AUSTRALIA

The US research-based pharmaceutical industry views the US-Australian FTA as a win-win opportunity to strengthen protection and enforcement of intellectual property rights, improve access to innovative U.S. medicines, support transparent science-based regulation in Asia Pacific, and improve recognition of the value of biomedical innovation under the for Pharmaceutical Benefit Scheme (PBS).

The successful negotiation of a U.S.-Australia FTA will do much to ensure that Australia remains competitive in the field of global biomedical research and that Australian patients are able to benefit from life-saving advances in treatment for disease and disability. We welcome the launch of U.S.-Australia free trade negotiations and look forward to working with the U.S. and Australian Governments to fashion an FTA agenda that advances policies that promote pharmaceutical and biotechnology and genomic discovery in both the US and Australia. Nonetheless, there are some intellectual property issues that have yet to be addressed. PhRMA therefore requests that Australia be included on the “Special 301” Watch List.

Intellectual Property Protection

Springboarding and Stockpiling

While Australia has strong intellectual property laws, which include patent term extension and data exclusivity consistent with the Trade Related Intellectual Property Agreement (TRIPS) Article 39:3 we are concerned, however, about proposals for expanded export "springboarding" and stockpiling.

Because of lobbying from certain local generic producers, the Australian Government periodically has considered various proposals for extending the existing “springboarding” provisions or “stockpiling” in which infringing medicines could be manufactured for export or stockpiled pending expiration of a patent. Such an approach makes little economic sense, because it would further undermine Australian investment in the innovative life sciences. While Australia’s total pharmaceutical exports amount to about A$2.3 billion per year, only 10% of such exports are generics. Thus, for Australia to abandon the innovative patented segment of the pharmaceutical industry, which is characterized by high value-added and advanced scientific discovery, would appear questionable from an industrial policy perspective. In addition, recent springboarding and stockpiling proposals appear to violate TRIPS Article 30, particularly in view of the ruling of the World Trade Organization (WTO) in Canada – Patent Protection of Pharmaceutical Products, WT/DS114/R (2000). Accordingly, the adoption of patent springboarding and/or stockpiling would send an important negative signal about Australia’s commitment to the innovative life sciences and the future success of the FTA negotiations.

Market Access Barriers

Due to increasing budgetary pressures, the Australian Government has adopted a series of increasingly restrictive regulatory and budgetary schemes that effectively diminish the intellectual property rights granted to innovative pharmaceutical and biotechnology products. Such practices include:

• Restrictive PBS Listings: The Pharmaceutical Benefits Advisory Committee (PBAC), a body of health and clinical experts appointed by the Australian Health Minister, is responsible for evaluating applications for PBS listings and making recommendations to the Health Minister. The PBAC rejected 40% of major applications for new listings in 1997 and 59% in1998.6 . Because of its overriding focus on cost-effectiveness, the PBAC devalues quality of life benefits, such as faster recovery times, return to work and function, reductions in patient out-of-pocket costs, etc. Such criteria have the effect of devaluing important benefits, which can have an enormous impact on patients.

• Reference Pricing: Once the PBAC has recommended a PBS listing, the Pharmaceutical Benefits Pricing Authority (PBPA) recommends a price. While the PBPA process is not transparent, it typically involves a comparator pricing methodology in which the price of an innovative drug is evaluated on the basis of (1) any existing chemical analogue of the proposed drug class, or (2) the product most likely to be substituted by the proposed drug on the indication sought. To obtain a premium, the applicant must demonstrate significant clinical advantages over its main comparator and satisfactory costeffectiveness versus that comparator. The PBPA uses such comparator pricing as leverage in negotiations with the applicant. The reference price is reviewed and maintained throughout the life of the product. If the price of the generic comparator drug decreases for any reason, including patent expiry, the subsidy level of the innovative medicine is also reduced and as Australians expect high levels of subsidy this usually leads to a reduction in price. This practice seriously erodes intellectual property protection, devalues innovation, and discourages investments in new medical discoveries.

• Pharmacoeconomics ("4th hurdle"): The PBAC and PBPA apply mandatory pharmacoeconomic cost-effectiveness criteria. As a result, applicants must justify the listing and price of an innovative drug through economic and therapeutic studies that show a clinical advantage over its main comparator. Data regarding head-to-head comparisons with the PBAC-selected comparator are rarely generated through global Phase III clinical trials for regulatory agencies. In addition, the definition of economic benefit is extremely restrictive, and devalues quality of life and patient expense considerations.