Regulatory changes recently approved by the Australian Government are likely to impact the way in which pharmaceutical patent litigation is conducted in Australia. The Therapeutic Goods Administration (TGA) is currently seeking feedback on options for implementing the proposed Prescription Medicines Transparency Measures by 9 June 2020. The reforms are directed at:
1. Early publication of major innovator prescription medicine applications.
2. Early confidential notification of generic or biosimilar medicine applications to innovators.
In Part 1 of this series we examine the reforms pertaining to generic and biosimilar medicine applications and their expected impact on the conduct of pharmaceutical patent litigation in Australia. In Part 2 (to follow), we will address the reforms relating to major innovator prescription medicine applications in further detail.
The reforms were the subject of a consultation paper released in February 2019. A total of 39 submissions were received from industry, government and interest groups, with a clear majority supporting early publication of all prescription medicines being evaluated for marketing approval in Australia. The consensus position was that TGA should be consistent in the way in which it manages all applications for registration, including generic and biosimilar applications.
Existing notification scheme
Under the current regime, the TGA does not release information about the lodgement or acceptance of an application for evaluation of a prescription medicine, in contrast to the practices of many overseas regulatory authorities including Medsafe New Zealand, Health Canada and the European Medicines Agency (EMA). Under Australia’s current practices, it is only after a prescription medicine has been evaluated, granted marketing approval and entered on the Australian Register of Therapeutic Goods (ARTG) that information about that product becomes publicly available. It is usually at this stage that an innovator will first become aware of the impending launch of a generic or biosimilar competitor.
At present, where an applicant for registration of a prescription medicine under s 23 of the Therapeutic Goods Act 1989 (the TG Act) intends to rely in whole or in part on safety or efficacy data for a reference (innovator) medicine, and the applicant has identified one or more potentially relevant patents that have not expired, the applicant must certify under s 26B of the TG Act either:
- that the applicant believes on reasonable grounds that the marketing of its product will not infringe a valid claim of the relevant patent(s); or
- where the applicant proposes to market its product before the expiry of the term of the patent(s), that it has notified the patentee of its application for registration.
However, an applicant seeking marketing approval for a generic or biosimilar product is currently able to avoid notification where:
- the applicant forms a view that no relevant patent(s) exist; or
- the applicant believes on reasonable grounds that it will not infringe any valid claim of otherwise relevant patent(s).
This has meant, in practice, that sponsors seeking marketing approval for a generic or biosimilar medicine in Australia generally do not notify the innovator of their application, and the innovator only becomes aware of the generic or biosimilar product when it is approved. This leaves very limited time after publication of the approved generic or biosimilar product on the ARTG (often less than 2 months) for the innovator to obtain information about it (eg, in relation to its manufacturing process or formulation), including through a contested preliminary discovery application if necessary. During that short period after publication of ARTG approval, the innovator must consider whether to commence patent enforcement proceedings (including whether to seek an interlocutory injunction) before the generic or biosimilar product is listed on Australia’s Pharmaceutical Benefits Scheme (PBS) (triggering reductions in the subsidised price of the innovator’s product) and launched on the Australia market.
Australia’s current regime for belatedly and somewhat passively notifying innovators of generic and biosimilar product approvals contrasts with the rigid and transparent processes of the US Food and Drug Administration (FDA). The FDA’s Paragraph IV Drug Product Application process (under the Hatch-Waxman Act) provides that a generic company submits an Abbreviated New Drug Application (ANDA) and the innovator is given 45 days to file an infringement suit. The generic company is automatically restrained until the entire process (including any litigation, which has set timeframes) is resolved, with the first ANDA applicant receiving 180 days exclusivity for the generic drug if successful. This regime encourages generic companies to seek to launch new products and challenge innovators’ patents, while protecting the innovators’ position until the patent issues are resolved without the urgency, cost and uncertainty associated with seeking a preliminary injunction in a small window between generic products obtaining regulatory approval and pricing subsidies. It is also worth noting that it is open to debate as to whether Australia’s current arrangements are consistent with its obligations under the Australia-United States Free Trade Agreement (AUSFTA).
TGA’S proposed reforms for notification of generic and biosimilar applications to innovators
The proposed changes are aimed at providing earlier notification to innovators that an application has been made for registration of a generic or biosimilar product, and to reduce or remove the discretion currently afforded to sponsors of generic or biosimilar products in determining whether or not a relevant patent exists (option 2), and if so, whether marketing of the generic or biosimilar product would infringe a valid claim of that patent (options 1 and 2). Whichever option is chosen, implementation of these measures is anticipated to commence in early 2021.
The first option being considered by the TGA provides early notification to the innovator of a generic or biosimilar application, regardless of whether or not the applicant believes that marketing of its generic product would infringe one or more relevant patents. Specifically:
- Applicants would be required to provide notification on a confidential basis to the innovator, when the application passes preliminary examination, and before acceptance for evaluation under section 25 of the TG Act, where the applicant has a reasonable belief that the term of any relevant patent has not expired.
- Where the applicant has formed a reasonable belief that no relevant patent exists, it may instead provide the TGA with a declaration to that effect.
While this option would remove the discretion currently afforded to a generic applicant to form its own view as to whether it will infringe a valid claim of any relevant patent(s), it would remain within the applicant’s discretion to decide for itself whether any relevant patent(s) exist, which in practice could significantly dampen the impact of these reforms.
The second option mandates early notification for all generic and biosimilar applications:
- regardless of the applicant’s belief as to the existence of any relevant patent(s); and
- even if the applicant considers that no valid patent claim would be infringed by the marketing of its product.
All applicants would be required to notify the relevant innovator, and provide a copy of that notification to TGA upon passing preliminary assessment. For innovators, this option is likely to be preferred.
Impact on pharmaceutical patent disputes
Information about the status of an application for registration of a generic or biosimilar medicine is of commercial value to innovators, where a relevant pharmaceutical patent exists and may be infringed by marketing of the generic or biosimilar product.
Early notification of generic applications for registration will provide innovators with more time to consider and, if appropriate, commence patent enforcement proceedings before the generic or biosimilar product is launched. As noted above, under Australia’s current arrangements, innovators typically obtain notice of impending generic or biosimilar competition at a late stage, shortly before the generic or biosimilar product is due to be listed on the PBS and launched on the Australian market. In these circumstances, it has been very common for innovators to seek an interlocutory injunction (also referred to as a preliminary injunction) to restrain PBS-listing and launch of the generic or biosimilar product pending the outcome of patent enforcement proceedings.
To secure an interlocutory injunction, the innovator is required to undertake to compensate the sponsor of the generic or biosimilar product, and any third party adversely affected by the grant of the injunction, if the patent is ultimately held to be invalid or not infringed. There are currently a number of cases pending (or recently settled or decided) in which generics and the Australian Government have made claims on such undertakings, with the Government seeking compensation for additional costs to Australia’s PBS where generic or biosimilar market-entry has been delayed by ultimately unsuccessful patent enforcement proceedings. The first decision in such a case found that the unsuccessful innovator patentee should pay compensation to generic companies who were party to the litigation as well as generic companies who were not party to the litigation but were still affected by the interlocutory injunction (the Commonwealth settled its claim with the patentee in that case): Sigma Pharmaceuticals (Australia) Pty Ltd v Wyeth  FCA 1556. Yesterday (28 April 2020), the Federal Court of Australia handed down the first major decision in relation to a claim by the Commonwealth under a patentee’s undertaking, dismissing the Commonwealth’s claim for AU$325,000,000 plus interests and costs and awarding costs to the innovator: Commonwealth of Australia v Sanofi (formerly Sanofi-Aventis) (No 5)  FCA 543. An appeal from the latter judgment is possible.
Earlier notice of applications for registration of generic or biosimilar products may enable any patent enforcement proceedings to be resolved before marketing approval is granted for the generic or biosimilar product, thereby removing the need for an interlocutory injunction and associated undertaking. Innovators who do apply for an interlocutory injunction will be able to do so much earlier in advance of the potential PBS listing and launch of generic or biosimilar products, making injunction hearings less urgent and potentially impacting upon the prospects of obtaining an injunction given the balance of convenience as between the parties’ respective interests and potentially irreparable harm may be different. In some cases, the sponsor of a generic or biosimilar product may choose to delay launch of their product for the time period necessary to complete patent proceedings commenced prior to the grant of marketing approval, and thereby avoid the potential for damages arising from an ‘at risk’ launch.
Even if patent enforcement proceedings are not completed by the time marketing approval is granted and a generic or biosimilar product is launched, the proposed reforms would be expected to reduce the period of time for which any interlocutory injunction, and associated undertakings, would remain in place, thereby reducing the potential liability of innovators in the event of any damages claim ultimately made on their undertakings.
The impact of these changes for sponsors of generic and biosimilar medicines is more difficult to predict and would depend upon the circumstances of each individual case.
Overall, the proposed reforms have a number of possible implications for the conduct of pharmaceutical patent disputes in Australia:
- Amending claims – Innovators may have more time and a greater opportunity to amend their patent claims and/or initiate divisional filings in the Patent Office, prior to the commencement of any enforcement proceedings, where this will improve the innovator’s overall prospects of success.
- Preliminary discovery – Under the proposed reforms, innovators will have more time to initiate and obtain preliminary (i.e., pre-action) discovery, for example in relation to the manufacturing processes for a generic or biosimilar product, or in relation to its formulation, to assess whether patent enforcement proceedings should be commenced.
- Interlocutory injunctions – Innovators will have more time to consider and prepare for any application for an interlocutory injunction. In addition, it is likely that such applications could be heard and determined on a less urgent basis, which would be of assistance to the courts called upon to decide such applications. Earlier notice may also enable patent enforcement proceedings in some cases to be resolved before marketing approval is granted for the generic or biosimilar product, avoiding the need for an interlocutory injunction and associated undertaking.
- Quantum of damages – Early notice may enable patent enforcement proceedings to be resolved earlier, reducing the period of time for which any interlocutory injunction and associated undertakings remain in place. This would be expected to reduce the quantum of any claim for damages made pursuant to those undertakings, if the innovator (patentee) is held to be ultimately unsuccessful.
- Non-adversarial options – Innovators will also have additional time to seek information from generic or biosimilar sponsors that will assist innovators in assessing whether their patent(s) would be infringed by marketing of the generic or biosimilar product. Innovators and the sponsors or generic or biosimilar products will also have increased time to seek to reach a negotiated outcome which may avoid the need for patent enforcement proceedings.
- Licensing agreements – As an example of such non-adversarial options, it is possible that innovators and the sponsors of generic or biosimilar products may choose to enter into licensing arrangement to avoid lengthy and expensive litigation. It will be essential for the parties to ensure that any such arrangements are not considered anti-competitive.
It remains to be seen whether early mandatory notification will ultimately lead to any significant reduction in patent litigation between innovators and the sponsors of generic and biosimilar products in Australia. On the other hand, for the reasons noted above, early notification would be expected to reduce the likelihood, or at least the quantum, of damages claims made on undertakings given by innovators to secure interlocutory injunctive relief pending the outcome of patent enforcement proceedings.
The main beneficiaries of early mandatory notification of applications for generic or biosimilar marketing approval will be the sponsors of innovative medicines, who will be afforded more time to prepare for and commence any patent enforcement proceedings prior to generic or biosimilar launch. Generic parties may be less enthused by the early notification proposals, not only because innovators will have more time to consider and commence patent infringement proceedings, but also because, if they are sued, their generic competitors may through the court process receive advance notice of the products they are seeking to bring to market.
More generally, when implemented, these reforms will achieve closer regulatory harmonisation between Australia and comparable overseas jurisdictions, which is a desirable outcome.
If you are a sponsor of therapeutic goods in Australia and have questions on how these reforms may impact your business, please do not hesitate to contact us. We would be happy to assist you with your enquiries.
 Australia – United States Free Trade Agreement (2004), Article 17.10.5(b).
 The time period between acceptance for evaluation and entry onto the ARTG (where the generic or biosimilar is approved) will vary between applications. For generic products, the TGA advises that the process is designed to take approximately 8.5 months. See TGA, Prescription medicines registration process, Appendix 1, Version 2.3, March 2018.