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Patent Law and Community Interest in Public Health: Should Patent Law be supplemented by a Health Impact Fund?
Jowa Chan [*]
This article explores the lively issue of whether using the patent system as a one-size-fits-all system to regulate the pharmaceutical industry is justified. In assessing the shortcomings of the patent system, this paper will discuss the problems inherent in the patent system, which result from its reliance on market forces to generate royalties to incentivise pharmaceutical research and development. It will be argued that the system at present does not sufficiently account for public health interests, a dimension unique to the pharmaceutical research and development industry. By linking financial returns to market demand for a product at monopolistic prices, an incentive system rewards the marketing of a product to consumers able to pay for the product, and not necessarily the health benefits of that product conferred on the community. Consequently, this article contends that reform is necessary.
The proposal of a Health Impact Fund, as advocated by Professor Thomas Pogge and Professor Aidan Hollis, will then be evaluated as a national scheme in the context of Australia's regulatory environment in the latter part of this article. The advantages of a Health Impact Fund, a prize system using a direct measure of health benefits for pharmaceutical treatments registered with the fund to determine the size of the prizes, will be explored and a critique of the adoption of such a system to complement the Australian patent system will be made. The current practical and legal challenges faced in implementing such a system will be discussed. Despite the potential obstacles in implementing a Health Impact Fund on a national scale, this article contends that having a voluntary scheme to complement the existing patent system is a beneficial option that is worth considering in light of the recent focus on pharmaceutical patent reform.
The role of patent law in the field of research and development into medicines and their methods of use, which for the purposes of this paper will be referred to as pharmaceutical research and development, has long been a topic for passionate debate. In Australia, advocates for stronger patent protection cite the essential incentivising effect that patent law has on pharmaceutical research and development,[1] and base their arguments on the need to encourage innovation in the pharmaceutical sector by addressing the rising costs of research and development.[2] On the contrary, the costs associated with patent protection are acknowledged to reduce the accessibility of the benefits of pharmaceutical research and development for the lower socio-economic sections of the community.[3] At the heart of these arguments lies the fundamental balance between private and public interests in Australian patent law.
In light of an assessment of the justifications of regulating the pharmaceutical innovation through patent law, this paper argues that the Australian patent system alone, in its current form, is not appropriate for managing all pharmaceutical innovation. Consequently, this paper posits that consideration should be given to supplementing the current system with a Health Impact Fund (‘HIF’), a government-run prize system rewarding particular classes of pharmaceutical innovation suggested by Professors Aidan Hollis and Thomas Pogge.[4] Despite the HIF being initially proposed as a global initiative aimed at improving access to medicines to developing nations, the implementation of a HIF on a national scale offers substantial benefits for developed nations such as Australia.
The first part of this paper, through an assessment of the patent system, will challenge the notion that patent law has been effective in achieving its policy objectives. In particular, the effectiveness of patent law in allowing for the recovery of research and development costs will be questioned. Further, it will be contended that the balance between public and private interests in the patent system has been skewed excessively towards private interests due to the reliance on market forces to direct innovation.
The latter part of this paper will explore the advantages of a prize-based system in the form of a national HIF, put in place to reward pharmaceutical innovation. It will critique the adoption of such a system to supplement Australian patent law and evaluate its potential effectiveness in Australia. This paper concludes that while practical and legal challenges faced in implementing a HIF do exist, the operation of a HIF is feasible and worth consideration in future reforms.
Research and development into new medicines and methods of use is a unique area of innovation when compared to traditional fields of innovation associated with patents.[5] In Australia, two features differentiate this area of research and development from other forms of technological innovation. The first is the rigorous regulation of the process of pharmaceutical research and development, and of the resultant product once its manufacturers wish to sell it to the public.[6] The Commonwealth regulates medicines mainly through the Therapeutic Goods Act 1989 (Cth) and the Therapeutic Goods Regulations 1990 (Cth).[7] To bring a new medicine to market, early research establishing proof-of-concept and potential compounds is followed by three phases of strict clinical trials, with each phase involving progressively more participants.[8] The final product is then submitted to the Therapeutic Goods Administration (‘TGA’) for approval before it can be listed on the Australian Register of Therapeutic Goods and marketed to the public.[9] The TGA requires, on average, two years to consider applications for approvals.[10] This stringent approval process, when compared to traditional patent technologies without similar regulatory approval requirements, extends the timeframe for the development of new medicines and methods of treatment.
The second unique aspect of pharmaceutical research and development is the widely acknowledged high risks of failure of pharmaceutical research projects,[11] which are linked to the research and approval processes and their associated costs. According to Medicines Australia, an organisation representing the interests of major pharmaceutical companies operating in Australia,[12] the average cost of developing a new medicine or method of treatment is approximately $1.5 billion.[13] An estimated 50 per cent of capital investment into pharmaceutical research and development for a product comprises of opportunity costs of pursuing novel yet unsuccessful compounds, which initially show potential but are ultimately screened out during clinical trials.[14] These figures are not beyond dispute. In commenting on pharmaceutical research and development costs estimated by North American pharmaceutical companies and industry analysts,[15] Light and Warburton have criticised the opaque methodology used in reaching large cost figures.[16] With opaque sampling of chemical compound research costs and unverifiable corporate data singled out,[17] Light and Warburton have cautioned that the ‘constructed nature’ of research and development costs estimates should be recognised and that the methods used to reach the presented figures should be scrutinised.[18] A similar argument may be made for the figures presented by Medicines Australia. Nevertheless, there is general recognition in the literature that the costs of bringing a new drug or method of treatment to the market have risen steadily over the past decade[19] with an associated decrease in the success rate of developing new compounds.[20]
The already-high risks and costs of research and development into pharmaceutical innovations are compounded by the direction taken by research in the pharmaceutical industry, notably the recent emphasis on biotechnology, as opposed to traditional small molecule chemical development. The Tufts Centre for the Study of Drug Development, a non-profit academic research group based in the United States, has observed that biotechnological drugs are increasingly dominant in the pharmaceutical industry, with a majority of the top 10 selling treatments in 2012 being based on biotechnological drugs.[21] This shift is relevant to Australia, given Australia’s growing prominence in the global biotechnology industry with ASX-listed biotechnology firms worth over $50 billion.[22] Biotechnological drugs rely on more complex active ingredients than small molecule chemicals, and require more rigorous pre-clinical trials than small molecule chemicals.[23] DiMasi and Grabowski have observed that biotechnological treatments in the United States, compared with traditional small molecule treatments, require extended periods of clinical approval[24] and appear to be significantly more costly to develop than new small molecules.[25] The research direction in the industry therefore appears to support claims of rising costs in research and development.
The role of patent law as a mechanism for balancing competing public and private interests in pharmaceutical innovation should be considered with regard to the industry’s unique regulatory environment and costs. In Australia, the Patents Act 1990 (Cth) (‘the Act’) and its regulations are the source of the national patent system. A patent is the award of a monopoly to the patented invention’s patent-holder, theorised in most cases to be the inventor, for a limited period of time, which for a standard patent is twenty years.[26] In return for that monopoly, the patented matters are disclosed to the public in the form of published specifications.[27] For inventors who are also patent-holders, the system allows them to obtain financial returns for their invention, and to obtain non-financial benefits by enforcing their proprietary rights under their patents to prohibit the violation of their statutorily-guaranteed monopoly period by rivals. The public gains access to the details of the invention on the publication of the patent specifications, and can freely use the information for follow-on innovation or for exploitation on the expiration of the patent’s term.[28] The private interest rights conferred onto the inventor via patents act as incentives for innovation and are balanced against the public interest in accessibility of the inventions. This balance is further affected by special regulations concerning pharmaceutical research and development. Under the Act, pharmaceutical patent terms can be extended for up to five years beyond the standard patent term of 20 years, entitling the patent-holder to up to 25 years of protection.[29] Pharmaceutical patents are unique in this respect, with a considerably higher level of protection relative to other forms of patents. This has been justified primarily by the high costs associated with developing new pharmaceutical products, the longer time taken for product development, and the high level of risk associated with engaging in pharmaceutical research and development.[30] The adoption of the patent system domestically by nations across the world appears to stem from historical and political factors, rather than a systematic analysis on the comparative efficiency of patents over alternative methods for incentivising innovation.[31] Despite this, under the current business models adopted by pharmaceutical research and development companies,[32] commentators have claimed that patent law plays a pivotal part[33] in providing financial incentives for pharmaceutical innovation.[34]
Increasingly, however, doubts have arisen over the efficiency of patent law as a mechanism for recovery of costs associated with drug development. While the patent system overall does encourage expenditure in pharmaceutical research and development,[35] the income generated from the sales of patented products in the pharmaceuticals industry by far exceeds the expenditure on recovering research and development. During the period from 2009-2010, of the total Australian industry turnover of $22 billion, the entire pharmaceutical industry only utilised around $1.03 billion on research and development.[36] Despite the fact that growth in spending on research and development within the pharmaceutical industry significantly outstripped growth in expenditure across all other business sectors,[37] the lack of transparency in the pricing of medicines generates doubt as to whether the disparity in total revenue and funding applied to research and development is justified.[38] For example, for the drug imatinib, used for treating numerous cancers such as leukaemia, the price at which it was marketed would have recouped its development costs within two years of entering the market.[39]
Part of the disparity is due to inefficiency arising from firms with established patents deriving income by developing strategies under patent law to effectively extend the periods of protection received under their patents, or to discourage the entrance of new participants. Ordinarily, once a patent for an active pharmaceutical ingredient lapses, the market is open for competition by generic drug manufacturers, increasing the range of products containing the ingredient and lowering the prices for equivalent products. For example, since the lapsing of the patent in 2012 for the compound clopidogrel, the active ingredient for the heart-attack prevention drug Plavix,[40] more than 70 products containing the same active ingredient have entered the market.[41] Further developments in delivery systems and in bio-equivalent compounds can also be conducted by generic companies once the patent of a medicine has lapsed.[42] However, in a review undertaken by the Pharmaceutical Patents Review Panel, it was found that firms often manage to register multiple successive second-generation patents around a single active pharmaceutical ingredient with negligible novelty, effectively extending or generating a monopoly over the product by creating a threat of litigation for new market entrants.[43] Generic suppliers are effectively delayed from entering the market despite the expiration of the original patent.
Arrow Pharmaceuticals Limited v Merck & Co., Inc[44] is an example of an attempt to extend the monopolistic protection around a patented compound. The respondent, Merck & Co., Inc, had acquired a base patent for alendronic acid for treating osteoporosis in 1988,[45] and subsequently registered seven patents over the administration of specific doses of alendronic acid and the composition of tablets and liquid forms of alendronic acid in 2000.[46] Gyles J of the Federal Court of Australia revoked the seven patents on the basis that the patents over the dosages and compositions were not inventions or methods of manufacture,[47] further commenting that the case involved a clear attempt to ‘evergreen’ a patent.[48] The problem of granting monopolistic rights for subject matter that provided negligible intellectual advancement was alluded to by Gyles J in his observation that:
[t]here is something anomalous about ...a new, stand-alone, patent for a particular dosage regime for a particular purpose that was contemplated at the time of the base patent, with no new properties of the compound having been discovered in an inventive fashion in the meantime.[49]
While it may be claimed that there is little empirical evidence on the frequency and extent of what are termed ‘evergreening’ practices,[50] the above case shows that attempts to ‘evergreen’ patents are made. Although the courts can intervene, the additional costs imposed on the consumers of intellectual property by the strategies and patents which are not brought to the attention of the courts represent a considerable inefficiency in the patent system. Chalmers also observes that reliance on matters brought before IP Australia for oversight is at times inadequate, due to the disparity between the resources and expertise available to the pharmaceutical firms, and those of IP Australia.[51] Additionally, the associated costs of litigation around challenges to questionable second generation patents and to protect valid patents against competitors must also be accounted for in the industry. Such inefficiencies in the system are borne by the public. Paying higher prices in the hope of funds indirectly trickling to research and development projects is therefore a costly and ineffective method to fund research.[52]
As a result of the monopolies granted to firms conducting research and development, the patent system also allows pharmaceutical products to be priced to prohibit access to medicines by those in need of them, arguably with a complete disregard for public interest health concerns. This is both an international and national concern.[53] In Australia, government subsidies exist for certain drugs that are assessed as being particularly cost-effective for the population, listed under the Pharmaceutical Benefits Scheme (‘PBS’). These subsidies are a recognition that at times the prices of patented drugs are too high, and that the public interest is served by government intervention.[54] For example, without the PBS subsidy, the drug ranibizumab, used for treating macular (eye) degeneration, costs $1,830 per dose.[55] When prescribed for patients under the PBS, the maximum amount that can be charged to patients is $36.10 per dose.[56] Another example is the recently-listed drug ipilimumab (marketed as Yervoy), used for treating advanced malignant melanoma. A course of four treatments costs approximately $120,000 without PBS subsidies,[57] while under the PBS it is accessible to patients at $36.10 per treatment.[58] Drugs without the benefit of being listed under the PBS are consequently only available to a small minority who have the capacity to bear the costs. As such, firms set the prices of their patented drugs to target the population of ‘price insensitive’ consumers,[59] regardless of the general demand for the drug.
Moreover, patent law has the effect of stifling real follow-on innovation based on existing patents. In a situation where patents have been filed around a particular pharmaceutical product, it becomes increasingly difficult for competitors or researchers to utilise the patented product in further innovations without fear of infringing the patent.[60] The concern regarding this deterrence to research and development is illustrated in the recent reforms made to the Act. The Intellectual Property Laws Amendment (Raising the Bar) Act 2012 introduced major reforms to more clearly differentiate between research and commercialisation concerning a patented product.[61] In particular, activities conducted to experimentally improve an invention are now exempted from infringement.[62] Nevertheless, the effects of the new reforms have yet to be felt, considering that these particular reforms were only effective from 16 April 2012,[63] and the fact that the exemptions only apply to experimental activities conducted after this date.[64]
Furthermore, the patents system is a blunt instrument for encouraging innovation concerning public health as it harnesses market forces to drive innovation in directions that often have only marginal benefits for public health. The greatest profits from pharmaceutical products are made by targeting drugs in demand by patients with the capacity to pay the high prices under a monopoly.[65] The patent system, by relying on the volume of sales of a product to incentivise pharmaceutical innovation, favours development of drugs demanded by such patients. The focus is therefore concentrated on mainly ‘maintenance’ drugs, medicines that address the symptoms of diseases without removing the disease itself, as the demand from patients over the course of the disease would be higher than one-off preventative or curative drug treatments.[66] Medicines that target symptoms of chronic diseases like heart disease and diabetes would be within this category.[67] Atorvastatin, used for decreasing the amount of cholesterol in the blood of heart disease patients, and incidentally the most expensive drug for the government under the PBS,[68] is an example. Cardiovascular failure in patients is at times indicated by elevated levels of cholesterol in the blood, a symptom of stresses placed on the body.[69] Evidence suggests that cardiovascular failure is primarily caused by a combination of stresses on the body arising from lifestyle problems that result in inflammation in the arteries.[70] By using atorvastatin to lower cholesterol levels, patients only treat the symptom of cardiovascular failure. Priorities in research are also skewed towards making only incremental improvements to existing blockbuster drugs,[71] a phenomenon described by commentators as ‘me-too’ drugs, which derive profitability mainly from the marketing power employed by their developers.[72] On the contrary, Medicines Australia claims that ‘me-too’ drugs are not necessarily detrimental to the market by offering advances in safety and efficacy in a particular line of medicines.[73] Nevertheless, this argument ignores the cost of directing efforts away from developing ground-breaking compounds.
On a broader scale, from both the impacts of patent law on pricing and the direction in which innovation is driven, traditional patent law focuses on incentivising pharmaceutical development and pays little regard to the strong public interest in promoting public health. Pharmaceutical research and development is distinctive in that the public interest in accessing innovation in the area directly impacts on the society’s fundamental interest in promoting public health. On the other hand, it may be argued that the patent system sufficiently caters for public health interests in that a Crown-use regime exists[74] for situations involving national emergencies requiring access to medicines, a regime that was to be clarified by the now-lapsed Intellectual Property Amendments Bill 2013.[75] However, even if the clarification of the provisions had been passed, the fact that Crown-use provisions have historically rarely been used, with a lack of recent case law interpreting the provisions,[76] cannot be ignored. Consumers of drugs during the patent period have an interest to access pharmaceutical products to promote their health. The focus of patent law on basing returns solely on the marketing power of inventors, without regard to wider public health implications on the end-users, is flawed.
The HIF is an alternative mechanism for stimulating research and development into pharmaceuticals that has been suggested to overcome the shortcomings of patent law. The concept of a HIF has its roots in proposals for a prize system for encouraging research,[77] where instead of basing financial returns for an invention off sales under a limited monopoly, as under the patents system, financial returns are provided for by an allocation of an award from a prize fund. The concept of a HIF has been the subject of academic debate in recent decades, with the concept supported and critiqued by many over the years, notably by Professor of Law Michael Abramowicz, Director of Knowledge Ecology International James Love, and Professor of Bioinformatics Tim Hubbard.[78] A variety of proposals have been advocated for by academics such as Professor of Law and Economics Steven Shavell, and Professor Tanguy van Ypersele.[79] One such version of a HIF was developed by Thomas Pogge, Professor of Philosophy at Yale University, and Aidan Hollis, Professor of Economics at the University of Calgary,[80] with some of its features directly resulting from a series of meetings between academics and industry participants in May 2001, hosted by the World Business Council for Sustainable Development.[81]
Presented in separate papers by Pogge and Hollis in 2005,[82] Pogge and Hollis’ HIF consists of a scalable publicly-funded program[83] administering an open pool of funds provided by the governments of participating nations. Originally developed as a global initiative involving governments around the world, this HIF envisages pharmaceutical companies voluntarily registering their products with the program for a fixed term of 15 years as a result of patenting their products.[84] In return for selling their product at the cost of manufacture and distribution, the companies are given annual financial prizes from the HIF for the duration of their registration, with the amounts received dependent on the assessed extent of health benefits conferred by the products on consumers.[85]
In voluntarily registering under Pogge’s conception of a HIF, pharmaceutical firms do not relinquish the patents to their registered products under the HIF, but merely guarantee that they sell their products in accordance to the conditions imposed by the HIF in return for annual prize amounts[86] and provide free licences of their product after the reward period lapses.[87] As such, the HIF has been described as a contract-based model for stimulating research and development.[88] It links returns derived from a medicine to the performance of that medicine, rather than to the effectiveness of its marketing.
Despite being a concept aimed at constructing an international regime,[89] and the fact that no nation has implemented a domestically-functioning HIF, a HIF as a national scheme is a concept that has gained traction over recent years. Various forms of HIF have been envisaged, with a framework for a HIF being suggested to replace the patent system for pharmaceutical innovations in the United States under a bill presented by Senator Bernard Sanders in 2011 and reintroduced in March 2013, the Medical Innovation Prize Fund Act S.627, which is currently under consideration.[90] Indeed, a scalable HIF has been proposed for regulating pharmaceutical developments on an individual state-wide level in the United States.[91] A national-scale HIF, as an alternative incentivising mechanism to patent law operating solely within Australia, should therefore be considered.
The primary advantage that a HIF has over patent law is the separation of cost-recovery for research and development expenditure from the sales of product on the open market, reducing the reliance on pricing of the end product to recoup the research and development costs. The return given by a HIF to innovators of registered products is linked instead to the health benefits conferred onto population; the greater the assessed health benefits conferred, the greater the return under a HIF. Pharmaceutical firms are incentivised to keep their registered product prices to a minimum to ensure greater accessibility to allow for more widespread health benefits.[92] Consequently, a multinational HIF would incentivise firms to develop products targeting diseases that affect large numbers of people, often in poverty-stricken nations, regardless of their ability to pay higher medication prices.
Nevertheless, questions have been raised as to whether a HIF would similarly affect the accessibility of the products to consumers in developed countries such as Australia. Specifically, this issue comes to the fore in the context of the widespread coverage of health insurance in developed nations,[93] which in Australia includes both private and public health insurance, and the existence of government subsidies in the form of the PBS, which subsidises over 80 per cent of all prescribed medicines.[94] In particular, with a publicly-funded HIF, it has been claimed that a HIF would merely reallocate the burden of funding research and development from consumers to taxpayers.[95] However, mark-ups for patented products in developed countries often do affect accessibility when the products reach such a high price that they become excluded from insurance coverage.[96] For example, in Australia, the use of paclitaxel with carboplatin to treat endometrial cancer is not within the PBS and has resulted in limited accessibility for patients due to the high prices.[97] Additionally, the flow-on effects of savings from reduced pharmaceutical prices will reduce the burdens that taxpayers and insurance members will need to bear.[98] A separation of cost-recovery from the profits derived from the sale of a pharmaceutical product would ultimately lead to lower prices for consumers, either directly in the purchase of the patented product or indirectly through the taxes and insurance premiums subsidising the products, and more direct investment in research and development.
Further, linking a product’s returns to the health benefits under a HIF also addresses the problem of misdirection of innovation that patent law promotes. Pharmaceutical firms registering products with a HIF have no incentive to register drugs with only marginal health benefits relative to a first-in-class drug that has been registered under a HIF or existing treatments. As Love observes, the system would reduce incentives for ‘medically unimportant’ products,[99] reducing expenditure on innovation that is ultimately unnecessary for community health. Moreover, competing firms would be incentivised to enhance the first-in-class drugs registered with a HIF considerably, rather than to produce imitation drugs. On the contrary, where a HIF entirely replaces pharmaceutical patents, the lack of commercialisation options for products under a HIF may have an unintended side-effect of reducing incentives for the originating firm to improve on the drug once it has been registered.[100] For example, penicillin, as an unpatented drug, was not subjected to further development until more than a decade after its introduction.[101] While there is a lack of data on this area as a HIF has not been implemented before,[102] such concerns are relevant only to a situation where a HIF replaces the rights conferred by patents mandatorily. Pogge’s conception, on the other hand, is of a HIF supplementing patent law. Firms can choose to commercialise their product under a HIF or the patent system, with products of limited medical importance able to be marketed without the input of a HIF.
Additionally, a HIF has the capacity to be flexible in encouraging real ‘follow on’ drug developments in the context of competing firms. Pharmaceutical firms often have a choice of developing a completely novel line of medicines with a ground-breaking approach to treating diseases, termed ‘first in class’ drugs.[103] Other firms opt for ‘follow-on’ drugs developed on the back of first-in-class drugs, which are often more effective and safer to use.[104] Under the patents system, while the first-in-class developer recovers its research and development costs, it can use its patent rights to restrict others from experimentation, demand damages for infringing products, and impose licensing agreements. A HIF, on the other hand, can be established so that remuneration can be given for registered first-in-class drugs whose patents are the basis for development of registered ‘follow on’ drugs. As returns are based on usage and health impact, a HIF may assign prizes to those developing the first-in-class drugs as a drug that did have a major positive health impact, as part of the assessment system, even where real demand may be minimal due to the market dominance of more effective follow-on drugs.[105]
Moreover, an innovation-incentivising system consisting of a voluntary HIF supplementing a patents system for pharmaceutical inventions, when implemented properly, appears to be economically superior to a system that relies purely on patents. The marketing of goods at monopolistic prices, such as patented products, generates a deadweight loss to society. Consumers who derive a value from using the goods which is greater than the production cost of the product, but who are unable or unwilling to buy the goods at the monopolistic price set by the patent-holder, will be excluded by the price.[106] According to Shavell and van Ypersele, an opt-in rewards system supplementing a patents system with sufficiently large rewards can avoid this deadweight loss.[107] Potential inventors who would be discouraged from innovating due to insufficient demand from consumers at the monopoly price for the invention would take the optional reward. For society to benefit as a whole, the size of the rewards must be ‘optimal’,[108] such that the reward is less than the social surplus generated by the patent.[109] Such a result may be achieved by the government linking the reward size for a invention to the volume of product sales[110] or another indicator of the invention’s value. An optional HIF, distributing rewards the size of which are linked directly to the health benefits conferred by the registered pharmaceutical products, and requiring registered patent-holders to sell their product at cost and to provide free licences at the end of the HIF reward term, would be equivalent to an opt-in rewards system. However, Abramowizc observes that while in theory an optional reward system is superior to the patent system, the administrative costs, in terms of the government obtaining information necessary to set an ‘optimal’ reward, and the susceptibility of the process to abuse, may outweigh the benefits of such a system.[111] Described as the ‘Achilles’ heel’ of a rewards system,[112] this problem is compounded where the value of follow-on innovations on the patents registered with the reward system needs to be evaluated as part of the process to determine the value of the registered patent.[113] Nevertheless, in Australia, the ex-ante valuation of patented pharmaceutical products under the PBS for the subsidies attached to each treatment shows that administrative costs are not entirely prohibitive for a centrally-administered system to operate. In any case, Abramowicz acknowledges that Shavell and van Ypersele have shown that economic benefits for an opt-in optimal rewards system complementing a patent system, such as a voluntary HIF, are greater than that generated by a system based solely on a patent system.[114]
The continuing use of patents alongside a national HIF and the reliance on the pharmaceutical firms’ voluntary participation has little risk of encountering legal obstacles internationally. Specifically, the Agreement on Trade-related Aspects of Intellectual Property Rights 1994 (‘TRIPS Agreement’) requires member nations to guarantee the availability of patents with terms of at least 20 years,[115] and only allows for exceptions to the exclusive rights of a patent, under Article 30, where they:
a) do not unreasonably conflict with the normal exploitation of the patent;
b) do not unreasonably prejudice the legitimate interests of the patent-holder; and
c) account for the legitimate interests of third parties.[116]
The TRIPS Agreement has arguably been effective at restricting government efforts to circumvent patent rights, with a narrow focus on allowing access to pharmaceutical innovations under the limited frameworks of compulsory licensing of specific products in times of national emergencies.[117] The flexibility allowed under Article 30 has been criticised as vague,[118] although interpretations of the provision’s scope have at times been broad.[119] A voluntary HIF operating together with a patents system, in contrast to a mandatory system that replaces patents for pharmaceutical products, preserves patents as required by the TRIPS Agreement and does not engage Article 30, avoiding the uncertainties in its interpretation.
Nevertheless, in considering the concept of a HIF, calls have been made for the HIF to be introduced as a mandatory scheme in addition to patent law regulation. While Pogge advocates for a voluntary scheme,[120] critics observe that such a scheme will allow pharmaceutical firms to continue exploiting their patents regardless of the social cost and only register products which they can anticipate the government will be willing to pay too much for,[121] introducing further inefficiencies by overcompensation. Such a situation will not be inevitable, as a HIF would operate to encourage investment in a treating a disease affecting a poorer section of society, where there has been underinvestment in the treatment under the patents system due to the forecasted lack of demand at a high monopoly price. A HIF would make the treatment commercially viable with a health-benefits rewards system. Yet, a mandatory scheme avoids the risk of overcompensation problems[122] and minimises the price paid under a HIF to incentivise research in general.
Further, in commentary directed towards Senator Bernard Sander’s bill proposing to establish the Medical Innovation Prize Fund in the United States, which sought to compulsorily limit the exploitation rights of pharmaceutical firms for their products,[123] Love suggests that a mandatory scheme does not violate the TRIPS Agreement. He asserts that the bill has been drafted to exploit the inherent flexibilities under the TRIPS Agreement[124] especially under Article 30. Love argues that a ‘limited’ exception may be made for patents concerning medicines and vaccines which are reasonable in the context of the legitimate interests of the patent-holders due to the payments to be made from the mandatory HIF.[125] Proponents of the mandatory scheme therefore suggest that a mandatory HIF is both legally feasible and necessary to realise the advantages of prize systems over those of the patent system.
On the other hand, a mandatory HIF scheme is more likely to conflict with the patent provisions against discrimination in regulating patents from different fields of technology within the TRIPS Agreement. Article 27.1 of the TRIPS Agreement prohibits discrimination in patent regulation along the lines of ‘the field of technology’ for patent rights.[126] While the strict interpretation of ‘discrimination’ between patents in different fields of technology has been rejected by a WTO Panel in favour of an interpretation allowing differentiated regulation for ‘legitimate reasons’,[127] a law that unjustifiably differentiates between patents of specific fields of technology is likely to be considered discrimination.[128] Unjustifiable differentiation is also not limited to imposing regulation to the detriment of patents within a particular field of technology, with laws unjustifiably favouring a particular field of technology being considered as discrimination.[129] A mandatory HIF that replaces patent regulation only for pharmaceutical research would be likely to be considered as regulatory discrimination against patents originating in the field of pharmaceutical innovation. While Article 27.1 does not prevent bona fide differentiated regulatory treatment for patents of different fields of technology to address problems unique to the specific fields,[130] the scope of bona fide differentiation in regulation to date appears to be limited. An example of regulation that has withstood a formal legal challenge regarding discrimination would be amendments to a patent system allowing for pharmaceutical products to be stockpiled by non-patent-holders for pursuing regulatory approval for generic production in the last six months of a patent term’s validity.[131] Such a measure does not appear comparable to the radical reform entailed by imposing a mandatory HIF, including the removal of industry-specific patent rights. In contrast, by working in conjunction with the patents system, a voluntary scheme does not require the removal of pharmaceutical patent rights, therefore reducing the risk of being seen as discriminatory regulation within the general patent system.
A voluntary scheme also avoids the risks of constitutional challenges in an Australian context. Under the Australian Constitution, the Federal Government must justly compensate individuals for any property acquired.[132] For schemes mandatorily restricting pharmaceutical patents to confer only rights compatible with the operation of a HIF, constitutional challenges are likely to be made on the basis that no just compensation would be provided to pharmaceutical firms for the limiting of their intellectual property rights by the government. While it has been recently re-iterated that mere restriction of intellectual property rights by Federal legislation, without more, does not engage s 51(xxxi),[133] the introduction of a scheme which would not compel firms to subscribe and restrict their exploitation rights under their patents would avoid the litigation costs of such challenges.
While there are merits to a mandatory scheme in reducing the risks of overcompensation, a mandatory HIF would also not be suitable for regulating all pharmaceutical products. As Pogge observes, a HIF will not generate substantial returns for drugs that have limited health benefits, such as hair-loss treatments.[134] A voluntary HIF established with the patents system will ensure that the patents system will remain open to firms as an alternate pathway for exploiting their products. Firms wishing to devote resources into developing drugs that do not have a great enough health impact for a HIF award may still have a viable mechanism to recoup their research and development costs under the patent system.[135]
Furthermore, the introduction of a mandatory HIF would encounter far more political and industry opposition than a voluntary scheme would encounter in terms of its implementation, especially in light of recent demonstrated willingness on behalf of pharmaceutical firms to utilise their patents in voluntary initiatives. Numerous commentators have noted that the introduction of a HIF to replace the patent system in financing pharmaceutical research and development would face considerable opposition from pharmaceutical firms,[136] which would be further exacerbated by the large public funding requirements for a mandatory HIF.[137] On the other hand, a voluntary HIF depending on industry participation is a more feasible option, especially due to the opportunities presented to firms to profit from research efforts directed at maximising HIF rewards. The willingness of pharmaceutical firms to participate in alternate schemes, utilising their patent rights in a more socially conscious yet simultaneously profitable manner, can be discerned in the operation of the voluntary international Medicines Patent Pool for HIV/AIDS treatments. A voluntary patent pool consists of a central administrating agency that receives patents registered to it by a group of patent-holders.[138] The patents are then licensed out to third parties in return for royalties that are distributed to the registered patent-holders.[139] With patent pools recognised as effective mechanisms to reduce transaction risk and costs in separately obtaining licences for numerous patents associated with a single product,[140] the Medicines Patent Pool was established by UNITAID in 2010 to allow pharmaceutical firms to register their patents across multiple jurisdictions for antiretroviral drugs.[141] There have been positive responses from several large pharmaceutical firms,[142] the most recent of which being an agreement by ViiV Healthcare, a joint venture between Pfizer, GlaxoSmithKline and Shionogi, to increase access to its new antiretroviral drug, dolutegravir, through the pool.[143] While the involvement of large pharmaceutical firms in such an initiative does not directly indicate the level of support that a HIF may receive, it does show that where returns are reasonable under a voluntary scheme, industry may be willing to lend its support to the scheme.
With regard to the existing literature on Hollis and Pogge’s HIF and the regulatory landscape for Australian healthcare, an operational national HIF is likely to be a Federal body administering allocated public funds. Hollis and Pogge suggest that the body administering the HIF consist of independent branches to:
a) determine the technical standards of measuring health impacts across various diseases;
b) conduct forecasts and surveying of health benefits of each registered treatment to determine the size of the reward available; and
c) audit the process of determining the rewards.[144]
Broadly, as a national Australian concern, the HIF may be administered by a Federal body with an annual budget tasked with distributing rewards. On application by a pharmaceutical patent-holder, the body would determine whether to register a treatment based on standards of similarity to the treatments already on the register, and would determine the reward sizes. To determine the annual rewards for a particular product, pharmaceutical research and development companies may be required to submit health impact data to the administrative body on application for registration, in a similar vein to the submissions made to the Pharmaceutical Benefits Advisory Committee on application for PBS registration,[145] and at the end of each year of registration for continuous evaluation. As transparency is central to such a system,[146] to allow companies to predict the extent of the rewards received, determinations should be published by the administering body.
The initial stage of implementing a scheme is likely to require a more limited scope of coverage for the HIF, to provide a period of time to evaluate the operation of the HIF and to reduce political opposition to its implementation. Due to the lack of an operational HIF, many uncertainties remain as to the potential problems that can arise on implementing the HIF and the extent of such problems. For example, aside from the need to establish the standards of patent registration, the potential scale of litigation around the refusal of the administering body to register treatments too similar to those already on the register[147] and the disputes regarding the sizes of the rewards distributed remains unknown.[148] Wei suggests that the HIF could be initially implemented as a scheme limited to particular types of treatment, such as vaccines, or limited by specific diseases.[149] Apart from the reduced level of complexity encountered in decision-making for the body administering the HIF, due to the smaller number of markets of treatments involved,[150] Abramowicz also observes that a HIF limited by treatment type may attract support from specific interest groups related to the treatment type, allowing for greater political support for the scheme.[151] While there may be concerns that targeting specific treatment types in the initial stage of the HIF may also make it susceptible to concentrated interest group lobbying,[152] the relative simplicity of a limited scheme would be necessary to gauge and respond to implementation issues.
The primary concern raised by critics of implementing a full-scale HIF is the funding of the prizes awarded to industry. Pogge’s original idea proposed seed funding for an international scheme of $6 billion per year, to be contributed by governments around the world and initially divided among approximately 20 registered medicines.[153] The funding would grow incrementally over each year, as more high impact medicines are registered.[154] For an Australian HIF, funding that could match the seed funding of a larger international regime may be found by redirecting some of the current funding to the PBS. In the financial year ending on 30 June 2012, approximately $9.19 billion was directed to subsidising prescription medicines under the scheme.[155] The top ten most expensive medicines subsidised by the government alone cost the scheme over $2.3 billion.[156] With such funding being directed towards medicines priced under patent monopolies, the removal of monopolistic pricing for products registered under the HIF would drastically reduce the rationale for having government subsidies for prescriptions under the PBS. However, an argument may be made that under a voluntary scheme, pharmaceutical companies will decide on the path that yields greater returns. As a result, there would be no real reduction overall to the government, as the drugs that are more profitable under the PBS will remain monopolistically priced for the government. Those drugs with more health impacts currently under the PBS and better remuneration prospects under the HIF will be registered, increasing the government’s total costs. While a scheme requiring all medicines to be registered under the HIF will overcome such a problem, this solution has its own obstacles as discussed above in Sections 3.2.2 and 3.2.3. It may be possible to reduce the profits made by pharmaceutical companies when registering under the PBS by reallocating a percentage of their returns under the PBS to subsidise the HIF. Nevertheless, the solution appears to require further taxation by the government to cover the costs of a HIF or reform to the PBS to limit the governments’ remuneration to firms listing products under the scheme.
Despite concerns raised by critics regarding the standard of measurement to assess the health benefits of a given treatment, and the adverse implications raised by employing health benefits as a standard for remunerating pharmaceutical innovators, Australia is in a unique position to overcome these challenges. Pogge has suggested that health benefits can be measured or estimated according to quality-adjusted-life-years (‘QALYs’), additional healthy life or years of life impaired by the effects of a medical condition gained by a patient from using a particular pharmaceutical product.[157] Under his conception of a HIF, remuneration is determined by a fixed monetary amount per QALY.[158] However, Hubbard and Love have criticised this proposal, claiming that a strictly proportional QALY-dependent payment under the fund would lack flexibility to address diseases that affect fewer patients.[159] In turn, a system based entirely on QALYs may unfairly disadvantage patients affected by diseases that are less common in the community.[160] Additionally, assessment regimes would necessarily be complicated where a patient requires a cocktail of drugs which have been registered under a HIF, or where a particular pharmaceutical product has detrimental side-effects.[161] While these problems appear to be overly complex, these have to an extent been addressed in the existing cost-effectiveness assessment system in Australia’s PBS,[162] which estimates the cost-effectiveness of pharmaceuticals to determine the level of reimbursement. Problems associated with establishing a monitoring system for the actual health impacts of a particular pharmaceutical innovation, while a concern where a HIF is implemented in a developing nation,[163] are not issues in a developed nation like Australia, given the extensive record-keeping infrastructure available. Therefore, Australia’s existing system of estimation of drug effectiveness may be well-suited to the problem of assessing remuneration under the HIF.
The debate around the merits of patent law in relation to pharmaceutical patents and access to pharmaceutical innovations has been one with a long history. The justifications for patent law’s role in regulating pharmaceutical products are well-known: to ensure the financial viability of innovation in a field where research and development involve significant investments and risks; and to provide public access to patented innovations after the expiration of the patent term. However, Australian patent law has its shortcomings in regulating pharmaceutical research and development; patents are an inefficient method for financing pharmaceutical research and development, and tend to direct investments towards profitable yet medically unimportant products. As a result, the balance between public and private interests at the heart of patent law has been skewed excessively away from public interests due to the unwillingness of patent law to consider the public interest in enhancing public health inherent in pharmaceutical innovation. Consequently, the proposal for establishing a HIF, as suggested by Hollis and Pogge, to supplement patent law in regulating pharmaceutical innovation should be considered. The establishing of a voluntary HIF mechanism circumvents potential legal obstacles under the TRIPS Agreement and the Australian Constitution. The HIF links financial returns to the performance of the patented innovation, incentivising not only research and development, but also access to the patented product. Despite the likely increase to costs borne by the public for the HIF to operate, such a system would be a more balanced incentives regime, encouraging pharmaceutical product innovation based to a larger extent on direct health benefits on the product rather than the marketing power of firms for their products. While numerous difficulties in implementing a HIF exist, Australia is uniquely placed to implement a HIF. Australia’s existing cost-effectiveness mechanism of the PBS may be transplanted into a HIF health impact assessment regime. The implementation of a voluntary HIF, either for general application or with a limited scope targeting specific treatments, alongside patent law regulation should therefore be seriously considered.
[*] BSc, LLB (Hons) University of New South Wales. Sincere thanks to Dr Catherine Bond and two anonymous reviewers for feedback during the drafting of this paper.
[1] Explanatory Memorandum, Intellectual Property Laws Amendment Bill 1997 (Cth), 3.
[2] Jim O’Keefe et al, Unleashing Pharma from the R&D Value Chain (July 2013) AT Kearney <http://www.atkearney.com.au/innovation/featured-article/-/asset_publisher/76R8b2bUBnsg/content/unleashing-pharma-from-the-r-d-value-chain/10192> .
[3] Tony Harris, Dianne Nicol and Nicholas Gruen, Pharmaceutical Patents Review Report (Canberra 2013) v.
[4] Thomas Pogge, ‘The Health Impact Fund: Better Pharmaceutical Innovations at Much Lower Prices’ in Thomas Pogge, Matt Rimmer and Kim Rubinstein (eds), Incentives for Global Health: Patent Law and Access to Essential Medicines (Cambridge University Press, 2010) 178, 196.
[5] According to the Pharmaceutical Patents Review, patents were traditionally primarily granted for mechanical and industrial processes: Harris, Nicol and Gruen, above n 3, 40.
[6] There exist other fields of innovation that require standards to be met before the patented product can be marketed. For example, for genetically-modified foodstuffs, safety approval from Food Standards Australia New Zealand is required based on scientific data provided by the company applying for approval, along with mandatory labelling requirements for products. However, it appears the pharmaceutical industry is unique in that the regulatory process has affected the duration of patents in Australia, forming a rationale for the availability of patent extensions, as discussed later in the article.
[7] Lawbook, The Laws of Australia (at 14 May 2008) 20 Health and Guardianship ‘20.11 Regulation of Drugs’ [20.11.260].
[8] Medicines Australia Oncology Industry Taskforce, Access to cancer medicines in Australia (2013) 37.
[9] Therapeutic Goods Act 1989 (Cth) s 9A.
[10] Medicines Australia, Medicines Australia Factbook 2013 (2013, 3rd ed) 55.
[11] Explanatory Memorandum, Intellectual Property Laws Amendment Bill 1997 (Cth), 12.
[12] Medicines Australia, About Us (December 2009) Medicines Australia <http://medicinesaustralia.com.au/about-us/> .
[13] Medicines Australia, Submission to the Pharmaceutical Patents Review, Commonwealth of Australia, Review of Pharmaceutical Patents in Australia, 23 January 2013, 1.
[14] Medicines Australia Oncology Industry Taskforce, Access to cancer medicines in Australia (2013) 38.
[15] See Joseph DiMasi, Ronald W Hansen and Henry G Grabowski, ‘The price of innovation: New estimates of drug development costs’ (2003) 22 Journal of Health Economics 151. The estimates of the costs required to bring one drug to market in that study are in the same order of magnitude made by Medicines Australia, with an estimate of an average of US$1.9 billion for capitalised pre-approval cost per new treatment brought to market: at 181.
[16] Donald W Light and Rebecca Warburton, ‘Demythologizing the high costs of pharmaceutical research’ (2011) 6(1) BioSocieties 34, 34.
[17] Ibid 38.
[18] Ibid 47.
[19] Harris, Nicol and Gruen, above n 3, 37.
[20] Ibid 38.
[21] Kevin Grogan, ‘Tufts report confirms domination of biotech products’, PharmaTimes Online (Online) 14 November 2013, <http://www.pharmatimes.com/article/13-11-14/Tufts_report_confirms_domination_of_biotech_products.aspx> .
[22] AusBiotech, About Biotechnology - Industry Overview (3 April 2014) AustBiotech: Australia’s Biotechnology Organisation <http://www.ausbiotech.org/content.asp?pageid=25> .
[23] Anita M O’Connor, ‘Introduction to biotech drugs’ (2009) 6(1) Regulatory Rapporteur 4,5.
[24] Joseph A DiMasi and Henry G Grabowski, ‘The Cost of Biopharmaceutical R&D: Is Biotech Different? (2007) 28 Managerial and Decision Economics 469, 473.
[25] Ibid 475.
[26] Patents Act 1990 (Cth) s 67.
[27] Patents Act 1990 (Cth) s 40.
[28] Kathy Bowrey, Michael Handler and Dianne Nicol, Australian Intellectual Property Law (Oxford University Press, 2010) 378.
[29] Patents Act 1990 (Cth) ss 70-87.
[30] Explanatory Memorandum, Intellectual Property Laws Amendment Bill 1997 (Cth), 3.
[31] Patent legislation was only adopted across Europe after considerable debate, which saw some nations such as Holland and Switzerland initially move away from patent legislation, and after historical events weakened opposition to protectionist policies like the patent system: Steven Shavell and Tanguy van Ypersele, ‘Rewards versus Intellectual Property Rights’ (2001) 44 Journal of Law and Economics 525, 527.
[32] Robert Chalmers, ‘Evergreen or Deciduous? Australian Trends in Relation to “Evergreening” of Patents’ [2006] MelbULawRw 2; (2006) 30(1) Melbourne University Law Review 29, 59.
[33] Harris, Nicol and Gruen, above n 3, 29. See also Andrew F Christie et al, ‘Patents Associated with High-Cost Drugs in Australia’ (2013) 8(4) Public Library of Science ONE 1, 1.
[34] It must questioned whether patents are fundamental to providing financial incentives to encourage innovation because of business strategies based on exploiting the patent system used by pharmaceutical firms at present, or because the system itself is inherently necessary to protect and stimulate innovation. The absence of empirical evidence due to the lack of recent dramatic changes to the patent system internationally has made it difficult to test whether patents are fundamental to encouraging innovation, with researchers resorting to analysis of the patent system in historical eras: Bronwyn H Hall and Dietmar Harhoff, ‘Recent research on the economics of patents’ (Working paper no. 17773, 4 Annual Review of Economics, 2012) 12. See Petra Moser, ‘Innovation without Patents – Evidence from the World Fairs’ (2012) 55 Journal of Law and Economics 43 <http://papers.ssrn.com/sol3/Papers.cfm?abstract_id=930241> . After presenting data from British and American World Fairs in the late 19th century and early 20th century, Moser notes that alternate methods to protecting and exploiting intellectual property, such as secrecy, were considered effective stimulants for innovation: at 1. She further observes that the majority of inventions presented at the World Fairs were not patented despite the availability of patent systems in Britain and the United States: at 29. Moser contends this was partly due to the difficulty of reverse-engineering some inventions at the time, notably those involving chemical formulations, allowing secrecy to be used as an effective method to provide for a monopoly resulting in financial returns: at 22. However, with the introduction of analytical chemistry, which allowed for chemical compounds to be reverse-engineered, patent rates for chemical compounds increased dramatically: at 25. Therefore the importance of patents for protecting and encouraging investment in innovation arises where the innovation can be easily reverse-engineered: at 29. While there is little empirical evidence supporting the claim that the patent system is fundamental to encouraging innovation, in light of Moser’s observations and given the ease with which rivals can reverse-engineer a pharmaceutical treatment, it can be said at least that patents play an important role in protecting pharmaceutical innovation from free-riders: see Irwin I Park, ‘Extinguishing Exclusive Marketing Rights: Interpreting the Medical Innovation Prize Fund Act of 2011’ (2011-12) DePaul Journal of Art, Technology & Intellectual Property Law 183, 189. Ultimately, Hall and Harhoff comment that while patents are “not important for innovation incentives in general”, their capacity for generating large financial returns does generate demand for research: at 35.
[35] Intellectual Property Australia Pharmaceutical Patents Review Panel, Commonwealth of Australia, Pharmaceutical patents review: draft report (April 2013) 6.
[36] Department of Industry (Commonwealth), Pharmaceuticals Industry Profile, Pharmaceuticals and Health Technologies <http://www.innovation.gov.au/INDUSTRY/PHARMACEUTICALSANDHEALTHTECHNOLOGIES/PHARMACEUTICALS/Pages/PharmaceuticalsIndustryProfile.aspx> .
[37] Intellectual Property Australia Pharmaceutical Patents Review Panel, Commonwealth of Australia, Pharmaceutical patents review: draft report (April 2013) 65.
[38] Medicines Australia Oncology Industry Taskforce, Access to cancer medicines in Australia (2013) 76.
[39] Ibid.
[40] Michael O'Riordan, So Long, Plavix, What a Ride! Clopidogrel Patent Expires (May 17, 2012) Medscape <http://www.medscape.com/viewarticle/764052> .
[41] MedIndia, Drug "Clopidogrel" Price list (2013) Generic Drug Database with Price Details <http://www.medindia.net/drug-price/clopidogrel.htm> .
[42] Pharmaceuticals Industry Strategy Group, Commonwealth of Australia, Final Report (2008) 26.
[43] Harris, Nicol and Gruen, above n 3, 115.
[44] Arrow Pharmaceuticals Limited v Merck & Co., Inc. [2004] FCA 1282; [2004] 213 ALR 182.
[45] Ibid 188.
[46] Ibid 207.
[47] Ibid 211.
[48] Ibid 182.
[49] Ibid 212.
[50] Andrew F Christie et al, ‘Patents Associated with High-Cost Drugs in Australia’ (2013) 8(4) Public Library of Science ONE 1, 1.
[51] Chalmers, above n 32, 60.
[52] Stephen Duckett, ‘Australia’s Bad Drug Deal’ (Report No 2013-2, Grattan Institute, March 2013) 30.
[53] Ibid 27.
[54] Australian Medical Association, PBS Discussion Paper with AMA Federal Council Relations (March 2002) Australian Medical Association 6 <https://ama.com.au/sites/default/files/node/910/PBS%20Paper-Final%20Version.doc>.
[55] Duckett, above n 52, 23.
[56] Department of Health (Commonwealth), Ocular Vascular Disorder Agents, Pharmaceutical Benefits Scheme <http://www.pbs.gov.au/medicine/item/1382R> .
[57] Melanoma Patients Australia, ‘MPA Members celebrate PBS listing of Yervoy’ (Media Release, 3 July 2013) 1 <http://www.melanomapatients.org.au/latest-news/mpa-members-celebrate-pbs-listing-of-yervoy-2> .
[58] Department of Health (Commonwealth), Chemotherapy Items for Private Hospital/Private Clinic use, Pharmaceutical Benefits Scheme <http://www.pbs.gov.au/medicine/item/2638W-2641B-2643D-2663E>
[59] Paul Grootendorst, Aidan Hollis and Aled Edwards, ‘Patents and Other Incentives for Pharmaceutical Innovation’ (29 January 2013) 8 <http://individual.utoronto.ca/grootendorst/pdf/Patents_and_Other_Incentives_for_Pharmaceutical_Innovation.pdf> .
[60] Park, above n 34, 192.
[61] Explanatory Memorandum, Intellectual Property Laws Amendment (Raising the Bar) Bill 2011 (Cth), 9.
[62] Patents Act 1990 (Cth) s 119C.
[63] Intellectual Property Laws Amendment (Raising the Bar) Act 2012 (Cth) s 2.
[64] Thomas Faunce, ‘Balancing Public Health, Trade and Intellectual Monopoly Privileges: Recent Australian IP Legislation and the TPPA’ (2012) 20 Journal of Law and Medicine 280, 283.
[65] Pogge, above n 4, 184.
[66] Ibid 185.
[67] Emily Robinson, Health not Wealth as an Incentive for Drug Development: A Conversation with Thomas Pogge (29 April 2013) Harvard Global Health Institute <http://globalhealth.harvard.edu/news/health-not-wealth-incentive-drug-development-conversation-thomas-pogge> .
[68] Drug Utilisation Sub-Committee, Australian Statistics on Medicines 2010, Department of Health (Commonwealth) <http://www.pbs.gov.au/statistics/ asm/2010/australian-statistics-on-medicine-2010.pdf> .
[69] Peter Dingle, Cholesterol a Symptom, not the Disease (February 2011) Positive Health Online Issue 179 <http://www.positivehealth.com/article/heart/cholesterol-a-symptom-not-the-disease> .
[70] Peter Libby, ‘Inflammation and cardiovascular disease mechanisms’ (2006) 2 American Journal of Clinical Nutrition 456S, 459S.
[71] Paul Grootendorst et al, ‘New approaches to rewarding pharmaceutical innovation’ (2010) Canadian Medical Association Journal 1, 2.
[72] Marlynn Wei, ‘Should Prizes Replace Patents? A Critique of the Medical Innovation Prize Act of 2005’ (Working paper, Boston University Journal of Science and Technology Law, 2007) 3.
[73] Medicines Australia, Medicines Australia Factbook 2013, above n 10, 3.
[74] Patents Act 1990 (Cth) ss 163-170.
[75] Genevieve Butler, Intellectual Property Laws Amendment Bill 2013, Parliament of Australia, Bills Digest No. 7 of 2013-14, (5 September 2013) 17.
[76] Ibid 10.
[77] Michael B Abramowicz, ‘Perfecting Patent Prizes’ (2003) 56 Vanderbilt Law Review 2, 4.
[78] James Love and Tim Hubbard, ‘The Big Idea: Prizes to Stimulate R&D for New Medicines’ (Paper presented at Ruby Hutchison Memorial Address, Sydney, 14 November 2006) 1519, 1528.
[79] Abramowicz, above n 77, 5.
[80] Amitava Banerjee et al, ‘The Health Impact Fund: incentives for improving access to medicines’ (2010) 375 The Lancet 166, 169.
[81] Love and Hubbard, above n 78, 1529.
[82] Ibid 1531.
[83] Pogge, above n 4, 199.
[84] Ibid 198.
[85] Banerjee et al, above n 80, 166.
[86] Matt Peterson, Aidan Hollis and Thomas Pogge, ‘A Critique in Need of Critique’ (2010) 3(2) Public Health Ethics 178, 184.
[87] Banerjee et al, above n 80, 168.
[88] Mark Nickas, ‘A Patent Prize System to Promote Development of New Antibiotics and Conservation of Existing Ones’ (2012) 12(5) Pittsburgh Journal of Technology Law & Policy 1, 16.
[89] Banerjee et al, above n 80, 167.
[90] Congress of the United States of America, S. 627: Medical Innovation Prize Fund Act 113th Congress (2013-2014) (2013) Congress.gov United States Legislative Information <http://beta.congress.gov/bill/113th/senate-bill/627> .
[91] Katherine Jeanne Racz, ‘The Health Impact Fund Proposal: Application in the United States' Era of Comparative Effectiveness’ (2011) 19 Journal of Intellectual Property Law 487, 513.
[92] Pogge, above n 4, 200.
[93] Jorn Sonderholm, ‘A Reform Proposal in Need of Reform: A Critique of Thomas Pogge's Proposal for How to Incentivize Research and Development of Essential Drugs’ (2010) 3(2) Public Health Ethics 167, 172.
[94] Medicines Australia Oncology Industry Taskforce, Access to cancer medicines in Australia (2013) 52.
[95] Sonderholm, above n 93, 173.
[96] Peterson et al, above n 86, 181.
[97] Medicines Australia Oncology Industry Taskforce, above n 95, 71.
[98] Peterson et al, above n 86, 184.
[99] James Love, The Medical Innovation Fund Prize - A New Paradigm for Supporting Sustainable Innovation and Access to New Drugs: De-Linking Markets for Products from Markets for Innovation (27 May 2011) Knowledge Ecology International 6 <http://keionline.org/sites/default/files/big_prize_fund_overview_26may2011_letter.pdf> .
[100] Wei, above n 72, 17.
[101] Ibid.
[102] Ibid 9.
[103] Informa, First-in-Class Drugs – pioneers with great potential! (16 August 2013) Informa Healthcare
<http://informahealthcare.com/doi/story/10.1517/news.2013.08.16.557> .
[104] Love and Hubbard, above n 78, 1542.
[105] Ibid 1542.
[106] Aidan Hollis, ‘The Health Impact Fund: A Useful Supplement to the Patent System’ (2008) 1(2) Public Health Ethics 124, 125.
[107] Steven Shavell and Tanguy van Ypersele, ‘Rewards versus Intellectual Property Rights’ (2001) 44 Journal of Law and Economics 525, 539.
[108] Ibid.
[109] Abramowicz, above n 77, 21.
[110] Shavell and van Ypersele, above n 107, 541.
[111] Abramowicz, above n 77, 10.
[112] Wei, above n 72, 9.
[113] Abramowicz, above n 77, 23.
[114] Ibid 24.
[115] Agreement on Trade-related Aspects of Intellectual Property Rights 1994, signed 15 April 1994, 1869 U.N.T.S. 299 (entered into force 1 January 1995) art 33.
[116] Ibid art 30.
[117] Dina Halajia, ‘Inadequacy of TRIPS & the compulsory license: Why broad compulsory licensing is not a viable solution to the access to medicine problem’, (2012-13) 38 Brooklyn Journal of International Law 1191, 1206.
[118] Ibid 1210.
[119] Geertrui Van Overwalle, ‘The implementation of the Biotechnology Directive in Belgium and its after-effects: the introduction of a new research exemption and a compulsory licence for public health’ (2006) 37(8) International Review of Intellectual Property and Competition Law 889, 909.
[120] Banerjee et al, above n 80, 167.
[121] Wei, above n 72, 15.
[122] Nickas, above n 88, 24.
[123] Park, above n 60, 185.
[124] James Love, The Medical Innovation Fund Prize - A New Paradigm for Supporting Sustainable Innovation and Access to New Drugs: De-Linking Markets for Products from Markets for Innovation, Knowledge Ecology International (27 May 2011) 8 <http://keionline.org/sites/default/files/big_prize_fund_overview_26may2011_letter.pdf> .
[125] Ibid 9.
[126] Agreement on Trade-related Aspects of Intellectual Property Rights 1994, signed 15 April 1994, 1869 U.N.T.S. 299 (entered into force 1 January 1995) art 27.1.
[127] Maria Victoria Stout, ‘Crossing the TRIPS Non-discrimination Line: How CAFTA Pharmaceutical Patent Provisions Violate TRIPS Article 27.1’ (2008) 14 Boston University Journal of Science and Technology Law 177, 182.
[128] Panel Report, Canada—Patent Protection of Pharmaceutical Products, WTO Doc WT/DS114/R (March 17, 2000) [7.94].
[129] Stout, above n 127, 182.
[130] Panel Report, Canada—Patent Protection of Pharmaceutical Products, WTO Doc WT/DS114/R (Mar. 17, 2000) [7.94].
[131] This was the subject of the most authoritative WTO Panel decision on the interpretation of Article 27.1 to date, namely the Canada Patent Protection of Pharmaceutical Products decision of 2000. The facts giving rise to the dispute centred about Canada’s implementation of laws removing liability for patent infringement in cases where the patented product was used for a purpose reasonably related to gaining regulatory approval in a period as specified by regulations. The Canadian government then specified a liability-free period of the last six months of a patent term for patented medicines in regulations: Panel Report, Canada—Patent Protection of Pharmaceutical Products, WTO Doc WT/DS114/R (March 17, 2000) [2.1]-[2.7].
[132] Australian Constitution s 51(xxxi).
[133] JT International SA v Commonwealth [2012] HCA 43; (2012) 86 ALJR 1297, 1311.
[134] Banerjee et al, above n 80, 167.
[135] Ibid.
[136] Love and Hubbard, above n 78, 1550.
[137] Nickas, above n 88, 16.
[138] Michelle Childs, ‘Towards a Patent Pool for HIV Medicines: The Background’ (2010) 4 The Open AIDS Journal 33, 34.
[139] Ibid.
[140] Ibid 35.
[141] Eric Noehrenberg, ‘Implications of Patent Pools on Innovation Regarding Antiretrovirals’ (2010) 4 The Open AIDS Journal 67, 69.
[142] The Medicines Patent Pool, at the time of writing, has obtained licensing agreements for eight antiretroviral drugs: See UNITAID, ‘UNITAID Welcomes ViiV Healthcare’s Latest Collaboration with the Medicines Patent Pool to Increase Generics Access for Key New HIV Medicines’ (Media release, 1 April 2014) <http://www.unitaid.eu/en/resources/press-centre/statements/1336-unitaid-welcomes-viiv-healthcare-s-latest-collaboration-with-the-medicines-patent-pool-to-increase-generics-access-for-key-new-hiv-medicines> .
[143] This agreement was announced on 1 April 2014 by the Medicines Patent Pool: Katherine Moore, ‘Medicines Patent Pool, ViiV Healthcare Sign Licence for the Most Recent HIV Medicine to Have Received Regulatory Approval’ (Media release, 1 April 2014) <http://www.medicinespatentpool.org/medicines-patent-pool-viiv-healthcare-sign-licence-for-the-most-recent-hiv-medicine-to-have-received-regulatory-approval/> .
[144] Aidan Hollis and Thomas Pogge, The Health Impact Fund: Making New Medicines Accessible for All
(Incentives for Global Health, 2008) 39.
[145] Stephen J Duckett, ‘Drug Policy Down Under: Australia’s Pharmaceutical Benefits Scheme’ (2004) 25(3) Health Care Financing Review 55, 59.
[146] Wei, above n 72, 15.
[147] Racz, above n 91, 512.
[148] Wei, above n 72, 22.
[149] Ibid 21.
[150] Abramowicz, above n 77, 90.
[151] Ibid.
[152] Ibid 89.
[153] Incentives for Global Health: The Whitney and Betty MacMillan Center at Yale, Financing the Health Impact Fund (2013) The Health Impact Fund <http://healthimpactfund.org/financing-the-health-impact-fund/> .
[154] Ibid.
[155] Department of Health (Commonwealth), Summary of PBS Processing year ending 30 June 2012, PBS Expenditure and Prescriptions: Expenditure and Prescriptions twelve months to 30 June 2012 <http://www.pbs.gov.au/info/statistics/expenditure-and-prescriptions-30-06-2012#Summary> .
[156] Department of Health (Commonwealth), Table 10(a) Highest Government Cost Drug (incl Drs Bag) by PBS Item, PBS Expenditure and Prescriptions: Expenditure and Prescriptions twelve months to 30 June 2012 <http://www.pbs.gov.au/statistics/2011-2012-files/table-10a.pdf> .
[157] William W Fisher and Talha Syed, ‘A prize system as a partial solution to the health crisis in the developing world’ in Thomas Pogge, Matt Rimmer and Kim Rubinstein (eds), Incentives for Global Health: Patent Law and Access to Essential Medicines (Cambridge University Press, 2010) 181, 198.
[158] Ibid 198.
[159] Love and Hubbard, above n 78, 1537.
[160] Wei, above n 72, 13.
[161] Ibid 12.
[162] Love and Hubbard, above n 78, 1541.
[163] Sonderholm, above n 93, 173.
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