The Pharmaceutical Intellectual Property and Competition Law Review: Australia
Pharmaceutical industry regulation in Australia comprises a number of regulatory frameworks administered by separate government departments or agencies. These include: the framework for gaining marketing authorisation for pharmaceutical goods, including their entry on the Australian Register of Therapeutic Goods (ARTG) (administered by the Therapeutic Goods Administration (TGA)); the framework of the Pharmaceutical Benefits Scheme (PBS) under which the Australian government subsidises the supply of certain pharmaceutical goods to Australian citizens and residents (administered by Department of Health); the framework for promoting competition and consumer protection as required by the Competition and Consumer Act 2010 (Cth) (CCA) (administered by the Australian Competition and Consumer Commission (ACCC) and other state agencies); and the framework for extending the term of pharmaceutical patents, which is contained within the provisions of the Patents Act 1990 (Cth) (the Patents Act) (administered by the Australian Patent Office).
Legislative and regulatory framework
The Therapeutic Goods Act 1989 (Cth) (the TG Act) and the Therapeutic Goods Regulations 1990 (Cth) (the TG Regulations) establish the legal requirements for the import, export, manufacture and supply of therapeutic goods in Australia. They detail the requirements for listing, registering or including medicines, medical devices and biological products on the ARTG, as well as many other aspects of the law, including advertising, labelling, product appearance2 and product recall.3
Unless it is exempt or otherwise authorised by the TGA,4 a therapeutic good must be approved by the TGA and entered on the ARTG before it can be marketed or supplied in, or exported from, Australia.
State and territory legislation also imposes requirements relating to pharmaceutical substances, including the scheduling of substances and the safe storage of therapeutic goods.5
ii Pricing and public purchasing of pharmaceuticals
The PBS is a programme under which the Australian government subsidises the supply of certain medicines to Australian citizens. All medicines that have been approved to be dispensed to patients at a government-subsidised price are listed on the PBS Schedule.
The Repatriation Pharmaceutical Benefits Scheme (RPBS), administered by the Department of Veterans Affairs, is a scheme that provides pharmaceutical benefits to eligible veterans and war widows and widowers.6 Pricing and reimbursement arrangements for the supply of pharmaceutical benefits under the PBS are automatically translated across to the RPBS.7
The PBS legislative provisions relating to supply and pricing of pharmaceutical benefits are located in Part VII of the National Health Act 1953 (Cth) (the NH Act) and include a number of provisions relating to the supply of pharmaceutical benefits (Division 2), payment for supply of pharmaceutical benefits (Division 3), recovery of payments for the supply of pharmaceutical benefits (Division 3AA), price reductions for new brands of pharmaceutical items (including both single and combination items) (Division 3A, Subdivision A-D) and price disclosure price reductions (Division 3B, Subdivision A-E).
In relation to the public purchasing of pharmaceuticals, Section 99 of the NH Act provides that a dispenser (pharmacist or approved medical practitioner) who has supplied a pharmaceutical benefit is entitled to be paid by the Commonwealth an amount equal to the Commonwealth price of the pharmaceutical benefit as at the time of the supply (or, if certain conditions are satisfied, an amount based on the Commonwealth price). The 'Commonwealth price' is defined in Section 84(1) of the NH Act.
In practice, patients pay an amount for a PBS-subsidised medicine (referred to as the patient co-payment) and the remainder of the cost is paid by the government directly to the dispenser. For general patients, the maximum cost for a pharmaceutical benefit item is A$41, while for concession card holders (e.g., RPBS patients), the maximum cost is A$6.60, together with any special patient contribution, brand premium or therapeutic group premium that is applicable.8
iii Patent duration
Australian patent law is governed by the Patents Act. There are two types of patents provided under the Patents Act – standard patents and innovation patents.
Extension of term
Patent term extension is available for standard patents but not for innovation patents.
The term of a standard patent relating to pharmaceutical substances may be extended, in certain circumstances, for up to five years.11 To qualify for patent term extension, the patent must contain at least one claim to one or more pharmaceutical substances per se, or pharmaceutical substances that are produced by a process involving the use of recombinant DNA technology, that is in substance disclosed in the complete specification of the patent.12
The available term of the extension is equivalent to the period between the filing date of the patent and the first regulatory approval date, which is the date any product containing the pharmaceutical substance is first listed on the ARTG, minus five years.13
The patent term cannot have been previously extended.
iv Encouraging innovation in the pharmaceutical sector
The TG Act, the Patents Act and the NH Act all include provisions that encourage innovation.
The patent term extension provisions in Section 70 of the Patents Act are, in part, in recognition of the fact that the patentee's reward for pharmaceutical patents may be diminished by reason of regulatory approval processes.
The data exclusivity provisions in Section 25A of the TG Act provide a five-year data exclusivity period commencing on the first day of the therapeutic product becoming registered. Within the exclusivity period, regulatory authorities cannot, without the permission of the innovator (in writing), use the preclinical and clinical data of the innovator's product to assess an application for registration of a generic or biosimilar. The data exclusivity provisions in the TG Act do not extend to protect information relating to a new indication or orphan drugs.
The NH Act provides that PBS-listed drugs are to be assigned to formularies identified as F1 or F2. The F1 formulary is for medicines for which only a single brand is listed, often because it is patented or an innovative medicine. In contrast, the F2 formulary contains medicines for which multiple brands are registered or for which a single brand medicine is registered that is interchangeable with multiple brand medicines at the patient level. The listing of a drug as F1 or F2 will affect its pricing.
When a new medicine is listed on the PBS as F1, its price is not linked to the price of any similar medicine in F2. Since F1 medicines are not interchangeable at the individual pharmacy level with other brands, the PBS price will not be affected by the pricing of other drugs until a bioequivalent or biosimilar brand is listed and upon which the medicine moves from F1 to F2.
v Effect of competition laws on the pharmaceutical sector
The CCA is enforced and administered by the ACCC, an independent statutory authority.14 The ACCC is also the only national agency dealing generally with competition or antitrust matters. The CCA regulates the following types of conduct that are relevant to the pharmaceutical sector:
- anticompetitive acquisitions;15
- exclusive dealing;16
- resale price maintenance;17
- anticompetitive agreements, including concerted practices;18
- misuse of market power;19 and
- cartel conduct, including price fixing, output restrictions, market sharing and bid rigging.20
Since 13 September 2019, an intellectual property exemption was removed from the CCA, meaning conditions in intellectual property transactions are treated like any other dealing from a competition law perspective.
The following maximum civil penalties apply for breach of the CCA:21
- for corporations, the greater of:
- A$10 million;
- three times the value of the benefit from the act or omission; or
- where the benefit cannot be calculated, 10 per cent of the corporation's annual turnover in the preceding 12 months; and
- for individuals, A$500,000.
Individuals found guilty of cartel conduct could face criminal or civil penalties, including up to 10 years in jail or fines of up to A$420,000 per criminal cartel offence, or both, and a pecuniary penalty of up to A$500,000 per civil contravention.
It is illegal for a corporation to indemnify its officers against legal costs and any financial penalty. Other forms of relief relating to the cartel offence include injunctions, orders disqualifying a person from managing corporations and community service orders.
For corporations, the maximum fine or pecuniary penalty for each criminal cartel offence or civil contravention (whichever applies) will be the greater of:
- three times the total value of the benefits obtained by one or more persons and that are reasonably attributable to the offence or contravention where benefits cannot be fully determined; or
- 10 per cent of the annual turnover of the company (including related corporate bodies) in the preceding 12 months.22
III NEW DRUGS AND BIOLOGICS – APPROVAL, INCENTIVES AND RIGHTS
The TGA has published the following guidelines to assist applicants (sponsors) in preparing their applications to register new medicines for human use in Australia, including the Australian Regulatory Guidelines for Prescription Medicines in relation to new prescription medicines23 and the Australian Regulatory Guidelines for Biologicals in relation to new biologicals.24
ii Approval of new prescription medicine applications
The TGA registration process for new prescription medicine applications (including generic medicines) consists of eight phases with eight milestones, each milestone marking the completion of a phase.25 The target time frame of a standard registration process is 255 working days from the date of acceptance for evaluation through to the date of the delegate's decision.26
Phase 1: pre-submission
Applications in category 1 and category 2 must go through a pre-submission phase,27 which begins with the lodgment of a pre-submission planning form (PPF). A complete PPF provides the TGA with planning data, such as general submission information, information about the proposed application type and details of the quality, and nonclinical and clinical evidence that will be provided in the dossier. Once the TGA considers a PPF is complete and acceptable, it begins arranging appropriate resourcing for the processing and evaluation of the application, including securing appropriate evaluators for the dossier.
Applicants are required to pay an application fee upon lodgment of a PPF. For applications submitted to the TGA from 1 July 2020, the application fee for a new chemical entity is A$49,800. For a new generic product, the application fee is A$19,200. There is no application fee payable for applications made under Section 23 of the TG Act and involving a medicine that has been designated as an orphan drug.28
Phase 2: submission
The submission phase involves the following TGA processing activities in preparation for evaluating the application:
- confirming the dossier would be delivered by the expected lodgement date;
- verifying that any fee has been paid;
- workflow planning and IT administration;
- considering the application against the TGA's regulatory requirements; and
- issuing a notification letter and, if applicable, a notice of the evaluation fee payable.
An evaluation fee becomes due and payable when the applicant is notified that the application has been accepted for evaluation. For applications submitted to the TGA from 1 July 2020, for a new chemical entity, the evaluation fee is A$199,500. For a new generic product, the evaluation fee is A$76,200.29
Phases 3 to 6: assessments, consolidated Section 31 request response and expert advisory review
During the first-round assessment phase (phase 3), all data provided in the dossier are considered by evaluators and where there are issues or questions about any component of the application, a consolidated Section 31 request for information is sent to the applicant. The applicant must then prepare a response (phase 4).
During the second-round assessment phase (phase 5), evaluators consider the applicant's response to the Section 31 request (if applicable) and complete their evaluation of the data. When assessment is complete, the evaluation reports are considered by the delegate (phase 6). The delegate may seek independent advice on issues concerning the application, including from the Advisory Committee on Medicines (ACM), the main advisory group for prescription medicines.30 The applicant's comments in relation to perceived errors of fact or major omissions in the second-round assessment reports of applications referred to the ACM are also considered.
Phase 7 and 8: decision and post-decision
The delegate then determines whether to approve (possibly modify or vary) or reject the application (phase 7). The applicant is notified in writing of the delegate's decision within 28 days of the decision being made. During the post-decision phase (phase 8), administrative and regulatory activities are completed.
iii Priority review applications
The priority review pathway allows for faster assessment of vital and life-saving prescription medicines where data for a complete dossier is available.31 The target time frame is 150 working days. A valid priority review designation must be held to access this pathway. The priority registration process, like the standard prescription medicines registration process, has eight phases, but with modifications made to reduce time frames.
For applications submitted to the TGA from 1 July 2020, the application fee for priority determination of a prescription medicine is A$13,000. The fee for a new prescription medicine application is A$52,700 and the evaluation fee is A$211,000. The fee for a new indications application is A$31,400 and the evaluation fee is A$125,500.32 Application and evaluation fee waivers are applicable to medicines with a valid orphan drug designation, provided that the priority therapeutic indication is identical to, or is a subset of, the orphan drug indication.
iv Provisional approval pathway
The TGA has an approval pathway for the provisional registration of prescription medicines on the ARTG for a limited duration on the basis of preliminary clinical data demonstrating that there is potential for a substantial benefit to Australian patients.33 A valid provisional determination must be held to access this pathway.
The provisional registration process, like the standard prescription medicines registration process, has eight phases, but with changes made to account for uncertainty associated with preliminary clinical data. The TGA specifies that the target time frame of the provisional registration process is 220 working days from the date of acceptance for evaluation through to the date of the delegate's decision.34
For applications submitted to the TGA from 1 July 2020, the application fee for a provisional determination of a prescription medicine is A$13,000. The fee for provisional registration of a new prescription medicine is A$49,900 and the evaluation fee is A$260,300. The fee for provisional registration of a new indications application is A$29,800 and the evaluation fee is A$171,700.35 Application and evaluation fee waivers are applicable to medicines with a valid orphan drug designation for the provisional registration process, provided that the therapeutic indication for provisional registration is identical to, or is a subset of, the orphan drug indication.
v Biologics and biosimilars
Products regulated as biologicals must be a therapeutic good defined in Section 3 of the TG Act and either meet the definition of a biological or be specified by a legislative instrument to be a biological. A product is not regulated as a biological if it is an excluded good or a product regulated as a therapeutic good, but not as a biological.36
Certain autologous human cell and tissue products may be eligible for exemption from some regulatory requirements, provided the products meet specific eligibility criteria and fulfil specific regulatory obligations.37
Unapproved biologicals can be supplied through the following schemes, depending on whether the use is38 part of a clinical trial (clinical trial schemes), for an individual patient (special access scheme) or by an individual practitioner for multiple patients (authorised prescriber scheme). Biologicals not otherwise exempt, approved or authorised, must be included on the ARTG.
A biological product must be classified before an application can be made to include it on the ARTG.39 Classification of biologicals is based on whether it is mentioned in Schedule 16 of the TG Regulations (Class 1 and 4 biologicals) or based on the method of preparation and intended use of the product (Class 2 and 3 biologicals).
A Class 1 biological product would be of low risk to public health and have an appropriate means of oversight, such as accreditation and a high level of practitioner oversight. To supply a Class 1 biological product, the product must comply with all applicable standards, must be mentioned in Schedule 16 of the TG Regulations and must be included on the ARTG.
Class 4 biologicals are high-risk products that are defined in Schedule 16 of the TG Regulations as:
- biologicals that comprise or contain:
- live animal cells;
- live animal tissues; or
- live animal organs;
- biologicals to which both of the following paragraphs apply:
- the biologicals comprise, contain or are derived from human cells or human tissues that have been modified to artificially introduce a function or functions of the cells or tissues; and
- the artificially introduced function or functions were not intrinsic to the cells or tissues when they were collected from the donor;
- pluripotent stem cells; and
- biologicals derived from pluripotent stem cells.
Class 2 is restricted to biological products that have been subjected to minimal manipulation and are only for homologous use.
Class 3 includes biological products that are for homologous use but have been prepared using more than minimal manipulation or for non-homologous use, regardless of whether they have been prepared using minimal manipulation or more than minimal manipulation.
Inclusion of new biological products on the ARTG
There are eight phases to the standard process for acceptance and review of an application to include a new Class 2, 3 or 4 biological on the ARTG.40
Phases 1 and 2: pre-submission and submission
Pre-submission (phase 1) involves a pre-submission meeting with the TGA and is recommended for applicants that are considering the supply of a biological product.
Following the pre-submission phase, applicants submit a biologicals application form, including supporting documentation required in the dossier, as specified in Sections 32DDA(9) and (10) of the TG Act, and payment of an application fee (phase 2). The application then proceeds to preliminary screening, which also entails payment of an evaluation fee.
For applications submitted to the TGA from 1 July 2019, the application fee for Classes 1, 2, 3 and 4 biologicals is A$1,130. The evaluation fee for Classes 2 biologicals is A$75,100, for Class 3 is A$150,300 and for Class 4 is A$244,200.41 A reduction or waiver of the evaluation fee is possible for applications submitted as a single submission or if an application only requires an abridged assessment.
Phases 3 to 6: evaluation and expert advisory review
During the first round of evaluation (phase 3), the application is reviewed by a number of specialist disciplines within the TGA, including quality, infectious disease safety, microbiology, toxicology and clinical areas, to ensure the following:
- the quality, safety and efficacy of the biological product is satisfactorily established for the proposed use or uses;
- the presentation of the biological is acceptable;
- the biological conforms to all applicable standards;
- if a step in the manufacture of the biological has been performed outside Australia and the biological is not exempt from the operation of Part 3-3 of the TG Act, the manufacturing and quality control procedures used in the step must be acceptable;
- the biological does not contain substances that are prohibited imports for the purposes of the Customs Act 1901;
- all the manufacturers of the biological product are nominated as manufacturers of the biological in the application; and
- other matters that the Secretary of the Department of Health (the Secretary) considers relevant.
The applicant is sent a consolidated letter under Section 32JA of the TG Act if additional information is required (phase 4). Evaluation is resumed in a second round (phase 5) and if further information is required, the applicant is again sent a consolidated letter under Section 32JA of the TG Act (phase 5a). In the third evaluation round (phase 5b), reports are finalised by each evaluation area and provided to the delegate for consideration. The TGA may work closely with the applicant to resolve any outstanding issues following evaluation of the applicant's responses during the review and decision phase, or the TGA may highlight them for the delegate to consider. The delegate will review the evaluation reports and where required, may seek advice from the Advisory Committee on Biologicals (phase 6).
Phase 7 and 8: decision and post-decision
The delegate may liaise directly with the applicant to resolve any outstanding issues before finalising its decision. Once a decision is made, the applicant is provided written notification. If the decision is to include the biological product on the ARTG, the decision letter will outline any specific conditions that apply. If the decision is not to include the biological product on the ARTG, the decision letter will outline the reasons and provide information on the applicant's rights to seek a review of the decision.
In relation to inclusion of Class 1 biologicals on the ARTG, applicants are required to submit a statement of compliance (a written certification) confirming that the biological product:42
- is a Class 1 biological;
- is safe for the purposes for which it is to be used;
- conforms with any relevant mandatory standards; and
- does not contain substances that are prohibited imports for the purposes of the Customs Act 1901.
vi Biosimilar medicines
Applications to register biosimilar medicines must meet the same requirements as for prescription medicines. Biosimilar medicines are evaluated through the standard prescription medicines registration process and applications must meet the same requirements and guidelines as those for prescription medicines (see Section III.ii).43
For a biosimilar medicine to be registered in Australia, a number of laboratory and clinical studies must be performed to demonstrate the comparability or biosimilarity of the biosimilar to the reference biological medicine that is already registered in Australia.
Biosimilar medicines must have the following similar characteristics to its reference biological medicine, demonstrated using comprehensive comparability studies:
- immunological; and
- efficacy and safety.
A number of European guidelines that outline the quality, non-clinical and clinical data requirements specific to biosimilar medicines have been adopted by the TGA. The TGA has also adopted the guideline of the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use on the assessment of comparability. The TGA notes that CTD Module 3 of the dossier, which describes the format and organisation of the chemical, pharmaceutical and biological data relevant to the application, will require significant modification from the EU dossier including in relation to:
- in-house standard;
- bridging comparability studies;
- shipping stability; and
vii Data exclusivity
As discussed in Section II.iv, innovators enjoy a period of data exclusivity with respect to confidential information that they submit to the TGA for the purpose of obtaining regulatory approval of a new product containing a pharmaceutically active ingredient for human use.
During the data exclusivity period, the TGA cannot use this confidential information for the purpose of evaluating an application to register therapeutic goods on the ARTG without first obtaining the written consent of the first sponsor. Section 25A of the TG Act provides that certain information is protected if it meets the following criteria:
- the information is to an active component (not being a device) that is contained in an application to register a therapeutic good;
- the information is not available to the public;
- the sponsor has not given written permission for the Secretary to use the information;
- at the time the application for regulatory approval was lodged, no other therapeutic goods containing the active ingredient were (or had ever been) included on the ARTG; and
- the therapeutic good has been included on the ARTG for less than five years.
The period in which data is protected for new prescription products and biological products is five years from the date the new product is registered.
Patent linkage is a term used to describe mechanisms that may be used to provide notice to a patentee, usually the innovator of the patented medicine, that a manufacturer is seeking to enter the market with a generic version or biosimilar of the patented medicine.
At present, there is no mechanism for notification to a patentee of the marketing authorisation applications submitted to the TGA by manufacturers in relation to generic or biosimilar medicines. While a certification process is mandated by the TG Act, this does not require notification to the patentee in all circumstances.
Under Section 26B of the TG Act, applicants for marketing approval are required to certify to the Secretary that either their product would not infringe a valid patent claim or that the patentee has been notified of the application. In practice, intending generics almost universally notify the Secretary that in their opinion, sale of the generic would not infringe a 'valid' patent, thereby bypassing the need to notify the patentee.
Where a generic manufacturer seeks to enter the market and the patentee decides to institute patent infringement proceedings, the patentee must first certify that the proceedings are being commenced in good faith, have reasonable prospects of success and will be conducted without unreasonable delay. Fines of up to A$10 million may be imposed for false or misleading information in a certificate and the Commonwealth Attorney General may join the action to recover losses to the PBS.
If an interlocutory injunction is contemplated, Section 26D(2) of the TG Act requires that the Attorney General of the Commonwealth, or of a state or of a territory be notified in writing of the interlocutory injunction application.
The TGA can proceed to register the generic or biosimilar even though the relevant patent has not yet expired. A generic manufacturer may then apply for listing on the PBS for its medicine at any time. The application for listing on the PBS by the generic, of itself, does not constitute patent infringement.
PBS listing of a generic or biosimilar medicine will trigger a 25 per cent reduction in the subsidised price of the innovator's medicine (and the further price reductions resulting from ongoing price disclosure obligations) and result in the transfer of the innovator's medicine from the F1 formulary to the F2 formulary.
i Preventing market entry of generic medicines – injunctions
Having regard to the matters discussed under Section IV, innovators will have no notice of an application for TGA approval and only a brief period of notice of an application for PBS listing. A patentee concerned that a newly registered generic or biosimilar will infringe its patent must therefore act swiftly if it wishes to seek to prevent launch of generic or biosimilar products upon becoming aware of the grant of marketing approval.
In urgent situations, a patentee may seek an interlocutory injunction to prevent launch of the generic or biosimilar product. In such an application, the patentee will be required to demonstrate to the court that there is a prima facie case of infringement; and that the balance of convenience favours the grant of the injunction, including that if no injunction is granted, the applicant will suffer harm for which damages will not be an adequate remedy. In exchange for the grant of an interlocutory injunction, the patentee must undertake to the court to compensate any person who suffers damage as a result of the injunction if it is later held that the injunction was improperly granted (undertaking as to damages).
In such an application, the question will often arise as to how validity issues are to be weighed in determining whether the applicant has discharged the onus of establishing a prima facie case of infringement. This necessarily requires the court to make a preliminary assessment of validity issues in determining the question of prima facie case.
A significant issue that arises on the determination of the balance of convenience is the relative positions of the patentee and generic with respect to the calculation of damages. The patentee will have an established market position in the therapeutic field and will often have the benefit of the PBS price for its product. As discussed above, the PBS listing of a generic or biosimilar will result in mandated price reductions for the patentee's product (see Section II.iv).
Notwithstanding the impact of such mandated price reductions on the patentee, judicial dicta in cases involving the calculation of damages claimed to have resulted from an interlocutory injunction have suggested that calculation of damages flowing to a generic from the grant of an injunction may present greater difficulty than the calculation of damages to the patentee from refusing the grant of an injunction. Each case must be assessed on its own facts.
An important point that arises on the determination of the balance of convenience is whether, if the court refuses an interlocutory injunction, but later grants final injunctive relief, the mandated price reductions under the NH Act would be reversed to restore the patentee's price. This would involve reversing the 25 per cent price reduction and the further price reductions resulting from ongoing price disclosure obligations. This is a matter that is completely within the discretion of the Minister and poses considerable uncertainty for the court.
Finally, an issue that arises under the undertaking as to damages is whether, in circumstances where an interlocutory injunction was granted, but final injunction is refused, the Australian government is entitled to claim under the undertaking for the difference between the cost of the PBS subsidy while the injunction was in place and the cost of the subsidy it would have borne if no injunction had been granted. The complexities of such a claim were recently demonstrated in Commonwealth of Australia v. Sanofi (No. 5)  FCA 543. In that case, the Federal Court dismissed a claim by the Australian government for compensation from Sanofi on the usual undertakings as to damages. The matter is on appeal to the Full Court of Federal Court.
ii Delaying market entry of generic medicines – settlement
Parties, or prospective parties to patent litigation may settle disputes; however, any such settlement will always be subject to oversight by the CCA.
i Competition enforcers in Australia
The primary responsibility of the ACCC is to ensure that individuals and businesses comply with the CCA. The following powers and remedies are available to the ACCC:44
- compulsory information-gathering powers;45
- search warrant and seizure powers (i.e., dawn raid powers) to gather evidentiary material. Pursuant to a search warrant, the ACCC may also require any person on the premises to answer questions and produce documents that relate to the ACCC's entry to the premises;46
- request that parties voluntarily provide information and documents to the ACCC in response to an investigation;
- issue infringement notices;47
- accept court-enforceable undertakings from a party under Section 87B of the CCA; and
- institute legal proceedings if the ACCC considers it appropriate. A number of remedies and penalties available to the ACCC by way of a court order include declarations, injunctions, pecuniary penalties and other remedial orders.
When deciding whether to pursue a matter, the ACCC will prioritise those that fall within its current priority areas.48 While the ACCC will prioritise its current priority areas, it will also retain capacity to pursue other matters that display the following factors:49
- conduct that is of significant public interest or concern;
- conduct that results in substantial detriment to consumers or small businesses;
- national conduct by large traders, recognising the potential for greater consumer detriment and the likelihood that conduct of large traders can influence other market participants;
- conduct involving a significant new or emerging market issue or where action by the ACCC is likely to have an educative or deterrent effect; and
- where action by the ACCC will assist to clarify aspects of the law, particularly in relation to the newer provisions of the CCA.
The ACCC also continues important residual work in areas previously identified as priority areas, such as healthcare.
Each year, the ACCC releases its Compliance and Enforcement Policy,50 which identifies the industries and behaviours it will be focusing on. In addition to this, the ACCC also has in place a set of enduring priorities that covers forms of conduct that it considers are so detrimental to consumer welfare and the competitive process that they should always be a priority.
Although the 2020 priorities are not directly relevant to the pharmaceutical sector, the enduring priorities are relevant and include the following:51
- cartel conduct;
- anticompetitive conduct;
- product safety;
- vulnerable and disadvantaged consumers; and
- conduct impacting indigenous Australians.
i Merger authorisation
Acquisitions that would have the effect or be likely to have the effect of substantially lessening competition in any market are prohibited by Section 50 of the CCA.52 Acquisitions are subject to the CCA and must be authorised by the ACCC. Merger authorisation allows merger parties to seek statutory protection for a proposed acquisition from legal action under Section 50 of the CCA. Prior to 6 November 2017, merger authorisation applications were made to the Australian Competition Tribunal.53 On 6 November 2017, amendments to the CCA empowering the ACCC to grant merger authorisation came into effect following recommendations by the Competition Policy Review. From 6 November 2017, applications for merger authorisation were made to the ACCC.
The ACCC can grant a merger authorisation if it is satisfied that either the proposed acquisition would not have the effect, or would not be likely to have the effect, of substantially lessening competition; or that the proposed acquisition would result, or be likely to result, in a benefit to the public and the benefit would outweigh the detriment to the public that would result, or be likely to result, from the acquisition.54 The ACCC's Merger Authorisation Guidelines reflect the proposed approach of the ACCC in assessing applications for authorisation, including the likely competition effects of proposed acquisitions under the CCA.55
The merger authorisation process is open to the public, and applications for merger authorisation, all related submissions by the applicant and interested parties and the ACCC's (and previously the ACT's) determinations, are stored on the merger authorisations public register. In January 2020, the ACCC provided authorisation in relation to the proposed acquisition by Gumtree AU Pty Ltd of Cox Australia Media Solutions Pty Ltd.56 To date, there have been no decisions by the ACCC or the ACT in relation to the pharmaceutical sector.
The merger authorisation process is an alternative to the informal merger review process. The informal merger review regime is set out in the ACCC's Informal Merger Review Process Guidelines.57
ii Informal merger reviews
The ACCC's informal review process is not mandated by the CCA or other legislation, rather the process has developed over time to provide an avenue for parties to seek the ACCC's informal view prior to completion of an acquisition. An informal view by the ACCC not to oppose a merger does not protect merger parties from legal action by the ACCC or other parties.
A recent example of the ACCC's informal merger review process is in relation to iNova Pharmaceuticals Australia's proposed acquisition of Juno PC Holdings.58 On 19 December 2019, the ACCC raised preliminary concerns that the proposed acquisition of pharmaceutical developer Juno PC by the pharmaceutical company iNova would contravene Section 50 of the CCA. iNova is currently the only producer of TGA-approved phentermine-based weight-loss medication in Australia and its phentermine products (Duromine and Metermine) have a share of approximately 70 per cent by revenue in the supply of prescription and OTC weight-loss medication. The ACCC expressed a preliminary view that the proposed acquisition would remove potential and likely competition from Juno PC (as a future competitor) in the supply of phentermine-based weight-loss medications and weight-loss medications more broadly, thereby substantially lessening competition in the relevant weight-loss medication market in Australia. This is notwithstanding that Juno PC's product was still in development (at the time) and subject to various regulatory approvals and registrations, as well as the parties' claims that Juno PC lacked the infrastructure, funds and experience to market its product. In the wake of the ACCC's concerns, on 6 January 2020, iNova withdrew its proposed acquisition of Juno PC.
A further recent example includes the ACCC's approval on 9 July 2020 of Elanco Animal Health Incorporated's acquisition of Bayer Aktiengesellschaft's animal health business, which covers development and distribution of prescription and non-prescription products for farm and companion animals. The ACCC approved the acquisition with divestiture of Drontal, Droncit and Profender brands (together, the Companion Animal Business) and the Avenge+Fly brand (the Avenge Sheep Lice Business).
The ACCC's informal merger reviews register59 contains a list of all public informal merger reviews by the ACCC that are under consideration or completed.
To date, there are no Federal Court decisions in respect of merger authorisation under Section 50 of the CCA.
As discussed in Section II.v, conduct involving intellectual property rights that was previously exempt from the anticompetitive conduct prohibitions in the CCA are now subject to those prohibitions. The following two cases are examples of legal action taken by the ACCC to enforce the CCA.
i ACCC v. Pfizer
Australian Competition and Consumer Commission v. Pfizer Australia Pty Ltd  FCA 113 concerned the provisions of the CCA prior to the amendments made by the Competition and Consumer Amendment (Competition Policy Reform) Act 2017 and Competition and Consumer Amendment (Misuse of Market Power) Act 2017 (the Competition and Consumer Amendments) coming into effect on 6 November 2017. This case was the first instance where the ACCC had brought proceedings against a pharmaceutical company concerning misuse of market power and exclusive dealing.
Pfizer manufactured, supplied and marketed atorvastatin (Lipitor) to pharmacies in Australia. In anticipation of the expiry of a number of its patents, including its patent for atorvastatin in May 2012, and the competition it would face in 2012, Pfizer took a number of steps to respond to the inevitable competition from generic manufacturers in the lead up to, and following, the expiry of the atorvastatin patent; and to manage the erosion of the revenue from sales of atorvastatin. The strategy Pfizer developed became known as 'Project LEAP'.
In 2014, the ACCC commenced proceedings against Pfizer alleging that Pfizer's conduct in implementing Project LEAP had contravened Sections 46 and 47 of the CCA. The ACCC claimed, inter alia, that Pfizer held a substantial degree of market power and took advantage of that power for a purpose prohibited by Section 46(1)(c); and Pfizer engaged in a course of exclusive dealing pursuant to Sections 47(1)(d) or (e), or both, and did so for the prohibited purpose of lessening competition.
In relation to the contravention of Section 46(1)(c), the ACCC took issue with the following aspects of Project LEAP:
- the commencement in January 2011 of the direct-to-pharmacy model in which Pfizer would cease supplying prescription pharmaceuticals through wholesalers and would itself commence marketing and supplying prescription pharmaceuticals exclusively and directly to community pharmacies;
- from January 2011, allocation to an accrual fund of 5 per cent of all Lipitor sales that was to be used as a rebate that could be 'unlocked' or accessed by the community pharmacies that accepted Pfizer's offers for its generic atorvastatin; and
- the making of bundled offers before 18 May 2012 (the expiry date of the atorvastatin patent) to pharmacies that tied the prices that Lipitor was to be provided to the amount of Pfizer's generic atorvastatin that the pharmacy agreed to purchase.
The ACCC alleged that Pfizer's conduct was pursued for the substantial purpose of deterring or preventing:
- Ranbaxy (and potentially one licensee) from supplying atorvastatin to a substantial proportion of community pharmacies from 19 February 2012;
- all other competitors from supplying atorvastatin to a substantial proportion of community pharmacies from 19 May 2012; and
- in relation to the contravention of Sections 47(2)(d) or (e), or both, the ACCC further alleged that atorvastatin was supplied by Pfizer on a condition and for the purpose of substantially lessening competition.
The Court dismissed the ACCC's case, concluding (inter alia) that while Pfizer maintained some degree of market power up to the expiry of its patent in May 2012, that market power gradually decreased as the expiration date neared. As from January 2012, Pfizer did not have a substantial degree of market power, and at no point in time did Pfizer engage in conduct for a purpose that contravened Section 46(1)(c).
The Court also rejected the ACCC's allegation that Pfizer had engaged in exclusive dealing by making the offers to pharmacies for the purpose of preventing or hindering the other manufacturers from supplying generic atorvastatin to pharmacies. For the purposes of Section 47 of the CCA, the Court concluded that despite Pfizer's conduct having the effect or practical consequence of making it harder for other manufacturers to supply generic atorvastatin, it did not engage in the conduct for the purpose of lessening competition.
The ACCC appealed the first instance decision to the Full Court of the Federal Court in March 2015. In relation to market power, the Full Court held that the primary judge had erred by finding that, by January 2012, in the lead up to the expiration of the atorvastatin patent in May 2012 Pfizer no longer had a substantial degree of market power.
Rather, the Full Court considered that while Pfizer's market power may have decreased as other manufacturers of generic versions of atorvastatin began to enter the market, the potential competition was not so imminent in January or February 2012 so as to diminish to any significant degree of the long-standing market power that Pfizer held. The Full Court also reasoned that had there been any diminution of Pfizer's market power in January or February 2012, the extent of that diminution was considered to be insufficient to render Pfizer's market power in the relevant market less substantial.
The Full Court upheld the primary judge's findings in relation to the allegation of exclusive dealing, finding that Pfizer had not engaged in exclusive dealing with the purpose of substantially lessening competition in a market.
The ACCC sought special leave to appeal against the Full Court's judgment on 25 May 2018. The High Court dismissed the ACCC's application for special leave on 22 October 2018.
ii ACCC v. Ramsay
Australian Competition and Consumer Commission v. Ramsay Health Care Australia Pty Limited  FCA 308 is the second case in which the ACCC had brought proceedings against a pharmaceutical company regarding misuse of market power and exclusive dealing issues under the provisions of the CCA prior to the Competition and Consumer Amendments.
On 1 May 2017, the ACCC commenced Federal Court proceedings against Ramsay Health Care Australia Pty Limited, alleging that Ramsay had contravened Sections 46 and 47 of the CCA by misusing its market power and engaging in anticompetitive exclusive dealing. The alleged contraventions arose from four pleaded conversations in which senior Ramsay officers told three individual surgeons in mid-2015, who were planning to establish a new competing private day surgery in Coffs Harbour, that their access to operating theatre time at Ramsay's Baringa Private Hospital in Coffs Harbour for the purpose of in-patient surgery procedures would be substantially reduced or entirely withdrawn if they proceeded with their plans to establish the new day surgery.
The Court dismissed the ACCC's case on the basis that the ACCC had failed to establish that the pleaded conversations were conduct by Ramsay that contravened the CCA. For completeness, the Court also addressed the ACCC's claims of misuse of market power and exclusive dealing by Ramsey.
In relation to Section 46 of the CCA, the Court found that Ramsay had substantial market power in the market for the supply to surgeons of private in-patient surgery services at private hospitals in Coffs Harbour, including the Private In-Patient Surgery Market, the Private In-Patient Theatre Market and the Alternate Private In-Patient Market, but considered that the ACCC had not established that Ramsay took advantage of that substantial market power.
In relation to Section 45 of the CCA, the Court held that Ramsay did not engage in prohibited exclusive dealing conduct, finding that:
- the alleged contravening conduct was incapable of constituting supply or an offer on condition since it was not alleged that Ramsay intended to revoke or withdraw a surgeon's operating list immediately. At the time the alleged contravening conduct occurred, there were no competing services to acquire and there was no competitor; and
- the alleged contravening conduct did not have the purpose or likely effect of substantially lessening competition since the surgeons' decision not to proceed with the competing day surgery was not due to Ramsay's conduct, but was instead because the surgeons decided that the competing day surgery would not be viable.
The ACCC has not appealed the Court's judgment.
Outlook and conclusions
The law affecting pharmaceutical patents continues to evolve in a number of important respects, including elucidating the principles applicable to the construction of Swiss-style claims; the law of novelty affecting method of treatment claims; the practical application of the principles relating to the grant of interlocutory injunctions; and the principles applicable to determining claims to damages in patent infringement cases that in turn affect the consideration of the balance of convenience in applications for interlocutory injunctions. At the same time, government policy reviews may significantly affect the litigation landscape, the most recent example being the examination of the level of confidentiality that attends an application for ARTG registration.
i Construction of Swiss-style claims
Swiss-style claims were recently considered in Mylan Health Pty Ltd v. Sun Pharma ANZ Pty Ltd  FCAFC 116 (Mylan v. Sun Pharma). The questions considered by the court in respect of Swiss-style claims included whether intention is a component in the factual matrix, and whether it is necessary to establish an alleged infringer's intention to prove infringement. The Full Court held that this was not the case and that 'infringement of a Swiss-style claim is concerned with what the allegedly infringing manufacturer has done, not what it intended to do'.
ii Law of novelty affecting method of treatment claims
In Mylan v. Sun Pharma, two questions were considered in relation to novelty, the first being whether clinical trials conducted to support an application for regulatory approval has the effect of prior publishing the invention; and the second being whether prior publishing of the invention can be based on a reasoned hypothesis. The Full Court decided both questions in the affirmative, finding that a document disclosing what is later claimed as an invention will anticipate the invention and deprive it of novelty.
iii Grant of interlocutory injunctions
In two recent decisions by the Federal Court, including Mylan v. Sun Pharma and Sanofi-Aventis Deutschland GmbH v. Alphapharm Pty Ltd (No. 3)  FCA 2060, the Court refused to grant interlocutory injunctions sought by the patentee to prevent launch of generic products which were alleged to infringe the patentee's patents. In both decisions, the Court's refusal to grant the injunctions was strongly influenced by the perceived strength of invalidity arguments advanced by the generics.
iv Calculation of damages
In circumstances where an interlocutory injunction is ordered, but a final injunction is refused, a particular aspect of the calculation of damages concerns the question of whether the Australian government is able to claim on the usual undertakings as to damages for the difference between the cost of the PBS subsidy while the injunction was in place and the cost of the subsidy it would have incurred if no injunction had been granted. The complexities of this issue were explored in Commonwealth of Australia v. Sanofi (No. 5)  FCA 543. The Court considered that the Australian government is not precluded from claiming compensation under the undertakings if it can be established that the loss it suffered directly flowed as a result of the interlocutory injunction and that the loss was reasonably foreseeable.
The calculation of damages to be awarded under the undertakings was discussed in Sigma Pharmaceuticals (Australia) Pty Ltd v. Wyeth  FCA 1556 and Lundbeck in H Lundbeck A/S v. Sandoz Pty Ltd  FCA 1797.
In Generic Health Pty Ltd v. Bayer Pharma Aktiengesellschaft  FCAFC 183, the generic had entered the market with its generic product prior to the expiry of the patentee's patent. The Court held that sale of the generic product had infringed the patent and determined that each sale of the generic's infringing product was a lost sale of the patentee's product.
v TGA – early notification of registrations of new prescription medicines
The TGA currently does not release information about the acceptance of an application for prescription medicines under evaluation or about applications being evaluated unless the information is already publicly available. On 15 February 2019, the TGA published a consultation paper titled 'Whether the TGA should publish that a prescription medicine is under evaluation'.60 The consultation paper is said by the TGA to reflect its increasing commitment to transparency by government agencies and its response to an increased demand from the public for more information on prescription medicines that are under evaluation.
The TGA sought comments from interested parties, including for reasons in support of or concerns on four options for the point-in-time in the evaluation of an application that the TGA should publish that an evaluation is taking place, as well as the types of prescription medicine applications that should be published.
Prescription medicines that are lodged as applications for the following were considered to be in scope for the consultation:
- new medicines: new chemical entities, new biological prescription medicines and new fixed dose combinations;
- new uses for medicines: extension of indications; and
- generic or biosimilar medicines.
The consultation period closed on 29 March 2019. A total of 39 submissions, not marked as confidential, were received from industry, health professionals, consumer representative groups, regulatory consultants and the government; and a further five submissions were received with claims of confidentiality or privacy.
Following consideration of the submissions, the government gave approval to proceed with implementing the enhanced transparency measures for applications under evaluation in a way that balances availability of information to the public, while recognising that such information could have commercial value to the applicant.61
In March 2020, the TGA published a paper titled 'Prescription medicines transparency measures'. The purpose of the paper was to seek feedback from sponsors and industry stakeholders to canvass implementation options for the following two measures. The feedback period ended on 9 June 2020.62
Measure 1: early publication of major innovator medicine applications
This measure will introduce early publication of major innovator prescription medicines that have been accepted for evaluation under Section 25 of the TG Act and will provide information on potential availability of new medicines, or new uses for medicines and new combinations where one active ingredient is a new medicine.
The implementation arrangement will involve a new legislative instrument supporting the release of information under the current Section 61 of the TG Act. The following details are intended to be published:
- product sponsor;
- product name;
- active ingredients;
- proposed indications; and
- application type.
Publication will occur for the following types of applications:
- new medicines (type A);
- new combinations of medicines (type B); and
- new indications for an existing medicine (type C).
The TGA will publish information within one month of the date that an affected application has passed preliminary assessment. Publication has yet to commence.
Measure 2: earlier notification of generic medicine applications to the innovator
This notification scheme will apply in the following circumstances:
- where a person has made an application for registration of a medicine under Section 23 of the TG Act;
- the medicine is a prescription medicine;
- the medicine has passed preliminary assessment, in accordance with Section 23B(1) of the TG Act; and
- the person has submitted evidence to establish the safety or efficacy of the medicine as part of the registration application, relying on evidence that another person has previously submitted for another medicine (whether or not that medicine is entered on the Register).
Implementation of this measure is planned for early 2021 and two options have been proposed for implementing an early notification scheme for new generic medicines.
Where an applicant has a reasonable belief that a patent has yet to expire, the applicant would be required to provide a confidential notification to the patentee that the application has passed preliminary assessment.
After passing preliminary assessment, evaluation of the applicant's application would not commence until the applicant provides to the Secretary evidence that it has notified the patentee, and a copy of the notification, or a declaration that it has a reasonable belief that no patent exists.
The option under Section 25AB(3)(c)(ii) of the TG Act to notify the Secretary that a certificate to inform the patentee is not required would no longer be available for applicants that have a reasonable belief that a relevant patent, or patents, has not expired. It would, however, continue to be available where the applicant has a reasonable belief that a patent, or patents, has expired.
This option would require the provision of early notifications from innovators (to the Secretary only) and generics (to the innovator and the Secretary), regardless of whether the patent has expired.
Option 2 applies to all applicants for the registration of a prescription medicine where it is proposed that the application will rely on information of another to support the application.
The current requirement under Section 25AB(3)(c) of the TG Act would move from the point in time where the evaluation has been completed to the point in time after an application for registration passes preliminary assessment, but prior to the commencement of evaluation of the medicine.
All applicants would be required to provide a notification to the innovator, and a copy of the notification to TGA.
vi Other TG Act amendments
On 25 June 2020, the Therapeutic Goods Amendment (2020 Measures No. 1) Bill 2020 received assent.63 The amendments came into effect on 26 June 2020 and a new compilation of the TG Act was registered on 15 July 2020.64 The amendments introduce a number of changes, including a new Section 26AF, which specifies when the Secretary must not use restricted information in evaluating assessed listed medicines (complementary medicines) in relation to clinical trial data that supports an indication of an existing medicine. This new regime is based on the existing data protection regime for innovator prescription medicines and will provide five years' protection for clinical trial data that a sponsor submits in support of an indication for an assessed listed medicine. This regime will apply to cases where clinical trial information is not publicly available and no other medicine has the same indication at the time the application for listing is made. Changes have also been made to Sections 3 and 26AE of the TG Act in light of the introduction of Section 26AF, in effect to make reference to the new provision.
The regulatory frameworks in the pharmaceutical field continue to evolve in their complexity. The principal intellectual property rights affecting the pharmaceutical field are confidential information and patents.
Recent changes to the CCA have brought the settlement of intellectual property law disputes into sharper focus, involving, as such settlements often do, agreements between actual or potential competitors. Careful analysis of the competitive situation is warranted. The potential for these changes to affect behaviours in the pharmaceutical sector is significant given the pivotal role of patents in creating exclusive rights for significant products in important therapeutic areas.
1 Anthony Muratore and Prudence J Smith are of counsel and Jenny Wong is an associate at Jones Day.
3 Sections 30EA, 32HA, 41KA and 42V TGA Act; recall provisions under the Australian Consumer Law apply when a therapeutic good is a consumer good. However, therapeutic goods that do not meet the definition of consumer goods (goods intended for personal, domestic or household use) are not subject to the Australian Consumer Law, for example: medical devices used in hospitals, goods used strictly in the practice of medicine and not supplied directly to consumers for personal, domestic or household use, etc.; see Section 2 of Schedule 2, The Australian Consumer Law in the CCA; see also www.tga.gov.au/book-page/accc-and-recalling-goods.
4 Regulations 12 and 12A, Schedule 5 and Schedule 5A TG Regulations; www.tga.gov.au/overview-supplying-therapeutic-goods-australia.
9 Section 67 Patents Act.
10 Section 68 Patents Act.
11 Section 70 Patents Act.
12 Section 70(2) Patents Act.
13 Section 77 Patents Act.
14 Section 6A of the CCA.
15 Section 50 CCA.
16 Section 47 CCA.
17 Section 48 CCA.
18 Section 45 CCA.
19 Section 46 CCA.
20 Section 44ZZRD CCA.
21 Section 56EV CCA.
22 Section 76(1A)(aa) CCA.
26 Regulation 16C(3) TG Regulations.
27 But this excludes requests for additional trade names.
30 Specific issues may also be referred to the Pharmaceutical Subcommittee of the ACM.
34 The statutory time frame for provisional registration is 255 working days (Reg 16C(3) TG Regulations).
36 Section 32A TG Act: the Secretary may determine that a specified thing is or is not a biological: www.tga.gov.au/sites/default/files/what-regulated-biological.pdf.
45 Section 155 of the CCA.
46 Division 6 of the CCA.
47 Infringement notices are issued where the ACCC believes that a contravention of the CCA requires a more formal sanction, rather than an administrative resolution, but where legal action is not required.
54 Section 90(7) CCA.