Public access to patented pharmaceuticals – the Australian climate
In brief: Lawyer Jonathan Barlow and Articled Clerk Miranda Harris discuss recent events in the US and South Africa and consider the Australian situation on public access to patented pharmaceuticals.
Introduction
Recent events in the United States of America and South Africa have shown that governments will react to public pressure and may take steps to increase public access to patented pharmaceuticals. A key factor prompting such public pressure is the perception of unjustifiably high margins (due to the relatively cheap unit cost of manufacture) and consequent profits. Whilst there is no doubt that the pharmaceutical industry is profitable, such margins are often indicative of the high research and development costs as well as high failure rates of potential drug candidates common in the industry – for every high margin product on the market, there are large numbers of candidates discarded on the way to regulatory approval.
Governments, therefore, need to strike a balance between maintaining the public health and encouraging commercial entities to take the necessary risks to develop better drugs.
This article briefly describes recent events overseas, and goes on to consider the options available under the Australian Patents Act 1990, should the issue also arise here.
Overseas developments
The issue surfaced recently when, following the anthrax outbreak after September 11 2001, the US government threatened to break the patent on Bayer's anti-anthrax drug Cipro and manufacture it itself unless Bayer drastically decreased its sale price. Bayer agreed.
In South Africa in March of 2001, 39 multinational drug companies attempted to overturn the 1997 Medicines Act which permits the importation and manufacture of low-cost generic drugs. The South African government proposed to use the Medicines Act to increase access to patented products for AIDS sufferers. A public backlash ensued, however, and the drug companies dropped their case.
The issue, however, was by now in the international spotlight. At a meeting of the World Trade Organisation in Doha, Qatar, relief for developing countries from high cost pharmaceuticals was high on the agenda. The result, adopted on 14 November 2001, was the 'Declaration on the TRIPS agreement and public health' which recognises the importance of IP protection in the development of new medicines, whilst also recognising concerns about its effects on prices. However, the Declaration does not set out a specific solution to this tension. It merely states that each member has the right to grant compulsory licences on grounds as it sees fit, and recognises that a member has the right to consider a public health crisis such as HIV/AIDS, tuberculosis and malaria as grounds for declaring a national emergency (note that it was under its 'national emergency' powers that the US government threatened to break the anti-anthrax patent).
Significantly, the Declaration also allows 'least-developed countries' to defer introducing patent and confidential information systems of law, as required under the TRIPS Agreement, until 2016. This concession may impact on research and development strategies of pharmaceutical companies.
However, what if a similar situation to that in the US or South Africa occurred in Australia? Indeed, to what extent can our courts or the Federal government alter a patentee's rights in the interest of 'public health' or other 'public need' circumstances?
The Australian position
Besides any powers that the government may hold in a situation of 'national emergency', there are at least two mechanisms under the Act which may facilitate public access to patented pharmaceuticals.
First, under s 133 of the Act a person may apply to a court for an order requiring a patentee to grant an applicant a licence to work a patented invention. The court may make such an order if it is satisfied that the reasonable requirements of the public with respect to the patented invention have not been satisfied, and the 'patentee has given no satisfactory reason for failing to exploit the patent.' The reasonable requirements of the public will not be met if a trade or industry in Australia is unfairly prejudiced, or the demand in Australia for the patented product is not reasonably met, because of the patentee's failure to manufacture it to an adequate extent, supply it on reasonable terms or grant licences on reasonable terms.
Such provisions offer opportunities for competitors and other members of the healthcare industry who believe a patentee has failed to properly work its patent or provide it at a reasonable cost to the community. However, these provisions can only be relied upon where the applicant has tried, for a reasonable period, but without success, to obtain authorisation to work the invention on reasonable terms and conditions.
Second, and more directly, Chapter 17 of the Act provides for the exploitation of inventions by the Commonwealth and state governments (or a person authorised in writing by these entities) for 'the services of the Commonwealth or the State' (ss 163(1)). Similar provisions allow the government to acquire a patent under s 171. In both circumstances the government must provide some form of compensation to the patentee. The immediate question is 'What are the services of the Commonwealth?'
In Pfizer Corp v Ministry of Health [1965] AC 512, the House of Lords considered the UK equivalent of s 163. The majority held that 'the supply of a patented drug to National Health Service hospitals for re-supply to outpatients was a use for the services of the Crown.' Lord Reid also said that 'the natural meaning of use for the services of the Crown' is use by its members of such services in the course of their duties. This could include benefits to the health service if use of a drug eases or facilitates the work of doctors and nurses. However, the minority considered that 'customers', being members of the general public, were not part of a Government department or Crown service.
Whilst these sections of the Act have not been judicially considered in Australia, they appear to have a potentially wide scope. These sections may not only apply to situations of large scale epidemics (as in South Africa) or outbreaks of rare, but curable, diseases (as in the US), but may in fact be used in more benign situations where a particularly useful drug is sold with a particularly high price.
Increased international awareness of governments' or courts' powers to sidestep patent protection means competitors, Commonwealth and state authorities may attempt to rely on such provisions in the future. However, it is unclear whether such attempts would be successful.
For further information, please contact:
- Dr Trevor DaviesPartner, Allens Patent & Trade Mark Attorneys,
Sydney
Ph: +61 2 9230 4007
Trevor.Davies@allens.com.au