Springboarding into the Australian Pharmaceutical Market

This article first appeared in The Watermark Journal Vol 23 No 4 (December 2006) 

There is no doubt that much of the biotechnology and pharmaceutical industry, is contingent on there being a robust Intellectual Property (“IP”)system to maintain the value of innovative products. It is often the case, particularly in relation to start–up biotech companies, that IP is one of, if not the most important and major assets of the company.

However, the biotechnology and pharmaceutical industry includes not only the originator companies who launch new products onto the market and protect these products with patents, but also the generic companies, who aim to have a generic version of a patented product onto the market upon expiry of the patent. Both must operate within the same legal boundaries, and under the same intellectual property regime, that exist in any given country. On one hand, there should be incentive and reward for originator companies in having undertaken the lengthy and expensive process of getting a new pharmaceutical onto market. On the other hand, there must also be room for competing generic companies to enter the market and offer their cheaper alternatives to the public in a timely manner.

It is little wonder then that there has been some fierce discussion and debate leading up to the implementation of the Intellectual Property Laws Amendment Bill 2006, passed by the House of Representatives on 22 June 2006, which has introduced what may be considered as some significant changes to the provisions in the Australian Patents Act, relating to what is known as “springboarding.”

What is springboarding?
In the context of intellectual property, “springboarding” is a process that allows a generic drug manufacturer to seek and obtain regulatory approval of their generic version of a patented drug, whilst the patent is still in force. This process enables generic manufacturers to rapidly launch their bioequivalent version of the drug onto the market as soon as the patent has expired. Without springboarding provisions, any use of the subject matter of the patent while it is in force constitutes patent infringement. Hence, without the ability to springboard, it could be any number of years before a generic version may enter the market within any particular patent area.

Pre-amendment provisions
Prior to the amendments recently introduced, springboarding was only possible in Australia in relation to pharmaceuticals protected by a patent upon which an extension of term had been granted (taking the total period of protection from 20 years up to a maximum of 25 years). That is, the subject matter of the patent could only be used in the period after the date the extension of term was granted. Due to a series of eligibility criteria, including the fact that the extension of term was only extendible by up to five years if the patentee experienced significant delay in attaining regulatory approval, the superceded springboarding provisions were only applicable to a relatively restricted category of patented drugs.

New springboarding provisions in a nutshell
Under the new provisions, there is a general exemption to patent infringement for springboarding activities conducted at any time during the life of the patent. There is no need for there to be any pharmaceutical extension of term or for the patent to be eligible for an extension. In addition, the exemption is applicable to pharmaceutical patents claiming a pharmaceutical substance, use, method or product, raw materials used in such substances and products, prodrugs and metabolites, and also to methods of treatment and processes for manufacture. This is a distinct broadening to the previous provisions, where springboarding was only permitted in relation to the pharmaceutical per se. Clearly, this opens up the ability to springboard from a much broader range of pharmaceutical patents. Certainly, it was the intention of the Australian government when tabling these amendments that the new provisions would encompass all the patents that a generic manufacturer would potentially need to exploit in order to attain appropriate regulatory approval. However, it remains that the exemptions are for purposes solely in connection with obtaining regulatory approval, whether it be in Australia or overseas. That is, it will remain impermissible to export the product for commercial sale, stockpile quantities for sale upon expiry of the patent, or to export the product overseas for regulatory approval (except during an extension period) whilst the patent is still in force.

It is also noteworthy that despite lobbying by interested industry groups, the new springboarding provisions will remain elusive to the medical devices and agricultural chemicals industries. This is despite the fact that these industries are typically subject to similar regulatory regimes prior to products being permitted onto the market.

Commercial Impact of the new Springboarding provisions
So what do the new provisions mean to both originator and generic companies in a commercial sense?

This may be best answered by firstly looking at the motivation behind the introduction of the new provisions. The primary reasoning behind the changes to springboarding was to address the apparent impact that the previous provisions had on the ability of generic companies based in Australia to competitively enter the Australian market. In particular, it was determined that the previous provisions are much more restrictive than similar provisions overseas, particularly in comparison to the major pharmaceutical market regions such as the USA and Europe. This had the effect of preventing local generic manufacturers from entering the domestic market shortly after patent expiry, unless the requisite regulatory work had been conducted offshore. Indeed, in the Australian government examination of the springboarding and extension provisions in 2002, it was strongly indicated by generic companies that they would relocate their R&D offshore unless the provisions were to be changed. The objective in amending the legislation has therefore been to try and encourage the retention and subsequent growth of a competitive pharmaceutical R&D industry in Australia, by building up a presence of, for example, companies that provide the services and skills associated with R&D. Once patents expire on valuable drugs, generics will undoubtedly be available in Australia – the only question is whether they are generics that have been researched, developed and produced in Australia, or whether they have been sourced from offshore. The governement hopes that the new provisions will encourage the production of generics in Australia.

The governement also hopes that the current provisions will enable generic manufacturers to seek timely regulatory approval overseas and be able to compete on a substantially equal footing with their overseas competitors in the significant and lucrative export markets. It thus seems apparent that the commercial implications of the new provisions favour generic manufacturers operating in Australia. In addition, as local generic pharmaceuticals are able to enter the market more quickly, there is the potential that competition will be increased, both in Australia and overseas.

However, there is another side to this discussion – the interests of the originator companies whose innovation and resources are the primary driving force for the introduction of new pharmaceuticals onto the market.

It has been argued that the new provisions send a negative message to biotech and pharmaceutical players in respect of the integrity of the intellectual property system and that the provisions will be seen as a dilution of the value of IP in this country, indicating that the Australian government is perhaps not wholly committed to growing and expanding an industry which is very much still in a critical state of growth and expansion. One of the main concerns is that the new provisions are applicable to all patents in force or applied for at the date of commencement. It is suggested that this will result in a reduction of rights for the patentee, without anything being offered in exchange for the extra exemptions on infringement.

However, it has always been possible for a generic company to seek and obtain the requisite regulatory approval prior to the patent expiry – provided the associated research and development has not been carried out in Australia. That is, there has always been competition from generic companies upon a pharmaceutical coming off patent.

Also important to note, there has been no change to the five year period of data exclusivity for pharmaceutical patents, where the pharmaceutical patentee is entitled to 5 years of data exclusivity on clinical data submitted to the regulatory authorities. That is, generic competitors are still unable to use, without the consent of the originator, previously undisclosed safety and efficacy test data and information, running from the date of marketing approval for that pharmaceutical. There is no equivalent to the springboarding provisions to this exclusivity period.

It appears that in practice, there is unlikely to be any substantial effect from the new provisions to originator companies either in a practical or commercial sense. Further, there is arguably a trend towards the blurring of the line between originator and generic manufacturers, with originators increasingly entering the competitive yet progressively more lucrative generic market, and generic companies starting to turn some of their R&D resources towards innovation of new products. The provisions are new, so it remains to be seen how they will take practical effect and be interpreted under Australian law.