent law is defective. It allows big pharma to combine known ingredients with known delivery methods to claim a new patent, just because the known delivery method has never been applied to that known ingredient before.
A better argument would be that the combination is obvious and therefore not an invention worthy of patent protection.
After all, there is a give and take here. The government gives protection in the form of an exclusive right to produce an invention in return for that invention ultimately becoming part of the public domain. And the exclusive right to produce encourages companies to do research and development.
When drugs go into the public domain, prices fall by as much as 95 percent. People are willing to pay huge premiums for their health if there is only one supplier.
The complexity of the Patents Act also means that legal costs for Big Pharma to tie cases up in the courts are trivial compared to the profits they can make by scaring off generic producers while applications for extensions or new ever-green patents are sought.
In effect extending patents by legal argument.
The other way Australia gets done over by Big Pharma is through us not being tough enough on negotiating prices for the supply of drugs (patent and generic) to the Pharmaceutical Benefits Scheme. New Zealand’s, Canada’s and Britain’s public health systems do far better.
Further, the various free-trade deals on offer might threaten the generosity and universality of the Pharmaceutical Benefits Scheme, but we will not know until it is too late, because these deals are being done in secret.
DOT DOT DOT
Meanwhile, there is brighter news on another legal front – conveyancing.
Earlier this year, overseas fraudsters managed to “sell” someone else’s property in the Canberra suburb of MacGregor without their knowledge. Two years ago there were a couple of similar cases is Western Australia.
This week, electronic conveyancing was introduced in Australia. It is possibly a world first.
Property Exchange Australia (PEXA) is running the scheme. PEXA is a public-private partnership under the COAG umbrella.
The first conveyance was in NSW. Other states will soon follow. The ACT will probably be last, if at all, because of the leasehold system, but in theory there is no reason for e-conveyancing in the ACT not to go ahead, except that a different system in a small jurisdiction may not be worthwhile.
The new system provides for the preparation, signing, stamping, exchanging and lodging of transfer, discharge of mortgage and mortgage documents and for the related transfer of funds.
Ten banks, including the four majors, have joined the scheme.
Strict identity verification should make the MacGregor and WA frauds well nigh impossible.
The very internet and communications developments that made such frauds possible will now be used to make them impossible.
Incidentally, the Torrens system of state-guaranteed land title means that the person on the register is the legal holder of the land. So the new owners in the fraud cases keep the property. The original owner is left to seek compensation from schemes that run in all jurisdictions to deal with fraud and mistaken registration.
CRISPIN HULL
This article first appeared in The Canberra Times on 15 November 2014.